Arm and Credo Post Distinct FY2026 Results Amid AI Demand

Arm Holdings and Credo Technology Group reported their respective fiscal year 2026 results, showcasing two distinct models for capturing value in the artificial intelligence boom. Arm, which licenses processor blueprints, reported revenue of nearly $4.9 billion, a 22.8% increase year-over-year. Credo, which manufactures high-speed connectivity chips, saw revenue surge to approximately $1.3 billion, representing a 205.7% jump from the prior year. Both companies delivered strong net income figures, though their underlying risk profiles and margin structures differ significantly.

The divergence in growth rates reflects the different positions these firms hold in the data center supply chain. Arm benefits from an asset-light licensing model that generates royalties without manufacturing costs, while Credo operates as a hardware provider with direct exposure to component pricing and supply chain dynamics. According to GN stocks/chips, these results underscore the varying degrees of leverage each company has to the current AI infrastructure buildout.

Arm Maintains Stable Profit Margins

Arm reported net income of roughly $904.0 million for the fiscal year ended March 31, 2026. This resulted in a net margin of approximately 18.4%, a slight decrease from 19.8% in the previous fiscal year. The company’s balance sheet remained conservative, with a debt-to-equity ratio near 0.1x and a current ratio of about 6.0x. However, stock-based compensation accounted for roughly 69% of operating cash flow, a factor that inflates reported cash generation metrics due to the non-cash nature of the expense.

Credo Achieves Margin Expansion and Growth

Credo Technology Group posted net income of approximately $472.3 million for the fiscal year ended May 2, 2026. The company’s net margin expanded significantly to close to 35.4%, up from roughly 11.9% in the prior period. Free cash flow reached nearly $407.0 million. Credo’s balance sheet showed a debt-to-equity ratio near 0.0x and a current ratio of approximately 10.2x. Stock-based compensation represented about 39.3% of operating cash flow, similar to Arm’s pattern of adding back non-cash expenses to reported cash metrics.

Customer Concentration Defines Credo Risk

Credo’s business model carries significant concentration risk, with its top ten customers accounting for approximately 90% of total revenue. Major clients include Oracle and Microsoft, creating dependency on a few large accounts. The company relies exclusively on Taiwan Semiconductor Manufacturing for wafer production, exposing it to supply chain disruptions and geopolitical tensions. In contrast, Arm faces risks related to competitive architecture shifts and international trade regulations that could restrict IP licensing in certain regions, though its broad licensing base provides greater diversification.