Cirrus Logic's strong September borrowed some sales from December
Earlier camera-component shipments help explain the next quarter's softer outlook. A temporary wafer-cost benefit is also fading as spending rises.
Cirrus Logic's September sales rose 22% from the previous quarter, helped by smartphone launches and more of its components going into each device. Some of that strength arrived early: management says revenue expected in December moved into September.
That shift helps explain a less familiar pattern for the smartphone-chip supplier. Its December revenue forecast points to a decline from September at the midpoint, while a temporary manufacturing-cost benefit is also fading.
Our Cirrus Logic company profile follows its customer exposure, earlier forecasts, cash generation and completed INVENTVM acquisition.
A stronger quarter, within the original range
Revenue reached $559.5 million in the fiscal second quarter ended September 26. It was above the midpoint of August's $510 million to $570 million guidance, but still inside that range. Against the same quarter a year earlier, sales were essentially flat.
Cirrus supplies audio amplifiers, chips that process audio signals, camera controllers and other components used in smartphones. Higher smartphone volumes and more components per device helped sales, offsetting weaker demand for some other products and previously expected price reductions.
On the earnings call, President and Chief Executive Officer John Forsyth said some December revenue had been pulled into September. Camera components tend to ship earlier than other parts, he explained, and management sees the full year roughly in line with its initial expectations. It describes the change primarily as timing.
The new December revenue range is also $510 million to $570 million. Its $540 million midpoint would be about 3% below September and about 7% below the comparable December quarter a year earlier.
The higher margin has a temporary ingredient
Cirrus kept 53.7% of revenue as gross profit, up from 52.5% a year earlier. Part of the improvement came from lower-cost wafers purchased under earlier agreements with GlobalFoundries. Wafers are the material from which chips are made.
This benefit was anticipated. In August, Cirrus said the favorably priced tranche would largely sell through in September, after which gross margin should normalize. Its December gross-margin forecast is 51% to 53%.
Even with the better gross margin, profit fell from a year earlier as operating expenses increased. Adjusted operating expenses rose to $141.6 million from $127.7 million, reflecting greater investment in people and product development. Adjusted earnings per share declined to $2.70 from $2.83; reported earnings fell to $2.23 from $2.48.
A new buyback, backed by a cash cushion
Alongside the results, Cirrus disclosed another $500 million share-repurchase authorization approved in October. The company has already been buying: its cash-flow statement records $128.5 million of repurchases in the September quarter.
Quarterly free cash flow was $42.3 million, down from $87.7 million a year earlier. That measure deducts capital spending, including technology investment, from operating cash flow. Over the trailing 12 months, however, free cash flow was $525.6 million, and Cirrus ended September with about $1.08 billion of cash and marketable securities and no debt drawn.
The cash balance gives the company room to fund repurchases and development beyond the cash produced in one quarter. The new authorization also preserves flexibility: it sets an additional spending limit without committing Cirrus to purchase the full amount.
More chip content is the longer-term test
Apple accounted for 93% of quarterly revenue, up from 90% a year earlier. Cirrus expects wider use of its existing components and new camera, battery and power products to increase its content per device. Its next-generation camera controller is expected to enter production in calendar 2028.
Expansion beyond smartphones is taking longer in PCs, where component shortages and delayed model launches are holding back near-term sales. Cirrus completed the acquisition of Italian chip designer INVENTVM on October 6, adding engineering expertise in power management and audio. It did not disclose a purchase price.
December's results will help show how the earlier shipments and normalized wafer costs play out. For sustained growth, the more important question is whether additional components per device and new applications generate sales beyond shifts between quarters.