Shares of chipmaker Cirrus Logic (CRUS 3.35%) have been red-hot so far in 2023 amid the broader market rally as well as solid results for its fiscal 2023 third quarter (ended Dec. 24, 2022, and released on Feb. 2).

The company, which counts Apple (AAPL 2.86%) as its largest customer, beat the slowdown in the smartphone market last quarter and delivered year-over-year revenue growth that surprised analysts. What's more, Cirrus' adjusted earnings turned out to be way better than Wall Street had expected. Investors cheered the company's results, which is evident from the stock's terrific returns so far this year.

But can Cirrus sustain this momentum? Or will the chipmaker's rally fizzle out thanks to its poor near-term guidance? Let's find out.

Cirrus Logic faces near-term headwinds

Cirrus Logic's revenue of $591 million last quarter was a jump of 8% over the prior-year period, well ahead of the $543 million consensus estimate. Adjusted earnings of $2.40 per share also topped the estimate of $1.99 per share by a wide margin.

The company credited its smartphone business for the resilient showing last quarter, which may seem a tad surprising given the 18.3% year-over-year plunge in global smartphone shipments in the fourth quarter of 2022. What's more, Apple is Cirrus' largest customer, and the manufacturer of iPhones didn't escape the smartphone slowdown either. Shipments of iPhones were reportedly off by almost 15% year over year last quarter.

As Cirrus' largest customer produced 88% of its total revenue last quarter, the slowdown in iPhone sales should have crushed the chipmaker. But that wasn't the case as Cirrus was supplying additional content for smartphones and enjoyed an improvement in average selling prices last quarter. It is worth noting that Cirrus has moved beyond its traditional business of selling audio chips that are used by Apple. The Cupertino, California-based tech giant is tapping Cirrus for power conversion chips as well.

So Cirrus was able to offset the losses of lower unit volumes with the help of more content in each iPhone. But the massive reliance on Apple has a downside as well. Cirrus forecasts $370 million in revenue this quarter at the midpoint of its guidance range, translating into a year-over-year drop of nearly 25%.

But seasonality in the smartphone market in the first quarter of the calendar year, along with the fact that Cirrus benefited from the launch of the 5G-enabled iPhone SE in March 2022 -- a tailwind that it doesn't have this year -- means that the company will end fiscal 2023 on the back foot. Cirrus' guidance suggests that it will end the fiscal year with a 6% increase in total revenue to $1.89 billion. Adjusted earnings are expected to shrink to $6.35 per share from $6.90 per share in fiscal 2022.

Analysts don't expect much of an acceleration in the chipmaker's growth in the next couple of fiscal years either. However, Cirrus may have a surprise up its sleeve and step on the gas later this year. Let's see why that may be the case.

A potential catalyst could send the stock higher

Cirrus' near-term outlook doesn't look inspiring right now, but management dropped hints on the latest earnings conference call that it could gain more business from its largest customer later this year. CEO John Forsyth pointed out that Cirrus has been witnessing an improvement in the adoption of its high-performance mixed-signal (HPMS) chips, such as camera controllers by smartphone OEMs (original equipment manufacturers), a trend that it expects to continue when it launches its next-generation camera controller later in 2023.

Forsyth also added that Cirrus has "made excellent progress toward the introduction of a new HPMS component during the second half of this year," suggesting that the company may be able to further increase its content level at Apple. Supply chain gossip suggests that Apple may equip the next-generation iPhones with touch-based buttons, and Cirrus could be the one providing chips to enable the same.

Along with a potential gain in content at Apple, Cirrus may also be able to take advantage of stronger shipments in 2023. IDC estimates that iPhone shipments were down 4% in 2022 to 226 million units. Apple is expected to ship 233.5 million iPhones, a small improvement over the prior year. One key reason why Apple may be able to increase its iPhone shipments in 2023 is because of faster growth in sales of 5G devices.

It is estimated that 5G devices could account for 69% of overall smartphone sales in 2023, up from 52% last year. That points toward a nice jump in the adoption of 5G smartphones this year, as 43% of devices sold in 2021 were 5G-enabled, suggesting that their growth slowed down in 2022 thanks to the weakness in the smartphone space. Apple is the dominant player in the 5G smartphone market as it controls nearly a third of this space, which could pave the way for an improvement in iPhone shipments this year.

So there is a chance that Cirrus' growth could accelerate in the second half of 2023, which is why investors might consider adding this tech stock to their portfolios, especially considering its valuation. Trading at 18 times trailing earnings and 16 times forward earnings, Cirrus is attractively valued when compared to the Nasdaq 100's price-to-earnings ratio of 25, which means it isn't too late for investors to buy Cirrus Logic even after its latest rally.