Cirrus Logic (CRUS) Q2 2027 earnings review
Cirrus Logic's chip growth stalls, while hiring squeezes its profit
Cirrus Logic, which makes audio and power chips mainly for one smartphone maker, saw its growth stall as an earlier shipping boost faded. Second-quarter revenue was flat from a year ago at $560 million, though above the middle of its own plan, while profit per share excluding one-offs fell 5%. Chief executive John Forsyth cited wider adoption of its third-generation camera chip in new phones, but the third-quarter outlook points to a 7% sales drop at the middle of the range.
| Revenue | $559.5M 0% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $2.70 -5% from a year ago |
| High-Performance Mixed-Signal sales | $245.0M +1% from a year ago (after +26% in Q1) |
| Q3 revenue outlook | $510–570M middle of the range: -7% from a year ago |
⚖️ Verdict: 🔴 Bearish
The story got worse because the rapid growth in camera and power chips slowed to 1% from a year ago, confirming that last quarter's jump was just earlier shipping for the autumn phone launch. At the same time, the company added 98 employees and bought Italian chip designer INVENTVM, lifting planned third-quarter operating costs excluding one-offs by 17% while sales shrink. On the brighter side, the board approved an extra $500 million for share buybacks after spending $126 million in the quarter.
The question now is whether higher camera chip adoption in smartphones can offset annual price cuts and a PC component shortage that management now expects to last through 2027. If camera chip content is still rising, revenue should beat the cautious December outlook and return to growth in the March quarter; if price cuts and PC delays dominate, the higher engineering payroll will keep squeezing profit margins. Next quarter's mixed-signal sales and operating expense plan will tell.
🐂 Bull Case
Single Customer Rises To 93% Of Sales
Cirrus Logic relies on one smartphone maker for 93% of its revenue, up from 90% last quarter, and wins when each phone uses more of its chips. That concentration leaves it exposed to one buyer's volume swings and "previously anticipated pricing reductions", while new chips take years to earn revenue.
In the September quarter, chief executive John Forsyth pointed to "broader adoption of our third-generation camera controller in these devices" as new phones launched. The company also finished the blueprint for a fourth-generation camera chip set for 2028 production, began sampling smart-meter chips, and took first production orders for industrial imaging chips.
Those wins matter because placing existing camera chips into more phone models lifts sales over the next 18 months while the 2028 chips are still in testing. What to watch: High-Performance Mixed-Signal revenue in the March quarter. Growth there would show higher camera chip adoption is overcoming annual price cuts.
Buybacks Jump With Fresh $500 Million Plan
Cirrus Logic holds $1.1 billion in cash and investments with no debt, and uses buybacks to shrink its share count. After buying back only $34.5 million of stock at $163.43 a share in the June quarter, the chipmaker stepped up its purchases as the price came down.
During the September quarter, the Austin-based group spent $125.5 million to retire 991,983 shares at $126.51 each, then bought another $18.6 million at $108.67 after the quarter closed. Its board approved an extra $500 million for buybacks in October, and the lower share count reduced the GAAP earnings per share drop by 2.7 percentage points by our math.
What to watch: quarterly share buybacks in the December report. Continued spending above $100 million would show the board is using its cash pile while earnings decline.
Positives this quarter didn't test
One supply-chain agreement and its inventory risk got no new numbers in the shareholder letter.
- GlobalFoundries 2027-2028 supply contract and chip-tester spending: management gave no new detail on wafer pricing or its roughly $600 million purchase commitment, which is also a risk if phone demand drops; the quarterly filing's commitment footnote will show any changes.
🐻 Bear Case
Camera And Power Chip Growth Stalled
High-Performance Mixed-Signal (HPMS), the division that makes camera controllers and power chips for smartphones, has carried all of Cirrus Logic's growth for the past year. Management argues it is adding more chip value to each phone, while sceptics warn that the June quarter's 26.0% jump was just earlier shipping for the autumn phone launch.
In the September quarter, HPMS sales grew 0.9% from a year ago to $245.0 million, while audio chip sales slipped 1.2% to $314.5 million. Across the first six months combined, HPMS grew 11.1% and total revenue rose 5.3%. For the December quarter, management's outlook of $510 million to $570 million points to a 7.0% revenue drop at the middle of the range.
That sharp slowdown confirms the June surge was a calendar shift rather than a lasting jump in annual growth. Even if Cirrus Logic beats its December outlook by its four-quarter average of 3.8%, revenue would still fall 3.5% from a year ago by our math.
What to watch: HPMS revenue growth in the December quarter. A drop from a year ago would confirm that higher camera chip attach rates are not enough to offset annual price cuts and weaker laptop sales.
Hiring Spree Squeezes Profit Margins
Cirrus Logic is expanding its engineering staff to design chips for laptops, wearables and industrial gear, a push that supports future products but raises fixed costs now. That hiring compressed operating margins this quarter because sales stood still.
- Total headcount: 1,815 employees, up 98 from last quarter and up 9.1% from a year ago by our math
- GAAP research and development: 22.0% of revenue, up 2.4 percentage points from a year ago
- GAAP selling and administrative costs: 8.0% of revenue, up 1.0 percentage point, including $6.9 million of buyout costs
- Operating margin excluding one-offs: 28.5%, down 1.3 percentage points from a year ago
The squeeze worsens in the December quarter after the INVENTVM buyout closed. Management's outlook puts operating expenses excluding one-offs at $152 million to $158 million, up 16.5% from a year ago at the middle of the range while revenue falls 7.0%. By our math, that drops operating margin excluding one-offs to 23.3%, down 6.9 percentage points from last December.
What to watch: operating expenses excluding one-offs in the March quarter outlook. Another increase above $155 million would show the higher cost base is permanent.
PC Shortage Will Drag Into Next Year
Personal computers are Cirrus Logic's main avenue to reduce its reliance on smartphones, using its amplifiers and voice chips in thin laptops. Last quarter management cut its fiscal 2027 PC sales plans and called the delay a shift in timing.
In the September letter, the company said "memory and other component shortages and the associated pricing pressure" cut PC shipments this year and will "further erode shipments in calendar year 2027". Those shortages "delayed the introduction of certain new models" that carry more of its chips, even as one customer launched a six-speaker laptop on Nvidia's RTX Spark platform.
Because the industry slump now stretches into 2027 and management still does not report PC dollar sales, laptop chips will not cushion the December revenue drop. What to watch: any dollar figure for full-year PC sales on the conference call, which would show whether the PC business is still growing.
Temporary Wafer Discount Fades Next Quarter
Gross margin — the share of sales left after making the chips — rose 1.2 percentage points from a year ago to 53.7% in the September quarter. Management attributed the gain to product mix, lower inventory write-downs, and a "temporary benefit from wafers purchased under prior agreements with GlobalFoundries".
That silicon wafer discount is now ending. For the December quarter, the company forecasts GAAP gross margin of 51% to 53%, down 1.7 percentage points at the middle of the range from this quarter and down 1.1 points from a year ago.
What to watch: March quarter gross margin outlook. A range below 51% to 53% would mean the new GlobalFoundries contract carries higher wafer costs.
👓 Other Themes
INVENTVM Acquisition Targets Wearables And AI
After the quarter ended, Cirrus Logic bought INVENTVM, a chip designer in Pavia, Italy that builds power and audio circuits, after five years of joint work. The company said the deal "strengthens our competitive position and product portfolio in the emerging consumer wearable and AI gadget markets". It did not disclose the price, but booked $6.9 million of buyout and retention costs in Q2 and expects $9 million in Q3.
💲 Other KPIs
Free cash flow — cash from operations minus equipment spending — fell 51.8% from a year ago to 8% of sales, down from 16% last September and 11% in Q1. Accounts receivable (uncollected customer bills) rose $111.8 million in the quarter to $365.8 million during the autumn smartphone build, tying up cash until the December quarter.
Chip inventory rose 3.2% from last quarter and 14.7% from a year ago, when it stood at $236.4 million. Inventory had dropped to $189.5 million in December 2025 before climbing for three straight quarters to support product ramps, while prepaid silicon wafers stayed at zero.
Total cash and marketable securities slipped $90.9 million from last quarter's $1,167.3 million, but remained 20.1% higher than the $896.0 million held a year ago by our math. The quarterly drop occurred because the audio chipmaker spent $128.5 million in cash to settle share buybacks, more than double its $50.9 million in operating cash flow.
🔮 Guidance
New. The plan calls for revenue to fall 3% from this quarter and 7.0% from a year ago at the $540 million middle of the range. That compares with a record $580.6 million last December. Over the last four quarters, the chipmaker beat the middle of its outlook by 3.8% on average; if the pattern holds, Q3 sales would reach $560.3 million by our math.
New. The outlook points to a 52.0% gross margin at the middle of the range, down from 53.7% in Q2 and 53.1% a year ago. The range returns to the 51% to 53% band management forecast in earlier quarters as the temporary benefit from older, lower-cost GlobalFoundries silicon wafers winds down.
New. Combined research and administrative spending is set to rise 20.5% from a year ago and 11.2% from Q2 at the $187 million middle of the range, by our math. The total includes $21 million of stock compensation, $9 million of acquisition-related costs following the INVENTVM purchase, and $2 million of intangible amortisation.
New. Excluding stock pay, buyout costs and amortisation, operating expenses are forecast to climb 16.5% from a year ago and 9.4% from Q2 at the $155 million middle of the range, by our math. The step-up reflects engineering hiring and the addition of INVENTVM's staff. Combined with the revenue and gross margin ranges, this implies a 23.3% operating margin excluding one-offs by our math.
Unchanged. Management kept its full-year tax rate estimate excluding one-offs at 16% to 18%. Both Q1 (17.4%) and Q2 (17.5%) landed inside that band, leaving the first-half rate at 17.5%, up slightly from 17.4% in the first half of last year.
❓ Key Questions
What did INVENTVM cost and how much revenue does it bring?
Cirrus Logic booked $6.9 million of buyout and retention costs in Q2 and expects $9 million in Q3, and added 98 employees in Q2 before the deal even closed. Investors need the purchase price and revenue run-rate to judge the return.
How much will PC sales fall in fiscal 2027 and 2028?
The shareholder letter says memory and component shortages will erode PC shipments through calendar 2027 and delayed new laptop models. In fiscal 2026 PC sales were in the $40 millions; management has not given a dollar figure since cutting its outlook.
Why is Q3 revenue forecast down 7% after camera wins?
Chief executive John Forsyth highlighted higher attach rates for the third-generation camera controller in newly launched smartphones. Yet the middle of the Q3 revenue outlook is down $40.6 million from last December, raising the question of whether volume or pricing drove the drop.
Where does gross margin settle once the new wafer contract starts?
A temporary discount on GlobalFoundries wafers lifted Q2 gross margin to 53.7%, and the Q3 outlook steps back to 51% to 53%. With the new 2027-2028 wafer agreement starting in January, management has not said whether new wafer pricing lowers that range.