The chipmaker is set to capitalize on growing demand for AI smartphones thanks to its largest customer.
Semiconductor specialist Cirrus Logic (CRUS 3.35%) may not be as well known as some of its peers, but the company has been an impressive performer in the market so far this year, up 69% as of writing.
Cirrus, best known for supplying chips to Apple (NASDAQ: AAPL), easily outperformed the Nasdaq 100 Technology Sector Index's 10% gain. The good news is that Cirrus' impressive growth is set to continue, and its largest customer could help the company finish the year on a high note. Plus, the emergence of artificial intelligence (AI)-enabled smartphones provides Cirrus Logic with a big long-term growth opportunity.
Let's take a closer look at why investors should consider rushing to buy Cirrus Logic shares before it's too late.
Cirrus Logic's Recent Results Point to a Bright Future
Cirrus Logic announced its fiscal first quarter 2025 financial results (for the three months ending June 29) on August 6. The company's revenues increased 18% year over year to $374 million, well above the market consensus estimate of $318 million. In addition, Cirrus' adjusted earnings increased 67% year over year to $1.12 per share, well above Wall Street's estimate of $0.61 per share.
The good news doesn't end there, as Cirrus now expects second-quarter revenue to be between $490 million and $550 million. The midpoint of the guidance range is $520 million, well above Wall Street's expectations of $485 million. Cirrus posted revenue of $481 million in the same quarter last year, implying that sales are on track to grow 8% year over year.
Cirrus' revenue could be near the high end of its guidance range thanks to its largest customer, Apple, which accounted for 88% of Cirrus' revenue last quarter. On a recent earnings call, Cirrus executives noted that the company's revenue exceeded the high end of its original guidance range due to “stronger-than-expected smartphone shipments.”
Because Apple is Cirrus' largest customer, the better-than-expected results mean that Cirrus increased its chip orders last quarter, which isn't surprising as Apple appears to be preparing an aggressive rollout of its next-generation iPhones primed to support generative AI capabilities.
Apple's rumored iPhone 16 is due to launch next month, and the tech giant is expected to ship 90 million units of its updated smartphone lineup this year, a 10% increase from last year. But at the same time, supply chain reports suggest that Apple is stockpiling 120 million display panels, suggesting that it may end up manufacturing more units than the market currently expects.
If that's true, Cirrus Logic's growth this quarter would again beat expectations. But more importantly, the integration of generative AI capabilities from its Apple Intelligence suite into the tech giant's next smartphones is expected to trigger a robust upgrade cycle. According to JPMorgan estimates, Apple's smartphone shipments are expected to grow 10% in fiscal 2025 and fiscal 2026.
Cirrus is expected to have more dollar content in the next generation of iPhones, meaning the company can make more money from each iPhone that Apple produces. So, Cirrus Logic looks poised to finish the year on a high note, and Apple's entry into the AI smartphone market, which is currently in its early stages of growth, should enable the company to maintain its newfound momentum into the future.
Two more reasons to buy stocks
As can be seen from the chart below, analysts are rapidly increasing their revenue growth estimates for Cirrus Logic.
CRUS current quarter EPS forecast data by YCharts
Cirrus Logic finished fiscal year 2024 (ending March 30) with non-GAAP earnings per share of $6.59. From the chart above, we can see that analysts were not expecting an increase in Cirrus' earnings for the current fiscal year, but that has changed recently. Additionally, the company's bottom line growth forecast for next year indicates an improving growth rate.
But if Apple does indeed decide to ramp up production of the next iPhone and Cirrus ends up supplying the company with more content, Cirrus' revenue is likely to easily surpass analysts' expectations going forward.
That's why now is a good time for investors to buy this semiconductor stock: It's trading at just 26 times its one-year earnings, a bargain compared with the Nasdaq-100's earnings multiple of 31. And AI-driven growth in the smartphone market and Cirrus' close relationship with one of the sector's biggest players should help the company outperform expectations going forward.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool property. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and JPMorgan Chase. The Motley Fool recommends Cirrus Logic. The Motley Fool has a disclosure policy.
