Credo Technology Shares Plunge 20% Despite Earnings Beat

Shares of Credo Technology Group Holding Ltd. (NASDAQ: CRDO) plummeted roughly 20% on Wednesday, September 2, 2026, closing near $164.50 after opening around $188, as investors punished the high-speed connectivity chipmaker despite a headline earnings beat.

The sell-off came a day after Credo reported fiscal first-quarter 2027 results that topped Wall Street expectations, with earnings and revenue surprises of 2.56% and 0.69%, respectively, for the quarter ended in July. However, the market’s reaction turned negative as analysts flagged shrinking gross margins and rising operating expenses buried within the report, along with a first-quarter outlook that disappointed some investors betting on accelerating AI-driven demand for the company’s optical and electrical Ethernet connectivity products.

The stock had already begun sliding Tuesday, closing down 8.7% at $206.63 as the earnings report circulated after hours, before the rout intensified Wednesday. Combined, CRDO has shed more than 25% of its value since Friday’s close near $226.

Wall Street reaction was mixed. Needham reiterated a Buy rating and $275 price target, citing strong optical revenue growth, while Roth Capital raised its target to $300 from $200, maintaining a Buy and implying more than 30% upside from current levels. Other analysts were more cautious, pointing to margin compression as a signal that competitive pricing pressure in the AI networking space may be intensifying.

Credo, which makes cables and optical digital signal processors used in data centers, has been a favorite among investors betting on AI infrastructure buildouts. Wednesday’s decline raised questions about whether that growth story is showing early cracks even as demand remains robust.