Key insights
- Credo's acquisition of DustPhotonics for $750M signals increased investment in silicon photonics for AI and hyperscale applications. The deal is expected to boost Credo's optical revenue and become accretive to earnings by fiscal 2027. While the acquisition is a positive long-term signal for Credo, the stock's current overvaluation may limit immediate upside for the broader US equity market.
SAN JOSE, Calif. - Credo Technology Group Holding Ltd (NASDAQ:CRDO) announced today it has entered into a definitive agreement to acquire DustPhotonics, a developer of Silicon Photonics Photonic Integrated Circuit technology for optical transceivers, according to a press release statement.
The transaction values DustPhotonics at $750 million in cash and approximately 0.92 million shares of Credo common stock. The deal represents a significant investment for Credo, which currently holds a market capitalization of $22.06 billion and has seen its stock surge 209% over the past year to $134.36. Additional contingent consideration of up to approximately 3.21 million shares may be paid based on achievement of certain financial milestones.
DustPhotonics, founded in 2017 and headquartered in Israel, has developed a portfolio of Silicon Photonics PICs spanning 400G, 800G, and 1.6T, with a roadmap extending to 3.2T. The company employs approximately 70 people and operates a fabless model.
The acquisition will bring Silicon Photonics PIC technology in-house for Credo, which provides connectivity solutions for AI-driven applications, cloud computing, and hyperscale networks. DustPhotonics’ technology is deployed in transceivers at hyperscale AI clusters and is in design for Near Port Optics and Co-Packaged Optics applications.
Credo stated the combined portfolio of ZeroFlap Optical Transceivers, Optical DSPs, and Silicon Photonics products is expected to generate greater than $500 million in optical revenue in fiscal 2027. The company expects the transaction to be accretive to non-GAAP earnings per share in fiscal 2027. According to InvestingPro data, Credo maintains impressive gross profit margins of 67.83% and 13 analysts have recently revised their earnings upwards. However, the stock currently appears overvalued based on InvestingPro’s Fair Value analysis. Investors can access detailed analysis through the comprehensive Pro Research Report, available for CRDO and 1,400+ other US equities.
The transaction is expected to close in the second quarter of calendar 2026, subject to customary closing conditions and regulatory approvals.
Credo will conduct a conference call on Tuesday to discuss the acquisition.
In other recent news, Credo Technology Group Holding Ltd. has been the focus of several analyst evaluations and corporate developments. Jefferies initiated coverage on Credo Technology with a buy rating, citing growth prospects in artificial intelligence applications. They set a price target of $175.00, suggesting a positive outlook on the company’s valuation. Mizuho reiterated its Outperform rating for Credo Technology, maintaining a $200 price target, driven by the company’s strength in active electrical cables and expansion in optical technologies. The firm notes that Credo’s AEC 800G/1.6T leadership is expected to continue into 2030, with significant growth in optical technologies as well.
In legal matters, Credo Technology has settled patent disputes with both TE Connectivity Corporation and Molex, LLC. The agreements with both companies include the dismissal of all lawsuits, although the specific terms remain confidential. These settlements mark a resolution of ongoing legal challenges for Credo Technology. Additionally, despite Nvidia’s CEO emphasizing the need for increased capacity in copper and optical interconnect solutions, Credo Technology’s stock saw a decline. This comes as Credo provides high-speed copper and optical interconnect products crucial for AI infrastructure.
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