What: Shares of audio-chip developer Cirrus Logic (NASDAQ:CRUS) jumped on Thursday following the company's third-quarter results. The company beat analyst estimates, but its guidance for the fourth quarter badly missed expectations. Despite the weak guidance, shares of Cirrus were up about 15% at noon on Thursday.
So what: Cirrus reported quarterly revenue of $347.9 million, up 16.5% year over year and about $1 million higher than the average analyst estimates. Cirrus' original guidance, issued in its second quarter earnings report, called for revenue of $370 million to $400 million, but the company lowered expectations earlier this month by releasing preliminary results.
The company also beat analyst estimates for earnings, producing non-GAAP EPS of $0.82, a penny higher than expected. This is down from $0.97 during the prior year period, but GAAP EPS of $0.63 rose by 80% year over year.
For the fourth quarter, Cirrus expects revenue to be $210 million to $240 million, down from $255 million during the prior year period. With Apple accounting for more than three-quarters of Cirrus' revenue during the third quarter, sluggish iPhone sales are to blame for the weak guidance. Analysts were expecting fourth-quarter revenue of $260.3 million.
Now what: It's unclear exactly why Cirrus stock rose following what appears to be a disappointing earnings report. Investors may have been expecting worse, given that the iDevice maker expects to report a year-over-year decline in iPhone sales during its fiscal second quarter. Cirrus' management is optimistic that the company will produce strong growth in fiscal 2017, but with Cirrus still extremely dependent on the iPhone, Cirrus' results depend solely on whether the tech titan can boost iPhone sales this year with the upcoming iPhone 7.
Although you wouldn't know it from the market's reaction to the news, Cirrus' heavy dependence on the iDevice maker has finally caught up to the company.
Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Cirrus Logic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.