The Cirrus Logic logo.

Image source: Cirrus Logic.

Audio-chip developer Cirrus Logic (NASDAQ:CRUS) reported its fiscal third-quarter results after the market close on Feb. 1. The company exceeded its own guidance, with strong demand for its portable audio products driving year-over-year revenue growth in excess of 50%. Profits soared as well, and guidance called for slower but still solid revenue growth during the fourth quarter. Here's what investors need to know about Cirrus' third-quarter report.

Cirrus Logic results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Growth


$523.0 million

$347.9 million










GAAP = generally accepted accounting principles; EPS = earnings per share. Data source: Cirrus Logic.

What happened with Cirrus Logic this quarter?

Cirrus exceeded its revenue guidance, driven by stronger-than-expected demand for certain portable audio products:

  • GAAP gross margin expanded by 140 basis points year over year to 48.8%, and GAAP operating margin jumped 10 percentage points to 28%.
  • GAAP operating expenses grew 7.9% year over year, far slower than revenue.
  • Cirrus generated 85% of its revenue from Apple, up from 78% during the second quarter and 68% during the first quarter.
  • Cirrus expanded the number of mid-tier devices sporting its chips, with several mid-tier smartphones launching during the quarter with Cirrus' smart codecs.
  • Shipments of new boosted amplifiers and hi-fi digital headset codecs accelerated during the quarter.

Cirrus expects a steep sequential decline in revenue during the fourth quarter due to seasonality:

  • Fourth-quarter revenue is expected in the range of $300 million to $340 million. At the midpoint, this represents year-over-year growth of 37.9%.
  • GAAP gross margin is expected to be between 48% and 50%.
  • Combined GAAP R&D (research and development) and SG&A (selling, general, and administrative) expenses are expected between $110 million and $116 million, compared to $109 million during the third quarter.

What management had to say

Cirrus Logic CEO Jason Rhode talked about the company's recent growth and its future opportunities:

Cirrus Logic delivered outstanding revenue, operating profit and earnings-per-share growth in the December quarter as demand for certain portable audio products accelerated. The company is delighted to be on track to deliver our third consecutive year of more than 25 percent annual revenue growth. With a comprehensive portfolio of products and extensive roadmap we are well positioned for success in the coming years as demand for innovative audio and voice technology continues to increase.

In the company's letter to shareholders, management assured investors that it was working to diversify:

More importantly, our engineers and technical marketing teams are working hard to execute on an extensive roadmap that will augment our product offerings, broaden our addressable market and drive future growth opportunities. Many of our potential growth vectors, including digital headsets and mid-tier smartphones, are still in the early stages of development and with an extensive platform of products that span the complete audio signal chain we believe the company is well positioned to continue to be a leading provider of audio and voice technology.

Looking forward

Cirrus' efforts to diversify haven't stopped Apple from dominating its customer list. The iPhone maker accounted for the vast majority of Cirrus' revenue during the third quarter, a blessing given the strong performance of the iPhone 7, but also a potential curse if iPhone sales don't remain as strong in the future.

It was a solid quarter in terms of revenue and profitability, and the company expects to continue growing at a blistering pace on a year-over-year basis during the fourth quarter. Revenue guidance fell a bit short of analyst expectations, but Cirrus will still finish out its fiscal year on a high note.

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