On September 2, Credo Technology Group Holding Ltd fell 8.31% in regular trading, trading at $186.695/share, with turnover of $229 million. The decline was driven by margin contraction concerns despite the company delivering a strong Q1 earnings beat.

Credo reported fiscal Q1 revenue of $479.0 million, more than doubling year-over-year and exceeding the consensus estimate of $471.8 million. Adjusted EPS came in at $1.20, above the $1.17 estimate, while non-GAAP net income reached a record $236.3 million. The company guided Q2 revenue to $525-535 million, also above consensus of $519.8 million.

However, profitability metrics deteriorated sequentially. GAAP gross margin fell 370 basis points quarter-over-quarter to 64.5%, with Q2 guidance pointing to a further decline to 63.9%. Non-GAAP operating margin dropped 140 basis points QoQ to 48.2%, and non-GAAP net margin contracted 260 basis points QoQ to 49.3%. GAAP operating expenses more than doubled year-over-year to $188.4 million, with rising R&D spending amplifying concerns. Sector sentiment was additionally pressured after optical interconnect peer Coherent previously fell over 8% post-earnings.

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