Why Credo Technology Stock Plunged 20% Today

Credo Technology (CRDO) experienced a significant drop of 20% in its stock price on Wednesday, despite delivering strong financial results for the first quarter of 2027. The company surpassed analysts' expectations with a 115% year-over-year increase in revenue, reaching $479 million for the quarter.

Adjusted earnings per diluted share also impressed, rising to $1.20 from $0.52 in the same period last year, marking a 131% increase. Notably, Credo's active electric cables (AECs) are being delivered to five major hyperscalers, while its optical business is experiencing rapid growth.

The company's guidance for the second quarter of 2027 is even more optimistic, projecting top-line revenue of around $530 million, up from $268 million in the previous quarter and well above the current analyst consensus of $517 million.

However, there is a concerning aspect of Credo's financial performance. The three largest clients accounted for a significant 74% of the company's total revenue, indicating a high level of concentration in its customer base. This concentration could present risks if these key clients were to face challenges or reduce their spending.