Okay, good morning, everybody. Welcome to the second day of Needham's 28th Annual Growth Conference. My name is Quinn Bolton. I'm the semiconductor analyst for Needham. It's my pleasure to host this fireside chat with Credo Technology, founded in 2008 and headquartered in San Jose, California. Credo's mission is to redefine high-speed connectivity by delivering breakthrough system-level solutions that enable the ever-expanding demands of AI, cloud computing, and hyperscale networks. The company's innovations address system bandwidth bottlenecks while simultaneously improving on power, security, and reliability. Last week, we named Credo our top pick for 2026. Joining me from the company are Bill Brennan, President, CEO, and Chairman, and Dan Fleming, CFO. We also have Dan O'Neill, VP of Corporate Development, in the audience. Bill, Dan, thank you for joining us. Thanks for having us. Well said, by the way. I wanted to start with sort of a big-picture question. and the company's seen tremendous growth in active electrical cables. But Credo is more than just an AEC company. As you look at data center interconnect market, can you talk about the importance of reliability and system level solutions and the types of products you're trying to develop for customers?
Sure, so let me start with the first part of the question about reliability. So going on, I guess two years ago, light kind of went on for our team from two customer conversations that we were having and so when we talk about ai clusters we talk about you know tens of thousands hundreds of thousands of gpus all interconnected to form one you know one big super computer and when we look at the network reliability our customers were describing an effect of link flaps an intermittent flapping of a given link in you know huge number of connections that could could ultimately take down the cluster because they're all interconnected together. And so that became front and center from a conversation we had with XAI. They were building all of their scale-out connections with laser-based optics based on the form factor, 18 racks all tied together. And they came to us and said, look, we're trying to build a zero-flap cluster. And the way we want to do that is move into our facility that's liquid cool, compress the 18 racks down to six, and they felt like if they could make those connections with AECs, so replace all of the laser-based optical connections, they could achieve that zero flap goal that they had, because of the fundamental underlying reliability of copper being maybe 1,000x better than laser-based optics. The second conversation we had with Oracle, and Oracle's architecture was one where they couldn't go short connections some of their connections were more than 50 meters and so the approach with with oracle was how do we build a zero flap cluster and how do we do that given the fact that we're going to have to use laser-based optical solutions so it was a different approach but you know they were they referenced the work that we did with microsoft way back when when we first started talking about aecs and having a product that was able to sense and act in a cable form really unique and groundbreaking but if we follow that same path and basically develop the ability to have real-time telemetry on every link in the cluster would we be able to go up the stack integrate within the network management software so that the optical modules themselves could be set at a threshold of link health and when the link health dropped below a certain level the idea is to identify a potential link and mitigate and so that's what we did so two different approaches to to addressing the network level reliability and idea is shortening the time to stability for a cluster of you know hundreds of thousands of gpus and also keeping the productivity level highest so that the cluster is not crashing continuously and so thematically Reliability has been kind of our north star, driving all of the roadmap development, including, you know, the new products that we recently announced, one being the micro LED ALC solution. but that kind of gives you a background but yes we we view you know our role as a connectivity system solution partner to the industry as as being you know much much greater than developing chips and and delivering those to connectivity
partners that ultimately do that work yeah it's a good segue into my next question which is what do you believe the company's core competencies are to enable the company to deliver the reliability you know to customers is it
certes is it chip is it software so i think it's a combination of things i mean we've been at this a long time we were you know i've been with the company more than a dozen years now and the core competence that we start with is always certes you know we're strong believers that certes is the you know the the starting point it really is the secret sauce so if you if you're doing things that are unique and application specific and optimized at a certes level that gives you an advantage the next is chip design so of course you know there's many things i can point to that make us differentiated and unique the way that we design chips but really the breakthrough for the company was owning the product at a system level um and so you know having your certes engineers sit right next to your chip designers right next to your system level engineers hardware engineers and a firmware and software team that touches every level That that really is is is the starting point of the core competency, but You know ultimately owning the product at a system level is what drives everything
We'll get into in more detail the new products But maybe just at a high level sort of talk about the three new products that you've introduced to the market or talk to Investors about over the last six months the active LED cables the Weaver interconnect, right? Sorry chiplets and than the zero-flap optical transceiver.
Yeah, so if we start with AECs and we look out into the future in the 1.6T ports, our AEC product family will reach 5 meters. And so when we think about the TAM expansion, we think about it in terms of length. And so starting with AEC, I said that the next product that will deliver at a core level solid reliability equal to copper is active micro-LED cables or ALCs. The reach will be extended from five meters to 30 meters. And the idea is that would cover any kind of application in a given row. And then ZF Optics, ultimately, the product that I described that we worked on with Oracle, that will cover up to two kilometers or whatever the max distance is within a data center. The goal there was also reliability. And so if we look at just the length of connection and the TAM expansion, You're really going from a relatively, you know, short connection of five meters, but obviously huge volume, multi-billion dollar market, but expanding it to any length within the data center. And then from an OmniConnect standpoint, that's really going down, you know, down the curve from a length standpoint. So we're talking about solving problems, die-to-die problems, and then system-level problems on, you know, moving from millimeters to 10 inches. And so it's creating a super small certes that's very low power, maximizing beachfront density, and improving the reach to 10 meters. It gives GPU designers incredible amount of flexibility, and you can build it so it's future-enabled. really a game-changer that's probably the the most complex system sale of the of the things that we've announced but potentially the largest market
opportunity as you think about these new products as they come to market do you expect to largely sell them to your existing customer base hyperscalers or does it open up a new customer opportunities I think for sure we're
going to sell these products to our existing customers but the point that you're making about the dynamics in the industry we're seeing you know lots of opportunities with customers that are outside of what I would consider the six hyperscalers and so in a sense these products we've delivered maybe will appeal the most to these companies because they're not going to be resource-rich and you know we are offering you know off-the-shelf shelf solutions to enable them to stand up a cluster, have it come up in weeks instead of months, and then ultimately operate at highest levels of productivity. So it's a perfect fit for those companies that are going and finding the capex and want to enter the game. So I see many opportunities really around the globe beyond the hyperscalers.
Great. Last sort of big picture question, just sort of your outlook for sort of data center AI spending. There've been a lot of concerns in the investment community about circular investments in the AI ecosystem, a lot of those around NVIDIA, OpenAI's ability to fund its 26 gigawatt commitments, and then Oracle and debt financing being used to fund some of these investments. Just what are you hearing from customers? What's your outlook? Do you think we continue to see strong growth this year?
Yeah, I think thematic from my perspective, you know, during the last three months is, you know, finding the signal through the noise, and you and I talked about that, and I appreciate you putting that in your report coming out of CES, but, you know, what we do basically as a business, we find the signal through the noise. So if you think about transmitting a signal over over a copper wire by the time it gets to the other end It's got noise along with the along with the signal and so the DSP basically removes the noise You know, I think if you look at the market level question You know, I think that that the financing of the demand is going to happen, you know one way or another The fact that the demand is there That's really what we're focused on I don't think there's any kind of circular house of cards that's being developed. And so we, you know, again, I'm probably not the right guy to comment on it. We're responding to our customers and really over the last 12 months. And my expectation going forward is there is going to be a strengthening in the demand.
Wanted to shift now to active electrical cables. You've obviously seen tremendous growth in this market over the past couple of years. But I'll ask sort of a similar question, you know, sort of where do you think we are? in industry adoption of active electrical cables you know sort of the what inning are we in type
question oh it's only early innings i learned that a long time ago yeah sure i've never heard an eighth or ninth inning if anybody says middle innings they're gonna be a sell-off but so we're you know we're definitely in the early innings so appreciate the question next i'm kidding i'm I'm kidding. And the way that I would build that bare case, I just did it. The way would I have that. I think the case, anyway, the bull case on this is that I can only point to one customer that is fully deploying in every part of the network that they can with AECs. Every other customer, I see great growth opportunities from a swim lane standpoint, if you look at front end, if you look at scale out, if you look at switch racks, if you look at routers, and ultimately, scale up is a network that's going to emerge as a large volume opportunity. And AECs will definitely apply there as well. So I can make the case as the market goes from 50 gig lanes to 100 gig lanes to 200 gig lanes, there's going to be a growth in the market for sure. So I don't think there's any question. and then we see these new companies that are emerging, and we're starting to take material orders from those that are outside of the hyperscaler community.
Got it, so outside of perhaps one hyperscaler, still lots of room for further adoption. Many hyperscalers, yeah. And hyperscaler, customer base. What are you seeing in terms of attach rates per XPU as we get to next generation platforms?
You know, it's a bit hard for us to, you know, lock that in. You know, there's the industry analysts and forecasters that focus on this type of summary. You know, you talk about different levels within the network and, you know, exactly are, like how many of those levels are using AECs. But, you know, I think comfortably that we can think about 1.5 to, you know, multiple X. You know, more than five, you know, 1.5 all the way up to five or more connections per GPU. Okay, that's a good number. Depending on how they're building out their networks.
And then two of your competitors, Marvell and Estera have both sort of said, they think that as the market transitions to 800 gig active electrical cables, they become more competitive or you see greater diversification of the supplier base. Just any thoughts from Credo's perspective on the 800-gig transition and how you're positioned for the 800-gig cables?
So we're talking about the transition to 800-gig.
To 800-gig, yeah.
Yeah, so I mean, if we look at our business right now, we haven't done the math exactly, but I would say half or more of our connections in AECs are at that 800-gig level. So at both XAI and Meta, we're connecting NVIDIA gear with 800-gig solutions. So for us, that transition is well along the way. I think that if we think about the competitive landscape, I think that the market is big enough at this point, and we can point to different market forecasters to talk about multi-billion dollar market, even over a $5 billion market as they see it today. There's, the market's big enough to support multiple players, And I don't think there's any one generation that I can point to that would say our competitors become more competitive. And I think fundamental to our strategy, I think we're really the only company in the industry that's taking ownership at a system level. And I can tell you from a competitive perspective, what we're focused on is delivering to our customers, delivering first, qualifying first, ramping first, having the ability to develop 20 SKUs in parallel and qualify those 20 SKUs in parallel internally before we go into a customer call. And the supply chain management part of it is also a huge advantage. So if you're gonna do the whole job, you've got an advantage over a company that's gonna design a chip and basically sell that chip and somewhat of a reference design to another company that's gotta own it fully. So I think the way we're approaching the market ultimately the way that we're working with customers has has proven out to you know to ultimately You know cause us to be preferred you know, so I can't point to any one competitive aspect that Other than diversity that would drive any kind of market share shift. Okay
How about thoughts on the AEC versus ACC the positioning, I think one large hyperscaler is set to deploy ACCs this year on a next generation platform. Do you see growing adoption of ACCs? Do you think it's a fairly niche product?
Yeah, so I think that if we look at the underlying technology, and we talk about comparing AECs to ACCs, ACCs are using, from a semiconductor standpoint, A device called a re-driver, or you could think about it as an amplifier. At each end of the cable, what's happening is there's an amplification of the signal, an amplification of the noise, and it's basically passing it down the wire to the switch or the NIC that it's interfacing with. And so that fundamentally is, from a signal integrity perspective, one that's challenged. And so if a customer did own both ends of the connection, and they were willing to go through the gymnastics of having customized or optimized firmware for every single port on that switch, because the length of the copper is different if you look at the board. If they're willing to go through those gymnastics and fight through it, it's possible. There's different, each one of these hyperscalers is a different market. So some of them go extremely vertical and want to take ownership of that. And so I don't see this as a long-term solution that's gonna threaten the AEC market at all, especially as you go faster. So the idea of interoperability, you lose that with ACCs. And from a signal integrity standpoint and a pure liability standpoint, AECs are in a different class.
Okay. Just sort of thinking about, you mentioned 1.6T, optical modules are starting to ship this year. When do you think we see 200 gig per lane 1.6 t active electrical cable starting to ship i would say in that time frame yeah it
you know for those that have followed the market for many years the transition between speeds is always slower than than you know what the uh you know the forecasters are predicting or or even some of the companies that are talking about are predicting um if we were to go back two years ago and we listened to some of the noise around 200 gig per lane they would have had you thinking in 26 that 100 gig is over and that you know the market's dominated by 200 gig there's talk about 400 gig now but you know ultimately our belief is that you know the the market really takes off when the ecosystem is in place and we're not quite there so you've heard about delays consistently over the last 18 months the bottom line it'll it'll sort itself out and we'll be ready for the market with you know super competitive solutions across the entire portfolio that that I just talked about my belief on the crossover between 100 gig and 200 gig lanes like when will there be a higher volume of 200 gig lanes in a given year I would project out the 28 timeframe okay and you know ultimately you know there are very large hyperscalers that are still at 50 gig per lane now and they're talking about a transition to 100 gigs so 200 gigs not even in you know in the you know any kind of near-term view again each one of these hyperscalers is a different market so the transition will be important it'll be great for the it'll be great for the connectivity industry you know given that the more difficult things become the better it becomes for the companies that can actually clear the hurdle great um and then lastly on the
aec side you've historically received long-term forecasts for many of your major hyperscaler partners can you kind of talk about the length or the duration of some of those forecasts and obviously it gives you some pretty good visibility sure into the business uh so just sure sure so
it's it's very standard for us to get 12-month forecasts so every month you can imagine a month gets added onto the 12-month forecast we've got a couple customers that are going out further you know 24 months and even one that goes beyond that um you know i think forecasts are great um you know especially the ones that are shorter term like 12 months but i think there's a feeling in the industry that from a supply chain standpoint that it's going to be a differentiator long term and that the industry is growing so fast that we can point to different areas that might become a ceiling on just overall deployments we can talk about wafers we can talk about memory We can talk about lasers. And so customers are going to great lengths to make sure that we understand what they need and we're doing the planning and making commitments on our end so that we can fulfill their demand. So it's really a great part. I mean, I can think back on my career where people didn't want to give any kind of forecast that were beyond 20 weeks. So it makes it easier from a planning standpoint.
Excellent. Wanted to shift over now to the zero flap optical transceivers. You gave us in your opening comments sort of a description of what the product was telemetry and so maybe just from a, clearly they're differentiated from a commodity 800 gig or 1.60 optical module, but maybe spend a minute on how that reflects to you in terms of ASP that you might get for zero flap optics versus the more commodity and any impact on your gross margin, you know, as you start to ramp zero-flap optics?
Yeah, so we've, all of these new product announcements that we made in our last earnings call, they all kind of fit into that category of 63 to 65% gross margin long-term. So, you know, these innovative solutions really bring that value as we've gone, you know, up stack in terms of what we're providing to the customer and zero-flap optics are certainly that. These are not commodity transceivers. We're not competing for commodity transceiver sockets. So there is an uplift in ASP. But most importantly, from a gross margin perspective, long term, 63% to 65%, it fits right in that pocket. Great.
And then can you discuss sort of how customer engagements are going with zero flap optics? I think you mentioned Oracle was sort of the partner you developed it with. Are you expanding beyond that lead customer? And then thoughts on ramp timing for CF Optics.
Yeah, so we've been definitely successful in seeing interest from several other customers. I would say that we're, you know, it's clear who the lead is. I think there's a second one that's strengthening. But generally, the idea of the product, it solves a real problem for anybody that's building clusters where the connections require laser-based optics. So I think from a ramp standpoint, on our most recent call, nothing's changed since then. So I expect fiscal 27 is when we'll see material revenue, first year ramping, and then we'll take off from there. But I think the market size is quite big. And so again, I can easily make a case that it's a multi-billion dollar market, especially if you think about just the size of the overall commodity module market for 800 gig.
And I don't wanna be too cute, but when you say meaningful revenue, some people think meaningful has to be the SEC definition of 10% of revs. Like when you say meaningful, what do you mean? Is that tens of millions of dollars? Is there any way you can frame how you think investment?
I think it's beyond that.
Yeah, okay.
Yeah, I think it's beyond that. Great.
Moving to active LED cables, maybe just spend a minute talking about the development of that micro LED-based technology, what Hyperloom brought to the company with that acquisition.
Yeah, so the reason that I'm very bullish on the product category is that when we bring this to market it's gonna have equal reliability to copper. It'll have equal power efficiency to AECs, it'll have equal cost efficiency. So the three main drivers on why the industry has adopted AECs so broadly, that will come with ALCs. What you get in addition is you get longer length and you get a thinner cable. And so the acquisition of Hyperlume was critical to marrying what we do from an electrical perspective with what they've developed from a micro-LED perspective. And so from here, I've mentioned before that it's really an execution play. It's bringing technologies that have been matured, ultimately merging them into this cable system and bringing it to market. So my expectation is that'll happen over the next year. And then fiscal 28 is when we'll see first volumes.
And just sort of as you think about the TAM expansion opportunity for ALCs, how does that TAM compare to your current AEC TAM And is there any AEC business that you see being cannibalized as ALC's ramp?
Yeah, so I think that we can talk about the areas of TAM within the AI and data center. The different parts of the network. And so I would add, in addition to front-end scale-out, switch racks, routers, I would add scale-up is going to be a big opportunity. And so it's, you know, the routing densities are going to be, you know, much more dense than what we're seeing on scale-out. And so where, you know, AECs will definitely be preferred for short connections. ALCs expand the TAM significantly, and as we look at that TAM generally expanding, that's why I feel comfortable saying that the market opportunity is double what we see for, at least double of what we see today for AECs. now if I were to have a customer tell me that they really like the fact that you can make a thinner cable they really like going to the optical form factor and they want me to build two meter cables I'm agnostic I'll build that I'll build an ALC if that's what's preferred so in a sense you could make a case that the ALCs might cannibalize some of the market for AECs depending on the
customer okay one of the questions we'll get your thoughts on on CPO in a second But just, can you deliver an active LED cable in a non-pluggable form factor? I mean, does it have to be a pluggable? Could you bring it into a sort of a chiplet, bring it closer to a switch or an XPU?
Yeah, great question. Yes, absolutely. You know, in a sense, the other companies in the market are really focused on that opportunity. and for me that's out on the horizon you know that's you know beyond this point A to point B execution that market opportunity is going to come in several years not next year not the year after that the great thing about ALCs is doing the work and you know basically bringing bringing the technology to market it hardens the solution and so the idea of having it being pluggable Absolutely not on our roadmap our longer-term roadmap that we've talked about with Omni Connect is doing a gearbox that interfaces electrically with With the GPU and then the gearboxing will happen to a bundle of fibers And you know the difference about that that kind of an NPO solution is again no lasers So when you compare it to CPO or NPO when you talk about lasers Again, it doesn't it doesn't you know clear the hurdle on reliability And that's the promise of micro LED long-term. So, and that's where you can make a case that OmniConnect becomes the largest opportunity that we've got long-term, you know, meaning on the three to five-year timeline. But we're more focused on, you know, the execution play in the next 18 months.
What's the odds that...
Yeah, absolutely. I mean, there's no bright lines on where we will be or where we will go. But if that opportunity emerges, you can count on the fact we'll be involved. yeah yeah count that as additional opportunity all right moving to Omni
Connect and Weaver talk about the first you know instantiation of that product the memory fan out gearbox application sure and and you're you I think you've announced your first partner with with with Weaver right right so we've talked
a lot about training everybody you know understands how massive that opportunity has been and will be ongoing, but inference is just starting to happen and happen in a big way. The challenge in inference is different than the challenges in training. Many people talk about the memory wall, and if we kind of baseline on a product that is being talked about coming to market, Ruben CPX, and we look at that and we look at the size of memory being 128 gigabytes and and you you kind of zoom in and say why is it 128 gigabytes and you look at the beachfront area on the GPU and how much you know how much of the beachfront is taken up by the certes and the files that connect 128 gig it's about 75% of the beachfront so there's no path to a terabyte just from the standpoint of the dye area the beachfront area and then if you look at the actual memory it can be about an inch away from the GPU based on on the reach of those certes. And so you're limited by two things physically. The beachfront area, because it's not very dense from the standpoint of throughput per millimeter on the die edge. And it's limited by the reach, so you can't get the DRAM very far away. So you're limited to packing it around the GPU. There's markets like real-time AI-generated video that require large models. And so if you're building an inference machine and you're not able to put the entire model into DRAM, your performance is going to be horrible because you're going to be paging in and paging out of DRAM. And so if you can kind of unlock those limitations by designing a SERDE that's got super high throughput per linear millimeter, and you can have reach that's 10 inches or you know 10 times what's out there today you could imagine and with our first partner they announced what they're going to be bringing to market is a an inference engine with two terabytes 15 times the memory or something on that order compared to what is coming you know for smaller models so we think that is really a breakthrough and another market that we can talk about is automotive there's no paging in and paging out so So if you're trimming your models because you don't have enough DRAM, that goes directly to the quality of full self-driving and safety. And so the idea of designing an inference solution that had a future-enabled ability to add more memory as your model increased, it'd be game-changing. And having the ability to change the gearbox from, say, LPDDR5 to LPDDR6 when the market changed, all you'd have to do is change the gearbox. And so that would be a completely different way to think about the challenges of that application as the models grow, which by the way, they're growing exponentially if you look at the data that's publicly available.
Right, right. And as you think about these chiplets, what would the dollar opportunity, dollar content opportunity be if you attach to an inferencing processor or a high-end autonomous vehicle.
For this first gearbox, for this memory, the Weaver device that is breaking the wall on memory, it really depends on how much memory is being deployed. So with our first application, I would say it's well over $1,000 of content based on the system that they've defined.
And from a design perspective, this requires the XPU or the ASIC provider to sort of design two-year sort of chiplet interface. And so it's gotta be a very tight design, co-design process. And so maybe just talk, how long does that design cycle take before you would be able to see the chiplets ramp?
Well, for our first customer, it feels like it's like a two-year type of timeline to production. And that's why we signaled that fiscal 28 is when we expect first revenue. But it is a much more collaborative design activity compared to the system solutions that literally I can take an order and you can put those in a deployment in weeks, not years. Yeah, so if you think about the concept of OmniConnect, think about, everybody seems to be familiar with NVLink Fusion where if you add NVIDIA Certes to your GPU design, that becomes a gateway to connecting with, say, the NVLink ecosystem. Same thing here is if you put our certes in your GPU design, that becomes a gateway to all of the gearbox chips that we're going to make. We'll make gearbox chips for memory first. We'll make gearbox chips for scale out, for scale up, and ultimately, near package optics. So you can imagine just the game changer it would be if you could make a GPU design that's future enabled, that you wouldn't have to make your decision on I.O. until late in the process. And you can be really prescriptive with the gearboxes you want us to design.
So you could have an electrical version of the gearbox. You could have an NPO or a CPO version of chiplets
to provide. Yeah, so very simply, if we talk about scale out, maybe the first gearbox we'll deliver is a 200 gig per lane capable. You could run it at 100 or 200. But when 400 gig is a reality, I'll deliver a new gearbox that you can connect to the same XPU and enable that functionality, enable that speed increase. So in a sense, that's where I think about it as being future enabled. You can literally, you don't have to spin the GPU. And so that's game changing.
Last question for me, just sort of thoughts. You did a financing recently, I think put an extra 750 million or so of cash on the balance sheet. You guys are nicely profitable with, I think, 45% plus net margins, so very cashflow positive. just thoughts on capital allocation and M&A. Obviously, you've done a couple of deals recently.
Yeah, so we closed, as you mentioned, $750 million financing. And really, we, with Hyperloom, you saw us do our first acquisition as a company. There may be others of similar size in our future. more tuck-in in nature or certainly not what I would call transformative, but very adjacent to where we are today. And with this close of that ATM, we preserve a lot of strategic flexibility with any opportunities that may present themselves to kind of accelerate some of the areas that we're going to. Excellent.
We've got a couple of minutes left, so I figure I'll open up to the audience for any questions, any takers. All right, well, we'll wrap it here then. Bill and Dan, thank you very much for joining us at the Newman Conference, really appreciate it.
Thanks so much. Thank you.