Following a successful first quarter in fiscal year 2026, Cirrus Logic, Inc. reported earnings exceeding expectations, with an Earnings Per Share (EPS) of $1.51, surpassing the anticipated $1.07. Company executives held a conference call to discuss the financial results and answer questions from analysts. Here’s a breakdown of the key highlights from the call:
Financial Performance Highlights
- Revenue: The company reported revenue of $407.3 million for the first quarter, exceeding the upper end of their projected range. This was primarily attributed to robust demand for smartphones incorporating Cirrus Logic’s silicon.
- Gross Margin: The non-GAAP gross margin stood at 52.6%. This figure saw a sequential decrease due to a less favorable product mix and a return to standard pricing conditions. However, year-over-year, the gross margin improved, largely due to a more advantageous product mix.
- Operating Expenses: Non-GAAP operating expenses for the quarter totaled $119.5 million. This represents a sequential decrease, primarily due to reductions in product development costs, variable compensation, and facility-related expenses. These reductions were partially offset by increased employee-related costs, primarily due to annual salary increases.
- Operating Income: Non-GAAP operating income was $94.9 million, representing 23.3% of revenue.
- Net Income: The non-GAAP net income was $80.3 million.
- Cash and Investments: The company’s balance sheet remains strong, with cash and investments totaling $847.8 million.
- Inventory: Inventory levels decreased to $279 million, representing approximately 132 days of inventory.
- Share Repurchase: The company repurchased approximately 1 million shares of its common stock for $100 million.
Strategic Growth Initiatives
Cirrus Logic is focused on a three-pronged strategy for long-term growth:
- Maintaining Leadership in Smartphone Audio: The company aims to maintain its dominant position in the high-performance audio market for flagship smartphones. The recent success of their latest generation custom boosted amplifier and 22-nanometer smart codec demonstrates their commitment to this area. These components deliver exceptional audio and voice experiences, alongside significant improvements in power and efficiency.
- Expanding High-Performance Mixed Signal Solutions: Cirrus Logic is actively expanding its portfolio of high-performance mixed-signal solutions for smartphones and similar products. This includes the continued success of their camera controller product line, with ongoing investment in battery, power, sensing, and other related domains. These investments are expected to drive product diversification and expand their footprint in the high-performance mixed-signal space.
- Leveraging Expertise in New Markets: The company is leveraging its expertise in audio and high-performance mixed-signal to expand into new markets beyond smartphones, such as laptops. They are actively engaging with laptop customers and have seen their next-generation PC amplifier and PC codec designed into several new laptops expected to ship in late 2025. A collaboration with Compal, a leading electronic design and manufacturing services company, aims to address persistent audio challenges in laptops.
Expansion Beyond Smartphones
Cirrus Logic is actively pursuing opportunities to expand its general market business, which includes professional audio, automotive, industrial, and imaging end markets.
- Professional Audio: The company has ramped up production of its latest generation ADCs, stacks, and ultra-high-performance audio codecs. They also expanded their professional audio portfolio with the launch of four new high-performance ADC and DAC products, making high-performance features accessible across a wider range of applications and price points.
- Automotive: Cirrus Logic has begun shipping its latest timing product to a leading automotive customer.
Guidance for Q2 Fiscal Year 2026
For the second quarter of fiscal year 2026, Cirrus Logic anticipates:
- Revenue: Expected to be in the range of $510 million to $570 million.
- Gross Margin: GAAP gross margin is expected to range from 51% to 53%.
- Operating Expenses: Non-GAAP operating expenses are projected to be between $131 million and $137 million.
The company anticipates that sales will be more weighted towards the first half of the fiscal year, although unit and revenue forecasts for the full fiscal year remain relatively unchanged.
Tax Implications
The recently enacted One Big Beautiful Bill Act, which permanently eliminates the requirement to capitalize and amortize U.S. R&D expenditures and makes modifications to international tax rules, is under evaluation to determine its impact on the company’s financials. The effects of the new law are not yet reflected in the guidance for the September quarter.
Customer Relationship
Cirrus Logic maintains a policy of not discussing specifics about its business relationship with its largest customer.
