MW Credo's stock surges. Here's why its new acquisition 'makes perfect sense.'

By Britney Nguyen

Bringing silicon photonics technology in-house will improve supply-chain and cost structure, an analyst says

Credo announced on Monday that it will acquire DustPhotonics.

Shares of Credo Technology were soaring on Tuesday morning following an acquisition that will help it capture more share of the hot market for optical connectivity.

Credo $(CRDO)$ announced on Monday that it will acquire optical transceiver technology leader DustPhotonics for $750 million in cash and about 0.92 million shares of its common stock. The company is also considering an additional payment of up to 3.21 million of its shares that is contingent on reaching certain financial milestones, according to Credo.

"The acquisition of DustPhotonics makes perfect sense for [Credo] as they look to capture greater share of the growing opportunity tied to ZF Optics," Jefferies analyst Blayne Curtis said in a Monday note, referring to the company's ZeroFlap optical transceivers.

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Ahead of the acquisition announcement, Curtis had written in a Sunday note that he saw the potential for Credo to generate more than $300 million in annual revenue from its ZeroFlap optical transceivers, which are used to improve network connection reliability and stability in artificial-intelligence chip clusters.

Curtis had said the company's optical transceivers represent "a major swing factor" for diversification of its product offerings and revenue.

DustPhotonics develops silicon photonics photonic integrated circuits, or SiPho PICs, which are chips that integrate optical components including lasers and detectors to move data using light. The technology is used in optical transceivers, which convert electrical signals into light pulses and vice versa to transmit data between hardware in data centers.

Credo said the deal will position the company to address the demand for both electrical and optical interconnects through a vertically integrated stack that includes its SerDes and digital signal processor technology.

The companies' combined portfolio is expected to drive more than $500 million in optical revenue in fiscal 2027, Credo said.

Having the PIC technology in-house "gives [Credo] control over a foundational component of its ZF Optics platform helping to reduce supply chain risk but more importantly creating a pathway to cost structure improvement at volume," Curtis wrote.

He noted that Credo follows a similar strategy for its active electrical cables, or AECs, "that allows them to compete very effectively vs. competitors."

Credo's stock was up about 13% on Tuesday morning and has been up for three consecutive sessions. The stock has gained 40.6% over that period, making for its best three-day stretch since Dec. 5, 2024, according to Dow Jones Market Data.

Interest in optical connectivity has grown amid the AI-infrastructure buildout, as it is seen as a faster, more energy-efficient solution compared with traditional copper-based wires. Credo's AECs are copper-based wires embedded with chips that are used to transmit data at high speeds between servers. Wall Street's fears over optical components replacing copper-based ones had weighed on Credo's stock in recent months.

But with the latest rally, the stock has rocketed 292% over the past 12 months, compared with the 127.2% rally in the PHLX Semiconductor Index SOX.

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In his Monday note, Curtis said he expects the acquisition to contribute less than $100 million in annual revenue for Credo. While the impact of the deal on Credo's operating expenditures and details on the product ramp are not clear, Curtis said he sees upside of 75 cents compared with his earnings-per-share estimate of $5.05 for Credo in fiscal 2027, which is ahead of the consensus for $4.72 on FactSet.

The acquisition is expected to close in the second quarter of this year, Credo said, and the company expects the deal will be accretive to its adjusted earnings per share in fiscal 2027.

-Britney Nguyen

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April 14, 2026 10:46 ET (14:46 GMT)

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