Credit: InvenSense.

This article is about InvenSense's Q3 2015 earnings report, and was originally published on Oct. 29, 2015. Click here for a article on the company's Q4 2015 earnings report in January 2016, or check out all of the Fool's coverage on InvenSense here.

It's been a rough ride for InvenSense (NYSE:INVN) shareholders since cautious guidance overshadowed an otherwise solid quarterly report in August. But things took a turn for the better this week, as InvenSense stock rose as much as 18.6% early Thursday, and settled to trade up around 11% into the afternoon following its impressive third-quarter results. This time, InvenSense also followed with a still cautious -- but decidedly more optimistic -- outlook.

Let's move closer to see what InvenSense accomplished in Q3.

The headline numbers
Quarterly revenue rose 25% year over year, to $112.5 million, and translated to adjusted net income of $14.9 million, good for a 14.3% increase in adjusted net income per share, to $0.16. For perspective, InvenSense's guidance last quarter called for revenue of $106 million to $114 million, and adjusted net income per share of just $0.13 to $0.15. Analysts, on average, were looking for earnings at the high-end of that range on revenue of $110.8 million. 

Referencing the company's continued expansion of its differentiated software-enabled sensor platform, InvenSense CEO Behrooz Abdi explained: "This is allowing us to drive more content into our current customer base, and also to solidify our 6-axis customer wins. With our success in proving out real use cases in mobile, we are poised to expand meaningfully to applications spanning a number of vertical markets that offer significant new opportunity for growth and diversification."

On large customers
During the subsequent conference call, CFO Mark Dentinger also noted there were two large customers that each accounted for at least 10% of sales -- almost certainly Apple and Samsung, at 34% and 19% of total revenue, respectively. There were three such clients last quarter -- though at exactly 10% of sales last quarter, it's no surprise the third unnamed customer -- which was likely Korea-based LG based on the geographic breakdown below -- might fall off the 10%+ list if its inclusion was due to the temporary boost in orders for an impending product launch. 

Geographically, the United States represented 38% of revenue in Q2, down sequentially from 41% last quarter, Korea fell to 22% of sales from 27% in Q1, China remained steady at 23%, and Japan rose to 7% from 4%. Rest-of-world customers rose one percentage point, to 3%.

On new products, design wins
Also contributing to InvenSense's results in fiscal Q2 was the successful ramp of high-volume production of a new 6-axis MotionTracking device for "a major North American customer that further differentiates our performance and quality from competing solutions."

"Our solid track record of reliably ramping to high volume manufacturing gives us credibility as we begin to diversify beyond motion tracking devices," Abdi went on, "and beyond the mobile market to support a wide variety of customers, channels, and applications."

Shortly before InvenSense's report hit the wires, it also announced a new, mass-manufacturable ultrasonic fingerprint touch sensor with a promised ramp to production in calendar 2017. According to InvenSense's press release, the new technology allows for the capture of "detailed fingerprint images from the epidermal to dermal layers, and to do so directly through glass or metal, even in the presence of oil, lotions, perspiration or other moisture, and other common contaminants that can easily undermine legacy capacitive solutions."

Put another way, InvenSense's new fingerprint sensors allow OEMs to avoid the design disruption of cutting holes in display glass, metal, or plastic case material if they so choose. According to InvenSense VP of Advanced Technology, Fari Assaderaghi, "Our innovative team is excited to work with equally motivated partners to quickly bring this new technology to market." 

InvenSense continues to win designs for its audio technology at a "brisk pace." Credit: InvenSense.

InvenSense is also seeing increased traction with both wide-scale adoption of its existing mobile optical image stabilization technology, as well as increased interest in multi-camera OIS (for both rear- and front-facing cameras), and 3-D photography. In addition, InvenSense is expanding its OIS scope to include electronic image stabilization, or EIS, for video, where it is currently in the design-in phase with several customers.

Perhaps most important to driving profitable growth in the near term is traction for InvenSense's first-gen FireFly system-on-a-chip. Most notable during the quarter, InvenSense began to ramp volume production for FireFly in an unnamed wearable device, and continued to see design progress in "a number of [other] applications including drones."

Elsewhere outside of mobile, InvenSense began ramping production into smart TV remotes for another major North American customer, continues to win audio designs at a "brisk" pace, and found places for its products in multiple next-gen head-mounted displays, virtual reality and gaming devices, and drones "at all of the top brands in their respective categories that require high-precision sensing." 

Looking forward
Finally, Abdi offered two intriguing stats on InvenSense's future direction, stating, "While more than 70% of our current revenue base is in mobile, more than 80% of our new design win pipeline is outside of mobile."

In the meantime, InvenSense anticipates current-quarter revenue to be $115 million to $120 million, with adjusted earnings per share of $0.17 to $0.19. Analysts, on average, were slightly less optimistic on the top line, with consensus estimates calling for roughly the same earnings on Q3 revenue of $116.8 million.

Dentinger elaborated that even this guidance incorporates some caution in light of the continuing macroeconomic concerns he initially voiced last quarter. But he also stated:

We have a pretty good signal from our biggest customers about what their anticipated volumes are going to be for next quarter. The tougher part of the forecast here is that -- you just heard as we completed this quarter -- we got a considerable amount of traction in what we call the "other bucket," which contains a lot of this [Internet of Things] piece of the world. If that were to go well, that would probably give us a little bit of upside.

And that's fair enough -- though it's also fair to say InvenSense's growth story never really changed for long-term investors. For now, though, considering InvenSense's outperformance in fiscal Q2, and the fact its "cautious" outlook still exceeded Wall Street's expectations, it's no surprise that the market is willing to move closer, and bid up InvenSense stock today.