Credo Technology stock has slipped after earnings: how low can it get?

Credo Technology Group stock continued its strong freefall, even after the company published encouraging financial results. CRDO dropped by over 9% in the premarket session, reaching its lowest level since July 30th. It has now remained deep inside a bear market after falling by nearly 40% from its highest level this year.

Credo Technology Group published strong growth

CRDO stock has slumped substantially in the past few months, moving from the year-to-date high of $308.30 to $192 today. This retreat happened even as the company continues growing, thanks to the soaring demand for its products and services. 

For starters, Credo Technology Group designs high-speed connectivity chips and cables that are mostly used in AI data centers, cloud infrastructure, and networking equipment. These products allow processors to communicate with each other quickly and efficiently. It competes with companies like Marvell Technology, Broadcom, and Astera Labs.

Credo released its earnings report on Tuesday, providing more insights about its business, which continued to see more demand. Its revenue jumped by 9.6% QoQ to $479 million. This increase was about 114.7% higher than what it made in the same period last year.

The company’s GAAP gross margin rose to 64.5%, while its GAAP net income rose to $129.4 million. While its net income rose sharply from $64 million in the same period last year, it was down from the $169 million it made in fourth quarter of fiscal year 2026. In a statement, Bill Brennan, the CEO said: 

“Our portfolio now spans connectivity from millimeters to kilometers, with solutions across optics and copper. As AI infrastructure scales, we will continue to provide an innovative suite of reliable and energy-efficient connectivity solutions for the data center.”

Credo expects that its revenue growth will continue as the data center buildup continues in the US and other countries. Indeed, most of its customers, including firms like Amazon, Microsoft, and SpaceX have all pledged to boost their data center spending. In total, data center spending is expected to be over $1 trillion this year. 

A major issue is that Credo is a highly overvalued, with the forward price-to-earnings ratio on a GAAP basis rising to 45, much higher than the technolgy sector median of 29. It is also significantly higher than other top companies like Dell and Nvidia. 

Credo stock technical analysis

CRDO stock chart | Source: TradingView

Technicals suggest that the CRDO stock may have a strong downward trend in the near term. It has dropped from a high of $308.30 in June to the current $191. 

This retreat, which is in line with our prediction, happened after it formed a double-top-like pattern, a common bearish reversal pattern in technical analysis. It has now moved below the 50% Fibonacci Retracement level.

The stock has dived below the 50-day and 100-day Exponential Moving Average (EMA), a sign that bears are in control for now. This retreat may continue in the near term, potentially to the 61.8% retracement level at $171.