Shares of Cirrus Logic (NASDAQ:CRUS) have underperformed the broader market this year due to speculation that it could lose business from Apple (NASDAQ:AAPL) after a few other component suppliers lost their lucrative contracts with that company. Cirrus relies on Apple for almost  80% of its revenue, so the speculation has taken its toll despite the company's reporting terrific fiscal fourth-quarter results around three months ago.

However, Cirrus' fourth-quarter results clearly indicated that it is diversifying  away from Apple. A repeat performance in the upcoming fiscal first-quarter results, which will be released after the market closes on Aug. 2, should build up investor confidence. Here's what investors can expect from the company's upcoming report.

Two hands holding a smartphone with wooden slats in the background.

Image Source: Getty Images

Wall Street's expectations

Cirrus' revenue is expected  to shoot up 23.4% year over year to $320 million, which is estimated to boost its earnings per share from $0.44 in the year-ago period to $0.66 in the recently concluded quarter. Such massive growth in the audio-chip specialist's financials can be attributed to the success of the Samsung Galaxy S8 smartphone.

Samsung claims  that its latest flagship smartphone is outselling its predecessor by 15%. This is great news for Cirrus investors as the chipmaker is supplying  its audio codecs to the North American version of the device. The preceding Galaxy S7 had 29% share  of the U.S. smartphone market, which explains why the success of the new device is good news for Cirrus' financials.

What's more, Samsung has already decided to boost the Galaxy S8's production after strong initial sales numbers. It could increase the device's production  to an estimated 60 million units in 2017 as compared to the average production range of 45 million to 48 million units seen in the past three years.

More importantly, Cirrus' top-line growth is filtering down to the bottom line. The company's non-GAAP (adjusted) gross margin was up 40 basis points year over year in the last reported quarter as smartphone makers have started using richer features  in lower-priced smartphones. The chipmaker forecasts  that midrange device makers, especially in China, will soon start using its amplifiers, smart audio codecs, and high-fidelity digital-to-analog solutions, leading to a stronger earnings performance.

Gauging the guidance

Analysts don't expect Cirrus Logic to come out with sunny guidance  as its revenue is expected to drop 5.2% year over year during the second quarter that ends in September. This seems surprising given the chipmaker's close relationship with Apple, as Cupertino ideally starts ramping up its iPhone production just before that quarter.

For instance, Cirrus' revenue jumped  almost 40% year over year during the quarter that ended in September last year, mainly due to the production ramp up of the iPhone 7. But this might not be the case this time as rumor has it Apple seems to have run into production issues  that will delay its next-generation iPhones.

A delay would hurt Cirrus given its massive dependence on Apple, though investors should take this possibility with a pinch of salt as supply chain rumors aren't always true. And Apple is reportedly leaving no stone unturned in getting the next iPhone out on time by buying  and leasing machinery on its own.

This could be a boon for Cirrus Logic's guidance and help it outperform Wall Street estimates. However, issuing guidance below Wall Street estimates could disappoint investors.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Cirrus Logic. The Motley Fool has a disclosure policy.