Credo Technology Stock Soars. Why It's the Latest AI Data Center Darling. -- Barrons.com

Dow Jones12-03 20:47

By Adam Clark

Credo Technology Group Holding stock was surging early Tuesday. It's the latest company to benefit from a wave of data-center investment linked to artificial intelligence.

Credo shares were up 34% at $64.11 in premarket trading after the provider of high-speed connectivity solutions for data centers reported second-quarter earnings ahead of expectations and it gave a stronger-than-expected revenue forecast.

Credo's stock price had already more than doubled so far this year as investors flock to invest in companies supplying components and power for AI data centers. However, its latest results indicate a stronger pace of investment from its customers such as Microsoft and Amazon.com.

Credo reported adjusted earnings of seven cents a share after the market close on Monday -- beating analysts' expectations of five cents a share, according to FactSet. Revenue surged 64% to $72 million and came in ahead of the $66.8 million that analysts were looking for, according to FactSet.

"For the past few quarters, we have anticipated an inflection point in our revenue during the second half of fiscal 2025. I am pleased to share that this turning point has arrived, and we are experiencing even greater demand than initially projected, driven by AI deployments and deepening customer relationships," said Chief Executive Bill Brennan in statement.

For its fiscal third quarter, Credo guided for revenue between $115 million and $125 million, compared with analyst expectations for sales of $104.6 million.

"We see Credo [as] an outsized beneficiary of AI-driven tailwinds while maintaining [its] cost/power competitive moat," wrote Mizuho Securities analyst Vijay Rakesh in a research note.

Rakesh raised his target price on Credo stock to $70 from $49 and kept an Outperform rating on the shares.

Write to Adam Clark at adam.clark@barrons.com

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December 03, 2024 07:47 ET (12:47 GMT)

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