It has been about a month since the last earnings report for Cirrus Logic (CRUS). Shares have lost about 3.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is Cirrus Logic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cirrus Logic Q3 Earnings & Revenues Beat

Cirrus Logic reported third-quarter fiscal 2025 adjusted earnings per share (EPS) of $2.51, which surpassed the Zacks Consensus Estimate by 23.65%. The company reported adjusted EPS of $2.89 in the prior-year quarter.

Quarterly revenues of $555.7 million were down 10.2% year over year. The downside resulted from lower smartphone sales partly because of its fiscal quarters' timing. This fall was partially offset by higher revenues from its latest product. The top line exceeded management’s revenue forecast for the third quarter ($480-$540 million), fueled by higher-than-expected smartphone shipments and increasing demand for audio components. 

The Zacks Consensus Estimate for revenues was pegged at $510 million. 

The company’s largest customer accounted for 91% of total revenues in the fiscal third quarter.

Segment Details

This Texas-based company rearranged its reportable segments and created separate categories — High-Performance Mixed-Signal and Audio — in the fourth quarter of fiscal 2021. Cirrus Logic is expanding into other applications such as laptops, gaming, tablets and AR/VR.

Cirrus Logic’s High-Performance Mixed-Signal segment includes a few of its non-audio products. It contributed 38% to total revenues in the fiscal third quarter. Revenues from the same division fell 12.9% year over year to $209.5 million.

The Audio segment’s sales decreased 8.5% to $346.3 million and contributed 62% to total revenues. 

Margins

Non-GAAP gross margin expanded 230 basis points year over year to 53.6%. The expansion is driven by a shift to higher-margin products, partly offset by higher inventory reserves and supply chain costs.

Cirrus Logic’s non-GAAP operating expenses rose 2.9% year over year to $129.2 million, owing to higher employee costs, partly offset by increased R&D incentives.

Non-GAAP operating income of $168.9 million declined 12.1% year over year. Non-GAAP operating profit margin fell to 30.4% from 31.1%.

Balance Sheet and Cash Flow

The company exited the fiscal third quarter with cash and marketable securities of $564 million compared with $478.3 million as of Sept. 28, 2024.

As of Dec. 28, 2024, accounts receivables were $261.9 million compared with $324.1 million as of Sept. 28, 2024.

In the fiscal third quarter, it reported $218.6 million of cash flow from operations. In the prior-year quarter, it generated $313.7 million of net cash from operations. Free cash flow was $211.9 million in the quarter under review.

The company repurchased almost 679,000 shares worth $70 million in the reported quarter. As of Dec. 28, 2024, it had $154.1 million worth of shares under its existing share repurchase authorization.

Fiscal Q4 Outlook

Management projects revenues between $350 million and $410 million.

Combined GAAP R&D and SG&A are anticipated to be between $141 million and $147 million, respectively. 

The GAAP gross margin is expected to be in the range of 51-53%.

Non-GAAP operating expenses are estimated to be in the band of $119-$125 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 20.09% due to these changes.

VGM Scores

Currently, Cirrus Logic has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cirrus Logic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Cirrus Logic, Inc. (CRUS) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research