Earnings call transcript: Cirrus Logic Q1 2026 beats earnings expectations

Cirrus Logic Inc. reported its Q1 FY2026 earnings, showcasing a robust performance with earnings per share (EPS) of $1.51, surpassing the forecasted $1.08 by 39.81%. Revenue reached $407.3 million, exceeding expectations by 11.58%. According to InvestingPro, the company maintains a "GREAT" overall financial health score of 3.11, supported by strong profitability and cash flow metrics. Following the announcement, Cirrus Logic’s stock saw a slight increase in aftermarket trading, reflecting positive investor sentiment.

Key Takeaways

• Cirrus Logic’s Q1 FY2026 EPS and revenue significantly outperformed forecasts.
• The company launched several new products, including a custom boosted amplifier and a 22nm smart codec.
• Strong demand in the smartphone market contributed to the revenue increase.
• Cirrus Logic is diversifying into the laptop and automotive markets.

Company Performance

Cirrus Logic demonstrated a strong start to its fiscal year with a 9% year-over-year increase in revenue. The company’s leadership in smartphone audio solutions and its expansion into new markets, such as laptops and automotive, are key drivers of this growth. The focus on AI-enabled devices and power efficiency is also positioning Cirrus Logic well against competitors.

Financial Highlights

• Revenue: $407.3 million, up 9% year-over-year
• Earnings per share: $1.51, exceeding the forecast by 39.81%
• Non-GAAP Gross Margin: 52.6%
• Non-GAAP Net Income: $80.3 million
• Cash and Investments: $847.8 million
• Cash Flow from Operations: $116.1 million

Earnings vs. Forecast

Cirrus Logic’s earnings per share of $1.51 exceeded the forecast of $1.08, marking a 39.81% surprise. The revenue of $407.3 million also surpassed the expected $365.04 million, reflecting an 11.58% surprise. This performance indicates a strong quarter compared to previous periods, driven by robust demand and strategic market expansion.

Market Reaction

Following the earnings release, Cirrus Logic’s stock experienced a modest increase in aftermarket trading, rising by 0.4% to $106. This movement reflects investor confidence in the company’s ability to outperform market expectations. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, trading at an attractive P/E ratio of 16.8x relative to its near-term earnings growth potential. The stock’s performance remains within its 52-week range, indicating steady investor interest.

Outlook & Guidance

Cirrus Logic provided guidance for Q2 FY2026, projecting revenue between $510 million and $570 million. The company anticipates continued strength in the first half of the fiscal year, driven by growing demand in the smartphone market and expansion into the laptop sector. The exploration of AI and power efficiency opportunities is expected to further bolster growth.

Executive Commentary

CEO John Forsyth highlighted the company’s strategic initiatives, stating, "We’re excited about the potential to grow content in smartphones with our high-performance mixed signal solutions." Forsyth also emphasized the importance of AI, noting, "AI fundamentally really unlocks the conversational interface." These comments underscore Cirrus Logic’s commitment to innovation and market expansion. InvestingPro data shows the company’s strong execution with a 5-year revenue CAGR of 8% and analysts projecting continued profitability this year. Get access to 8 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Risks and Challenges

• Potential supply chain disruptions could impact production and delivery timelines.
• Market saturation in the smartphone segment may limit growth opportunities.
• Macroeconomic pressures, such as inflation and currency fluctuations, could affect profitability.
• Increased competition in the mixed-signal product market poses a challenge.
• Dependency on a few key customers may affect revenue stability.

Q&A

During the earnings call, analysts inquired about the strong smartphone demand and potential tariff-related impacts. Cirrus Logic’s diversification efforts in the automotive and PC markets were also discussed, highlighting the company’s strategic focus on expanding its product portfolio and market reach.

Full transcript - Cirrus Logic Inc (CRUS) Q1 2026:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic First Quarter Fiscal Year twenty twenty six Financial Results Q and A Session. At this time, all participants are in a listen only mode. After a brief statement, we will open up the call for questions from analysts. Instructions for queuing up will be provided at that time.

As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.

Chelsea Heffernan, Vice President of Investor Relations, Cirrus Logic: Thank you, and good afternoon. Joining me on today’s call is John Forsyth, CerusLogic’s Chief Executive Officer and Jeff Wohlard, our Chief Financial Officer. Today at approximately four p. M. Eastern Time, we announced our financial results for the first quarter of the fiscal 2026.

The shareholder letter discussing our financial results, the earnings press release and the webcast of this Q and A session are all available at the company’s Investor Relations website. This call will feature questions from the analysts covering our company. Additionally, the results and guidance we will discuss on this call will include non GAAP financial measures that exclude certain items. Reconciliations of these non GAAP measures to their most directly comparable GAAP measures are included in our earnings release and are all available on the company’s Investor Relations website. Please note that during this session, we may make projections and other forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections.

By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward looking statements, whether as a result of new developments or otherwise. Please refer to the press release and the shareholder letter issued today, which are available on the CerusLogic website and the latest Form 10 ks as well as other corporate filings registered with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations. Now I’d like to turn the call over to John.

John Forsyth, Chief Executive Officer, Cirrus Logic: Thank you, Chelsea, and welcome to everyone joining today’s call. As you’ve seen in the press release, in the June, Cirrus Logic delivered revenue of $407,300,000 above the top end of our guidance range, driven primarily by strong end demand for smartphones incorporating our silicon. In a moment, I’ll hand the call over to Jeff to discuss the financial results for the June in detail, along with our outlook for the September. Before we get to that, I’d like to make a few comments about the recent progress we’ve been making across our business. As many of you are aware, our long term strategy for growth at Cirrus is based around three principles.

First, we seek to maintain a strong leadership position in our core flagship smartphone audio business. Second, we aim to expand the value and range of high performance mixed signal solutions with which we serve our customers in smartphones and similar products. And third, we are increasingly leveraging our world class expertise on IP in both audio and high performance mixed signal areas to grow and broaden our business in new markets. I want to now speak to our recent progress in each of these areas. In our flagship smartphone audio business, during the quarter, we were pleased with the positive impact of our latest generation custom boosted amplifier and our first 22 nanometer smart codec.

These components enable exceptional audio and voice experiences along with significant power and efficiency improvements over previous generation products. We are proud to see these new devices contribute to the remarkable performance of our customers’ products. Outside of our custom audio solutions, we also continue to serve customers in the Android ecosystem. While the majority of our general market r and d efforts are directed toward developing products for new markets, we continue to enjoy success and strong customer relationships in Android and expect new flagship smartphones featuring our components to launch in the second half of the calendar year. Looking beyond audio, we’re excited about the potential to grow content in smartphones with our high performance mixed signal solutions, where we see a meaningful opportunity to not only expand our addressable market, but also to diversify our revenue.

Our progress in this area has been demonstrated through the continued success of our camera controller product line. We see considerable potential to add further value in this area as we identify more opportunities to enhance system performance and help enable advanced camera functionality. Beyond camera controllers, we also continue to invest in developing our capabilities around battery, power, sensing and other domains and have a number of R and D programs underway in these areas. We anticipate that the investments that we are making in this space today will contribute to product diversification and expand our high performance mixed signal footprint in the future. The third principle of our strategy is to leverage our audio and high performance mixed signal expertise into new applications and markets outside of smartphones, for example, in laptops.

During the quarter, engagement with our laptop customers was strong, and we saw our next generation PC amplifier and PC codec designed into several new laptops that are expected to begin initial shipments in late calendar twenty five. These components expand our product portfolio’s reach across price points and architectures, enabling us to support our customers’ higher volume mainstream programs. This, in turn, allows us to capture more of our serviceable addressable market and build additional revenue opportunities. In the June, we also announced a collaboration with Compound, a leading electronic design and manufacturing services company, to address persistent audio challenges in laptops, notably the mechanical rattle and audio distortion that often leads to poor and inconsistent audio quality. Further, we’re also developing multiple new products that aim to significantly improve voice and audio capture functionality across a wide range of laptops.

Beyond laptops, we also believe that there are great opportunities to expand our general market business, which spans a large number of customers across the professional audio, automotive, industrial, and imaging end markets. As part of this effort, during the quarter, we ramped production of our latest generation ADCs, DACs and an ultra high performance audio codec. Additionally, we expanded our professional audio portfolio with the launch of four new high performance ADC and DAC products, making our high levels of performance and advanced features accessible across a wider range of applications and price points. Lastly, we recently began shipping our latest timing product to a leading automotive customer and to professional audio customers. We continue to be encouraged by the high level of customer interest across these areas of our business and by the strategic opportunities ahead of us.

And with that, let me now turn the call over to Jeff to provide an overview of our financial results as well as the outlook.

Jeff Wohlard, Chief Financial Officer, Cirrus Logic: Thank you, John. Good afternoon, everyone. I’ll start with a summary of our financial results for our fiscal Q1 and then provide guidance for our Q2 fiscal twenty twenty six. In Q1 fiscal twenty twenty six, we delivered revenue of $407,300,000 above the top end of our guidance range due to stronger than expected smartphone unit volumes. On a sequential basis, revenue was down 4% primarily due to lower smartphone unit volumes.

On a year over year basis, sales were up 9% primarily driven by sales associated with our latest generation products and higher smartphone unit volumes. Turning to gross profit and gross margin. Non GAAP gross profit in the June was $214,300,000 and non GAAP gross margin was 52.6%. On a sequential basis, the decrease was mostly driven by a less favorable product mix and a return to a more typical pricing environment. On a year over year basis, the increase in gross margin was largely due to a more favorable product mix.

Now I’ll turn to operating expenses. Non GAAP operating expense for the first quarter was $119,500,000 On a sequential basis, OpEx was down $500,000 primarily due to a reduction in product development costs, largely due to the timing of expenses for new products. The decrease also reflects a reduction in variable compensation and lower facilities related expenses. This was offset by higher employee related expenses, mostly due to annual salary increases. On a year over year basis, operating expense was up $1,500,000 largely due to higher employee related costs, mostly associated with annual salary increases.

This was offset by lower product development costs. Non GAAP operating income for the quarter was $94,900,000 or 23.3 percent of revenue. Turning now to taxes. For the June, our non GAAP tax rate was 22.1% in line with our previous guidance. And lastly on the P and L, non GAAP net income was $80,300,000 resulting in earnings per share for the June of $1.51 Let me now turn to the balance sheet.

Our balance sheet continues to be strong and we ended the June with $847,800,000 in cash and investments. Our ending cash and investment balance was up $12,900,000 from the prior quarter as cash generated from operations was partially offset by share repurchases. We continue to have no debt outstanding. Inventory at the end of the first quarter was $279,000,000 down from 299,100,000 from the prior quarter. Days of inventory were down sequentially and we ended the quarter with approximately one hundred and thirty two days of inventory.

Looking ahead in Q2 fiscal twenty twenty six, we expect inventory to decrease as we continue to fulfill demand and manage our wafer purchase commitments for our long term capacity agreement with GlobalFoundries. Turning to cash flow. Cash flow from operations was $116,100,000 in the June and CapEx was 2,800,000.0 resulting in non GAAP free cash flow margin of 28%. For the trailing twelve month period, cash flow from operations was $473,300,000 and CapEx was $21,400,000 This resulted in a non GAAP free cash flow margin of 23%. On share buybacks in Q1, we utilized $100,000,000 to repurchase approximately 1,000,000 shares of our common stock at an average price of $98.66 At the end of Q1 fiscal year twenty twenty six, the company had 454,100,000 remaining on its share repurchase authorization.

Now on to guidance. For Q2 fiscal twenty twenty six, we expect revenue in the range of $510,000,000 to $570,000,000 While we only provide guidance for one quarter, given our strong Q1 results and Q2 guidance, we want to share additional color on seasonality. We now anticipate that our sales will be more weighted towards the first half of the fiscal year. We would note that our unit and revenue forecasts for the full fiscal year are relatively unchanged from previous expectations. GAAP gross margin is expected to range from 51% to 53%.

Non GAAP operating expense is expected to range from 131,000,000 to $137,000,000 Turning to taxes. On July 4, the One Big Beautiful Bill Act was signed into law. Among other provisions, this bill permanently eliminates the requirement to capitalize and amortize U. S. R and D expenditures and makes modifications to international tax rules.

The effects of the new law are not reflected in our guidance for September as we are evaluating the impact of the legislation. In closing, we delivered strong results for the June as we continue to execute on our strategy to grow our business and drive long term shareholder value. Before we begin the Q and A, I would like to note that while we understand there is intense interest related to our largest customer in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship. With that, let me now turn the call over to Chelsea to start the Q and A session.

Chelsea Heffernan, Vice President of Investor Relations, Cirrus Logic: Thanks, Jeff. We will now start the Q and A portion of the earnings call. Please limit yourself to a single question and one follow-up. Operator, we are now ready to take questions.

Conference Operator: Your first question comes from Christopher Rolland with Susquehanna. Your line is open.

Christopher Rolland, Analyst, Susquehanna: Hey guys, thanks for the question and congrats on the results. I guess with the results and guidance here, the results in particular, there’s just a very big delta between what you’re expecting and what actually happened. And so I just wanted to understand what’s driving that delta. Was it just conservatism in the guide? Or is this better units or better content or a better inventory build or tariff related pull ins?

What was driving this delta?

John Forsyth, Chief Executive Officer, Cirrus Logic: Thanks, Chris. Yes. Obviously, big picture is strong demand for smartphones primarily. And there are no content surprises to us at this point in the cycle, but it is true that we’re shipping more content in smartphones than ever before. So that strong demand had a significant effect on us.

Obviously, we guide, we guide based on our best judgment using all the information we have available. Relative to guidance, I would say that in the last quarter, we saw demand remain really robust and sustained during a period of the year where that is not something that we typically see. And so also factored into that, there was the launch of a lower cost product earlier in the year, which contributed to an extent. So we obviously shift to customer demand. That means we don’t have perfect visibility of how much might be related to, for example, tariff related pull ins or pull ahead of demand.

We think that contributed somewhat to it, but it’s difficult for us to put a number on.

Christopher Rolland, Analyst, Susquehanna: Thanks, John. I guess, secondly, I wanted to kind of check-in on your diversification efforts outside of your largest customer. On the PC side, I wanted to know how big the CommPul thing was in driving new designs and then check-in with the auto opportunity as well? And anything else that you can point to there? Is it going better than you would expect, that diversification effort?

John Forsyth, Chief Executive Officer, Cirrus Logic: Yes. Thanks, Chris. We’re certainly very excited about the progress that we’re making. Auto, I’ll cover off first. That’s still very early stage for us.

To be clear, we’ve been shipping in the automotive market for some time, but it’s really not something we’ve been investing in. It’s been legacy products and so on. We’ve started reinvigorating that. It’s going to take some time given the design cycles that we’re all familiar with in that market. But I think we see plenty of opportunity there.

There’s fairly obvious ones that you would associate with us around audio and haptics and so on, just improving the in cabin experience. And that’s an area where we do have great engagement with customers. We also mentioned in the commentary for this quarter the design in of the timing products that we I think we just launched late last year. Again, that’s not a needle mover today revenue wise, but it’ll those products will ship for a long time. Automotive is one of the target markets for them.

And I think it’s a great indicator of one of the strengths of the company given that we have a vast array of IP and capability at pretty advanced geometries for the kind of mixed signal stuff that we do, most of which has been targeted and developed for our major markets around smartphones. But we’re able to take a lot of that IP and a lot of that design capability and refresh and upgrade existing kind of legacy product segments and see very positive adoption and response from our customers to that. And that’s what we’ve seen with timing where we went from, I think, publicly launching those products not that long ago to talking this quarter about those being designed into Tier one automotive customer. And there is plenty of other activity around those products within both automotive and other segments as well. On the PC side, yes, we continue to track to the kind of progress path and milestones that I’ve talked about previously.

I think we’re very excited about what that can turn into for us over time. So we previously mentioned we were low tens of millions revenue in fiscal twenty twenty five, expecting that to roughly double in fiscal twenty twenty six based on the designs that have already been secured. In the past quarter, we saw design activity around new codec and amplifier products, which we talked about sampling previously, but it’s great to see those getting designed into products, which the very first of which will hit the market even later this calendar year. The comp out thing, think we just demonstrated that in May. So yet to see how that translates into kind of top line impacts.

But it is addressing a persistent long standing challenge in PC design. Obviously, relative to, for example, our largest customer, way products are designed and manufactured in the PC space is quite different. You end up with a lot of challenges when it comes to getting the best audio around mechanical rattle distortion and so on. And we’ve got a lot of expertise in tuning. We’d really like to vastly improve the audio experience in laptops because it’s been subpar for so long.

And that announcement we did with CommPal is squarely aimed at helping customers do that and deliver much better experiences to their customers in audio. Just one final I guess, one final milestone to talk to on the PC side, just to give a little more color of the progress. I think one of the most important things in the PC space is getting into the mainstream category. So you’ve got the kind of horizontal axis, which is getting across the customers, getting across as many customers as we can. So we’re shipping in the top six laptop OEMs.

But then the vertical axis is very important for volumes, getting down into the mainstream category. If you look back at FY ’twenty four when we were kind of starting this laptop strategy and starting to see that customer engagement, We had very little revenue at that time. Roughly, like, dollars 2,000,000 or something came from mainstream devices. It was effectively rounded to zero. In this fiscal year, we expect that to be more like closer to 10x that driven by mainstream.

I highlight that because that’s a really good milestone and indicator of the fact that we can break into the high volume product tiers, which are really going to be significant for driving revenue.

Conference Operator: Your next question comes from David Williams with The Benchmark Company. Your line is open.

David Williams, Analyst, Benchmark Company: Hey, good afternoon and thanks for taking my question. So lots of great color there on the last question. I guess if we kind of think about the volumes and the content and just kind of the puts and takes around the first half being more weighted versus the second half, Is there a way to kind of, I guess, qualify the magnitude of that? And maybe what how to think about the difference between the content and the volume differential?

John Forsyth, Chief Executive Officer, Cirrus Logic: Let me give a bit of color. Obviously, we just guide one quarter at a time. But I do want to give color to this. Clearly, we’re coming off a record June and then a very strong September guide, which overall reflects strong demand for our smartphone products generally which is generally a very, very positive picture for us. But there are a few factors which we think are giving a somewhat different shape to the seasonality this year that you should keep in mind when thinking about your models for the rest of the year.

So I’ll just touch on each of the factors that we think are playing a part there. One of them, I mentioned already, we think the pull ins contributed to some extent from our position in the value chain. It’s pretty much impossible to say precisely how much because we shift to customer demand. But we believe we’ve likely seen a pull forward of some level of demand and common sense that has to come from somewhere. Secondly, although we don’t have the perfect visibility of this, we do think it’s possible that with a more complex and diverse global manufacturing supply chain on the part of certain of our customers that we may have seen and may be seeing a need for parts to be available and on hand a little earlier than normal, which again would just pull forward some of the revenue ramp.

And then finally, and this is certainly, I think, perhaps a secular trend for us. As you know, the quantity of our camera content has been growing over time. And that content is part of a longer supply chain process than our other products because it’s typically incorporated into modules and the manufacturing timelines associated with that are longer, which means that we ship the camera parts earlier than we ship the other parts that don’t go into modules and that pulls a larger part of our revenue forward. So if you look actually last year, we also saw a comparatively stronger September and that again in part reflected this trend. So I think we just guide to what we can see.

But as we commented and Jeff commented in his prepared remarks, we do see these factors all playing a part in tilting the demand pattern more towards the first half of the calendar year rather than the back half as it perhaps used to be for us. That said, as Jeff mentioned, there’s nothing about that shift in pattern has changed our overall view and expectations for the full year.

David Williams, Analyst, Benchmark Company: Great. Lots of great color there. Appreciate it. And then just kind of thinking about the AI opportunities and you’ve talked

John Forsyth, Chief Executive Officer, Cirrus Logic: to this before, but just kind

David Williams, Analyst, Benchmark Company: of curious if there’s new areas or new products potentially that you could work into the AI trend or especially at your largest customer. But even beyond that, maybe in the laptop space or even on the Android side, anything I think to that future opportunity would be helpful. Thanks.

John Forsyth, Chief Executive Officer, Cirrus Logic: Yes. I think on the product side, all of the above. I think we definitely want to be a part of the set of enablers that our largest customer views is critical for AI features. We for sure see that as being potentially something that brings a kind of paradigm shift in how people use laptops. I think it can be very significant there.

And I think other device categories are going to emerge around these technologies, which we haven’t seen yet. And we really want to be addressing all of those. So first and foremost, think we’re big fans of voice centric devices and enabling voice technology. We think AI fundamentally really unlocks the conversational interface. And that can be whether that’s through your phone, through your laptop or through some other yet to be invented or announced device, we believe that we can play a very important part in that.

That’s absolutely our wheelhouse voice capture, voice processing and so on. And then the other area where we think we can make a big impact is power. Everybody is fully aware of the amount of power that running AI features at the edge inference and so on consumes. And we both provide technologies which are incredibly power efficient on the voice and audio side and power specific products, which help customers get more out of batteries. Your

Conference Operator: next question comes from Tore Svanberg with Stifel. Your line is open.

John Forsyth, Chief Executive Officer, Cirrus Logic: Yes, thank you. So I just had

Tore Svanberg, Analyst, Stifel: a follow-up question on where you talked about seasonality there, John, and maybe I missed this from Jeff’s comments. But I mean, half, first calendar is 40% and then second half, 60%. So are we kind of looking more sort

John Forsyth, Chief Executive Officer, Cirrus Logic: of at a 40 five-fifty profile? Is that how we should think about it? So 40 five-fifty five profile versus forty-sixty? Well, think as you want

Jeff Wohlard, Chief Financial Officer, Cirrus Logic: to think about it is just to reiterate what John said, what has been typical as we have more camera content and that becomes a bigger piece of the total revenue pie, it is shipped earlier. So if you think about that trend of it is a change, whether you had seen in years past, that camera content, bigger piece of the pie gets shipped earlier. And then certainly, was some amount of pull in, which is hard for us to determine. So I think as you think about that moving forward, it’s not it’s really a mix of the camera content and the total pie and how that has just shifted forward from where we have to place in our customer supply chain.

Tore Svanberg, Analyst, Stifel: Got it. And related to that, you mentioned you expect inventories to be down sequentially in September. So does that also have something to do with that? Or is it just purely the global foundry’s commitments that are sort of trailing off?

Jeff Wohlard, Chief Financial Officer, Cirrus Logic: Yes. It’s mostly the global foundry commitments trailing off as we continue to work through that and manage both our customer demand and our GF contract. So we’ll continue to see that going As we said in the last call, we had a peak there, and that’s really all that is. And we’ll get closer to our inventory sweet spot as we work through that.

Chelsea Heffernan, Vice President of Investor Relations, Cirrus Logic: Great. Thanks, Tore. That was the last question. So now I’ll turn the call back to John for final comments.

John Forsyth, Chief Executive Officer, Cirrus Logic: Thank you, Chelsea. In summary, Cirrus Logic delivered outstanding results for the June, driven by strong demand for components shipping into smartphones. We also continued to make great progress in each major area of our long term strategy, and the team at Cirrus remains very excited about the opportunities in front of us. I’d like to thank you for your continued interest in our progress, And I’d like to thank all of our employees around the world for their incredible dedication to innovation and to supporting our customers’ success. Before we close, I’d also like to note that we will be participating in the KeyBank Technology Leadership Forum in Deer Valley on August 12.

Please check our investor website for the details. I’d like to thank everybody for participating today. Goodbye.

Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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