Needham has maintained a Buy rating on Credo Technology Group Holding Ltd. (NASDAQ: NASDAQ:CRDO) and increased the price target to $33 from $29.
The adjustment follows Credo's announcement of a top-line beat and raised expectations, driven by accelerating Application-Specific Integrated Circuit (ASIC) revenue from multiple hyperscaler customers.
The firm's confidence in Credo's revenue inflection in the second half of fiscal year 2025 has been bolstered by the ASIC ramps across four key customers, which are believed to include major tech companies such as Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Oracle (NYSE:ORCL), and an entity referred to as xAI.
Additionally, Credo's product gross margins (GMs) have shown a strong quarter-over-quarter increase. However, the overall GM growth is expected to be non-linear.
The analyst also highlighted that shipments of Optical Digital Signal Processors (DSPs) are projected to be robust in fiscal year 2025, accounting for more than 10% of total sales.
The Long-Reach Optics (LRO) technology is anticipated to contribute to growth in the calendar year 2025 and beyond.
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