Credo Technology Group (NASDAQ:CRDO) has entered into a definitive agreement to acquire DustPhotonics, a company Credo described as a leader in silicon photonics photonic integrated circuit (PIC) technology. The transaction is intended to expand Credo’s optical portfolio and deepen its system-level connectivity offering for AI infrastructure, spanning copper and optical solutions across front-end, scale-out, and scale-up networks, executives said on a conference call.
Strategic rationale: expanding the optical stack
Chief Executive Officer Bill Brennan said the acquisition builds on Credo’s foundation in high-speed connectivity, which he said combines SerDes, DSP, and system-level design. As AI clusters scale, Brennan said requirements for “reliability, power, and performance are only getting tighter,” and the company is aiming to stay ahead of those demands by integrating DustPhotonics’ silicon photonics PICs with Credo’s existing optical DSP and ZeroFlap (ZF) optics platform.
ZeroFlap optics and a system-level approach
In the Q&A, Brennan said Credo is applying a similar system-level approach in optics as it has in active electrical cables (AEC). He said that while AEC is largely centered on the DSP, optical transceivers involve multiple critical components, including the PIC, and that owning more of the stack can lead to an “optimized system-level design.” He also said integration could improve margins by eliminating “margin stack” that can exist when sourcing components externally.
Brennan also pointed to what he called a sizable market opportunity for standalone silicon photonics PICs, noting analysts expect a multi-billion-dollar market in the coming years, and adding that “by 2030, some analysts call it a $6 billion market.”
Financial expectations and timing
The company said it expects to close the transaction in the second quarter of calendar 2026. During the call, Chief Financial Officer Dan Fleming said Credo’s forecast for fiscal 2027 has increased compared with prior guidance. “The $500 million that Bill referenced, it is above what we had previously guided,” Fleming said, adding that fiscal 2027 revenue is now expected to grow “in excess of 75% year-over-year.”
Fleming described the cadence behind that outlook as “mid-single-digit sequential growth through the first half of the year and the second half inflection driven by that ramp of our optical portfolio,” which he said includes Optical DSP, ZF Optics, and the company’s “silicon photonics platform” following the acquisition.
On profitability, Fleming said the company’s announcements remain consistent with its long-term model, and reiterated prior comments that ZF Optics is expected to align with Credo’s long-term gross margin model, described as “mid-60s%.” He added that integrating silicon photonics into ZF Optics would be “accretive to the overall ZF Optics story.”
Asked about operating expense and capital expense implications for fiscal 2027, management said it had not yet provided overall fiscal 2027 guidance, but noted the expectation that the deal will be “accretive in fiscal 2027 and beyond.” Fleming also said the deal includes a contingency earn-out over a two-year timeframe based on a mix of financial metrics.
Roadmap: silicon photonics, telemetry, and CPO/NPO
Executives emphasized a dual technology roadmap spanning DustPhotonics’ laser-based approaches for co-packaged optics (CPO) and near-packaged optics (NPO), alongside Credo’s microLED initiatives. Brennan said Credo will continue to invest heavily in microLED, describing it as addressing reliability challenges associated with laser-based solutions. He also said DustPhotonics’ PICs include sensors that can enhance Credo’s telemetry capabilities, building on the telemetry approach Credo has discussed for its ZF Optics platform.
On next-generation speeds, management said DustPhotonics has “made lots of progress” on 448G or 3.2 Tbps and is “ahead of the market,” though Brennan cautioned it may take time for the broader market to develop. He said the combined offering of Dust’s PIC along with Credo’s optical DSP and SerDes positions the company to participate as that market evolves.
Customer traction and channel considerations
Brennan said Credo has been making “great progress” on customer traction for ZF Optics and plans to provide an update on an upcoming call in June. He also said DustPhotonics’ engagements at both hyperscaler and module manufacturing customers are “quite good” and complementary to Credo’s efforts, and that the company expects to integrate Dust technology into the ZF Optics platform over about a year.
Management declined to provide a revenue breakout for DustPhotonics but said its backlog is “quite healthy” and growing through fiscal 2027. Brennan also addressed questions about potential channel conflicts, saying Credo does not currently see a conflict between operating a component business in PICs and its ZF Optics transceiver product line, describing ZF Optics as distinct from the “commodity transceiver market.”
About Credo Technology Group (NASDAQ:CRDO)
Credo Technology Group, Inc (NASDAQ: CRDO) is a fabless semiconductor company that develops high?speed connectivity solutions for cloud, enterprise and telecommunications infrastructure. The company focuses on semiconductors and related IP that enable reliable, low?latency movement of large volumes of data between servers, switches and optical modules in data centers and network equipment.
Credo’s product portfolio centers on high?speed analog and mixed?signal devices designed to preserve signal integrity and extend reach over copper and optical links.
