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Audio codec specialist Cirrus Logic (NASDAQ:CRUS) got crushed today after reporting results that beat almost all expectations. Revenue of $190.7 million and adjusted earnings per share of $0.84 both topped consensus estimates, and guidance was similarly rosy. Next quarter should see sales in the range of $200 million to $220 million, the midpoint of which is well ahead of the $205 million that analysts were asking for. Clearly, not all expectations were met, though; gross margin was the only sore spot. Next quarter should see gross margin fall to 45% to 47%, well below the 52% gross margin just posted last quarter.
Cirrus Logic warned about this prospect months ago at an investor conference in May, citing pricing pressures in the smartphone market. Apple (NASDAQ:AAPL) remains Cirrus Logic's biggest customer by far at 80% of revenue, and it's evident that Apple is finagling some pricing concessions. Still, Cirrus Logic already told investors to expect gross margins in the mid-40s in the long term, so investors should have seen this coming. Pessimism has dogged Apple for the past year, and some of this negativity is likely carrying over to Cirrus Logic.
In this segment of Tech Teardown, Erin Kennedy discusses Cirrus Logic's very bad day with Evan Niu, CFA, our tech and telecom bureau chief.