Goldman Sachs sees optical ramp and AEC demand extending Credo’s growth beyond FY27

Overview

This conference-takeaways report covers Credo Technology Group’s connectivity growth outlook, product strategy and financial guidance. Goldman Sachs highlights a transition toward optical connectivity alongside ongoing AEC growth, while retaining its Buy rating and $285 target price.

Core views

Goldman Sachs identifies three central takeaways from Credo’s Communacopia + Technology presentation: growth beyond FY27 should be supported by an optical-product ramp and continued active electrical cable (AEC) adoption; the company is differentiating itself by owning the full connectivity solution rather than supplying individual components; and FY27 gross margin is expected to stay consistent with FY26 even as operating expenses rise about 55% year over year before returning toward a more normalized revenue-to-OpEx ratio. Management described copper and optical connectivity as serving different distance requirements. Copper is expected to remain the preferred option for short-reach links because of its reliability, while optical connectivity should gain share at longer distances. Credo said its investment emphasis has shifted increasingly toward optics over the past two years. The optical portfolio includes PICs and ZF Optical transceivers intended to address reliability issues in AI networks, including network downtime from link flaps in AI clusters. The report sees several potential growth vectors into FY28 and beyond: increasing deployment of AECs at existing customers, expansion at neocloud customers, the optical ramp, and initial Active LED Cable (ALC) contributions. Credo’s planned ALC products use micro-emitter technology to extend reach from about 7 meters to about 30 meters with comparable reliability, while reducing cable volume by about 75% relative to AECs. Management expects the products to launch at OCP next month, move into customer qualification afterward, and enter volume production in FY28. AECs remain a key medium-term driver in the report’s view. Management linked demand to denser AI networks and a transition to higher lane speeds, both of which increase connectivity content and demand for Credo’s solutions. In optical transceivers, Credo is focusing on higher-value reliability-enhancing products rather than commodity IEEE-standard 1.6T offerings, which management believes supports higher average selling prices. Its vertical integration, including in-house DSPs and silicon-photonics PICs, is presented as reinforcing differentiation, reliability and gross-margin potential. On near-term financials, management reiterated strong growth, guiding to approximately 20% quarter-over-quarter revenue growth in FY3Q and approximately 30% in FY4Q. Goldman Sachs’ forecast table shows revenue rising from $1,335.1 million in 4/26 to $2,553.4 million in 4/27E, $4,072.5 million in 4/28E and $5,016.5 million in 4/29E; EPS is forecast at $3.44, $6.36, $10.40 and $12.75, respectively. Goldman Sachs maintains its Buy rating and bases its $285 12-month target on 27x its Q5–Q8 EPS estimate of $10.75.

Analysis framework

The report synthesizes management commentary from the conference, linking product roadmaps and customer adoption to Credo’s growth outlook. It then assesses differentiation through system-level ownership and vertical integration, incorporates management’s revenue, margin and expense guidance, and values the shares using a 27x multiple on Goldman Sachs’ Q5–Q8 EPS estimate.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Price-to-earnings multiple valuation

  Goldman Sachs derives its $285 target price by applying a 27x multiple to its Q5–Q8 EPS estimate of $10.75.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Connectivity demand transmission from AI-network architecture

  The report links AI-network densification and higher lane speeds to greater connectivity content, supporting demand for AECs and longer-reach optical products.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Credo Technology Group (CRDO)

  Primary covered company; expected to benefit from optical portfolio ramp, AEC proliferation and future ALC contributions.

  Strengths

  System-level ownership, in-house DSPs and silicon-photonics PICs, and a focus on reliability-enhancing optical solutions.

  Weaknesses

  FY27 OpEx is expected to increase about 55% YoY.

  Comparison

  Management contrasts Credo’s higher-value optical focus with commodity IEEE-standard 1.6T products.

  Risks

  Faster optical adoption at the expense of copper, increased AEC competition, and revenue lumpiness from customer concentration.

Key data

• Target price$28512-month target price based on 27x Goldman Sachs’ Q5–Q8 EPS estimate of $10.75.
• Share price and upside$167.92; 69.7%Price as of 9 Sep 2026 close and stated upside to the target price.
• Near-term revenue guidance~20% QoQ in FY3Q; ~30% QoQ in FY4QManagement’s reiterated growth guidance.
• FY27 operating expense growth~55% YoYExpected before trending toward a more normalized revenue-to-OpEx ratio.
• Revenue forecast$1,335.1mn / $2,553.4mn / $4,072.5mn / $5,016.5mn4/26, 4/27E, 4/28E and 4/29E, respectively.
• EPS forecast$3.44 / $6.36 / $10.40 / $12.754/26, 4/27E, 4/28E and 4/29E, respectively.
• ALC product reach and cable volume~30m; ~75% reductionALCs are intended to extend reach from ~7m to ~30m and reduce cable volume versus AECs.

Impact & implications

The report argues that Credo’s growth opportunity broadens as optical connectivity becomes more important at longer distances while copper-based AECs remain relevant in short-reach AI-network links. Its system-level and vertically integrated approach is presented as supporting differentiation, higher ASPs and gross-margin resilience.

Risks

• Optical solutions could be adopted faster than expected at the expense of copper interconnects.
• Competition in AECs could increase.
• Revenue may be volatile because of customer concentration.