Credo Technology soars after announcing deal to acquire photonics company
Credo Technology Group is soaring in premarket trading after announcing an agreement to acquire DustPhotonics, a developer of silicon photonic integrated circuits for optical transceivers (that is, chips that help use light to move information around data centers).
The price is $750 million in cash plus 920,000 shares of Credo, and has the potential to escalate from there based on the achievement of certain financial milestones.
The acquisition marks a concerted effort by Credo to play both ends of connectivity: advanced photonics in addition to active electrical cables (its bread and butter).
Per the press release, “The acquisition will position Credo with a vertically integrated connectivity stack... for scale out and scale up networks — addressing both electrical and optical interconnects across the full AI infrastructure.”
Following this transaction, the company expects optical revenues of more than $500 million in fiscal 2027, well above the pre-acquisition consensus estimate of $161 million.
Management projects this deal will be accretive to adjusted earnings per share in fiscal 2027.
Shares of Credo boomed after Broadcom reported earnings last month, as the custom chip specialist said that its clients were sticking with direct attach copper cables through 2028. But going forward, connectivity demand appears to be a story of both copper-centric and light-centric solutions to transmit information within and between racks.
