Credo Technology's Stock Falls Amid Margin Concerns Despite Strong Earnings
Shares of Credo Technology (NASDAQ: CRDO) dropped by nearly 30% this week despite reporting strong first-quarter fiscal year 2027 results. The company exceeded revenue and earnings per share expectations, with revenue rising 114.7% to $479 million and adjusted EPS increasing 130%. However, the stock declined due to concerns over margin compression and high valuation. Credo's GAAP gross margins fell to 64.5%, down from previous quarters, while management guided for further declines in the current quarter. The company also faces pressure from rising stock-based compensation costs that dilute shareholder value. Despite its strong AI-related growth trajectory, Credo trades at a high valuation—around $45 billion with an estimated revenue run rate of about $2 billion. The drop may present buying opportunities if sustained triple-digit growth continues beyond next year. However, investors are advised to consider the true earnings multiple when factoring in GAAP net income figures.
Topics: Credo Technology margins revenue growth stock price drop