Credo Technology Group Holding Ltd (NASDAQ:CRDO) stock fell 16.35% (As on March 3, 11:26:56 AM UTC-4, Source: Google Finance) despite the company reported third quarter fiscal 2026 results that exceeded analyst expectations. For the third quarter, the company reported adjusted gross margin of 68.6% and adjusted operating expenses of $77.4 million. Adjusted net income totaled $208.8 million, compared to $45.4 million in the year-ago quarter. The company ended the quarter with cash and short-term investments of $1.3 billion.

Moreover, Active LED Cables or ALCs extend the system-level AEC philosophy into mid-reach optical. By combining Credo’s connectivity architecture with the MicroLED expertise gained in the HyperLUM acquisition, the company is creating a new system-level product category that delivers the reliability and power profile of an AEC with a thinner gauge optical cable capable of reaching up to 30 meters. ALCs expand the TAM outward from short-reach copper into mid-reach optical, bridging the gap between AECs and conventional optical modules. The company expects to sample and qualify the first ALC products in fiscal 2027 and production ramp in fiscal 2028. In addition, the company expects the production ramp for the first OmniConnect gearbox to be in fiscal 2028.

CRDO in the third quarter of FY26 has reported the adjusted earnings per share of $1.07, beating the analysts’ estimates for the adjusted earnings per share of $0.96, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 201.5 percent to $407.01 million in the third quarter of FY26, beating the analysts’ estimates for revenue by 4.52%. Revenue also grew 51.9% sequentially from the second quarter.

Credo projected fourth quarter revenue between $425 million and $435 million, with a midpoint of $430 million above the analyst consensus of $411 million. For the fourth quarter, Credo expects adjusted gross margin between 64.0% and 66.0%, with adjusted operating expenses ranging from $76 million to $80 million. The company expects strong optical DSP growth in fiscal 26, driven by 100 gig per lane deployments with increasing traction at 200 gig as customers prepare for 1.6T transitions. For Ethernet retimers, the company is seeing significant growth with the 100 gig per lane solutions in both traditional switching fabrics and the rapidly expanding AI server segment. The PCIe Gen 6 retimers remain on track with fiscal 26 design wins expected to convert to production revenue in fiscal 27.