Credo Technology Group Holding Ltd (ASX: CRDO) experienced a significant stock drop of over 10% in after-hours trading on Monday, despite reporting quarterly results that surpassed analyst expectations.

The company's revenue for the quarter ending May 2 surged 157% year-over-year to $437 million, exceeding the forecasted $433.3 million.

Adjusted earnings per share for the fourth quarter came in at $1.16, beating the consensus estimate of $1.03, while GAAP earnings per share were $0.88, also above the expected $0.78.

CEO Bill Brennan highlighted the full fiscal year 2026 performance, noting that revenue more than tripled to $1.3 billion and non-GAAP net income grew over fivefold to $662 million.

Looking ahead to the first quarter of fiscal 2027, Credo provided revenue guidance between $465 million and $475 million, which is above the market's expectation of $460 million.

The company also projected an adjusted gross margin of 67% to 69% for the coming quarter, higher than the anticipated 65%, though this represents a sequential decline from the previous quarter's 68.3%.

During Monday's regular session, the stock had already fallen 4.2% to close at $226.10, after hitting an intraday record high of $243.21.

In after-hours trading, the decline deepened, with shares falling approximately 11.4% to around $204.70.

Investment group leader Julian Lin commented that while Credo's data was strong, it failed to meet the market's elevated expectations, attributing the pullback more to unrealistic expectations driven by the broader semiconductor rally than to fundamental issues.

Another analyst team noted the situation mirrored the previous quarter's report, where good results were not enough given the stock's 151% rally this quarter.

They expressed concern that the magnitude of earnings beats was narrowing amid numerous upward revisions from Wall Street and pointed to the gross margin guidance as a potential worry for future profitability expansion.

However, the team characterized the sell-off as a healthy valuation reset and maintained a positive long-term view on Credo's positioning in AI infrastructure.

Credo Technology Group is a fabless semiconductor company focused on providing high-speed connectivity solutions for cloud, enterprise, and telecom infrastructure.

Its product portfolio centers on high-speed analog and mixed-signal devices designed to maintain signal integrity and extend data transmission distances over copper and optical links.