Credo Technology Surpasses Palantir with 180% Surge in 2025

Credo Technology Rides the AI Wave to Record Sales

Credo Technology has emerged as a standout player in the AI industry, surpassing even Palantir Technology in terms of growth and stock performance this year. While Palantir focuses on helping enterprises and governments develop secure AI applications, Credo's success is rooted in its position as the leading supplier of high-speed active electrical cables (AECs) used within data centers.

AECs are essential components that enable efficient communication between high-performance AI chips such as Nvidia's GPUs and Alphabet's TPUs. As more data centers are constructed and hyperscalers aim to optimize their infrastructure for AI training and inference, demand for AECs has surged, driving Credo’s revenue, profit, and stock price upward.

On December 1, Credo Technology reported impressive quarterly results, outperforming not only Palantir but also many other major AI stocks. The company's shares rose 10% on the day, bringing its year-to-date return to an impressive 180%. Revenue jumped 272% year over year to $268 million, with earnings per share (EPS) reaching 67 cents—35% higher than Wall Street's expectations.

For context, Palantir’s revenue grew by 63% year-over-year, and its stock gained 126% in 2025. Credo’s CEO, Bill Brennan, highlighted the growing demand from hyperscalers for AECs during the earnings call. Although the company does not disclose specific customers, it lists four major clients, each contributing over 10% of its quarterly revenue. Together, these hyperscalers account for over 90% of Credo’s sales.

Why Hyperscalers Are Using AECs

Hyperscalers rely on AECs for several key reasons:

• Power Efficiency: AECs consume up to 50% less power than active optical cables while maintaining the same speed, making them ideal for energy-intensive AI clusters.
• Distance and Performance: Unlike copper cables, which are limited in distance, AECs incorporate small semiconductors that clean signals, allowing for longer, more reliable connections within data centers.
• Reliability and Density: Traditional copper wires are too thick for modern server racks, and optical cables can experience disruptions known as link flaps. AECs, being thinner and more flexible, reduce the risk of failure.

The company's largest customer, responsible for 42% of its revenue, is likely Amazon’s AWS. Microsoft’s Azure is believed to be its second-largest client, and Meta Platforms is considered the third. There is speculation that either Google Cloud or Nvidia may also be among its top customers. During the quarter, management noted that orders from a fifth hyperscaler were beginning to ramp, potentially including Oracle.

The Future of Credo Technology

With capital expenditures by hyperscalers expected to exceed $405 billion in 2025 and rise further in 2026, Credo has raised its revenue guidance. The company projects a 27% sequential increase in revenue to at least $335 million for the current fiscal third quarter, representing a 148% year-over-year growth.

Analysts expect this to translate into EPS of 79 cents, up from 25 cents last year. For the full year, estimates have been increased to $1.19 billion in revenue and $2.81 in EPS. This marks a significant jump from the $0.70 EPS recorded in fiscal 2025.

Looking ahead, analysts anticipate continued growth, with fiscal 2027 revenue projected to reach $1.63 billion and EPS of $3.64. Bank of America recently raised its stock price target for Credo to $240, a 45% increase, citing the company’s product diversification roadmap.

Expanding Beyond AECs

Credo is also working on new products to diversify its revenue beyond AECs. These include pluggable optical solutions using micro-LEDs, known as active LED cables (ALCs). According to Brennan, the total addressable market (TAM) for ALCs could eventually be more than double that of AECs.

“We believe the ALC TAM will ultimately be more than double the size of the AEC TAM,” Brennan stated on the earnings call. He also mentioned that the overall TAM for Credo is expected to expand to $10 billion in the coming years, more than triple where it stood just 18 months ago.