Thank you for being with us. I would now like to hand the conference over to Dan O'Neil. Please proceed, sir.

Good afternoon. Thank you for joining our earnings call for the second quarter of fiscal 2026. Today, I'm joined by Bill Brennan, Credo's Chief Executive Officer; and Dan Fleming, Credo's Chief Financial Officer. During this call, we will make certain forward-looking statements. The 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's not possible for the company's management to predict all risks nor can the company assess the impact of all factors on its 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. 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. 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 accessed using the Investor Relations portion of our website. I will now turn the call over to our CEO. Bill?

Thanks, Dan, and thank you, everyone, for joining our fiscal '26 second quarter earnings call. I'll walk through our Q2 results, highlight the transformative developments we've announced since our last call and then share our forward outlook. After my remarks, our Chief Financial Officer, Dan Fleming, will provide a detailed financial review and our guidance for the third quarter. In the second quarter, we delivered record revenue of $268 million, representing 20% sequential growth from Q1 and an extraordinary 272% increase year-over-year. Non-GAAP gross margin came in at a robust 67.7%, and we generated approximately $128 million of non-GAAP net income. These are the strongest quarterly results in Credo's history, and they reflect the continued build-out of the world's largest AI training and inference clusters. AI clusters are no longer measured in tens of thousands of GPUs. They're now measured in hundreds of thousands and soon millions. The scale, density and complexity of these systems are pushing every aspect of interconnect. Reliability, power efficiency, signal integrity, latency, reach and total cost of ownership have all become mission-critical. This is the challenge our customers face, and it's where Credo is uniquely positioned to deliver the solutions they need to succeed. Our 3-tiered innovation framework, purpose-built SerDes technology, world-class IC design and a true system-level development approach, all wrapped with our industry-leading pilot debug and telemetry platform has allowed us to forge deep strategic partnerships. Let me now walk through our business in detail. Starting with our active electrical cables. The AEC product line remains the fastest-growing segment in the company. AEC revenue again grew strongly, driven by rapidly increasing customer diversity. In Q2, 4 hyperscalers each contributed more than 10% of total revenue. The fourth hyperscaler is now in full volume ramp and a fifth started contributing initial revenue. Customer forecasts have strengthened across the board in the past months. AECs have become the de facto standard for inter-rack connectivity and are now displacing optical rack-to-rack connections up to 7 meters. At 100 gig per lane today and 200 gig per lane tomorrow, zero-flap AECs deliver up to 1,000x better reliability than traditional laser-based optical modules while consuming roughly half the power. When you're installing a 100,000 GPU cluster, Link Flaps can delay time to stability and time to revenue. And when you're training a model costing tens of millions of dollars, Link flaps can have a significant impact on overall uptime and productivity. It is this step function improvement in reliability and power efficiency that's driving the expansion of the AEC TAM in 100 gig and now 200 gig per lane generations. And we expect that trend to continue as customers densify racks and push cluster scale to new levels. Next, our IC business, which includes retimers and optical DSPs, also continued the strong performance. We expect significant optical DSP growth in fiscal '26, driven by 50-gig and 100-gig per lane deployments with longer-term growth driven by our 200-gig per lane solutions. Live demonstrations last quarter of our 200-gig per lane Bluebird optical DSP drew significant interest and extremely positive feedback. Ethernet retimers remain important in both traditional switching fabrics and the fast-growing AI server segment, where features like MACsec encryption, gearbox functionality and rich software programmability are highly valued. Our PCIe retimer and AEC families are also progressing on plan. Customer silicon evaluations have consistently highlighted our best-in-class combination of reach, latency and power efficiency, a rare trifecta enabled by our unique purpose-built SerDes architecture. We remain on track for PCIe design wins in fiscal '26, followed by meaningful production revenue in fiscal '27. Our existing AEC and IC businesses both address multibillion-dollar market opportunities with excellent visibility for continued growth. But the truly exciting part of this quarter is that we've added 3 entirely new growth pillars, each representing distinct multibillion-dollar market opportunities that significantly expand our total addressable market and extend the reach and depth of our connectivity leadership. The first new growth pillar is Zero Flap optics, the first laser-based optical connectivity family that delivers AEC-class network reliability, enabled by a customized optical DSP that is tightly coupled with our pilot software and integrated with a switch-level SDK. Our Zero Flap optics integrate with our customers' network software. Link Health telemetry data on each optical link enables autonomous detection and mitigation of conditions that cause link flaps before they bring down the cluster. This enables a step function improvement in network reliability. We're currently in live data center trials with our lead partner, and we expect to begin sampling a second U.S. hyperscaler later this fiscal year. Our ZF optics solutions expand our addressable market to any length of connection within the data center. We anticipate initial revenue in fiscal '27 and long term, a market that will be a multibillion-dollar opportunity. The second new pillar of growth was announced in September. Credo has combined forces with Ottawa-based Hyperlume, a team of experts specializing in high-performance microLED technology. Credo has been investing in microLED innovation over the past 18 months with the intent of developing a new class of connectivity solutions. Uniting with the Hyperlume team will accelerate our time to market. As a first product, we'll develop and bring to market a pluggable optical solution that utilizes micro LEDs as the light source. Our same 3-tiered innovation playbook will be the catalyst to pioneering this entirely new connectivity category we call active LED cables or ALCs. ALCs will deliver the same reliability and power profile as an AEC, but in a thin gauge cable that can reach up to 30 meters and is ideal for row scale scale-up networks. Customer reaction has been very positive. We plan to sample the first ALC products to lead customers during our fiscal '27 with initial revenue ramping in fiscal '28. We believe the ALC TAM will ultimately be more than double the size of the AEC TAM. Finally, we announced the third new pillar of long-term revenue growth, OmniConnect gearboxes, a family of products that will enable a disaggregated and optimized approach to XDU connectivity. In November, together with our lead customer, we unveiled the first gearbox that will address that memory wall by redefining memory-to-compute connectivity, a solution we call Weaver. Today's on-package high-bandwidth memory is capacity and throughput limited as well as expensive and supply chain constrained. Weaver allows designers to move to commodity DDR memory and achieve up to 30x more memory capacity and 8x the bandwidth. The key enabler for the OmniConnect family is Credo's purpose-built 112-gig VSR SerDes that enables a 10x improvement in beachfront I/O density and has a reach of up to 10 inches. The Weaver gearbox from 112-gig BSR to DDR effectively overcomes the physical and logical limitation of current memory-to-compute connectivity solutions. Our first customer for Weaver announced their plan to deliver an XPU targeted for inference with 2 terabytes of memory capacity, a complete game changer for workloads such as real-time AI video generation and full self-driving, where memory capacity and bandwidth are the primary gating factors. Industry forecasters project the memory-to-compute connectivity market to be a multibillion-dollar market by the end of the decade. We anticipate initial revenue in our fiscal '28 with significant scaling thereafter. The next OmniConnect gearboxes to be introduced will provide a future-enabled path to scale out, scale up and near package optics connectivity with XPUs. In summary, we now have 5 distinct high-growth connectivity pillars: AECs, IC solutions, including retimers and optical DSPs, zero-flap optics, ALCs and OmniConnect Gearbox solutions. Together, they'll give Credo a combined total market opportunity that we believe will exceed $10 billion in the coming years, more than triple where we stood just 18 months ago. Looking forward, we couldn't be more excited about the combination of continued growth in our core AEC and IC businesses, plus the upcoming ramps of ZeroFlap optics, ALCs and OmniConnect gearboxes. We believe this combination gives us a strong outlook into continued revenue growth through fiscal '26 and well beyond. Team Credo continues to execute at an elite level, delivering record results quarter after quarter while simultaneously pioneering and launching new multibillion-dollar product categories. I'm proud of our world-class operational excellence and innovation. With that, I'll turn the call over to Dan Fleming for a detailed financial review and our Q3 guidance.

Thank you, Bill, and good afternoon. I will first review our Q2 results and then discuss our outlook for Q3 of fiscal year '26. In Q2, we reported revenue of $268 million, up 20% sequentially and up 272% year-over-year and well above the high end of our guidance range. Our product business generated $261.3 million of revenue in Q2, up 20% sequentially and up 278% year-over-year. Notably, our AEC product line again grew healthy double digits sequentially to achieve new record revenue levels once again based on substantial year-over-year growth across 4 domestic hyperscale customers. Our top 4 end customers were each greater than 10% of revenue in Q2. As a reminder, customer mix will vary from quarter to quarter, and we continue to make progress in diversifying our customer base. We continue to expect that 3 to 4 customers will be greater than 10% of revenue in the coming quarters and fiscal year as hyperscale customers continue to ramp to more significant volumes and as we expect to begin to ramp an additional hyperscale customer in the coming quarters. Our team delivered Q2 non-GAAP gross margin of 67.7%, above the high end of our guidance range and up 11 basis points sequentially. Our product non-GAAP gross margin was 66.8% in the quarter, up 18 basis points sequentially and up 469 basis points year-over-year. Total non-GAAP operating expenses in the second quarter were $57.3 million, slightly above the midpoint of our guidance range and up 5% sequentially. Our non-GAAP operating income was $124.1 million in Q2 compared to non-GAAP operating income of $96.2 million in Q1, up demonstrably due to the leverage attained by achieving more than 20% sequential top line growth, while OpEx growth was in the mid-single digits. Our non-GAAP operating margin was 46.3% in the quarter compared to a non-GAAP operating margin of 43.1% in the prior quarter, a sequential increase of 319 basis points. Our bottom line once again demonstrated the substantial leverage we are delivering in the business. Our non-GAAP net income was $127.8 million in the quarter, a record high and a 30% sequential increase compared to non-GAAP net income of $98.3 million in Q1. And our non-GAAP net margin was 47.7% in the quarter as we drove significant leverage in the business. Cash flow from operations in the second quarter was $61.7 million, up $7.5 million sequentially. CapEx was $23.2 million in the quarter, driven largely by purchases of production MACsec. And free cash flow was $38.5 million, down from $51.3 million from the first quarter due to higher CapEx investments. We ended the quarter with cash and equivalents of $813.6 million, an increase of $333.9 million from the first quarter, up largely from the proceeds of our ATM offering, which began in October. We remain well-capitalized to continue investing in our growth opportunities while maintaining a substantial cash buffer. Our Q2 ending inventory was $150.2 million, up $33.5 million sequentially. Now turning to our guidance. We currently expect revenue in Q3 of fiscal '26 to be between $335 million and $345 million, up 27% sequentially at the midpoint. We expect Q3 non-GAAP gross margin to be within a range of 64% to 66%. We expect Q3 non-GAAP operating expenses to be between $68 million and $72 million. We expect Q3 diluted weighted average share count to be approximately 194 million shares. These expectations are based on the current tariff regime, which remains fluid. As we look toward the end of fiscal year '26 and into fiscal '27, we expect sequential revenue growth in the mid-single digits, leading to more than 170% year-over-year growth in the current fiscal year. We expect each of our top 4 customers from Q2 to grow significantly year-over-year in fiscal year '26. We also expect revenue diversification to strengthen further with our fourth customer surpassing the 10% revenue threshold for this fiscal year. We expect non-GAAP operating expenses to increase year-over-year by approximately 50% in fiscal year '26. As a result, we expect our non-GAAP net margin to be approximately 45% for fiscal year '26. This should translate to net income more than quadrupling year-over-year. And with that, I will open it up for questions.

And your first question comes from the line of Tom O'Malley with Barclays.

There is a rapid expansion in the AEC market, with the fourth and soon the fifth customer reaching the 10% revenue mark. It's interesting to note that despite the strong growth in the AEC market, the ALC market has a total addressable market that could be twice as large. Could you elaborate on whether this growth is driven by units sold or average selling price? It's surprising considering how well the AEC sector has been performing.

So I think it's a combination of both the quantity as well as ASPs. Now when we think about ALCs, it's really an ideal product from the standpoint of delivering the same reliability as AECs, which is really the most critical factor right now with host to GPU-to-switch connections. Also, from a power efficiency standpoint, it's in the same class as AECs. I would say from a system cost perspective, again, in that same class. What it delivers is a thinner wire gauge and longer length. And as we see the scale-up networks really going from intra-rack to row scale, we're talking about a tremendous increase in the number of connections. We estimate that it could be up to 10x that of the number of scale-out connections. And so yes, we are really, really bullish and we're strong believers in microLED as a technology that's really going to be a game changer for us as well as our customers.

And then just on the timing and the scale of the other customers ramping on, maybe you could give us what the percentages of the top 4 were this quarter? And then any commentary on how large those other customers rolling on will be just to give us a feel for how one is kind of handing off the next over the next couple of quarters would be super helpful.

Sure, Tom. So for Q2, as we mentioned in my prepared remarks, we had 4 10% customers. The largest was 42% of revenue, and that was the customer that we've, in the past, said we expect to be the largest customer this fiscal year. The second largest was 24%, which have to be our first hyperscaler to ramp a few years back. Third largest was 16%, which was our largest customer in Q1. And the fourth was 11%, which is our newest hyperscaler that we've discussed in the past. So when you kind of plot that all out, what you see and what we've been fairly consistent in saying is that the ramp at any given single hyperscaler is never really linear. So we're seeing that with our largest customer from last quarter, taking a bit of a pause this quarter. But our largest customer for this fiscal year, which had been down for the last few quarters is back up again. So there is definitely a give and take that we are managing through. And again, we have 12-month visibility, in some cases, even greater visibility with our customers in order to be able to manage that through the course of time. Hard to predict exactly how things are going to fall quarter-to-quarter longer term. But hopefully, that gives you kind of a flavor as to what we're seeing kind of on the ground right now today.

And your next question comes from the line of Tore Svanberg with Stifel.

Yes. Congratulations on the solid results. Bill, I had a question on your sort of 3 new product lines here, obviously, all in the optical domain. First of all, could you maybe elaborate a little bit on how much you're focusing on the system-level products because obviously, in copper, yes, you have system-level products, but the 3 areas in optical, how much of those should we assume or systems? And then I have a follow-up.

We have consistently communicated our intention to expand our portfolio at the system level. Both ALCs and ZF optics are optical solutions, but the OmniConnect family will begin with copper-based options and eventually include near package optics. Our goal is to deliver exceptional value to our customers by providing solutions that exceed standard commodity offerings. ZF optics exemplifies this approach, as we received considerable feedback from customers concerned about reliability while building AI clusters. At OCP, we collaborated with a customer to explore how to enhance their AI cluster with better integration and network software. The aim is to provide greater visibility and telemetry, making critical information actionable at the network level. We're essentially creating a system that can alert users to any issues in real time, allowing for proactive management of the cluster's performance. This innovative value proposition is focused on reliability, especially with traditional laser-based transceivers. We've invested significantly in developing a custom optical DSP and a telemetry platform, which have been in the works for several years. Integrating these elements at the system level has been crucial for bringing this product to market. Regarding ALCs, they are transformative by improving light source reliability. Our first gearbox in the OmniConnect family is copper-based, but it redefines how memory connects to processing units. While high-bandwidth memory presents significant challenges in heat dissipation, our approach allows us to position the memory further away, resolving reliability issues associated with excessive heat generation. Our solutions effectively combine both optical and copper technologies, but we remain flexible regarding the medium used. Ultimately, our focus is on providing customers with superior solutions compared to what's currently available in the market.

That's very helpful. And as my follow-up, and I'm very interested in the 112 gig VSR SerDes technology. I think you mentioned initially, it's going to be copper, but eventually, you're going to have an optical solution as well. I'm just curious, would you have to develop some silicon photonics technology there? Or would that still sort of be a solution in the pure silicon domain?

Yes. So regarding the SerDes that was developed specifically for this application. I love the arguments in the market about who's got the best SerDes and a lot of times in the market, people like to think the longest REIT SerDes is obviously the best. We look at it differently. We really look at it from an application-specific perspective. And so when we think about the idea of giving an XPU customer a piece of IP to integrate. We think about how do we achieve the smallest footprint, the lowest power. And ultimately, with this VSR SerDes that we developed on a max reticle die, we can fit 1,200 of these SerDes, creating 120 terabits per second of potential bandwidth. That's unprecedented. That has yet to be achieved, especially when you think about the reach being 10 inches. Other competitive solutions, the reach would be an inch or less. And so basically, forcing there to be a die-to-die connectivity versus moving a chip outside the package. And so it's a real breakthrough. I would argue that this SerDes is best-in-class, and it's enabling an entire family of solutions that range from I/O solution for memory, but also from a scale-out or scale-up perspective and long term with near package optics. And the near package optics will leverage the work that we're doing in microLED. So first step will be ALCs and then we'll roll that right into some additional game-changing applications like near package optics.

Your next question comes from the line of Vivek Arya with Bank of America.

Bill, which applications are your 4 customers using AECs for today? And which applications are they not yet using AECs for? And as they look into next year, there's a lot of talk of co-packaged optics coming into the mix. And I was hoping you could give us a sense for what impact that might have on the current or future AEC usage by your customers?

We have discussed several applications in the past. First, there are front-end network connections, which were the initial application to see growth with our first customer years ago. Next, we mentioned the scale-out opportunity related to the back-end network of AI clusters. The third application is switch racks, where instead of purchasing a chassis filled with switches, the switches are stacked vertically in a rack, connecting through short cables instead of using a backplane connection within a chassis. We are currently in production with all three applications for different customers, though we have not fully penetrated the market with all our customers yet. One additional application expected to see significant volume is the scale-up network as it transitions to a rack scale and eventually to a row scale, contingent on the density and number of racks deployed. Regarding co-packaged optics, this has been a longstanding discussion in the industry for over 12 years, evolving in terms of terminology. However, before its widespread adoption, solutions must address well-known challenges related to reliability, serviceability, maintenance, and cost. We believe there are enhanced solutions that will be more efficient in terms of power and reliability, which we aim to bring to market potentially around the same time that co-packaged optics are discussed. Although there have been numerous demonstrations, we have not observed significant customer movement in that direction that would affect us. It is clear that reliability is the top priority from a connectivity standpoint, and we do not anticipate a shift to co-packaged optics in the high-volume market anytime soon.

And for my follow-up, I'm curious, how does your ASP lift from the 100 to 200 gig per lane compared to the lift that you have seen and are still seeing in the 50 to 100 gig transition? And does the competitive landscape change as you start moving to 200 gig, does that new application create a bigger opportunity for some of your competitors?

I think the question is a bit more complex than just thinking about moving from one lane speed to a faster lane speed. Our ASPs are highly dependent on the number of connectors in the SKU, the devices that we're using within those connectors and the length of the connections. And so it is safe to say that we have had some uplift going from 50 to 100 gig. And I believe there's going to be an uplift going from 100 to 200, but I can't kind of categorize it simply. But I do think that naturally, there will be an advantage as we move to faster lane speeds.

Your next question comes from the line of Quinn Bolton with Needham & Company.

Congratulations on the nice results and outlook. I guess, Bill, I had a question just on the supply side of things. I think looking at the 10-K you guys put out, you list Bizlink as sort of your sole provider of AEC cable manufacturing. And obviously, the forecast here is getting pretty big pretty quickly. How are you feeling about AEC supply? Are there any constraints you're working through? Anything to call out on the supply front?

I believe we are entering a time where supply constraints will become a more common topic of discussion. Regarding our AEC volumes, I don't have concerns about our production capacity with our partners. We have demonstrated our ability to significantly increase production in a short period over the last year. This situation is different from considering a wafer foundry. In recent months, we've noticed a rise in discussions about the overall wafer demand in the market for next year and beyond. From a demand perspective, the market will likely get to a point where we are almost regulated by foundry capacity. While I don't want to stir debate, I anticipate that conversations about capacity constraints at the wafer level, particularly regarding advanced nodes, will occur more frequently. As for Credo, we have some advantages. Our established strategy has always been to focus on older geometry processes compared to our competitors, provided we can deliver top-notch power, die sizes, and performance. Currently, our primary process is 12-nanometer, which is not as tight as 3-nanometer or 5-nanometer, so we feel confident about our position amidst rising wafer volume demand. Additionally, our foundry partners understand the importance of connectivity solutions, which are essential for shipping GPUs. Thus, I believe we will navigate this situation effectively. Regarding our AEC product partners, our vertical integration provides us with an advantage since I have a system-level supply chain team ensuring that all component suppliers for the AECs receive the visibility and commitment necessary for future production needs. This approach will be particularly relevant as we progress toward calendar year 2026.

For my follow-up, Phil, could you confirm that your top two customers are still operating at either 50 gig or 25 gig per lane? It seems that the majority of your AEC business is still at 50 gig per lane, and as those customers prepare to transition to 100 gig per lane, there is likely potential for an increase in average selling prices. While I won't ask for specifics on when this transition will occur, it appears that it hasn't happened yet. Please confirm if your top two customers are still at either 25 or 50 gig per lane.

I can confirm that we're in production with 25 gig per lane, 50 gig per lane, and 100 gig per lane. One of the fastest-growing areas of our business has been the shipments of 100-gig per lane solutions. While it may not be straightforward to categorize this, I believe that over time, we will see our entire customer base shift to 100 gig per lane, eventually progressing to 200 gig per lane in the next 2 to 3 years. Overall, the trend you mentioned is accurate, and we expect to see growth as the market moves toward faster speeds.

Your next question comes from the line of Suji Desilva with ROTH Capital Partners.

Congrats on the progress here. Maybe you could talk about your customers now when your first IPO, you had a handful of customers, now you're gaining with 5 customers here potentially. So the hyperscales that don't kind of use you at a scaled level 10%-plus type levels. I know you're in all of some level. What is the difference between the customers you haven't penetrated yet and the ones you're getting to 10-plus percent in various quarters.

We view each hyperscaler as a unique market. They all aim to address similar challenges, but there are various ways to tackle those issues. Consequently, network architecture is tailored to each customer. Typically, the first program we engage with leads to additional projects within the same customer. Currently, we recognize six hyperscalers in the U.S. and a few in Asia, but we anticipate more discussions about the next tier of customers, as we believe significant growth can come from that segment of data centers. Overall, this quarter has been crucial for us, demonstrating a pathway to a more diversified business, not just in terms of customer base but also in protocol diversity with PCIe and by expanding our total addressable market with our system-level solutions. For instance, with OmniConnect, we're addressing connections at the system level, such as die-to-die or chip-to-chip. Regarding retimers, those connections can reach between 0.5 to 1 meter, typically found on appliance or switch cards. AECs can extend up to 7 meters, ALCs up to 30 meters, and ZF optics can cover distances of a kilometer or more in data centers. The past 90 days have been particularly transformative for us from a communications standpoint. We have been developing these solutions for about 18 months, and now that we can discuss them, it indicates a clear direction toward becoming a more diversified company in the long run. Our goal is to grow from $1 billion in annual revenue to $5 billion and beyond in the coming years.

Okay. Appreciate how you classify the products there for us. And then my other question is on manufacturing. I know with AECs, you're doing the cable manufacturing in-house selling the entire cable solution. Is it the same strategy for ALC? Will it be modules versus cables, outsourcing? Any color there would be helpful.

The strategy for ALCs will be very similar to the strategy for AECs. We intend to own the entire stack, take accountability for the entire system solution. And so we'll see as that develops that will be a very similar model to what we've got today with AECs.

Your next question comes from the line of Vijay Rakesh with Mizuho.

Bill and Dan, congratulations here. Just a quick question on the scale up. Do you see those revenues start to ramp in second half calendar '26? And I think you mentioned active AD cables ALC in calendar '27. Is that the way to look at it?

For scale-up specifically, we will enter that market with PCIe Gen 6 solutions. While we will consider Gen 5 in the interim, the primary focus is on Gen 6. We plan to launch both retimers and AECs simultaneously, and we see significant opportunities for both. In the long term, we expect to evolve towards faster lane speeds, and discussions around PCIe Gen 7 are certainly underway. We will provide products to meet the Gen 7 standard, which supports 128 gigabits per second per lane. There is also considerable discussion about 200 gig per lane. Over time, the protocol competition will likely stabilize with one, two, or even three protocols going into production. We are optimistic about this since all current 200 gig per lane products utilize the same IEEE SerDes. We have stated our intention to remain protocol agnostic for the 200 gig per lane generation. All the solutions we've discussed will be aimed at scale-up, including AECs and ALCs. If market demand shifts towards longer connections, we are prepared to transition to ZF optics, though that remains to be seen.

Got it. Looking ahead, you're seeing a strong ramp in AC. How should we view the gross margin profile as optical DSPs begin to ramp up? What is the long-term perspective on gross margins?

Yes. We've been very consistent in saying our long-term expectation for gross margins is in the 63% to 65% range. So we are clearly at a point in time right now where we're a bit above that, but we don't expect that to be the case longer term. If you look at the more medium term, probably we guided to 65% at the midpoint. So we'll be kind of near that high end of that long-term expectation. But just longer term, I expect that to settle down into an area that historically, companies like us have been in.

Your next question comes from the line of Sean O'Loughlin with TD Cowen.

Congratulations on the excellent results. I have a question regarding the ALC technology and your partnership with Hyperlume. Bill, you mentioned that you've been working on this for about 18 months, which I assume contributed to the acquisition. Could you elaborate on that? Additionally, if we were to reach 2027 or 2028 and ALCs haven't increased as expected, would that be due to a technology issue that you still need to resolve, or is it more related to a business issue where the market didn't align with your expectations?

I believe our interest in microLED technology began a couple of years ago as a way to develop unique products, starting with ALCs while also addressing challenges related to near package optics. Initially, we partnered with a few independent companies but decided earlier this year to bring the technology and team in-house to ensure a more predictable timeline for market introduction. Over the past 18 months to 2 years, we've gained significant insights. Working with the team from Hyperlume, we feel confident that we are now focused on execution rather than development. I expect we will introduce a product in fiscal '27, with initial ramps occurring in fiscal '28. Given our years of experience launching new products, I foresee no major obstacles in gaining customer acceptance for this product. These solutions will be delivered via cable, promising reliability, power efficiency, and a system cost comparable to AECs while offering a thinner wire and longer lengths. I consider this primarily an execution challenge, and I am optimistic about our team's capabilities and the planned additions over the next 12 months to ensure success.

Yes. And then a quick follow-up on ZF Optics. Understanding that they're a system-level solution, is there a line rate or a lane rate that the ZF optics platform is targeting to intersect with? Or is it relatively flexible and can be utilized for applications at 50 gig, 100 gig, or 200 gig per lane?

It can be leveraged across the board. The first product that we'll go to production with is 100 gig per lane. It will be 800 gig ports that we're addressing. But there's definitely a path to 1.6T. But if we had a customer that wants to bring a product to market that was 50 gig per lane, there's no issue with that.

Your next question comes from the line of Christopher Rolland with Susquehanna.

Congratulations on the impressive results. It seems that you have exceeded my previous projections in a positive way. You mentioned over 170% year-over-year growth. Looking ahead to next year, we can expect some slowdown. Do you think we could maintain a growth rate similar to analyst expectations, or should we adjust that downward considering this year's strong performance? Any insights into the growth rate for next year would be greatly appreciated.

Yes. In my prepared remarks, I specifically mentioned mid-single digits revenue growth sequentially through fiscal '27. That is the expectation we have set, which we established about three or four quarters ago, and we have actually outperformed that. While things could change, we are not adjusting our expectations.

Okay. I don't know, were we at the higher end of mid-single digits? And do we expect to drop lower due to the improved results? My second question is about OpEx. There seems to be a significant increase for the next quarter. Could you explain that? Is it mostly new engineers coming on board, or is it more of a one-time occurrence? Should we plan to carry that increase into future quarters? How should we approach this? Also, what do you think OpEx might grow as a percentage of revenue, if that's easier to discuss?

Yes. Let me start by saying that we are actively managing our operating expenses to support the revenue growth we anticipate. As you know, all of our growth initiatives discussed by Bill have long lead times, and they require skilled engineers to implement effectively. We believe we are well-positioned to achieve this. Our Q3 operating expense guidance shows an increase of 22% at the midpoint compared to previous quarters. However, looking at our Q results, you'll notice that our research and development spending actually decreased sequentially in Q2. This means we are somewhat offsetting that decline. In summary, we are guiding for $70 million at the midpoint, which establishes a new baseline. This figure includes expenses related to various projects and additional hiring, including the acquisition of the Hyperlume team. Many factors contribute to this number. If you incorporate this into your model and assume a modest sequential increase in Q4, you will see approximately 50% year-over-year operating expense growth from fiscal ’25 to fiscal ’26, which I also mentioned in my prepared remarks. Hopefully, this clarifies things.

Your next question comes from the line of Karl Ackerman with BNP Paribas.

I have 2 questions, if I may. First, could you speak to why you are now licensing your active electrical cable IP to third parties and how this agreement reflects your perceived competitive moat in go-to-market for AECs?

To give background on the case that we filed with the ITC this is a market, the AEC market that Credo pioneered over the last 7 or 8 years. We spent tens of millions of dollars establishing the innovations required to build these products. And it's great to see that the product category has realized what we felt would be a multibillion-dollar market potential. And so along the way, we've been pretty communicative with others that are in the market or showing intent to enter the market that we've got IP, and we're intending to make sure that there's respect for that IP. And so we got to the point where we felt it necessary to file with the ITC because we weren't getting great respect or great acknowledgment of the fact that the path was pretty well defined by Credo and our engineering team. And so I think we feel really good with where we are. We never thought about this market as being a market that would take off if there was a single supplier. And so our customers all want multiple suppliers. Ultimately, we've landed in a good spot with 3 of the conversations that we've had thus far. We've got a couple more in flight or maybe even more than a couple more in flight. This doesn't change anything competitively for us. We've always thought about competition as a challenge of moving more quickly and in a way that delivers what our customers want. And so it's a function of delivering what they want first having it be qualified first, ramping first, delivering flawlessly as they ramp and as they are in high-volume production. That's really our focus as a team, both at an engineering level as well as an operations level. And so I would say that we're satisfied with where we are competitively, and we're satisfied with where we are with the results thus far that we've seen as we've protected our IP.

Got it. That's helpful, Bill. Maybe a question for Dan. You have 12 months of visibility with several hyperscale customers. This raises the question, what was the biggest difference in your newly revised outlook compared to your previous outlook of 960 and change? How much of it was due to the ramp-up of the fifth hyperscale customer versus just higher order rates from existing programs or even new AEC applications across scale-out and disaggregated chassis at some of these other customers?

What I'd say this is more of a general comment, and this is true of the last 3 to 4 quarters. We've seen continuing strengthening of our forecast throughout the quarters as they proceeded, which is how we've gotten into this particular rhythm that we're in right now. So it's not specific to a customer. It's perhaps more of an industry trend, and we've benefited from that. So that's what we've seen.

And your next question comes from the line of Joseph Cardoso with JPMorgan.

Maybe for my first one, I just wanted to touch again on the entry into the optical transceiver market beyond just DSPs. This is obviously a very large and expanding TAM, but perhaps one where current industry margins are somewhat below your long-term targets. So maybe can you just take a second and just talk about how you're thinking about the margin opportunity here? And also curious whether you're focused on just selling the full modules or if there's an opportunity to drive attach of the DSPs, pilot software, et cetera, and sell those building blocks of the zero flap solution to potential customers? And then I have a follow-up.

Yes. We're absolutely thinking about this product in a similar way that we think about the other system-level products. We're going to take full ownership and accountability for the entire system-level solution. So we're not necessarily competing in the current commodity market. If a customer is looking for that step function in reliability that you can get by going up the stack with the solution we're bringing to market. I mean, absolutely. But it's not a conversation about what is the price of a transceiver in the market. This is really a system-level solution. And so it's a combination of all things, DSP, it's a combination of the software that we're bringing. And it's really most importantly is the tight interaction that we've got with our customers. And so I think we've been really clear, and I think Dan specifically has been clear in stating that we don't see any change to our long-term gross margin model.

No. Got it. Very clear, Bill. And then maybe just a quick clarification on the fifth customer in the quarter. And maybe this is anecdotal, but it sounds at least like they're tracking ahead of expectations relative to last quarter with some initial revenue this quarter, but just wanted to clarify if that was the case, and as we think about that customer tracking into the back half of this year, is there any opportunity for this customer to be 10% at least on a quarterly basis now in the back half? Or have the denominator just kind of outpaced that opportunity there?

Things take time. If you look at the base we’re discussing, that 10% figure has changed quite a bit from a couple of years ago to now. It takes time to ramp up. When we consider customer number five, we look at the initial revenue for this year. There’s no way that this customer will reach 10% this fiscal year. However, I believe this customer has the potential to become a 10% customer, particularly when we assess it on a quarterly basis first, and then consider the annual perspective. There's no doubt that they have the capacity to achieve those numbers, but it will take time.

And your last question comes from Sebastien Naji with William Blair.

Congrats on a nice set of results. I'll ask both my questions together in the interest of time. The first one is Credo has an advantage in that it's agnostic to the underlying compute, could be merchant GPU racks, ASIC racks, even CPU servers. So could you maybe talk a little bit about how much of your business is tied to ASIC versus merchant silicon deployments today and where that share might go over the next year? And then my second question, I just wanted to ask about the timing of purchases from your customers. How aligned are AEC purchases with the GPU or ASIC purchases? And do customers typically purchase ahead or one after the other? And is there any risk of inventory build if they're purchasing ahead of GPU orders?

We're unable to specify the percentage of GPUs that are internally developed versus those available in the market, as we don't track it that way. However, your first point about our agnosticism toward the type of GPU deployed is completely accurate. Regarding deployment, I believe that everything is ordered to ensure all necessary components are delivered simultaneously. Our customers navigate a complex supply chain, but I believe they order the connectivity solutions together with the GPUs. This gives us good visibility into the supply chain from product delivery to deployment. We have a solid understanding of the inventory within our partners that our customers use for staging. Overall, we feel confident that there isn't a significant amount of product currently sitting in inventory.

And with no further questions, Mr. Brennan, I turn the call back over to you for closing remarks.

Yes. Thank you. I really appreciate the strong interest in Credo. We'll talk to you all soon. We're a little bit off schedule, so the call might be a bit rushed and a bit delayed. But again, really appreciate it. Thank you very much.

This concludes today's conference call. You may now disconnect.