CIRRUS LOGIC, INC. - 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 27, 2026 (First Quarter of Fiscal Year 2027). Cirrus Logic, Inc. is a leader in low-power, high-precision mixed-signal processing solutions for mobile and consumer applications. The company operates in two primary product lines: Audio and High-Performance Mixed-Signal (HPMS).
Key Financial Metrics
| Metric | Q1 FY2027 (Ended June 27, 2026) | Q1 FY2026 (Ended June 28, 2025) |
|---|---|---|
| Net Sales | $459.7 million | $407.3 million |
| Gross Profit | $241.9 million | $214.0 million |
| Gross Margin | 52.6% | 52.6% |
| Operating Income | $84.4 million | $72.4 million |
| Net Income | $76.9 million | $60.7 million |
| Diluted EPS | $1.47 | $1.14 |
| Cash from Operations | $64.1 million | $116.1 million |
| Cash & Equivalents (End of Period) | $810.7 million | $548.9 million |
| Total Debt Outstanding | $0 | $0 |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 13% ($52.5 million) year-over-year. Audio products grew $9.0 million, while HPMS products grew $43.5 million, driven by higher smartphone component sales despite average selling price (ASP) declines.
- Profitability: Net income increased 27% to $76.9 million. The effective tax rate decreased to 18.4% from 24.7%, primarily due to the reinstatement of immediate expensing of U.S. R&D expenditures under the "One Big Beautiful Bill Act" enacted in July 2025.
- Operating Expenses: R&D expenses rose 12% to $115.0 million due to increased personnel and product development costs. SG&A expenses increased 9.5% to $42.4 million.
- Cash Flow: Operating cash flow decreased to $64.1 million from $116.1 million, reflecting a $42.0 million unfavorable change in working capital (increases in receivables and inventory).
- Capital Allocation: The company repurchased $34.5 million of common stock during the quarter. As of June 27, 2026, approximately $239.6 million remained available under the $500 million repurchase authorization.
Outlook, Risks, and Contingencies
- Outlook: Management highlights strong demand for custom smartphone products and progress in next-generation camera controllers and smart power ICs. The PC market is identified as the largest near-term growth opportunity, with new design wins for AI-enabled PCs expected to ship later in the year.
- Customer Concentration: Apple Inc. represented approximately 90% of total net sales for the quarter. The top ten customers accounted for 96% of sales. Loss of or reduced orders from key customers poses a significant risk.
- Supply Chain: The company entered a new Capacity Reservation Agreement with GlobalFoundries on June 30, 2026, committing to purchase approximately $600 million of wafers for calendar years 2027-2028. Risks include potential excess inventory if demand falls short of commitments.
- Tax Litigation: The IRS is examining fiscal years 2017-2019 regarding transfer pricing. The IRS has proposed additional taxes of approximately $168.3 million plus $63.7 million in penalties. The company disputes these positions and has not accrued a liability, though the outcome remains uncertain.
- Liquidity: The company maintains a $350 million revolving credit facility with no outstanding balance as of June 27, 2026.
Investor Verification Checklist
- Verify the sustainability of the 90% revenue concentration with Apple Inc. and potential impacts of ASP reductions.
- Monitor the resolution of the IRS transfer pricing dispute regarding fiscal years 2017-2019 and potential material tax liabilities.
- Assess the execution risk of the new $600 million wafer commitment with GlobalFoundries for 2027-2028 against actual demand forecasts.
- Track the ramp-up of new AI-enabled PC products and their contribution to revenue in subsequent quarters.
- Review working capital trends, specifically inventory and receivables, which negatively impacted operating cash flow this quarter.