Image source: Cirrus Logic.

Audio-chip developer Cirrus Logic (CRUS 0.89%) reported its fiscal second-quarter results after the market close on Oct. 27. The company followed through on its previous guidance calling for substantial revenue growth, beating its own expectations and delivering earnings growth in excess of 100%. Guidance for the third quarter was also strong, with another double-digit revenue increase predicted. Here's what investors need to know.

Cirrus Logic results: The raw numbers


Q2 2017

Q2 2016

Growth (YOY)


$428.6 million

$306.8 million










Data source: Cirrus Q2 earnings release. YOY = year over year.

What happened with Cirrus this quarter?

Cirrus beat its own guidance for revenue, driven by the launch of new products.

  • GAAP gross margin expanded by 300 basis points year over year to 49.4%, and GAAP operating margin expanded nearly 10 percentage points to 24.2%.
  • GAAP operating expenses increased by just 9.8% year over year.
  • Cirrus' dependence on Apple grew during the quarter, with 78% of revenue derived from its largest customer. That's up from 68% during the first quarter.
  • Cirrus began volume shipments of its first digital headset solution and a new boosted amplifier during the quarter, and it began shipments of a smart codec at a leading customer aimed at mid-tier smartphones.

Cirrus expects to produce a strong third quarter.

  • Revenue is expected between $475 million and $515 million, up 42% year over year at the midpoint.
  • GAAP gross margin is expected between 47% and 49%.
  • Combined research and development and selling, general, and administrative expense spending is expected between $107 million and $113 million, compared to $107.7 million during the second quarter.

What management had to say

Cirrus CEO Jason Rhode summed up the quarter:

Robust demand for portable audio products drove Cirrus Logic's revenue above the high end of guidance. We are extremely pleased with our progress in the September quarter as we began volume shipments of our new digital headset solution, expanded our share with boosted amplifiers and ramped production in a mid-tier smartphone at another leading customer. With a broad portfolio of components that span the entire audio signal chain we believe we are well positioned to capitalize on a variety of growth vectors in the coming years.

In the company's letter to shareholders, management laid out its general strategy going forward:

In summary, we are participating in an industry where demand for complex processing that spans the analog and digital divide is intensifying. As a broader range of OEMs place a premium on audio and voice technology our opportunities are increasing substantially in both existing and new segments of the market, including those that traditionally have not utilized stand-alone components. Going forward, we expect to continue to leverage our technology developed for mobile into emerging areas such as voice biometrics, virtual reality headsets, wearables and the smart home.

Looking forward

The launch of the iPhone 7 drove Cirrus' revenue higher during the second quarter. Despite the company's attempts to diversify, Apple remains the overwhelmingly dominant source of revenue for Cirrus. Progress was made on that front during the quarter, with the company talking up a smart codec aimed at mid-tier phones. But Cirrus remains highly susceptible to any weakness in iPhone sales.