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Cirrus Logic Faces Pricing Pressure: Can Gross Margin Stay Firm?
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Key Takeaways
Cirrus Logic guides fiscal Q2 gross margin to 52%-54% as it manages pricing reductions and higher costs.
Lower-cost GlobalFoundries wafers should temporarily benefit Q2 margins before largely selling through.
Cirrus Logic plans cost cuts and targeted price increases while maintaining its long-term margin outlook.
Cirrus Logic, Inc. (CRUS - Free Report) reported a non-GAAP gross margin of 52.7% for the first quarter of fiscal 2027, alongside non-GAAP gross profit of $242.1 million. The margin declined sequentially, primarily reflecting previously expected pricing reductions, although cost cuts partially offset the impact. Compared with the year-ago quarter, gross margin increased slightly, mainly due to a favorable product mix, partly offset by higher freight and supply-chain costs. The company also highlighted that anticipated pricing reductions partially offset year-over-year revenue growth.
For the second quarter of fiscal 2027, Cirrus Logic expects GAAP gross margin between 52% and 54%. On the last earnings call, management stated that the quarter should receive a temporary benefit from wafers purchased under prior agreements with GlobalFoundries at favorable pricing. However, this tranche of lower-cost wafers is expected to largely sell through during the fiscal second quarter, after which gross margin is expected to normalize.
During the earnings call, management reiterated its long-term gross-margin outlook despite ongoing discussion around input costs across the supply chain. The company noted that many of the costs currently flowing through its results had been agreed upon well in advance and were therefore coming through largely as expected. At the same time, the company continues to monitor input-cost developments closely. To address potential pressure, management said it will aggressively pursue cost reductions and consider targeted price increases where warranted.
Supply-chain conditions remain an important consideration. Cirrus recently entered into a new capacity reservation and wafer supply agreement with GlobalFoundries that secures dedicated wafer capacity and pricing for calendar years 2027 and 2028. In addition, the company highlighted that newly developed products for smart-meter and adjacent applications are expected to carry gross margins well above the corporate average, while also broadening its addressable market.
Overall, Cirrus is managing previously anticipated pricing reductions, higher freight and supply-chain costs and broader input-cost uncertainty while maintaining its long-term gross-margin outlook and guiding second-quarter gross margin to 52-54%.
Taking a Look at CRUS’ Competitors
Qualcomm Incorporated (QCOM - Free Report) faces mounting earnings risk as handset weakness, lower Apple modem share and rising input costs weigh on QCT profitability. Memory-driven demand pressure and customer mix shifts are constraining mobile, while price increases will take time to offset higher wafer, assembly, test and packaging costs. Data center expansion also carries execution risk because near-term custom silicon revenue is expected to dilute QCT gross margins before the platform reaches scale. Elevated spending on new compute programs and debt above cash and marketable securities further limit flexibility. Qualcomm’s QCT EBT margin declined to 26% from 30% as higher product costs offset higher average selling prices. For the fourth quarter of fiscal 2026, the company expects QCT EBT margin of 23-25% and total revenue of $9.7-$10.5 billion.
Skyworks Solutions, Inc. (SWKS - Free Report) is benefiting from sustained Broad Markets growth, led by Wi-Fi adoption, automotive connectivity and data center timing and power products. Rising RF complexity and a multi-generational Android win support the Mobile content outlook, while the Qorvo combination could add scale, diversification and cost savings. Near-term demand remains steady, and the fall smartphone ramp should lift Mobile revenue. For the fourth quarter of fiscal 2026, Skyworks expects revenues to be between $1.01 billion and $1.06 billion. Mobile revenues are expected to grow sequentially in the high teens, driven by seasonal product launches at the largest customer. Broad Markets is projected to increase approximately 5% year over year and represent about 39% of sales. The company anticipates gross margin between 44% and 45%.
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Cirrus Logic Faces Pricing Pressure: Can Gross Margin Stay Firm?
Key Takeaways
Cirrus Logic, Inc. (CRUS - Free Report) reported a non-GAAP gross margin of 52.7% for the first quarter of fiscal 2027, alongside non-GAAP gross profit of $242.1 million. The margin declined sequentially, primarily reflecting previously expected pricing reductions, although cost cuts partially offset the impact. Compared with the year-ago quarter, gross margin increased slightly, mainly due to a favorable product mix, partly offset by higher freight and supply-chain costs. The company also highlighted that anticipated pricing reductions partially offset year-over-year revenue growth.
For the second quarter of fiscal 2027, Cirrus Logic expects GAAP gross margin between 52% and 54%. On the last earnings call, management stated that the quarter should receive a temporary benefit from wafers purchased under prior agreements with GlobalFoundries at favorable pricing. However, this tranche of lower-cost wafers is expected to largely sell through during the fiscal second quarter, after which gross margin is expected to normalize.
During the earnings call, management reiterated its long-term gross-margin outlook despite ongoing discussion around input costs across the supply chain. The company noted that many of the costs currently flowing through its results had been agreed upon well in advance and were therefore coming through largely as expected. At the same time, the company continues to monitor input-cost developments closely. To address potential pressure, management said it will aggressively pursue cost reductions and consider targeted price increases where warranted.
Supply-chain conditions remain an important consideration. Cirrus recently entered into a new capacity reservation and wafer supply agreement with GlobalFoundries that secures dedicated wafer capacity and pricing for calendar years 2027 and 2028. In addition, the company highlighted that newly developed products for smart-meter and adjacent applications are expected to carry gross margins well above the corporate average, while also broadening its addressable market.
Overall, Cirrus is managing previously anticipated pricing reductions, higher freight and supply-chain costs and broader input-cost uncertainty while maintaining its long-term gross-margin outlook and guiding second-quarter gross margin to 52-54%.
Taking a Look at CRUS’ Competitors
Qualcomm Incorporated (QCOM - Free Report) faces mounting earnings risk as handset weakness, lower Apple modem share and rising input costs weigh on QCT profitability. Memory-driven demand pressure and customer mix shifts are constraining mobile, while price increases will take time to offset higher wafer, assembly, test and packaging costs. Data center expansion also carries execution risk because near-term custom silicon revenue is expected to dilute QCT gross margins before the platform reaches scale. Elevated spending on new compute programs and debt above cash and marketable securities further limit flexibility. Qualcomm’s QCT EBT margin declined to 26% from 30% as higher product costs offset higher average selling prices. For the fourth quarter of fiscal 2026, the company expects QCT EBT margin of 23-25% and total revenue of $9.7-$10.5 billion.
Skyworks Solutions, Inc. (SWKS - Free Report) is benefiting from sustained Broad Markets growth, led by Wi-Fi adoption, automotive connectivity and data center timing and power products. Rising RF complexity and a multi-generational Android win support the Mobile content outlook, while the Qorvo combination could add scale, diversification and cost savings. Near-term demand remains steady, and the fall smartphone ramp should lift Mobile revenue. For the fourth quarter of fiscal 2026, Skyworks expects revenues to be between $1.01 billion and $1.06 billion. Mobile revenues are expected to grow sequentially in the high teens, driven by seasonal product launches at the largest customer. Broad Markets is projected to increase approximately 5% year over year and represent about 39% of sales. The company anticipates gross margin between 44% and 45%.
CRUS Price Performance, Valuation and Estimates
Shares of CRUS have lost 18% in the past three months compared with the Electronics-Semiconductors industry’s decline of 12.4%.
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CRUS is trading at a forward 12-month price/earnings ratio of 15.98, higher than the Electronics-Semiconductors sector’s multiple of 13.93.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CRUS’ earnings for fiscal 2027 has been revised downward over the past 60 days.
Image Source: Zacks Investment Research
CRUS currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.