Cirrus Logic, Inc. (CRUS) - 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended December 27, 2025 (Fiscal Q3 2026). Cirrus Logic 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). The company is a large accelerated filer with 51,007,389 shares of common stock outstanding as of January 30, 2026.
Key Financial Metrics
| Metric | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Net Sales | $580.6 million | $555.7 million | $1,548.9 million | $1,471.6 million |
| Gross Profit | $308.1 million | $297.8 million | $816.5 million | $769.3 million |
| Gross Margin | 53.1% | 53.6% | 52.7% | 52.3% |
| Operating Income | $152.9 million | $145.8 million | $370.1 million | $324.4 million |
| Net Income | $140.3 million | $116.0 million | $332.6 million | $260.2 million |
| Diluted EPS | $2.66 | $2.11 | $6.27 | $4.69 |
| Operating Cash Flow (YTD) | $499.2 million (vs. $314.0 million YTD 2025) | |||
| Cash & Equivalents | $778.1 million (as of Dec 27, 2025) | |||
| Debt | $0 outstanding on $300M Revolving Credit Facility |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 4% quarter-over-quarter and 5% year-to-date, driven primarily by higher smartphone unit volumes in both Audio and HPMS segments. This growth was partially offset by anticipated average selling price (ASP) reductions.
- Profitability: Net income increased 21% in Q3 and 28% YTD. The effective tax rate decreased significantly to 13.6% in Q3 (from 24.5% prior year) and 16.1% YTD (from 25.7% prior year) due to the "One Big Beautiful Bill Act" (OBBBA) enacted in July 2025, which eliminated the capitalization of U.S. R&D expenditures within GILTI.
- Working Capital: Inventories decreased by $109.6 million YTD, contributing to a $55.8 million favorable change in working capital. Accounts receivable increased by $63.0 million YTD due to timing of collections.
- Share Repurchases: The company repurchased 2.0 million shares for $210.0 million YTD. As of period end, approximately $344.1 million remains available under the March 2025 authorization.
Outlook, Risks, and Contingencies
- Strategic Initiatives: Management continues to focus on smartphone audio leadership, increasing HPMS content in smartphones, and expanding into AI-enabled PCs and automotive haptics. New voice interface components for AI PCs were sampled, and automotive haptic components were announced.
- Customer Concentration Risk: The company faces extreme concentration risk. Apple Inc. represented approximately 94% of net sales in Q3 2026 and 90% YTD. The top 10 customers accounted for 97% of Q3 sales.
- Tax Litigation: The IRS is examining federal tax returns for 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 an adverse outcome could be material.
- Supply Chain: The company maintains a Capacity Reservation Agreement with GlobalFoundries through 2026, with $33 million in prepaid wafer balances as of period end.
Investor Verification Checklist
- Apple Dependency: Verify the stability of the relationship with Apple, which accounts for ~90-94% of revenue, and assess the impact of potential ASP reductions or volume shifts.
- Tax Provision Sustainability: Confirm the long-term impact of the OBBBA on the effective tax rate and the potential financial exposure from the ongoing IRS audit regarding transfer pricing.
- Inventory Management: Monitor inventory levels and prepaid wafer balances to ensure they align with demand forecasts, given the recent significant drawdown in inventory.
- Share Buyback Execution: Track the pace of the remaining $344.1 million share repurchase authorization and its impact on diluted EPS.
- New Market Penetration: Evaluate the commercial traction of new AI PC components and automotive haptic products to diversify revenue beyond smartphones.