Q4 2025 Credo Technology Group Holding Ltd Earnings Call

Okay.

Operator: Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode.

Speaker Change: Ladies and gentlemen, thank you for standing by at this time, all participants are in a listen only mode.

Operator: Later, we will conduct a question-and-answer session. At this time, if you have a question, you will need to press star followed by the number one on your telephone key. If you would like to withdraw your question, press the pound key.

Speaker Change: Later, we will conduct a question and answer session. At this time. If you have a question you will need to press star followed by the number one on your telephone keypad. If you would like to go to your question press. The pound key I would now like to turn the conference over to Dan O'neill. Please go ahead Sir.

Operator: I would now like to turn the conference over to Dan O'Neill. Please go ahead.

Dan O'Neill: Good afternoon. Thank you for joining our earnings call for the fourth quarter of Fiscal 2025. Today, I'm joined by Bill Brennan, Credo's Chief Executive Officer, and Dan Fleming, our Chief Financial Officer.

Dan O'Neill: Good afternoon. Thank you for joining our earnings call for the fourth quarter of fiscal 2025 today I'm joined by Bill Brandon <unk>, Chief Executive Officer, and Dan Fleming, Our Chief Financial Officer.

Dan O'Neill: During this call, we will make certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties discussed in detail in our documents filed with the SEC, which can be found in the Investor Relations section of the company's website. It is not possible for the company's management to predict all risks, nor can the company assess the impact of all factors on this business, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement. Given these risks, uncertainties, and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ materially and adversely from those anticipated or implied.

Dan O'Neill: During this call we will make certain forward looking statements. These forward looking statements are subject to risks and uncertainties discussed in detail in our documents filed with the SEC, which can be found in the Investor Relations section of the company's website.

Speaker Change: It is not possible for the company's management to bricked all risks nor can the company assess the impact of all factors on this business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements.

Dan O'Neill: Given these risks uncertainties and assumptions the forward looking events discussed during this call may not occur and actual results could differ materially and adversely from those anticipated or implied.

Dan O'Neill: The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call, to conform these statements to actual results or to changes in the company's expectations, except as required by law. Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be important measures of the company's performance. These non-GAAP financial measures are provided in addition to, and not as a substitute for or superior to, financial performance prepared in accordance with U.S. GAAP.

Dan O'Neill: The company undertakes no obligation to publicly update forward looking statements for any reason after the date of this call to conform these statements to actual results or to changes in the companys expectations, except as required by law.

Dan O'Neill: Also during this call we will refer to certain non-GAAP financial measures, which we consider to be important measures of the company's performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or superior to financial performance prepared in accordance with U S. GAAP.

Dan O'Neill: A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be assessed using the investor relations portion of our website.

Dan O'Neill: A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release, we issued today, which can be assessed using the investor relations portion of our website with that I will turn the call over to our CEO Bill.

William Brennan: With that, I will turn the call over to our CEO, Bill. Thanks, Sam. Thank you for joining our earnings call for the fourth quarter of Fiscal 25. I'll begin with a review of our results, and then I'll provide highlights for our outlook into Fiscal 26. Dan Fleming, our CFO, will follow with a detailed discussion of our Q4 and fiscal year 25 results and then provide our outlook for the first quarter. In the fourth quarter, we delivered revenue of $170 million, a 26% sequential increase, and up 180% year-over-year. Our non-GAAP gross margin was 67.4%. For Fiscal 25, Credo achieved revenue of $437 million for growth of 126% year-over-year.

Bill: Thanks, Dan.

Bill: Thank you for joining our earnings call for the fourth quarter of fiscal 'twenty five I'll begin with a review of our results and then I'll provide highlights for our outlook into fiscal 2006.

Bill: Dan Fleming, our CFO will follow with a detailed discussion of our Q4 and fiscal year 'twenty five results and then provide our outlook for the first quarter.

Bill: In the fourth quarter, we delivered revenue of $170 million or 26% sequential increase and up 180% year over year our.

Bill: Our non-GAAP gross margin was 67, 4%.

Bill: For fiscal 'twenty, five credo achieved revenue of $437 million for growth of 126% year over year, our non-GAAP gross margin for fiscal 'twenty five or 65%.

William Brennan: Our non-GAAP gross margin for Fiscal 25 was $65. I'm proud of Credo's achievements in Fiscal 25, record-breaking revenue and profitability were fueled by surging demand for our innovative, reliable, and energy-efficient high-performance connectivity solution. Our long term commitment to customer driven innovation paid off significantly in fiscal 25. Quarterly revenue nearly tripled from Q1 to Q4, validating our foresight and our ability to capitalize on a predicted inflection point. Our Agile approach strengthened partnerships with hyperscalers amid a rapidly evolving AI landscape. As a pure play high-speed connectivity leader, Credo delivers a growing portfolio of differentiated solutions for global data center operators.

Bill: I'm proud of Creatives achievements in fiscal 'twenty five record breaking revenue and profitability were fueled by surging demand for our innovative reliable and energy efficient high performance connectivity solutions.

Bill: Our long term commitment to customer driven innovation paid off significantly in fiscal 'twenty five.

Bill: Quarterly revenue nearly tripled from Q1 to Q4, validating our fore sight and our ability to capitalize on our predictive inflection points are.

Bill: Our agile approach strengthened partnerships with hyperscale amid a rapidly evolving AI landscape.

Speaker Change: As a pure play high speed connectivity Cedar.

Speaker Change: Accretive delivers a growing portfolio of differentiated solutions for global data Center operators currently supporting port speeds from 100 gigabit per second to one six terabits per second.

William Brennan: Currently supporting port speeds from 100 gigabits per second to 1.6 terabits per second. Our innovation spans three tiers. Advanced Series Technology, Cutting-Edge Integrated Circuit Design, and Comprehensive System-Level Solutions. These innovations are seamlessly integrated with our pilot software platform. PILOT is an acronym for Predictive Integrity, Link Optimization, and Telemetry. PILOT offers an industry-leading user interface, robust debugging tools, and advanced telemetry tailored for large-scale deployment. This holistic innovation strategy enables Credo to deliver copper and optical connectivity solutions that surpass industry standards. providing unmatched functionality, reliability, and energy efficiency. While achieving a remarkable revenue ramp in fiscal 25, we continue to build the foundation for sustained growth.

Speaker Change: Our innovation spans three tiers.

Speaker Change: Charities technology cutting edge integrated circuit design and comprehensive system level solutions.

Speaker Change: These innovations are seamlessly integrated with our pilot software platform pilot.

Speaker Change: Pilot is an acronym for predictive integrity linked optimization and telemetry.

Speaker Change: <unk> offers an industry, leading user interface robust debugging tools and advanced telemetry.

Speaker Change: Alerts for large scale deployments.

Speaker Change: This holistic innovation strategy enables creatives to deliver copper and the optical connectivity solutions that surpass industry standards, providing unmatched functionality reliability and energy efficiency.

Speaker Change: While achieving a remarkable revenue ramp in fiscal 'twenty five we continued to build the foundation for sustained growth.

William Brennan: Looking ahead, we anticipate increasing customer diversification across copper and optical connectivity for Ethernet, PCIe, UA-Link, and other emerging applications in both scale-out and scale-up AI networks. Following the significant revenue inflection in Fiscal 25, we're energized by the expanding opportunities and total addressable market that lie ahead.

Speaker Change: Looking ahead, we anticipate increasing customer diversification across copper and optical connectivity for Ethernet Pcie UA link and other emerging applications in both scale out and scale up AI networks.

Speaker Change: Knowing the significant revenue inflection in fiscal 'twenty five we're energized by the expanding opportunities and total addressable market that lie ahead.

William Brennan: I'll now review our business in more detail. Regarding our active electrical cable product line in Q4, our AEC revenue maintained a steep growth trajectory. As anticipated, our customer base diversified, with three hyperscalers each contributing over 10% of our revenue, strengthening our market position. When we pioneered the AEC market years ago, we recognized the compelling advantages over both traditional direct-attached cables, or DACs, and laser-based optical solutions, especially at data rates of 50 gig per lane or higher. AECs have extended the viability of copper connectivity, becoming the de facto standard for inter-rack applications. Compared to DACs, AECs deliver superior signal integrity, advanced features, and a more versatile form factor.

Speaker Change: I will now review our business in more detail regarding our active electrical cable product line in Q4, our AEG revenue maintained a steep growth trajectory.

Speaker Change: As anticipated our customer base diversified with three hyperscale as each contributing over 10% of our revenue strengthening our market position.

Speaker Change: When we pioneered the AUC market years ago, we recognized the compelling advantages over both traditional direct attached cables for tax and laser based optical solutions, especially at data rates of 50 gig per lean or higher.

Speaker Change: <unk> have extended the viability of copper connectivity, becoming the de facto standard for inter rack applications.

Speaker Change: Compared to docs Auc's deliver superior signal integrity advanced features and a more versatile form factor.

William Brennan: Now, AECs are gaining traction as a robust rack-to-rack solution for distances up to seven meters, offering over 100 times greater reliability than laser-based optical modules, virtually eliminating link flaps, and significantly improving energy efficiency. which are both key enablers for best in class AI. Credo's system-level approach has driven substantial competitive advantages by owning the entire solutions. Surrey's IP, Retimer ICs, System Level Design, Qualification, and Production. Our approach positions Credo for significant innovation and time-to-market advantage. Data Center Architectures evolve rapidly, we foresee a continued shift towards curated system level solutions. We're enthusiastic about the ongoing expansion of the AEC.

Speaker Change: Now agencies are gaining traction as a robust rack to rack solution for distances up to seven meters offering over 100 times greater reliability and laser based optical modules virtually eliminating linked flaps and significantly improving energy efficiency.

Speaker Change: Which are both key enablers for best in class AI deployments.

Speaker Change: Our system level approach has driven a substantial competitive advantages by owning the entire solution stack.

Speaker Change: Turning to IP re timer Ics system level design qualification and production our approach physicians credo for significant innovation and time to market advantages as data center architectures evolve rapidly we foresee a continued shift towards curated system level solutions.

Speaker Change: We are enthusiastic about the ongoing expansion of the ADC market.

William Brennan: For instance, our recently demonstrated PCIe Gen 6 AECs at GTC promise the same compelling benefits for AI scale-up networks as deployments transition to rack-scale architecture. Our growing traction with hyperscalers is evident. With strong customer forecasts and new design wins in qualification, we're confident in sustained AEC revenue growth.

Speaker Change: For instance, our recently demonstrated pcie Gen six adcs at GTC promise the same compelling benefits for Aig's scale networks as deployments transition to rack scale architectures.

Speaker Change: Our growing traction with Hyperscale is evident.

Speaker Change: With strong customer forecast and new design wins and qualifications, we're confident a sustained AUC revenue growth.

William Brennan: I'll now discuss our progress in the optical art. Fiscal 25 was a standout year for Credo's optical business. We closed the year with strong momentum, expanding customer diversity across lane rates, port speeds, and applications. We achieved our revenue growth targets, delivering 50 gig and 100 gig per lane optical DSPs to a broad base of optical module customers. In Q4, we secured a significant DSP win for an 800-gig transceiver with initial deployments expected at a U.S. hyperscaler in fiscal 26.

Now I'll discuss our progress in the optical market.

Speaker Change: Fiscal 'twenty five was a standout year for Creatives optical business, we closed the year with strong momentum expanding customer diversity across lane rates port speeds and applications. We achieved our revenue growth targets, delivering 50 gig and 100 gig per lane optical DSP to a broad base of optical module customers.

Speaker Change: In Q4, we secured a significant DSP win for an 800 gig transceiver with initial deployment is expected in the U S. Hyper scaler in fiscal 2006.

William Brennan: At the OFC conference in San Francisco last month, Credo's latest optical innovations drew widespread attention from industry leaders. We unveiled our ultra low power 100 gig per lane optical DSPs built on 5 nanometer technology. This family, including full DSP and Linear Receive Optics, or LRO variants. sets new industry benchmarks for power efficiency. In collaboration with an optical module partner, Credo demonstrated an industry-first 800-gig optical module with total power consumption of roughly 9 watts. powered by our LARP LRO DSP and single-mode optics. We achieved error rates comparable to full DSP solutions, earning significant interest from hyperscalers, prioritizing power efficiency for AI deployment.

Speaker Change: At the OFC conference in San Francisco last months. He does the latest optical innovations through widespread attention from industry leaders, we unveiled our ultra low power 100 gig related optical DSP.

Speaker Change: Built on five nanometer technology.

Speaker Change: This family, including full DSP and linear receive optics or <unk> areas.

Speaker Change: Such new industry benchmarks for power efficiency.

Speaker Change: In collaboration with an optical module partner Credo demonstrated an industry first 800 gig optical modules with total power consumption of roughly 90 watts powered by our large <unk> DSP and single Board optics, we achieved air rates comparable to full DSP solutions earnings.

Speaker Change: Difficult interest from Hyperscale is prioritizing power efficiency for AI deployments.

William Brennan: We also showcased our 3 nanometer, 200 gig per lane optical DSP, supporting port speeds up to 1.6 terabits per second. With leading signal integrity and power efficiency, this solution positions Credo to drive the industry's transition to 200 gig lane speeds in the coming year.

Speaker Change: We also showcased our three nanometer 200 gig per lane optical DSP supported port speeds up to one six terabits per second.

Speaker Change: Leading signal integrity and power efficiency this solution positions to drive the industry's transition to 200 gig landscapes in the coming years.

William Brennan: Looking ahead, we see a dynamic and growing market for optical connectivity, where reliability and energy efficiency are increasingly critical. Credo is poised to deliver system-level innovations that provide substantial advantages to our partners. Credo's optical business demonstrated robust execution at Fiscal 25. With our growing differentiation and an expanding system-level market opportunity, we anticipate accelerated revenue growth in the years ahead.

Speaker Change: Looking ahead, we see a dynamic and growing market for optical connectivity, where reliability and energy efficiency are increasingly critical.

Speaker Change: <unk> is poised to deliver system level innovations that provide substantial advantages to our partners.

Speaker Change: Accredo as optical business demonstrated robust execution in fiscal 'twenty five.

Speaker Change: Growing differentiation and an expanding system level market opportunity, we anticipate accelerated revenue growth in the years ahead.

William Brennan: Turning to our re-timer business. In Q4 of Fiscal 25, our retimer business delivered robust results, reinforcing our leadership. ReTimer revenue growth was fueled by our 50 gig and 100 gig per lane Ethernet solution. offering advanced features like Max-Tech encryption, Gearboxing, and software-enabled functionality tailored to diverse customer requirements. Our customer base now includes leading AI server vendors alongside traditional switching clients, reflecting the growing adoption of our solutions in AI-driven architecture. For Fiscal 26, we anticipate strong growth driven by the continued shift to 100 gig per lane solution. and increasing demand for system level expertise and software capabilities to address hyperscalers complex AI optimized architecture.

Speaker Change: Turning to our re timer business in Q4 and fiscal 'twenty five a recap of our business delivered robust results reinforcing our leadership.

Speaker Change: <unk> revenue growth was fueled by our 50 gig 100 gig per lean Ethernet solutions.

Speaker Change: Offering advanced features like Mac second correction gearboxes and software enabled functionality tailored to diverse customer requirements are.

Speaker Change: Our customer base now includes leading AI server vendors alongside traditional switching clients, reflecting the growing adoption of our solutions and AI driven architectures.

Speaker Change: For fiscal 'twenty, six we anticipate strong growth driven by the continued shift to 100 gig <unk> solutions and.

Speaker Change: An increase in demand for system level expertise software capabilities to address Hyperscale is complex AI optimized architectures.

William Brennan: Our recently launched PCIe Gen 6 retimer. led by the Toucan retimer, achieved full compliance at the PCI-C workshop, showcasing superior performance and interoperability. Demonstrations at GTC, OFC, and most recently at Computex with two leading ODM partners further validated our capability. Customer momentum for our PCIe re-timers is accelerating, positioning Credo to secure design limits in calendar 25 with production revenue expected in calendar. Our competitive edge lies in leveraging core SERTES technology, a customer-centric approach, and system-level innovation to deliver differentiated latency, reach, and power efficiency. Additionally, our pilot development telemetry software platform drives faster time to market, improved yields, and enhanced system monitoring, providing clear advantages based on market feedback.

Speaker Change: Our recently launched Pcie Gen six re timer family.

Speaker Change: Led by the <unk> retirement achieved full compliance PCI workshop.

Speaker Change: Showcasing our superior performance and interoperability.

Speaker Change: Demonstrations at GTC OFC and most recently at Computex with two leading ODM partners further validated our capabilities.

Speaker Change: Customer momentum for our Pcie <unk> is accelerating.

Speaker Change: <unk> <unk> accretive to secure design wins in calendar 'twenty five with production revenue expected in calendar 'twenty six.

Speaker Change: Our competitive edge license leveraging core search technology, our customer centric approach and system level innovation to deliver differentiated latency reach and power efficiency.

Speaker Change: Additionally, our pilot development telemetry software platform drives faster time to market improved yields.

Speaker Change: Hedged system monitoring, providing a clear advantages based on market feedback.

William Brennan: In summary, Fiscal 25 marked a pivotal year for Credo, achieving record revenue, profit, and market adoption of our innovative connectivity solutions, hitting the inflection point we anticipated. Our operational and customer-facing teams executed flawlessly to deliver these results. Credo pioneered a market that transformed how hyperscalers connect switches and servers. We continue to innovate with recent product announcements reflecting customer-driven solutions These advancements position us to capture significant opportunities in the global AI infrastructure investment. fueling our next phase of growth. Reflecting on our journey, Credo has navigated successes and challenges with relentless focus on delivering world-class products. This resilience defines our DNA and is our greatest strength.

Speaker Change: In summary.

Speaker Change: Fiscal 'twenty five marked a pivotal year for accretive achieving record revenue profit and market adoption of our innovative connectivity solutions hitting the inflection point, we anticipated our operational and customer facing teams executed flawlessly to deliver these results.

Speaker Change: <unk> pioneered a market that transforms how hyper scaler connect switches and servers, we continue to innovate with recent product announcements, reflecting customer driven solutions.

Speaker Change: These advancements position us to capture significant opportunities in the global AI infrastructure investment wave fueling our next phase of growth.

Speaker Change: Reflecting on our journey Credo has navigated successes and challenges with relentless focus on delivering world class products. This.

Speaker Change: This resilience defines our DNA and is our greatest strength.

William Brennan: Thank you Team Credo for your dedication. I'm excited for what lies ahead. We see growing demand for high-speed connectivity solutions across our hyperscaler customers to power advanced AI services, a trend we anticipate continuing for the foreseeable future. Customers require reliable, power efficient, high performance and tailored solutions to support their diverse architecture. Credo meets this demand with a differentiated portfolio of copper and optical connectivity solutions, customized for customers. built on our core services IP, tiered innovation strategy, and system level approach.

Speaker Change: Thank you Jean Credo for your dedication I'm excited for what lies ahead.

Speaker Change: We see growing demand for high speed connectivity solutions across our hyperscale customers to power advanced AI services, a trend we anticipate continuing for the foreseeable future.

Speaker Change: Customers require reliable power efficient high performance and tailored solutions to support their diverse architectures.

Speaker Change: To meet this demand with a differentiated portfolio of copper and optical connectivity solutions customized for customers built on our core series IP tiered innovation strategy and system level approach.

Daniel Fleming: With that, Dan Fleming, our CFO, will now provide additional details, and we'll then take questions. Thank you, Bill, and good afternoon. I will first provide a financial summary of our fiscal year 25, then review our Q4 results, and finally discuss our outlook for Q1 and provide some color on our expectations for fiscal year 27. Revenue for fiscal year 25 was a record at $436.8 million, up 126% year over year, driven by product revenue that grew by 157%. Gross margin for the year was 65% up 257 basis points year over Our operating margin improved by 2,500 basis points as we continue to generate considerable top-line leverage driven by growth in our products while growing operating expenses considerably slower than revenue.

Speaker Change: With that Dan Fleming, our CFO will now provide additional details and we will then take questions.

Dan Fleming: Thank you Bill and good afternoon, I will first provide a financial summary of our fiscal year 'twenty. Five then review our Q4 results and finally discuss our outlook for Q1 and provide some color on our expectations for fiscal year 'twenty six.

Dan Fleming: Revenue for fiscal year 'twenty five was a record at $436 8 million up 126% year over year, driven by product revenue that grew by 157% gross margin for the year was 65% up 257 basis points year over year.

Dan Fleming: Our operating margin improved by 2005 hundred basis points as we continue to generate considerable topline leverage driven by growth in our products, while growing operating expenses considerably slower than revenue.

Daniel Fleming: That step up in profitability flowed through to the bottom line, as we reported earnings per share of 70 cents for the year, a 62 cent improvement over the prior year. In fiscal year 25, Credo not only delivered the dramatic product growth, which we had forecast, but we also demonstrated the earnings power in our business model.

Dan Fleming: That step up in profitability flow through to the bottom line as we reported earnings per share of <unk> 70 for the year of 62 <unk> improvement over the prior year.

Dan Fleming: In fiscal year, 'twenty, five credo, not only delivered the dramatic product growth, which we had forecast, but we also demonstrated the earnings power in our business model.

Daniel Fleming: Moving on to the fourth quarter. In Q4, we reported revenue of $170 million, up 26% sequentially, and up 180% year over year, and well above the high end of our guidance range. Our product business generated $165.9 million of revenue in Q4, up 26% sequentially and up 276% year over year. Notably, our AEC product line again grew healthy double digits sequentially to achieve new record revenue levels once again. Our top three end customers were each greater than 10% of revenue in Q4. As a reminder, a customer mix will vary from quarter to quarter, and we continue to make progress in diversifying our customer base.

Dan Fleming: Moving on to the fourth quarter and Q4, we reported revenue of $170 million up 26% sequentially and up 180% year over year and well above the high end of our guidance range.

Dan Fleming: Our product business generated $165 $9 million of revenue in Q4.

Dan Fleming: 26% sequentially and up 276% year over year, notably our AUC product line again grew healthy double digits sequentially to achieve new record revenue levels once again.

Dan Fleming: Our top three end customers, where each greater than 10% of revenue in Q4.

Dan Fleming: As a reminder, our customer mix will vary from quarter to quarter, and we continue to make progress in diversifying our customer base. We continue to expect that three to four customers will be greater than 10% of revenue in the coming quarters and fiscal year.

Daniel Fleming: We continue to expect that three to four customers will be greater than 10% of revenue in the coming quarters and fiscal year. as hyperscale customers continue to ramp more significant volumes and as we expect to begin to ramp to new hyperscale customers in the second half of fiscal year 2016. Our team delivered Q4 non-gap gross margin of 67.4% above the high end of our guidance range and up 355 basis points sequentially. Our product non-GAAP gross margin was 66.5% in the quarter, up 354 basis points sequentially, and up 1,289 basis points year-over-year, primarily due to increasing scale.

Dan Fleming: As hyperscale customers continue to ramp more significant volumes and as we expect to begin to ramp up two new hyperscale customers in the second half of fiscal year 2006.

Dan Fleming: Our team delivered Q4, non-GAAP gross margin of 67, 4% above the high end of our guidance range and up 355 basis points sequentially.

Dan Fleming: Our product non-GAAP gross margin was 66, 5% in the quarter.

Dan Fleming: 354 basis points sequentially, and up 1289 basis points year over year, primarily due to increasing scale.

Daniel Fleming: Total non-GAAP operating expenses in the fourth quarter were $52 million at the high end of our guidance range and up 19% sequentially, primarily driven by headcount. Our non-GAAP operating income was $62.5 million in Q4, compared to non-GAAP operating income of $42.4 million in Q3, up demonstrably due to the leverage attained by achieving 26% sequential top line growth. Our non-GAAP operating margin was 36.8% in the quarter compared to a non-GAAP operating margin of 31.4% in the prior quarter, a sequential increase of 538 basis points. Our non-GAAP net income was $65.3 million in the quarter, a record high compared to non-GAAP net income of $45.4 million in Q3.

Dan Fleming: Total non-GAAP operating expenses in the fourth quarter were $52 million at the high end of our guidance range and up 19% sequentially, primarily driven by head count.

Dan Fleming: Our non-GAAP operating income was $62 $5 million in Q4 compared to non-GAAP operating income of $42 4 million in Q3 up demonstrably due to the leverage attained by achieving 26% sequential top line growth.

Dan Fleming: Our non-GAAP operating margin was 36, 8% in the quarter compared to a non-GAAP operating margin of 31, 4% in the prior quarter, a sequential increase of 538 basis points.

Dan Fleming: Our non-GAAP net income was $65 3 million in the quarter, a record high compared to non-GAAP net income of $45 $4 million in Q3.

Daniel Fleming: And our non-GAAP net margin was 38.4% in the quarter, well above the high end of our long-term net margin model of 28 to 33%. Cash flow from operations in the fourth quarter was $57.8 million, up $53.6 million sequentially due to cash collection driven by the significant sequential product CapEx was $3.7 million in the quarter, driven largely by purchases of production equipment, and free cash flow was $54.2 million, an improvement of $54.6 million from the third quarter. We ended the quarter with cash in equivalence of $431.3 million, an increase of $52.1 million from the third quarter.

Dan Fleming: And our non-GAAP net margin was 38, 4% in the quarter well above the high end of our long term net margin model of 28% to 33%.

Dan Fleming: Cash flow from operations in the fourth quarter was $57 8 million $53 $6 million sequentially due to cash collection driven by the significant sequential product ramp.

Dan Fleming: Tax was $3 7 million in the quarter, driven largely by purchases of production equipment.

Dan Fleming: And free cash flow was $54 2 million, an improvement of $54 $6 million from the third quarter.

Dan Fleming: We ended the quarter with cash and equivalents of $431 $3 million, an increase of $52 $1 million from the third quarter.

Daniel Fleming: We remain well capitalized to continue investing in our growth opportunities while maintaining a substantial cash budget. Our Q4 ending inventory was $90 million dollars up $36.8 million dollars sequentially.

Dan Fleming: We remain well capitalized to continue investing in our growth opportunities, while maintaining a substantial cash buffer.

Dan Fleming: Our Q4, ending inventory was $90 million up $36 $8 million sequentially now turning to our guidance. We currently expect revenue in Q1 of fiscal 'twenty six to be between $185 million and $195 million.

Daniel Fleming: Now, turning to our guidance, we currently expect revenue in Q1 of fiscal 26 to be between $185 million and $195 million, up 12% sequentially at the mid-period. We expect Q1 non-GAAP gross margin to be within a range of 64 to 66%. We expect Q1 non-GAAP operating expenses to be between $54 million and $56 million. We expect Q1 diluted weighted average share count to be approximately 188 million shares. These expectations are based on the current tariff regime, which remains fluid. We were pleased to see fiscal year 25 play out as we expected. The rapid shift to AI workloads continued to drive new, broad-based customer engagement, and we executed well to deliver the sequential growth we had forecast throughout the year.

Dan Fleming: Up 12% sequentially at the midpoint.

Dan Fleming: We expect Q1, non-GAAP gross margin to be within a range of 64% to 66%.

Dan Fleming: We expect Q1, non-GAAP operating expenses to be between $54 million and $56 million. We expect Q1 diluted weighted average share count to be approximately 188 million shares.

Dan Fleming: These expectations are based on the current tariff regime, which remains fluid.

Dan Fleming: We were pleased to see fiscal year 'twenty five play out as we expected.

Dan Fleming: The rapid shift to AI workloads continue to drive new broad based customer engagement, and we executed well to deliver the sequential growth we had forecast throughout the year.

Daniel Fleming: As we begin fiscal year 26, we expect revenue to exceed $800 million for year-over-year growth in excess of 85%. We expect non-GAAP operating expenses to grow at less than half the rate of revenue from fiscal year 25 to fiscal year 26. And as a result, we expect our non-GAAP net margin to approach 40%.

Dan Fleming: As we began fiscal year 2006, we expect revenue to exceed $800 million for year over year growth in excess of 85%. We expect non-GAAP operating expenses to grow at less than half the rate of revenue from fiscal year 'twenty two fiscal year 2006, and as a result, we expect our non <unk>.

Dan Fleming: GAAP net margin to approach 40%.

Operator: And with that, I will open it up for questions. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Dan Fleming: And with that I will open it up for questions.

Speaker Change: At this time I would like to remind everyone in our <unk>.

Speaker Change: I ask a question press Star then the number one on your telephone keypad.

Speaker Change: Pause for just a moment to compile the Q&A roster.

Vivek Arya: Your first question comes from the line of Vivek Arya with Bank of America. Your line is open. Thanks for taking my questions. For the first one, on the revenue side, I was hoping you could, you know, perhaps quantify how large were the three 10% customers, especially the largest one. And thanks for giving the fiscal 26 revenue outlook. That suggests kind of a, you know, modest kind of sequential growth through the year. But I think you mentioned that you expect other new hyperscalers to come on board in the second half.

Speaker Change: Your first question comes from the line of Vivek Arya with Bank of America. Your line is open.

Vivek Arya: Thanks for taking my questions for the first one.

Speaker Change: On the revenue side I was hoping you could perhaps quantify how large were the 310% customers, especially the largest one and thanks for giving the fiscal 2006, our revenue outlook.

Speaker Change: That suggests kind of a modest kind of sequential growth through the year, but I think you mentioned that you expect.

Speaker Change: Other new Hyperscale is to come onboard in the second half. So if you could just talk through what the puts and takes out as you look at kind of shaping the year, what could be the upside drivers and downside risks from here into fiscal 'twenty six as you get more customers on board.

Daniel Fleming: So if you could just talk through what the puts and takes are as you look at kind of shaping the year, what could be the upside drivers and downside risks from here through fiscal 26 as you get more customers on board and out of it. All right, sure, Vivek.

Speaker Change: Had a follow up.

Dan Fleming: Sure Vivek this is Dan Fleming.

Daniel Fleming: This is Dan Fleming. So, as you know, last quarter in our earnings call, we said that we had expected 3% to 4%, 10% end customers in the coming quarters and fiscal year. So, we reiterated that again in our prepared comments, and that's exactly what we saw in our Q4. So, the largest customer was 61% of revenue. No surprise who that was. And we also had a 12% and an 11% customer, and they were the same customers that we saw in Q2, past that 10% threshold. So, kind of addressing your second point, we expect to continue our diversification throughout fiscal 26.

Dan Fleming: No.

Vivek Arya: As you know last quarter in our earnings call. We said that we had expected 3% to 410% customers in the coming quarters in fiscal year <unk>.

Dan Fleming: So while we've reiterated that again.

Dan Fleming: Prepared comments and that's exactly what we saw in our Q4, so the largest customer was 61% of revenue.

Dan Fleming: No surprise for you that was.

Dan Fleming: And we also had a 12% and 11% customer.

Dan Fleming: And.

Dan Fleming: They were the same as the same customers that you saw in Q2.

Dan Fleming: Past that 10% threshold.

Dan Fleming: Kind of addressing your second point, we expect to continue.

Dan Fleming: Patients throughout fiscal 'twenty six.

Daniel Fleming: And in addition to these three customers, we do expect to have two additional hyperscalers in the second half of fiscal 26, in addition to those three 10% customers. It's a little difficult for us to map out exactly how that will chart through the year, but right now, if you just kind of apply a linear projection, that's probably as best as we could project at this point in time. But we're certainly excited about our continued revenue diversification across several hyperscalers as our innovative solutions are more broadly adopted across the industry.

Dan Fleming: And in addition to these three customers.

Dan Fleming: We do expect to have two additional hyperscale or as in the second half of fiscal 2006. In addition to the 310% customers. It's a little difficult for us to map out exactly how that will chart through the year, but.

Dan Fleming: Right now if you just kind of applying a linear trajectory that's probably as best as best as we can project at this point in time.

Dan Fleming: But we're certainly excited about our continued revenue diversification across several hyperscale or as our innovative solutions are more broadly adopted across the industry.

Daniel Fleming: And for my follow-up on gross margin, you know, you mentioned scale as a reason for gross margin expansion, but I think for Q1, you're getting gross margin to kind of get back to trend 65%, but you know, you should be getting more scaled benefits. So is there anything else in mix or customers that are selling?

Dan Fleming: And so my follow up on gross margin.

Dan Fleming: Didn't maintain scale and the reason for gross margin expansion, but I think for Q1, you're guiding gross margin to kind of get back to.

Dan Fleming: 65%, but you.

Dan Fleming: You should be getting more scale benefits or is there anything else that makes our customers. That's that sounds. So just conceptually how should we think about the gross margin trajectory for the fiscal year and if or.

Daniel Fleming: So just, you know, conceptually, how should we think about the gross margin trajectory for the fiscal year and if for extra credit, if you could also tell us about how you think about EBIT margin, because there you are above your longer term model. Yeah, we're certainly seeing the benefit of scale. We saw that in Q3, we saw it even more so in Q4, as that scale continued to grow. So it's a fair question that you ask. You know, we were up 355 basis points from Q3 to Q4, gross margin wise. And that puts us, you know, above the high end of our long term model.

Dan Fleming: Extra credit if you could also tell us about how you think about EBIT margin because they are you at above your longer term model.

Dan Fleming: Thank you.

Dan Fleming: Yes, we're certainly seeing the benefit of scale, we saw that in Q3, we thought even more so in Q4 as that scale continue to grow. So it's a fair question that you asked we were up 355 basis points from Q3 to Q4 gross margin lines.

Dan Fleming: And that puts us.

Dan Fleming: Above the high end of our long term model.

Daniel Fleming: But having said all that, our gross margin expansion won't always be linear as we continue to increase scale. And there will always be some differences in product mix from quarter to quarter. So we guided Q1 to 65% at the midpoint. But more importantly, you know, we're not setting a new long term model for gross margin, but we're clearly entering a phase right now where gross margin will be at or above the high end of that long term expectation.

Dan Fleming: Having said all that our gross margin expansion won't always be linear as we continue to increase scale and there'll always be some differences in product mix from quarter to quarter. So we guided Q1 to 65% at the midpoint.

Dan Fleming: But more importantly, we're not setting a new long term model for gross margin, but we're clearly entering a phase right now where gross margin will be at or above the high end of that long term expectation.

Daniel Fleming: Anything on EBIT, Dan? They're all to your, about the target. Same, you would expect that to follow kind of the improvement or expansion in net margin should fall right through to EBIT. So you could do that math pretty, in a pretty straightforward fashion. Our CapEx, the one additional piece I'll give you is, if you look at all of the different tape outs and leading those that we have planned over the coming fiscal year, our CapEx might be maybe double what it was this last year. So that'd be the last piece of the equation you would need to come up with your own EBIT.

Speaker Change: And anything on EBIT.

Dan Fleming: Daryl.

Dan Fleming: And at the same you would expect that to follow.

Dan Fleming: Kind of the.

Dan Fleming: The improvement or expansion in net margin should file Paul right through to EBIT.

Dan Fleming: So you can do that math pretty.

Dan Fleming: And a pretty straightforward fashion, our capex. The one additional piece I will give you his.

Dan Fleming: If you look at all of the different tape outs and leading nodes that we have planned over the coming fiscal year, our capex might be maybe double what it was this last year. So that'd be the last piece of the equation you would need to come up with your own that EBIT.

Dan Fleming: Okay.

Operator: Again, before going to the next question, if you would like to ask a question, please press star then the number one on your telephone keypad. We request that you limit your question to one and one follow-up.

Dan Fleming: Again before going to the next question.

Speaker Change: You would like to ask a question. Please press Star then the number one on your telephone keypad, we request that you limit your questions to one and one follow up. Your next question comes from the line of stories Wattenberg with Stifel. Your line is open.

Tore Svanberg: Your next question comes from the line of Tore Svanberg with Stifel. Your line is open. Yes, thank you, Bill, Dan and Dan. Awesome results, great execution.

Speaker Change: Yes, Thank you Bill and Dan.

Speaker Change: Awesome results great execution.

William Brennan: Bill, I was hoping you could talk a little bit more about some of the use cases with your large customers that are ramping, especially on the AEC side. So, you know, there's clearly, you know, an 800 gig upgrade cycle going on. You know, I guess you're still, you know, shipping some 400 gig. And especially as we think about the two new customers that are coming out, coming on second half of the year. If you could talk to the use cases for those as well, that'd be really helpful. Thank you. Sure. So I think we see the use cases being pretty consistent with what we've talked about in the past.

Bill: Bill I was hoping you could.

Speaker Change: Talk a little bit more about some of the use cases with your large customers that are ramping, especially on the AUC side. So there's clearly.

Speaker Change: 800 gig upgrade cycle going on.

Speaker Change: I guess youre still shifting some 400 gig.

Speaker Change: And especially as we think about the two new customers that are coming out coming on second half of the year.

Speaker Change: If you could talk to the used cases for those as well that'd be really helpful. Thank you.

Speaker Change: Sure. So I think we see the use cases being pretty consistent with what we've talked about in the past.

William Brennan: There's three basic areas. There's, and our main business today is in connecting servers with switches. The first business that we ramped was really front end connections. And that that is what we think about traditionally when we think of the network. The second area is now with back-end networks and specifically with scale-out networks. This is the majority of the product that we're shipping today. Really, if we look at all of the customers combined, I would say it's far greater than 50% of the shipments that we're seeing scale up back in networks for AI. The third area is really within disaggregated chassis, and so we see that being a growing part of our business, and that exists in both the back-end and front-end networks.

Speaker Change: Three basic areas.

Speaker Change: And.

Speaker Change: Our main business today is connecting.

Speaker Change: Servers with with switches.

Speaker Change: The first business that we ramp was really front end connections.

Speaker Change: And that's what we think about traditionally one fifth of the network.

Speaker Change: Second area is now with back end networks, and specifically with scale out networks.

Speaker Change: This is the majority of the products that we're shipping today really if we look at all of the customers combined I would say, it's far greater than 50% of the shipments that we're seeing scale up.

Speaker Change: Back yet.

Speaker Change: Back in networks right.

Speaker Change: The third third area is really within disaggregated chassis.

Speaker Change: So we see that being a growing part of our business and that exist in both backend and front end networks.

William Brennan: What we're seeing is, you know, our largest volume right now is actually in 50 gig per lane ADCs, but we see the trend moving quickly to 100 gig per lane. Hopefully that gives you the color you were looking for. Yeah, no, that's great. And maybe as a follow up, and so related to that, because you mentioned the largest volume is still 50 gig, I assume that that means it's more 400. But you know, where are we sort of then in the inflection point to 800 gig? Is this sort of still very early days for 800 gig upgrades?

Speaker Change: What we're seeing is.

Speaker Change: Our largest volume right now is actually 50 gig per lane adcs, but we see the trend moving quickly to 100 gig per lane.

Speaker Change: Hopefully that gives you the color you were looking for.

Speaker Change: Yes, no that's great and maybe as a follow up and related to that.

Speaker Change: Because you mentioned the largest volume is still 60 gig I assume that that means it's more 400.

Speaker Change: Where are we sort of been in the inflection point for 800 gig is this sort of still very early days 400 gig upgrades.

William Brennan: And, you know, I assume it would be very different by customer, right? You know, some customers probably haven't even moved to 800 gig for your AEC products yet, right? Right. Yeah, each one of our customers, we kind of use a different market in itself. They all have different strategies. And there's, you know, many different ways to achieve the networking objectives, as it relates to AI clusters, as it relates also to the network in general. And so We see that really towards the end of Fiscal 26, we see the transition from 50 gig to 100 gig.

Speaker Change: I assume they will be very different by customer right.

Speaker Change: Some customers probably haven't even move to 800 gig for your ADC product content right.

Speaker Change: Right yes.

Speaker Change: Each one of our customers, we kind of use a different market.

Speaker Change: In of itself. They all have different strategies and there's many different ways to achieve the networking objectives as it relates to clusters.

Speaker Change: As it relates also to the network in general.

Speaker Change: And so.

Speaker Change: We see that that really towards the end of fiscal 2006, we see it.

Speaker Change: The.

Speaker Change: For 50 gig 100 gig.

William Brennan: Overall, broadly for our business, we'll, you know, we'll really start to happen in a bigger way. But again, we've got some customers who are already there, 100% of the shipments that we're making are 100 gig per lane. So it's, it's hard to talk generally about it, given the fact that each one of our customers will have a different strategy. Well, that's great. Congrats again. Thanks.

Speaker Change: Overall broadly for our business.

Speaker Change: It will really start to happen in a bigger way, but again, we've got some customers who are already there are 100% of the shipments that we're making a 100 gig per lane.

Speaker Change: It's hard to talk generally about it given the fact that each one of our customers will have a different strategy.

Speaker Change: Well, that's great Congrats again.

Ray: Thanks Ray.

Ken Bolton: Your next question comes from the line of Ken Bolton with Needham and Company. Your line is open. Hey, guys.

Speaker Change: Your next question comes from the line of Ken <unk> with Needham and company. Your line is open.

Ken: Hey, guys, let me offer bias congratulations as well I wanted to come back Dan to the gross margin and the step down in.

Daniel Fleming: Let me offer my congratulations as well. I wanted to come back, Dan, to the gross margin and the step down in the July quarter. Wondering if you could just talk to us about the tariff risks. I think you've got BizLink and FoxLink, which manufacture your AEC cables, both located in China, and wondering if tariff risks and tariff costs are having any impact on that margin in the July quarter. And then I've got a follow-up. Yeah, that's not. We don't expect there to be a significant tariff risk impact to gross margin percentage at this point. So that's not what's what's driving, you know, potentially a minor reduction in gross margin percentage, you know, q1 to q2 or q4 to q5.

Ken: The July quarter wondering if you could just talk to us about the tariff risks I think he's got his link and Fox link which manufacturer your AUC cables both located in.

Ken: China, and wondering if tariff risks and tariff costs.

Ken: Having any impact on that gross margin in the July quarter, and then I've got a follow up.

Ken: Yes, that's not.

Ken: We don't expect there to be a.

Ken: Significant tariff risk impacted gross margin percentage at this point, so thats not.

Ken: What what's driving potentially a minor reduction in gross margin percentage Q1 to Q2 Q4 to Q1.

William Brennan: But just thinking of tariffs in general, maybe I'll let Bill comment on them a little more broadly. Sure. So I think what we've seen over the last quarter since our last call, tariffs and the overall macroeconomy are continuing to evolve. We're obviously monitoring the situation closely. And we're working very closely with our customers. And ultimately, we're trying to be as flexible as we can in delivering the best solution for each customer. The, you know, over the past year, we've talked about. The efforts that we're making to diversify geographically. You know, really happy to say that in the kind of worst case scenario, you know, within months, we could be out of one geographic location and into another.

Ken: But.

Ken: Just thinking of tariffs in general maybe I'll, let bill comment on them, but more broadly for sure.

Ken: I think what we've seen over the last quarter since our last call tariffs and the overall macro economy are continuing to evolve.

Ken: Obviously monitoring the situation closely.

Ken: We're working very closely with our customers.

Ken: Ultimately, we're trying to be as flexible as we can and.

Ken: Delivering the best solution for each customer.

Ken: The.

Ken: Over the past year, we've talked about.

Ken: The efforts that we're making to diversify.

Ken: Geographically.

Ken: Really happy to say that given the kind of a worst case scenario.

Ken: Within months, we could be out of one geographic location and into another and so I feel like.

William Brennan: And so I feel like our team and our customers, we're trying to take a, you know, a mindset that's dynamic and, you know, ultimately. We feel like this thing is going to be more well understood over the next three to six months and we're going to try to be as flexible as we can to deliver solutions in the most efficient way possible.

Ken: Our team and our customers we're trying to take.

Ken: Our mindset is dynamic.

Ken: Ultimately.

Ken: We feel like this thing is going to be more well understood over the next three to six months.

Ken: We're going to try to be as flexible as we can to fill.

Ken: Deliver suite solutions in the most.

Ken: Efficient way possible.

Ken Bolton: And my follow-up, Bill, just you've talked about your fourth and your fifth hyperscale customer ramping. It sounds like kind of more second half of the year. You've got three 10% customers. You're saying there could be three to four.

Ken: Got it and then my follow up Bill just.

Ken: Talk to you about your fourth tier fifth hyperscale customer ramping.

Ken: It sounds like kind of more second half of the year.

Speaker Change: You've got 310% customers you are saying there could be three to four I'm wondering if you think either of the two hyper scaler.

William Brennan: I'm wondering if you think either of the two hyperscalers that ramped this year, would you expect them to ramp so quickly that one of those could be a 10% customer, you know, on a quarterly basis by the end of fiscal 26? Or would you expect a more modest ramp from the two new hyperscalers this year?

Speaker Change: That ramp this year would you expect them to ramp so quickly that one of those could be a 10% customer.

Speaker Change: On a quarterly basis by the end of fiscal 'twenty six or.

Speaker Change: Would you expect a more modest ramp from the two new hyper scaler. This year. Thank you.

William Brennan: Thank you. I think all of the hyperscalers have the potential to be a 10% customer long term. If we look at more of a short term outlook, it's very hard for us to get specific with that. I will say that one of the two additional customers that we've talked about, the ramp, looks like it's going to happen towards the middle of the year. So we're getting some clarity that that ramp is planned to be a little bit sooner than we expected. The additional customer beyond that, it's also firming up, but it looks more towards more towards the second half when that's going to happen.

Speaker Change: I think all of the Hyperscale.

Speaker Change: Has the potential to be a 10% customer long term.

Speaker Change: If we look at more of a short term outlook is very hard for us.

Speaker Change: Get specific with that.

Speaker Change: I will say that one of the two additional customers that we that we've talked about the ramp it looks like it's going to happen.

Speaker Change: Towards the middle of the year, so we're getting some clarity that that.

Speaker Change: And that ramp is as.

Speaker Change: Planned to be a little bit sooner than we expected.

Speaker Change: The additional customers beyond that.

Speaker Change: It's also.

Speaker Change: Firming up but it looks more towards the.

Speaker Change: More towards the second half when thats going to happen.

William Brennan: Again, really hard for me to say in that time frame. How large these two additional customers will be, but long-term, I surely believe that both of them could be a 10% customer long-term.

Speaker Change: Again really hard for me to say in that timeframe.

Speaker Change: How large these two additional customers will be but long term I surely believe that.

Speaker Change: Both of them could be a 10% customer long term.

Ken Bolton: Thank you, Bill. Appreciate it.

Bill: Got it thank you bill.

Tom O'malley: Your next question comes from the line of Tom O'Malley with Barclays. Your line is open. Hey, guys, thanks for taking my questions. The first one built to your commentary about a majority of your business being scale-out today. If you look at the number of connections, like you're increasingly seeing a lot of these links are going to be in the scale-up architecture, and you're seeing, you know, UAL, scale-up Ethernet, and then NV Fusion now come out, and different, you know, methods for connecting those nodes. Could you talk about your play in the scale-up architecture? And do you think that you need to be embedded deeply in one of those protocols slash standards to have success?

Speaker Change: Your next question comes from the line of Tom O'malley with Barclays. Your line is open.

Speaker Change: Hey, guys. Thanks for taking my questions. The first one bill to your commentary about a majority of your business being scale out today. If you look at the number of connections like you're increasingly seeing a lot of these links are going to be in the scale up architecture, and Youre seeing ual Scaleup Ethernet and then N V fusion now come out in.

Speaker Change: Different methods for for conducting those nodes could you talk about your play in the scale up architecture and do you think that you need to be embedded deeply in one of those protocols such standards.

William Brennan: Like, today, it feels like your customer wins are very much, you know, one-on-one, but, you know, as those standards grow and those protocols grow, like, do you feel like that's where you will get the next wind of this company, is when you get aligned there? And just any comments on NV Fusion?

Speaker Change: <unk> success.

Speaker Change: It feels like your customer wins are very much.

Speaker Change: One on one but as those standards grow in those protocols grow like do you feel like Thats, where you will get the next window of this company is is when you get aligned there just any comments on the engine fusion. Please.

Speaker Change: Sure.

William Brennan: Before we jump into NVLink Fusion and scale up Ethernet or SUE and UALink, first of all, there's a large market for PCIe. And so that's Gen 5 today, moving to Gen 6. And then longer term, when we talk about these other standards, these are all going to be 224-gig, 224-gig SERDIs. So at the You know, in the near term, we expect that we're going to We're going to establish revenue and really increase that revenue base in the PCIe Gen 5 and Gen 6 time frame. And then after that, we're going to be flexible in a sense of offering Gen 7 or doing products that would be universal for all of the standards that we mentioned.

Speaker Change: Before we jump into it.

Speaker Change: So it would be linked fusion and scale up Ethernet or SUV and <unk>.

Speaker Change: Yes.

Speaker Change: You had link first of all there.

Speaker Change: There is a large market for pcie and so thats.

Speaker Change: Gen five today moving to Gen six and then longer term when we talk about these.

Speaker Change: These other standards. These are all going to be $2 24 gig.

Speaker Change: 224 gig series.

Speaker Change: Yes.

Speaker Change: So.

Speaker Change: In the near term, we expect that.

Speaker Change: We're going to.

Speaker Change: Increase we're going to establish revenue and really increase that revenue base in the pcie Gen five and Gen six timeframe.

Speaker Change: And then after that we're going to be flexible on the types of offerings Gen seven or doing products that would be universal for all of the standards that we mentioned.

William Brennan: At the physical layer, Layer 1, these are all similar surties, and we think that if we talk about AECs specifically, we think that for the 224 gig per lane AECs. We'll be able to support Ethernet, SUE, UALink, and also NVLink Fusion. So we think generally that the announcement from NVIDIA is good for the market. Open standards are good, and that will open up opportunity for the market in general, including Credo. And that's helpful.

Speaker Change: At the physical layer.

Speaker Change: Layer one.

Speaker Change: These are all similar therapies and we think that.

Speaker Change: If we talk about Adcs, specifically, we think that.

Speaker Change: For 224 gig per lean adcs.

Speaker Change: To be able to support Ethernet SUV.

Speaker Change: And also any link fusion so.

Speaker Change: Think generally that the announcement from Nvidia is good for the market.

Speaker Change: <unk> standards are good and that will open up opportunity for the market in general including Accredo.

Speaker Change: And that's helpful. As a follow up I wanted to kind of dive in on some comments you made in the preamble on the optical side just talking about the success of the execution. This year and then thoughts on growth into next year.

William Brennan: As a follow-up, I wanted to kind of dive in on some comments you made in the preamble on the optical side, just talking about the success of the execution this year and then thoughts on growth into next year. In terms of your opportunities at higher speeds, are you seeing more traction with customers today? It seems like there's a lot of diversification going on and just any, you know, evidence points of that success in the market thus far. Thanks. Yeah, our progress with Optical continues. So we felt great about what the team was able to accomplish in Fiscal 25.

Speaker Change: In terms of your opportunities at higher speeds or you're seeing more traction with customers today.

Speaker Change: It seems like Theres, a lot of diversification going on and just any evidence points of that success in the market. Thus far thanks, Ken Bill.

Speaker Change: Our progress with optical continues so we felt great about what the team was able to accomplish in fiscal 'twenty five and we're looking again to double or even beyond double our optical revenue in fiscal 'twenty six.

William Brennan: And we're looking again to double or even beyond double our optical revenue in Fiscal 26. So, the majority of our business today is, believe it or not, 50 gig per lane, and we've got several designs that are in flight, and we're seeing traction now in revenue for 100 gig per lane designs. That is going to continue. Our share increase for 100 gig per lane optical DSPs will continue. I think when we saw each other at OFC, you could sense the interest that we saw in the demonstrations that we made there. Probably most impressive coming out of that show was showing an 800 gig LRO DSP built into a module that was being demonstrated, showing great error rates.

Speaker Change: So the majority of our business today is believe it or not 50 gig per lane and we've got several designs that are in flight and we're seeing traction now on revenue for 100 gig protein designs.

Speaker Change: That is going to continue our share increase for 100 gig per lane optical DSP will continue I think when when we saw each other at OFC you could you could see.

Speaker Change: The.

Speaker Change: The interest that we saw in the demonstrations that we made there.

Speaker Change: Most impressive coming out of that show was.

Speaker Change: Showing.

Speaker Change: <unk> 800 gig Lauro.

Speaker Change: <unk>.

Speaker Change: Built into a module that was being demonstrated showing great error rates.

William Brennan: And the key point was at roughly 9 watts. So there's an increasing focus on power efficiency, especially in AI networks, in AI clusters. And so my feeling is that we're going to experience a lot of success in the 100 gig per lane market in the next 12 to 24 months. And of course, beyond that, 200 gig per lane is coming. I think we're in the camp that says it's going to come a little bit more slowly than predicted, as it always seems to happen. But also at OFC, we demonstrated what we believe is an industry-leading 200 gig per lane.

Speaker Change: The key point was at roughly 90 watts. So there is an increasing focus on on power efficiency.

Speaker Change: Specialty and in AI.

Speaker Change: It works clusters.

Speaker Change: So.

Speaker Change: My feeling is that we're going to experience a lot of success in the 100 gig per land.

Speaker Change: Market in the next 12 to 24 months.

Speaker Change: And of course beyond that 200 gig per lane is coming I think we're in the camp that says it's going to come a little bit more slowly than predicted.

Speaker Change: Is it always seems to happen, but also at OFC. We demonstrated what we believe is an industry leading 200 gig currently.

William Brennan: optical DSP solution. Again, you know, leading error performance and setting probably a new benchmark in power efficiency for that 1.6T market. We're going to come out with both full DSP and LRO variants at the same time. And our expectation is that we're really well positioned in that market as that as that develops.

Speaker Change: Optical DSP solution.

Speaker Change: Again, leading air performance and setting.

Speaker Change: <unk>, probably a new benchmark in power efficiency for that $1 60 market, we're going to come out with both full DSP and <unk> variance at the same time and.

Speaker Change: Our expectation is that we're really well positioned in that market is that.

Speaker Change: That develops.

Vijay Rakesh: Your next question comes from the line of Vijay Rakesh with Mizzou. Your line is open. Hi Bill and Dan. Congratulations on a great quarter I guess. Just a couple of quick questions, I'm at the airport, it's a little noisy. But can you talk to what is the traction you're seeing on optical DSP? I think you talked about three customers going to five.

Speaker Change: Your next question comes from the line of Vijay Rakesh with Mizuho. Your line is open.

Speaker Change: Hi, Ben.

Speaker Change: Great quarter I guess.

Speaker Change: Just a quick question is I mean, the endpoint there is a little noisy.

Speaker Change: Can you talk to one of the worst it's actually youre seeing in optical.

Speaker Change: You talked about getting to five.

William Brennan: I'm just wondering if they're all full DSP or LRO and when do you expect those ramps to become much bigger I guess? Sure. So I feel like we're, we're really well positioned right now. If we talk about 100 gig per lane solutions, and 200 gig per lane solutions, specifically. We're going to have various products that are going to enable our customers to target specifically what they're most interested in. So our 12 nanometer family of DSPs is by far the lowest cost from the standpoint of any DSPs in the market. So super cost effective in 12 nanometer.

Speaker Change: I'm, just wondering if that or will it be.

Speaker Change: Yes.

Speaker Change: No.

Speaker Change: And Randy.

Speaker Change: Turning to become familiar.

Speaker Change: Sure. So I feel like we're really well positioned right now if.

Speaker Change: If we talk about 100 gig per lane solutions, and 200 gig per lane solutions specifically.

Speaker Change: We're going to have various.

Speaker Change: Various products.

Speaker Change: Are going to enable our customers to target specifically, what they're most interested in and so our 12 nanometer family.

Speaker Change: Of DSP is by far the lowest cost.

Speaker Change: Sure.

Speaker Change: From standpoint.

Speaker Change: Standpoint of any dsp's of the market so super cost effective in 12 nanometer. The product line, we came out with recently in five nanometer this setting new benchmarks for power efficiency and.

William Brennan: The product line we came out with recently in 5 nanometer, this sets new benchmarks for power efficiency. And so that is a trend that we see, that that is something that our customers are pursuing pretty aggressively right now. As it relates to full DSP versus LRO, we're very agnostic. And certain customers, if they could fit under the power ceiling for the module design with a full DSP, they'll go with a full DSP. In other cases, if power efficiency is really critical, and we're seeing this market for 800 gig optical DSPs and optical modules really becoming much more prioritized.

Speaker Change: And so that is a trend that we see that.

Speaker Change: Something that are our.

Speaker Change: Customers are pursuing pretty aggressively right now as it relates to full DSP versus MRO, we're very agnostic.

Speaker Change: And certain customers if they can fit under the under the power ceiling for the module design with a full DSP. They will go with a full DSP.

Speaker Change: In other cases.

Speaker Change: Yeah.

Speaker Change: Power efficiency is really critical.

Speaker Change: And we're seeing this market for 800 gig optical DSP and optical modules.

Speaker Change: Really.

Speaker Change: Really becoming much more prioritize so to sub 10 watts.

William Brennan: So sub 10 watts is very much an objective. And in the past, those in the industry have said that the only way to do that is to go an LPO solution, which drops the DSP and creates a whole host of issues with interop and diagnostics. So the LRO is a solution. As we've shown, we can deliver on this requirement of sub 10 watt modules and still maintain the benefits of having the DSP designed into the system.

Speaker Change: It is very much an objective and in the past.

Speaker Change: Those in the industry have said that the only way to do that is to go to on LPL solution, which drops the DSP.

Speaker Change: And it creates a whole host of issues with Interop and.

Speaker Change: In diagnostics.

Speaker Change: The MRO is a as a solution as we've shown we can deliver on this requirement of sub 10 watt modules and still maintain the benefits of having <unk>.

Speaker Change: SP designed into the system.

Vijay Rakesh: Got it, thanks.

Speaker Change: Got it thanks, and then lastly on the.

William Brennan: And then last, on the scale-up side, I know you showed tables at CES, but when do you expect scale-up, you know, where it needs to start to get, or start to show up and get material for you? Thanks. Yeah, for us, we've been pretty consistent saying that our design loans will come this calendar year, and our revenue ramp will start in calendar 26. And I feel like we're, you know, absolutely right on top of, you know, that time frame. When I think it's going to become a very material and significant part of our business, I think, you know, over the next two to five years, this is going to be a part of the network where there's intense demand across the board.

Speaker Change: I know you should be able to see yet.

Speaker Change: When do you expect.

Speaker Change: Very.

Speaker Change: And you're still stuck again.

Speaker Change: Suddenly show up and get them continuously.

Speaker Change: Thanks.

Speaker Change: Yes for us, we've been pretty consistent saying that our design wins will come.

Speaker Change: This calendar year, and our revenue ramp will start in calendar 'twenty six and I feel like we are.

Speaker Change: Absolutely right on top of.

Speaker Change: That time frame.

Speaker Change: I think it's going to become.

Speaker Change: Very material and significant part of our business I think over the next.

Speaker Change: Two to five years this is.

Speaker Change: Going to be a.

Speaker Change: Part of the network, where there is intense demand.

Speaker Change: Across the board and so I see our business growing pretty dramatically beyond sales.

Karl Ackerman: And so I see our business growing pretty dramatically beyond, say, our fiscal 27 time frame. Thank you.

Speaker Change: Our fiscal 2007 timeframe.

Speaker Change: Alright, thank you.

Daniel Fleming: Your next question comes from the line of Karl Ackerman with BNP Paribas. Your line is open. Yes, thank you. I have two, please. First, Dan, you spoke about CapEx doubling this year to support your sales outlook for fiscal 26. Given the capital commitment to support these programs, could you discuss whether any of these programs are take or pay that may give you better visibility into the manufacturing ramp requirements for these programs over the next couple of quarters? No, no, this is the largest thing that drives our CapEx is our production mask set tape outs. So And we've talked now for a while about upcoming three nanometer tapeouts in fiscal 26.

Speaker Change: Your next question comes from the line of Karl Ackerman with BNP Paribas. Your line is open.

Karl Ackerman: Yes. Thank you.

Speaker Change: I have two please.

Speaker Change: Dan you spoke about Capex doubling this year to support your sales outlook for fiscal 'twenty six given the capital commitment to support these programs could you discuss whether any of these programs are take or pay.

Speaker Change: That may give you better visibility into the manufacturing ramp requirements for these programs over the next couple of quarters.

Doug: No no this is Doug.

Doug: The largest thing that drives our capex as our production mask tape outs. So.

Speaker Change: And we've talked now for a while about.

Speaker Change: The upcoming three nanometer tape outs in fiscal 'twenty, six so thats really whats driving it.

Daniel Fleming: So that's really what's driving it. So it's, it's, in a sense, kind of disconnected from any customer contracts or customers specifically, it's really, you know, fundamental devices that we're, that we're taping out that we capitalize.

Speaker Change: In a sense kind of disconnected from any customer contracts, our customer specifically, it's really fundamental devices thats, where we are taping out the recapitalize.

Daniel Fleming: Yep, thanks for that.

Speaker Change: Yes, thanks for that.

William Brennan: I understand that you may not have full visibility into every AEC connection, but do you have a general rule of thumb to think about your AEC sales being used to connect GPU compute racks versus custom compute server racks? I ask because there's a misperception that you are over indexed to custom basic server racks for AEC. Yeah, I think you I think you got it right, that that our AECs are used to connect Any any kind of GPU to any kind of switch. And we've seen that across the board with our customers. There's, there's definitely no way to to look at our, our AEC business as a proxy for any kind of custom GPU solutions.

Speaker Change: I understand that you may not have full visibility into every AC connection, but do you have a general rule of thumb to think about your AUC sales being used to connect GPU compute racks versus custom compute server racks I asked because there was a misperception that you're over indexed to customize it server racks for Auc's. Thank you.

Speaker Change: Yes. Thank you I think you've got it right.

Speaker Change: Our adcs are used to connect.

Speaker Change: Any kind of GPU.

Speaker Change: Kind of switch.

Speaker Change: And we've seen that across the board with our customers. So there is there is definitely no way to to look at our our ADC business as a proxy for.

Speaker Change: Any kind of custom GPU solutions, we're connecting broadly at a lot of our customers with that with both.

Suji DeSilva: We're connecting broadly at a lot of our customers with with both Your next question comes from the line of Suji DeSilva with Roth Capital.

Speaker Change: Your next question comes from the line of Sushi, the silver with Roth Capital. Your line is open.

William Brennan: Your line is open. Hi, Bill, Dan and Dan, congrats on the progress here. Maybe it's been a few quarters since some of your competitors have announced AEC products and talked about them. Can you just update us on the competitive landscape? And, you know, obviously, you said it'd be a large market where you get some share, but maybe you can just talk about the competitive advantages that Credo can choose to bring to the marketplace with more folks talking about AEC offerings. Sure. From our perspective, the competitive environment has not changed meaningfully in the last 90 or 120 days.

Speaker Change: Hi, Bill Dan and Dan Congrats on the progress here, maybe it's been a few quarters in some of your competitors have announced AC products and talked about them can you just update us on the competitive landscape.

Speaker Change: Obviously, you said it would be a large market, where you get some share but maybe you can just talk about the competitive advantages that credo continues to bring to the marketplace with more folks talk about AC offerings.

Speaker Change: Sure.

Speaker Change: Yeah from our perspective, the competitive environment has not changed meaningfully in the last.

Speaker Change: 90, or 120 days, we know that our customers want multiple sources.

William Brennan: We know that our customers want multiple sources. And it's really becoming increasingly clear that the AC market can support multiple winners. So our goal is to maintain our position as the leader and in doing that are important. continuing that leadership. It's really, you know, based on delivering innovative solutions more quickly than our competition. So we're very, very focused on at each one of our customers on delivering the next generation solution, you know, first sampling, and then ultimately going through qualification and being the first to ramp. And that has to do with our ability to, you know, to act quickly, in a sense that, you know, the entire responsibility for the system level product sits within the Credo organization.

Speaker Change: It's really becoming.

Speaker Change: Increasingly clear that the AC market can support multiple winners so our goal is to maintain our position as the leader in.

Speaker Change: In.

Speaker Change: And doing better.

Speaker Change: Continuing that leadership is really.

Speaker Change: Based on delivering innovative solutions more quickly than our competition. So we're very very focused on at each one of our customers on delivering the next generation solution.

Speaker Change: First sampling and then ultimately going through qualification and being the first to ramp and that has to do with our ability to.

Speaker Change: To act quickly get a sense that.

Speaker Change: The entire responsibility for the system level product fits within the.

William Brennan: And that really comes from product definition, you know, through development, through delivery of first samples, all the way through qualification, and ultimately in production, we take full ownership. There's no question, there's no time loss. All of our engineers that work on, you know, the different parts of this, from SERTIs, to the ICs, to the system level cable system, to the firmware team, all of them, you know, are, you know, sitting right next to each other. And so our ability to iterate to close a design and bring it, you know, through qualification in production, I think is probably best in class.

Speaker Change: Accredo organization and that really comes from product definition through development through delivery of <unk>.

Speaker Change: For example, all the way through qualification and ultimately in production, we take full ownership.

Speaker Change: Theres No question Theres, no time loss of all of our engineers that work on the.

Speaker Change: The different parts of this certainty to the to the.

Speaker Change: So the Ics to the system all the cable systems to the firmware team all of them.

Speaker Change: Sitting right next to each other and so are our ability our ability to iterate to close are designed and bring it through.

Speaker Change: Through qualification is production.

William Brennan: And, you know, that's really our focus is to make sure our team is the one that's, you know, delivering for our customers first and satisfying them. And I think we've done a great job with that thus far.

Speaker Change: It's probably the best in class.

Speaker Change: And that's really our focus is to is to make sure. Our team is the one that's delivering for our customers first.

Speaker Change: Satisfying them and I think we've done a great job with that thus far.

William Brennan: Okay, very helpful there, Bill.

Speaker Change: Great very helpful. There.

William Brennan: And then my second question is on the rack-to-rack seven-meter solution that you're planning, I guess. Is that gonna, the timing of that dovetailing, as you get into scale up more so, second half of this year, next year, or can you just talk about when the demand for rack-to-rack extended cables would come in versus the ones you're selling? I think that, you know, the catalysts are really in the way that next generation data centers are being built. We've talked a lot about liquid cooling and, you know, the the non-linear power sourcing increase that's happening. And so we really see the rack-to-rack opportunity come as those deployments increase.

Speaker Change: And then my second question is on the rack to rack seven meter solution that you're planning I guess is that.

Speaker Change: The timing of that Dovetailing as you get to scale up more so second half of this year next year or can you just talk about when.

Speaker Change: When the demand for rack to rack.

Speaker Change: Standard cables would come in versus the ones youre selling today.

Speaker Change: Yes, I think that the.

Speaker Change: Lists are really in the way that.

Speaker Change: Next generation data centers are being built we've talked a lot about liquid cooling.

Speaker Change: And the.

Speaker Change: The non linear power source of increase that's happening and so we really see the rack to rack opportunity.

Speaker Change: Comment as those deployments increase so you can do.

William Brennan: So you can do a lot to get significantly higher density from a computer. And that really opens the door to improving the reliability of the network by replacing optical solutions with ADCs, effectively eliminating link flaps. And so we see that there's one customer we've publicly talked about being XAI, and that's gone very, very well. We've accomplished their very high-level objectives in building the most reliable cluster possible. But we've got a second customer that's going to ramp this year that the catalyst there was similar in the sense that. their ability to move to these longer length AECs.

Speaker Change: A lot to get significantly higher density.

Speaker Change: And that really opens the door to improving the reliability of the network by replacing optical solutions with with Adcs effectively eliminating link <unk> and so we see the.

Speaker Change: There is one customer we've public.

Speaker Change: Publicly talked about being X AI.

Speaker Change: That's gone it's.

Speaker Change: <unk> gone very very well, we've accomplished there very high level objectives.

Speaker Change: Building, the most reliable cluster possible.

Speaker Change: We've got a second customer thats going to ramp this year that the catalyst there was similar in the sense that.

Speaker Change: Their ability to move to these longer lengths.

Speaker Change: Adcs.

Speaker Change: Really opens the door for them to improve the reliability. So I believe we will see we will see that over time as it relates to scale up that's really going to be.

Christopher Rowland: Unknown Attendee, Richard Shannon, Daniel Fleming, Karl Ackerman, Nathaniel Bolton, Credo Your next question comes from the line of Christopher Rowland with Susquehanna. Your line is open. Hey guys, thanks for the question and congrats on these results.

Speaker Change: Pcie Gen six to begin with and we expect that that will become somewhat popular in the calendar 'twenty six calendar 2007 timeframe.

Speaker Change: Your next question comes from the line of Christopher Rolland with Susquehanna. Your line is open.

Christopher Rolland: Hey, guys. Thanks for the question and congrats on these results.

William Brennan: Bill, just a broad question for you. Beyond AECs, like if we look out maybe three years, five years, you've talked about Optical becoming larger, I think 10% of revenue or higher at some point, but how would you view your total product mix, AECs versus Optical versus let's say re-timers for scale-up versus other, how do you see this mix broadly playing out three to five years from now? Good question. In a sense that there's a lot of conversation about the necessity to move to optical over time. And I think the market has spoken very loudly that, you know, if you can use copper, you will.

Speaker Change: Bill just a broad question for you beyond the AUC is like if we look out maybe three years five years.

Speaker Change: You've talked about optical becoming larger I think 10% of revenue are higher at some point.

Speaker Change: But how would you view your total product mix.

Speaker Change: Fees versus optical versus let's say re timers first scale up versus other.

Speaker Change: How do you see this mix broadly playing out three to five years from now.

Speaker Change: Yes.

Speaker Change: It's a good question.

Speaker Change: There's a lot of conversation about.

Speaker Change: The necessity to move to optical over time, and I think the market has spoken very loudly that.

Speaker Change: If you can use copper you will.

William Brennan: Even, you know, the folks like NVIDIA have been pretty... You know, pretty outspoken in saying that. So we believe that the market for copper is going to be very large in the next three to five years. But with that said, if we look at the largest investments that we're making right now as a company, they're all in the optical space. So my belief is that over time, yes, we'll have a 10% represented by optical, but I think that number will grow, especially if we're talking about three to five years. We see a tremendous opportunity in the optical space, really even beyond what we would think of as traditional optical DSPs.

Speaker Change: Even.

Speaker Change: It looks like Nvidia has been pretty good.

Speaker Change: Pretty outspoken in saying that.

Speaker Change: So we believe that the market for for copper is going to be very large in the next three to five years, but with that said if we look at the largest investments that we're making right now is.

Speaker Change: They are all in the optical space.

Speaker Change: So my belief that is that over time, yes, we will we will have a 10% represented by optical but I think that number will grow.

Speaker Change: Especially if youre talking about three to five years, we see a tremendous opportunity.

Speaker Change: In the optical space really even beyond beyond what we would think of as traditional optical esp's. We're looking at improving implementing the same kind of system level.

William Brennan: We're looking at implementing the same kind of system-level innovative solutions that we've done with AEC. So there's a lot of learning there. And so when we talk about going beyond the standard, that's something we're very focused on right now. I will also say that we do see a large opportunity for ICs. And maybe it's in areas that are related to emerging applications within the AI space, specifically with inference. Not going to talk too much about that, but addressing different bottlenecks within the landscape is definitely part of our plan, and we're investing in different spaces there.

Speaker Change: Innovative.

Speaker Change: Solutions that we've done with it with AUC. So there's a lot of learning there and so when we talk about going beyond the standard is something we're very focused on right now I will also say that.

Speaker Change: We do see a large opportunity for <unk>.

Speaker Change: For Ics.

Speaker Change: And.

Speaker Change: Maybe it's in areas that are related to emerging applications within the AI space.

Speaker Change: Specifically with the entrance.

Speaker Change: Im not going to talk too much about that but addressing different bottlenecks within the landscape is definitely part of our plan and theres been we're investing in.

Speaker Change: In different spaces, there, but that will definitely play play into our or our revenue in a significant way in the five year kind of timeframe.

William Brennan: But that will definitely play into our revenue in a significant way in the five-year kind of time frame. So we see a lot of opportunities across.

Speaker Change: So we see lots of opportunities across the board.

William Brennan: Excellent. Excited to hear more about those products.

Speaker Change: Excellent excited to hear more about those products.

William Brennan: My second question is around supply. So you guys are putting up just some really massive growth numbers here. And usually when we have a product take off like this, you can end up with some bottlenecks.

Speaker Change: My second question is around supply.

Speaker Change: So you guys are putting up just some really massive growth numbers here and usually when we have a product take off like the U.

Speaker Change: You can end up with some bottlenecks.

William Brennan: So I guess my question is, are you seeing any bottlenecks, any constraints in either front end or back end or at your cable suppliers? And what has happened to lead times for your products during this growth? Have they grown and where are they now? The question is generally like how far do these guys have to book out to get a product? Yes, I think we've shown in the past couple of quarters, you know, a great ability to ramp in a short period of time. And if we kind of break it down, specifically to the AEC, there's really two pieces, there's the silicon aspect of it.

Speaker Change: So I guess my question is are you seeing any bottlenecks any constraints in either front end or back end or at your cable suppliers.

Speaker Change: And you know what what has happened to lead times for your products during this growth.

Speaker Change: Have have they.

Speaker Change: Have they grown.

Speaker Change: No.

Speaker Change: Where are they now.

Speaker Change: <unk>.

Speaker Change: Yeah.

Speaker Change: The question is generally like how far these guys have to book out.

Speaker Change: To get a product.

Speaker Change: Yes, I think we've shown in the past couple of quarters, a great ability to ramp in a short period of time.

Speaker Change: And if we kind of break it down.

Speaker Change: Specifically to the AUC Theres really two pieces, there's the silicon aspect of it and then there is the.

William Brennan: And then there's the, you know, the system level aspect. So we've got two different operations teams in the company, we've got a silicon operations team, and a systems operations. And so the longest lead time that we've got is really on the silicon side, and that's, you know, with TSMC and our assembly partners. On the system side with the AEC, it's really important that, you know, that we stay close with all of the different suppliers in our supply chain, but specifically the cable assembly partners. We've shown great ability to increase volumes quickly. And so this isn't, you know, the same kind of challenge as it would be to expand fab capacity.

Speaker Change: The system level aspect. So we've got two different operations teams in the company, we've got a silicon operations team and our systems operations.

Speaker Change: And so the longest lead time that we've got is really on the silicon side and Thats with TSMC and our Assembly partners.

Speaker Change: On the on.

Speaker Change: On the systems side, but the AUC, it's really important that.

Speaker Change: That we stay close with all of the different suppliers in our supply chain, but specifically the cable Assembly partners.

Speaker Change: We've shown great ability to increase <unk>.

Speaker Change: <unk> quickly and so.

Speaker Change: This isn't the same kind of challenges it would be to expand fab capacity basically.

William Brennan: You know, basically, if we install an additional line, if we look at, say, a 24-7 operating kind of situation, every line represents about a million units in production capacity annually. And so the investment that's required is not as significant as taping out, you know, say, a 5-nanometer chip or a 3-nanometer chip. It's substantially less. And so the cap that's required, the lead time to get the equipment, and the lead time to bring up the line is actually shorter than what it would take to build a semiconductor from start to finish. So I believe we're in good position that even if we do see the kind of, you know, percentages increase that we've seen over the, you know, the last 12 months, that we'll be in good shape.

Speaker Change: Basically if we install an additional lines.

Speaker Change: If we look at say a 24 seven operating.

Speaker Change: Kind of situations every line represents about 1 million units.

Speaker Change: Production capacity annually and so.

Speaker Change: The investment that's required.

Speaker Change: Not as significant as taping out.

Speaker Change: No.

Speaker Change: Five nanometer chip or three nanometer chips.

Speaker Change: Substantially less than the <unk>.

Speaker Change: Capex required the lead time to get the equipment and the lead time to bring up the line.

Speaker Change: Actually shorter than what it would take to build a semiconductor from start to finish. So I believe we're in good position that even if we do see the kind of <unk>.

Speaker Change: Percentages increase that we've seen over the last 12 months that we'll be in good shape. So.

William Brennan: And again, it's a huge benefit that our systems operations team has close relationships with all of the supply chain partners. And so it's, you know, it's important that we have those direct connections so that we don't miss a beat when, when, you know, we're trying to ramp quickly. All of our supply chain partners knows that we're, they know that we're ultimately responsible for, you know, for making commitments and, and delivering the solution.

Speaker Change: And again, it's a huge benefit that our systems operations team has close relationships with all of the supply chain.

Speaker Change: And so it's Scott.

Speaker Change: It's important that we have those direct connections so that we don't Miss a beat when when we're trying to ramp quickly.

Speaker Change: All of our supply chain partners noticed network. They know that we are ultimately responsible for for.

Speaker Change: We're making commitments.

Speaker Change: And delivering the solution.

Joshua Buchalter: Your next question comes from the line of Joshua Buchalter with Judy Cohen. Your line is open. Hey, guys. Congrats on the results and guidance, and thank you for taking my question. I actually wanted to ask about your pilot software that you talked about in the prepared remarks. How does the SDK and debug tool differ from what, you know, your competitors are bringing to market? And I was also hoping, you know, are there any synergistic elements that the pilot software brings across your AEC, DSP, and ReTimer hardware?

Speaker Change: Your next question comes from the line of Joshua <unk> with TD Colin Your line is open.

Speaker Change: Hey, guys congrats on the results and guidance and thank you for taking my question.

Speaker Change: I actually wanted to ask you about your pilot software that you talked about in the prepared remarks, how does the SDK and debug tools differ from what your competitors are bringing to market.

Speaker Change: Also helping.

Speaker Change: Okay are there any synergistic elements of.

Speaker Change: The pilot software brings across your AEP.

Speaker Change: And re timer hardware. Thank you.

William Brennan: Sure, so we recently announced the platform, but this has been, this debug and development tool has really been something that has been key to our success really over the past decade. And so in the ethernet space, at the speeds where we've been operating, having the ability to offer a solution like this to customers is really critical for them to be able to develop the platforms that they're trying to develop. And so when we talk about getting into the PCIe space, what we're bringing is years of experience and years of knowledge to the space. We are going beyond what we have traditionally done, especially as it relates to system level features like telemetry.

Speaker Change: Sure.

Speaker Change: We recently announced the platform, but this has been.

Speaker Change: Yes.

Speaker Change: Debug and development tool.

Speaker Change: Has really been something that has been key to our success really over the past decade, and so in the Ethernet space at the speeds, where we've been operating.

Speaker Change: Having the ability to.

Speaker Change: To offer a solution like this to customers is really critical for them to be able to develop to the platforms that they are trying to develop.

Speaker Change: And so when we talk about getting into the Pcie space, what we're bringing his years of experience in years of of of knowledge to the space. We are going beyond what we have traditionally done, especially as it relates to system level.

Speaker Change: Features like telemetry, we've learned a huge amount from our efforts in the ADC space.

William Brennan: We learned a huge amount from our efforts in the AEC space. And so the platform that we refer to as pilot really touches all levels, all three tiers of innovation that we've talked about and even extending into our customer system. So it gives great visibility into the SIRTIS IP, REITs, IMRICs, or even the system level solution. So additionally, adding diagnostic and analytic capabilities, along with this telemetry, establishes what we think is a new benchmark for the competitive space that is specifically related to reliability and uptime stability.

Speaker Change: And so the platform.

Speaker Change: Sure.

Speaker Change: That we refer to as pilot.

Speaker Change: It really touches all levels all three tiers of innovation that we've talked about and even extending into our customer system.

Speaker Change: So it gives us great great.

Speaker Change: Great visibility into the series Ip's re timer Ics or even the system level solution. So.

Speaker Change: Additionally, adding diagnostic and analytic capabilities along with the telemetry establishes what we think is a new benchmark for.

Speaker Change: For the competitive space that are specifically related to reliability and uptime stability.

Joshua Buchalter: Thank you for all the color there.

Speaker Change: Thank you for all the color there.

William Brennan: From my follow-up, I want to ask, as your customer base diversifies through the year, can you maybe compare and contrast what types of infrastructure build-outs that you're servicing with your new customers? Are these primarily accelerated AI builds? Are they general-purpose servers? Are they for internal versus external offerings? Anything that we could... to help us better understand the composition. Thank you. Comment that both of the new customers that we've talked about, the first part of the ramp will definitely be related to AI deployment. And then longer term, we see opportunities related to desegregated switch chassis, but as you would expect.

Speaker Change: Follow up I wanted to ask as you.

Speaker Change: Our customer base diversifies through the year.

Speaker Change: Can you maybe compare and contrast, what types of infrastructure build outs that you're.

Speaker Change: Youre servicing with your new customers are these primarily accelerated AI builder and a general purpose servers are they for internal versus external offerings like anything that we get.

Speaker Change: But help us better understand the composition. Thank you.

Speaker Change: Driving.

Speaker Change: Comment that both of the new customers that we've talked about.

Speaker Change: The first part of the ramp we'll definitely be related to AI deployments.

Speaker Change: And then longer term, we see opportunities related to.

Speaker Change: Related to disaggregate it switched chassis, but.

Speaker Change: As you would expect.

William Brennan: You know, it's really the AI application that's driving the, you know, the increased need for ADCs. Thank you.

Speaker Change: Yes, it's really the AI application that's driving.

Speaker Change: The increased need for Acs.

Speaker Change: Thank you.

Richard Shannon: Your next question comes from the line of Richard Shannon with Cray Talent Capital Group. Your line is open. Well, thanks, Bill and Dan, for taking my questions. And Aleko, congratulations on a couple of great quarters in a row. My first question is on your DSP with a hyperscaler here. I think you said there's 800 gig, but I'm not sure if you said whether it was full DSP or LLR, if you can share that one. But I think more importantly here, we'd love to understand how you could describe the share allocation here. It does seem like it's a much bigger deal than any of your wins in the past year.

Speaker Change: Your next question comes from the line of Richard Shannon with Craig Hallum Capital Group. Your line is open.

Speaker Change: Okay.

Richard Shannon: Thanks, Bill and Dan for taking my questions and I'll Echo.

Speaker Change: Gratulation on a couple of great quarters in a row.

Speaker Change: My first question is on your DSP win with a hyper scaler here I think you said Theres 800 gig, but im not sure. If you said, whether it was <unk> or if you can share that one but I think more importantly here, we'd love to understand how you could describe the share allocation here. It does seem like it's a much bigger deal than any of your wins in the past year.

William Brennan: So maybe we get a sense of the size of this win versus the one And so I'm not going to give too much color given the fact that, you know, this is a super competitive space we're in, but I will say that this implementation is a full DSP implementation. Okay, thanks for that, Bill.

Richard Shannon: So maybe we can get a sense of the size of this wind versus the ones you've had in the past.

Richard Shannon: Sure.

Richard Shannon: Okay.

Richard Shannon: Yes, I think it's hard for me to.

Richard Shannon: In contrast, the size of the opportunity we can look at volumes and we can look at revenue kind of two different things and so I think that if you would.

Richard Shannon: Break it out from a volume standpoint, I think it would be similar.

Richard Shannon: Similar to the sense that we expected to be high volume as you've seen in the past with our designs given that it's 100 gig per lane.

Speaker Change: From a revenue standpoint, it's probably going to be the largest opportunity that we've had to date.

Speaker Change: And so.

Speaker Change: I'm not going to give too much color given the fact that this is a super competitive space, we're in but I will say this.

Speaker Change: This implementation is a full ESP implementation.

Speaker Change: Okay. Thanks for that thanks for that my second question is I guess topic that hasn't come up a lot in recent quarters, given how well your ASC business going but look at Youre looking at your IP business.

William Brennan: My second question is, I think a topic that hasn't come up a lot in recent quarters, given how well your AAC business is going, but looking at your IP. Obviously, I mean, obviously, the revenue is coming down here as you apply with seemingly more engineering resources, so the product side certainly makes sense here, but love to get your sense of how you see this business going over the long term. And in response to one of the last questions, you referred to UA Link and BlinkFusion, it just seems like there's some great opportunities there, so maybe you can help us understand kind of the long term for your IP business.

Speaker Change: Obviously I mean, it's obviously the revenue is coming down here.

Speaker Change: As you apply with seemingly more engineering resources to the product side should we make sense here, but love to get your sense of how you see this business going over the long term and our response to one of the last questions you referred to Lincoln and be like fusion just seems like there's some great opportunities. There. So maybe you can help us understand kind of long term.

Speaker Change: From your IP business. Thanks Bill.

Speaker Change: Yes.

William Brennan: So I think going forward, we're not going to be breaking it out, since it's not going to be above 5% of our revenues. What we've seen is, we've actually seen an acceleration in our product revenue. When we did our IPO three and a half years ago, we signaled that we thought our IP business would be in the 10 to 15% range on a shorter term basis of our total revenue. But we've accelerated so quickly that we now find it being sub 5%. From my perspective, it's really a return on investment scenario. And I've always been very consistent in saying that from a percentage revenue standpoint of our total available market, this is tiny.

Speaker Change: Sure. So I think going forward, we're not going to be breaking it out since it's not going to be above 5% of our revenues what we've seen is.

Speaker Change: We've actually seen an acceleration of our product revenue.

Speaker Change: Debt.

Speaker Change: Causes us to.

Speaker Change: When we when we did our IPO three years ago, we signaled that we thought our IP business will be in the 10% to 15% range.

Speaker Change: Shorter term term basis of our total revenue, but we've accelerated so quickly.

Speaker Change: We now find it being sub 5%.

Speaker Change: My perspective, it's really a return on investment scenario and I've always been very consistent in saying that.

Speaker Change: From a percentage of revenue standpoint of our total available market. This is tiny.

William Brennan: And I don't expect that to change.

Speaker Change: And I don't expect that to change.

William Brennan: I think the way we think about that business internally now is... Engaging where it makes sense from a strategic perspective. And so we've had lots of opportunities. We'll be talking to a customer about an overall system solution. And a key enabler can be us providing the core IP for the main chip that they're developing, and then complementary solutions that would connect to that. And so those are very valuable contracts as we engage with those types of customers. And I expect those types of relationships will continue, existing relationships and new relationships. So I think as I think about our IP business, we're going to be somewhat opportunistic, of course.

Speaker Change: I think that we think about that business internally now is.

Speaker Change: Engaging where it makes sense from a strategic perspective, and so we've had lots of opportunities we'll be talking to a customer about an overall system solution and a key enabler can be us providing the core IP.

Speaker Change: The main ship that Theyre, developing and then complementary solutions that would connect to that and so.

Speaker Change: Those are very valuable contracts.

Speaker Change: As we engage with those types of customers and I expect those types of relationships continue existing relationships and new relationships. So I think as I think about our IP business.

Speaker Change: Going to be somewhat opportunistic of course, but the strategic aspect of it it's really enabling.

William Brennan: But the strategic aspect of it is really enabling system level solutions with key customers.

Speaker Change: System level solutions with with key customers.

Tore Svanberg: Your next question comes from the line of Tore Svanberg with Stifel. Your line is open. Yeah, I just have a follow up, Bill, you know, because there's a lot of focus on your AEC business, obviously copper, you know, you did talk about the optical DSP when, but you've also talked about sort of taking that further and perhaps, you know, work on a system level optical solution. I'm just wondering, you know, would you intersect the 200 gig per lane, you know, market with that, that particular product? Or would you consider doing it 100? I think yes to both questions.

Saree Lundberg: Your next question comes from the line of Saree Lundberg with Stifel. Your line is open.

Saree Lundberg: Yes, I just have a follow up bill because there's a lot of focus on your AUC business, obviously copper.

Speaker Change: You did talk about the optical DSP win but you've also talked about sort of taken that further and perhaps work on a system level optical solution.

Speaker Change: I'm just wondering would you intersect D 200 gig per thing.

Speaker Change: Market with that particular product or would you even consider doing it in 100 gig.

Speaker Change: I think yes to both questions.

William Brennan: I think yes for 200 gig for sure, 200 gig per lane solutions, but you know, I expect 100 gig per lane.

Speaker Change: Yes for 200 gig for sure 200 gig per lane solutions, but.

Speaker Change: I expect 100 gig per lane.

Unknown Attendee: Unknown Attendee, Vivek Arya, Daniel Fleming, Karl Ackerman, Nathaniel Bolton, Credo Technology Unknown Attendee, Vivek Arya, Daniel Fleming, Karl Ackerman, Nathaniel Bolton, Credo Technology to make our customers' networks more reliable and more power efficient. And so I would say yes that we're looking at solutions that don't require a significant shift in speeds.

Speaker Change: Market to extend for several years and so we're definitely looking at what kind of value can we add above the standard.

Speaker Change: To make.

Speaker Change: Our customers' networks more reliable and.

Speaker Change: More power efficient.

Speaker Change: And so I would I would suggest that we're looking at solutions that don't require a significant shift.

Speaker Change: In speeds.

Operator: Well, we look forward to hearing more updates on that system of the product. Thank you. There are no further questions at this time.

Speaker Change: Great well when we look forward to hearing more updates on that just a little product. Thank you.

Speaker Change: There are no further questions at this time, Mr. Brennan I turn the call back over to you.

William Brennan: Mr. Brennan, I turn the call back over to you. Thank you very much. I'd like to thank everybody for the continued strong interest in Credo and for joining the call, and we'll talk shortly. Thank you very much.

Speaker Change: Thank you very much.

Speaker Change: I'd like to thank everybody for the continued strong interest in credo and for joining the call and we'll talk shortly thank you very much.

Operator: This concludes today's conference call, you may now disconnect.

Speaker Change: This concludes today's conference call you may now disconnect.

Operator: Please wait, the conference will begin shortly.

Speaker Change: Please wait the conference will begin shortly.

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