Date: 2026-02-22 | Analyst: Saul Rosenthal Quarter: Q3 FY26 (ended January 31, 2026) — PRELIMINARY RESULTS Official results + transcript: March 2, 2026
CRDO just delivered the biggest beat in its history — $406 million versus guidance of $335–345 million. That is a $63–68 million upside, roughly 19% above the midpoint. And the company raised its full-year FY26 growth outlook from 170% to more than 200%.
You know what that means? It means demand picked up SHARPLY late in the quarter. And management said exactly that. This is the opposite of deceleration. This is re-acceleration.
Thesis: Strengthening. I am not adding pre-March 2 — but if the margins hold up on the official results, I would be a buyer.
| | Q3_FY25 | Q4_FY25 | Q1_FY26 | Q2_FY26 | Q3_FY26* | | | Jan-25 | Apr-25 | Jul-25 | Oct-25 | Jan-26 | |---|---|---|---|---|---| | Revenue ($m) | 135.0 | 170.0 | 223.1 | 268.0 | 406.0 | | YoY % | +154% | +180% | +274% | +272% | +201% | | QoQ % | +36% | +26% | +31% | +20% | +51% |
*Preliminary, unaudited. Official results March 2.
Look at that QoQ column. After decelerating from +36% to +26% to +31% to +20%, we get FIFTY-ONE PERCENT sequential growth. That is such a preposterous result! The revenue went from $268 million to $406 million in a single quarter. That's $138 million of new revenue added in 90 days.
Yes, YoY decelerated from 272% to 201%. But that is a math problem — we are lapping the massive ramp that started in Q3 FY25. The QoQ re-acceleration tells the real story. Demand is not slowing. Demand is accelerating.
| | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 | Q1_FY26 | Q2_FY26 | | | Jul-24 | Oct-24 | Jan-25 | Apr-25 | Jul-25 | Oct-25 | |---|---|---|---|---|---|---| | Revenue ($m) | 59.7 | 72.0 | 135.0 | 170.0 | 223.1 | 268.0 | | YoY % | +70% | +64% | +154% | +180% | +274% | +272% | | Gross Margin [GAAP] | 62.5% | 63.2% | 63.6% | 67.4% | 67.4% | 67.5% | | Op Margin [GAAP] | -24.3% | -11.7% | 19.4% | 36.8% | 27.2% | 29.4% | | Net Margin [GAAP] | -15.9% | -5.8% | 21.8% | 38.4% | 28.4% | 30.8% | | EPS Diluted [GAAP] | -$0.06 | -$0.03 | $0.16 | $0.38 | $0.34 | $0.44 |
GAAP profitable since Q3 FY25. Operating margins now running 27–37%. Net margins 28–38%. And growing gross margins — from 62.5% to 67.5%, a 500 basis point expansion, while revenue grew 349%! This is what operating leverage looks like.
| Quarter | Guide Midpoint | Actual | Beat | Beat % |
|---|---|---|---|---|
| Q3 FY25 | $120m | $135m | +$15m | +12.5% |
| Q4 FY25 | $190m | $170m | -$20m | -10.5% MISS |
| Q1 FY26 | $190m | $223m | +$33m | +17.4% |
| Q2 FY26 | $235m | $268m | +$33m | +14.0% |
| Q3 FY26 | $340m | $406m* | +$66m | +19.4% |
Five consecutive beats (with one miss in Q4 FY25 that turned out to be timing). Each beat getting larger in dollar terms. The Q3 beat of $66 million is the biggest in company history. And management said demand "picked up sharply late in the quarter." That means the Q4 starting base is already elevated.
What I know (from the preliminary announcement):
What I don't know yet (coming March 2):
The gross margin question is critical. GAAP gross margins have been running 67–68% the last four quarters. Management guided FY26 gross margins at "approximately 45% non-GAAP." I believe this 45% figure refers to non-GAAP OPERATING margin, not gross margin — the numbers simply don't add up otherwise (non-GAAP gross margin is always higher than GAAP, not lower). The rolling tracker confirms: net margin of ~40% was "ACHIEVED." That is consistent with non-GAAP operating margins in the 45%+ range. Watch this on March 2.
CRDO makes Active Electrical Cables (AECs) and high-speed interconnects for AI data center networking. When hyperscalers build out massive GPU clusters for AI training, they need interconnect — lots of it. CRDO dominates the AEC market with estimated 88% share. This is not a commodity. It is a high-performance semiconductor solution that replaces optical transceivers at significant cost savings.
The TAM has expanded from $3 billion to over $10 billion as new products (Zero Flap Optics, ALCs, OmniConnect, PCIe retimers) come online. Revenue diversification is improving — four customers now above 10% of revenue (up from two a year ago), and the largest customer declined from 61% of revenue to 42%.
The secular trend here is undeniable. AI infrastructure spending is accelerating, not decelerating. NVIDIA keeps building faster GPUs. Hyperscalers keep adding more of them. And each GPU needs interconnect. CRDO is the dominant supplier for a product that scales with AI compute spend.
Customer concentration: 82% of revenue from the top 3 customers. If one of those hyperscalers has a CapEx pause or a product transition delay, CRDO feels it. We saw this in Q4 FY25 when CRDO missed guidance. Management attributed it to timing and mix. And they were right — Q1 FY26 came roaring back.
The Q4 FY26 guidance of "mid-single digit sequential" is also worth watching. After a $138 million sequential increase, adding only 5% in Q4 is a deceleration. Management has been cautious with guidance all year (average beat of 17%), so I'm not panicking. But I want to hear them explain it on March 2.
$813.6 million cash. Zero debt. FCF margin of 23% in Q1 FY26 on $223 million in revenue. This company is a cash machine. They are funding their own growth with operating cash flow. No dilution concerns, no financing risk.
Prior (no prior formal analysis — this is first): CRDO is a high-conviction AI infrastructure semiconductor play. The AEC market leadership is real. The hyperscaler demand is secular. The growth is extraordinary — but the customer concentration and lack of contracted revenue (only $3.1m deferred) means I need to see continued beat cadence to stay confident.
Updated after Q3 preliminary: Conviction goes UP. The 19% beat above guidance — the largest in company history — and the re-acceleration to +51% QoQ tells me demand is not plateauing. Management raised FY26 from 170% to >200% with three months of data remaining. That is not a hedged guide. That is confidence. The beat track record (17% average) suggests even the raised FY26 guide may prove conservative.
I have an 11% position plus 2.8% in LEAPS. I am not adding pre-March 2 — I need to see the full Q3 margins and hear the Q4 formal guide before sizing up. But I am absolutely not selling ahead of the March 2 call. This is one of the best growth companies I have watched in years. Really, really extraordinary results. The question is not whether to own CRDO. The question is how much.
Rating: HOLD (with strong bias to ADD post-March 2 if margins intact)
Data as of 2026-02-22. Q3 FY26 results are preliminary. Official results and earnings call March 2, 2026, 2:00 PM PT.
Best, Saul