Cirrus Logic, Inc. Aktie

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic Fourth Quarter and Full Fiscal Year 2026 Financial Results Q&A Session. [Operator Instructions] After a brief statement, we will open up the call for questions from analysts. Instructions for queuing will be provided at that time. As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the conference call over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.

Thank you, and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer; and Jeff Woolard, our Chief Financial Officer. Today, at approximately 4:00 p.m. Eastern Time, we announced our financial results for the fourth quarter and full fiscal year 2026. The shareholder letter discussing our financial results, the earnings press release and the webcast of this Q&A session are all available at the company's Investor Relations website.

This call will feature questions from the analysts covering our company. Additionally, the results and guidance we will discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release and are all available on the company's Investor Relations website.

Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise.

Please refer to the press release and the shareholder letter issued today, which are available on the Cirrus Logic website and the latest Form 10-K as well as other corporate filings registered with the Securities and Exchange Commission for additional discussion of our risk factors that could cause actual results to differ materially from current expectations.

Now I'd like to turn the call over to John.

Thank you, Chelsea. Good afternoon, everyone, and thank you for joining today's call. As you have seen in the press release, in the March quarter, Cirrus Logic delivered revenue of $448.5 million, above the midpoint of our guidance range. For the full fiscal year 2026, Cirrus Logic delivered record revenue of $2 billion, up 5% from the prior year, driven by demand for components shipping into smartphones as well as higher PC sales.

We're also pleased to have delivered record GAAP and non-GAAP earnings per share for the full fiscal year. In a moment, I'll hand the call over to Jeff to walk us through the financial results for the March quarter and the full fiscal year in greater detail. Before I do that, I'd like to take a few minutes to highlight just some of the many accomplishments across our business over the past year.

As many of you are aware, our long-term strategy for growth at Cirrus is based on 3 principles. First, we aim to maintain a strong leadership position in our core flagship smartphone audio business. Second, we seek to expand the value and range of high-performance mixed-signal content with which we serve our customers in smartphones and similar products. And third, we aim to leverage our world-class expertise and IP in both audio and high-performance mixed signal to grow and broaden our business in new markets.

In FY '26, we made significant progress in each of these areas. In our flagship smartphone audio business, we continued to see robust demand for our latest generation custom-boosted amplifier and 22-nanometer smart codec, both of which are designed to deliver meaningful system-level improvements and exceptional performance. As a consequence of their advanced design, we expect these products to enjoy extended life cycles and to ship for a significantly longer period than is typical for consumer products, thus providing solid long-term visibility and sustained revenue contribution. This, in turn, enables the company to deploy our R&D resources in new areas that can drive further innovation and growth.

In our high-performance mixed-signal business, our goal is to expand the range and value of advanced products with which we serve our customers. And here, we also made exciting progress in FY '26. Customer demand for our camera controllers remain strong, and engagement with our customer around our road map for future camera controllers was equally robust. These products continue to enhance a central part of the smartphone experience. And today, we are actively designing the next generation of components and technologies that will bring advanced functionality and differentiation to the camera performance of future smartphones.

We are also very pleased with our accomplishments in advanced battery and power applications, where we validated new technologies and intellectual property in silicon and demonstrated our ability to enhance battery performance, health and longevity as well as to improve efficiency for application-specific power management solutions.

Moreover, our goal of expanding HPMS content in smartphones has frequently been advanced by demonstrating our capabilities in components designed for other end products. And in the past year, we were excited to deliver new high-performance power solutions for both accessory and tablet devices. While we continue to pursue multiple opportunities in power, our progress in this area was exemplified by a recent announcement from our largest customer that highlights our collaboration on a solution to support Face ID implementations in future products. This reflects a 2-decade engineering partnership that has been built on exceptional execution, continuous innovation and trust. It also marks an exciting new application space for Cirrus Logic, and we are presently in the design phase of our first product in this area, a smart power IC for 3D sensing that integrates high-efficiency power delivery, precision current drive and programmable control.

The third pillar of our strategy is to leverage our audio and high-performance mixed-signal expertise in new applications and markets outside of smartphones. In PCs, we delivered strong year-over-year revenue growth in FY '26, largely driven by share gains across all PC segments. We introduced new amplifiers and codecs that address a wider range of platforms, including mainstream and AI-enabled PCs.

Looking ahead, we believe voice will be a critical enabler for agentic interaction across many different types of edge device, including PCs, and we will continue to leverage our expertise and intellectual property in this area to deliver significant enhancements to the AI user experience. Design momentum across our PC portfolio is very robust, and we expect increased adoption of SDCA and higher content per device to contribute to further strong growth in our PC business in FY '27.

Beyond PCs, we made meaningful progress expanding our general market product portfolio in FY '26 and are encouraged by the momentum we are building in this area of our business. We introduced multiple new product families that target a broad range of customers across the professional audio, automotive, industrial and imaging end markets. Our progress included continuing to ramp production of our ultra high-performance audio ADCs, DACs and codec both professional audio and automotive applications, sampling our latest family of prosumer high-performance audio converters and launching a new series of industrial imaging components designed for high-precision scanning systems.

Finally, over the past year, we made great progress both in driving the geographic diversification of our supply chain and advancing the process technologies that help us deliver exceptional performance in our products. This included joining our largest customer's American manufacturing program where we are working with both our customer and GlobalFoundries to develop new process technologies and working towards manufacturing products for the first time at the GlobalFoundries facility in Malta, New York.

To summarize our progress over the past year, we continued our track record of consistent execution as we delivered record financial results, broadened our engagement with our largest customer and advanced our plan to drive application and market diversification. As we look ahead, we see the strongest pipeline of opportunities in front of us in recent history.

Accordingly, to capitalize on these opportunities, we plan to increase our R&D investment throughout fiscal '27. Cirrus has a strong record of operational discipline, and we have previously made it clear to shareholders that we'll accelerate R&D investment where we have high confidence in the long-term benefits to the business of doing so. We believe these investments will generate substantial returns over time and that they will continue to drive shareholder value creation well into the future.

And with that, let me now turn the call over to Jeff to provide an overview of our financial results for the fourth quarter and for the full fiscal year 2026 as well as the outlook for the first quarter of fiscal 2027.

Thank you, John. Good afternoon, everyone. I'll start with a summary of our financial results for fiscal Q4 and full fiscal year 2026, then provide guidance for our Q1 fiscal year 2027.

Revenue in Q4 fiscal year 2026 was $448.5 million, which was above the midpoint of our guidance range. On a sequential basis, revenue was down 23% due to lower smartphone unit volumes. On a year-over-year basis, revenue was up 6%, driven primarily by strong demand for components shipping into smartphones. This was partially offset by pricing reductions and, to a lesser extent, lower general market sales. Fiscal year 2026 was a record $2 billion, up 5% from a year ago. This increase was driven by demand for components shipping into smartphones as well as higher component sales into PCs.

Turning to gross profit and gross margin. Non-GAAP gross profit in the March quarter was $237.9 million, and non-GAAP gross margin was 53%. On a year-over-year basis, the decline in gross margin is primarily due to higher freight expenses. Non-GAAP gross profit for the fiscal year 2026 was $1.1 billion, and non-GAAP gross margin was 52.8%. The year-over-year increase in gross margin reflects a more favorable product mix.

Now I'll turn to operating expenses. Non-GAAP operating expenses for the fourth quarter were $126.1 million. On a sequential basis, OpEx was down $6.9 million, primarily due to lower variable compensation and employee-related expenses. On a year-over-year basis, operating expense was up $6.1 million mostly due to higher employee-related expenses. This was partially offset by a reduction in product development costs, primarily associated with the timing of new products. Non-GAAP operating income for the quarter was $111.8 million or 24.9% of revenue. For fiscal year 2026, non-GAAP operating expense was $506.4 million, up $12.3 million, primarily due to an increase in employee-related expenses. Non-GAAP operating income for the fiscal year 2026 was $548.8 million. As a result, fiscal year 2026 operating margin came in at 27.5%, up from 26.5% in the prior year.

Turning now to taxes. For the March quarter, our non-GAAP tax rate was 16%. For fiscal year 2026, non-GAAP effective tax rate was 16.4%. And lastly, on the P&L, non-GAAP net income in the fourth quarter was $102.3 million or $1.95 per share. For fiscal year 2026, non-GAAP net income was $489.3 million, resulting in record earnings per share of $9.26, up from $7.54 in fiscal year 2025.

Now let's turn to the balance sheet. Our balance sheet continues to remain strong, and we ended fiscal year 2026 with approximately $1.2 billion in cash and investments. Our ending cash and investments balance was up $319 million from the prior year, primarily from cash from operations, which was partially offset by share repurchases. We continue to have no debt outstanding.

Inventory balance at the end of the fourth quarter was $240.9 million, up from $189.5 million in Q3 fiscal year 2026, and we ended the quarter with 104 days of inventory.

Turning to cash flow. Cash flow from operations was $151.4 million in the March quarter, and CapEx was $2.4 million, resulting in a non-GAAP free cash flow margin for the quarter of approximately 33%. For fiscal year 2026, the cash flow from operations was $650.6 million and CapEx was $14.8 million. This resulted in a non-GAAP free cash flow margin of 32%.

On share buybacks, in Q4, we utilized $70 million to repurchase 491,000 shares of our common stock at an average price of $142.54. During fiscal year 2026, we returned $280 million of cash to shareholders as we repurchased 2.5 million shares at an average price of $113.91. At the end of Q4 fiscal year 2026, the company had $274.1 million remaining on its share repurchase authorization.

Now on to guidance. For Q1 fiscal year 2027, we expect revenue in the range of $430 million to $490 million, up 3% sequentially and 13% year-over-year at the midpoint. We expect gross margin to range from 51% to 53%. Non-GAAP operating expense is expected to range from $132 million to $138 million, up sequentially, largely due to increases in R&D. As John previously mentioned, given the breadth of opportunities ahead of us, we expect fiscal year 2027 operating expenses to increase. We expect our fiscal year 2027 non-GAAP tax rate to be approximately 16% to 18%.

In closing, we delivered record financial results and made significant progress executing on our strategy to drive application and market diversification.

Before we begin the Q&A, I would like to note that while we understand there is intense interest related to our largest customer, in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship. With that, let me now turn the call to Chelsea to start the Q&A session.

Thanks, Jeff. We will now start the Q&A portion of the earnings call. [Operator Instructions]

[Operator Instructions] Your first question comes from Christopher Rolland of Susquehanna. Please go ahead.

This is Yash on for Christopher Rolland. I know you guys guide 1 quarter at a time, but I would love any color around how you think about seasonality and any puts and takes to consider as we get into the fall quarter?

Yes, thanks. So as you noticed from our guide, the guidance for June is a little stronger than the typical average for this quarter. We believe that reflects the continued strength of our customers' current products, along with some of the dynamics that we've talked about regarding a greater proportion of our content being ramped a little earlier than in the past. And yes, we do only guide 1 quarter. But we think that those dynamics likely contribute to a smaller delta between the June and September quarters than what we've seen in the past.

Perfect. And then my second question is around the PC opportunity. So you called out higher PC sales. And I was wondering how large that business was in fiscal '26? I would love to know how that opportunity is progressing and if you had any expectations for fiscal year '27.

Yes. Thank you. So as you know, we don't break it out formally, but we do like to give some color to give our investors a sense of the momentum that we're building there. So we showed strong growth in fiscal '26 and exited the year with really good momentum, meaning we expect to see continued strong growth in fiscal '27, and we continue to be excited about the long-term contribution that this can make to our business.

One of the things I've said before is that for us to go after a new market, we need to believe it can become a 10% business for us, and that continues to be the case for PC.

So if I wind the clock back a little, as you know, we did low tens of millions in fiscal '25. And then that grew into the 40s in fiscal '26. And we, as I said, exited the year with really, really good momentum across our customer base. So we are shipping in the top 6 laptop vendors. And the indicators that we take as good kind of signals about the direction of travel for us and the momentum were all very positive as we exited the year.

And just to give you a bit more color on those. One of the indicators, for example, is the number of designs which are shifting from a legacy audio interface called HDA to the new audio interface called SDCA. We've talked about that transition in the past and how significant it is for us. We tend to stand a very good chance of winning SDCA-related designs. And if we look back in time, in fiscal '25, SDCA was still at a very early stage. And most of the market was HDA, most of our revenue was HDA as well. But in fiscal '26, we actually saw that pass an inflection point. SDCA revenue tripled so that it became almost 60% of our total PC revenue. And in FY '27, we expect that transition to continue. And we would expect, based on what we see, that the figure would be closer to 80% of our revenue being driven by SDCA-related designs. So that transition is well underway now. And it's great for us because we believe we have the strongest portfolio of SDCA audio and voice products. And it's great for consumers because it delivers a significantly better audio and voice experience.

One of the other good indicators that we look to and we've talked about in the past is our penetration of the mainstream tier of devices. That's really critical for driving volume and is an important part of our growth strategy. And again, that's an area where, if we look back over the past couple of years, that's been a relatively small proportion of our revenue. In fiscal '27, we would expect that more of our -- more than half of our revenue will likely come from mainstream devices. So we feel we're building a lot of momentum, and we're very pleased with the traction we've got across our customer base and excited about where it can go in the future.

Your next question comes from the line of Tom O'Malley with Barclays.

I wanted to ask on the smart power IC, which you talked about in the commentary in the shareholder letter and then you also saw in the Apple announcement. Can you talk about the timing that it takes to traditionally ramp up a part like this? And then maybe a little bit of a technical deep dive on exactly what it's doing? Obviously, you can't share specifics. But with a chip like this, is this just gating power to a certain functionality? Is it something to do with the camera as well? Anything that you can give there would be super helpful.

Yes. Thanks for the question, Tom. Obviously, we are limited. I know you know this and what we can say about a custom product that is being made for a customer product that hasn't yet been announced and is not on the market. To answer the first part of your question, from where we are at in the design stage today, I would say that we're looking at a couple of years before that gets introduced. That's not speaking to our customers' plans, but just based on where we are at. And as to its functions, I think we are limited in what we can say there, but what I would highlight is it's a really good example of something that we do well.

First of all, as you know, we've been investing in certain areas of power where we believe we can bring innovation to the customer. But alongside that, we have the ability to provide very, very high-performance power analog circuits combined with digital. So this is a highly programmable device which will bring functionality and performance to that subsystem which hasn't been there before, which is a really good kind of example of what we are good at bringing to our customers by virtue of the investments that we make in advanced node mixed-signal IP.

Great. And then as a follow-up, maybe sticking on the same side of the business to some extent, on the camera controllers, there's some commentary here as well. I know you talked about that a lot, but you've seen proliferation at your largest customer over the last several generations as that continues to move from camera to camera and then content per camera is going up. Is your commentary looking to call out anything particular, an inflection point in that market? Or is it just kind of describing the ongoing penetration that you're seeing over the next couple of years?

You are picking up on something there that we would like our investors to understand for sure, which is that we are in design of next-generation components today. That's a development that happened during the past few months. And beyond that, we have a very rich road map of IP. So because there is a differential attach rate across different SKUs and then obviously, many different SKUs and multiple generations that are sold of our customer products at any one time, the impact of new content, it tends to be more linear than big step functions. But suffice to say, we've got great stuff coming down the track and an incredibly close and collaborative relationship with our customer around the road map there. So yes, we did want to call that out that we see that as being an area where we believe we can continue to grow content and deliver more value to our customers and capture more value ourselves.

[Operator Instructions] Your next question comes from Rick Schafer of Oppenheimer & Co.

This is Wei Mok on the line for Rick. Congrats on the results. My first question is on the PC market. It looks like there's strong momentum in PC in fiscal year '26. And in the past, you talked about this business potentially doubling again in fiscal year '27. But in light of all the industry-wide memory shortages, forecast for PC units have come down. So just wondering if you maintain that view given talks of all these memory concerns? How do you see the PC business operating this year?

Yes. Thanks for the question. I don't think I actually have talked about fiscal '27 previously and set expectations around that. We certainly -- that is until about 5 minutes ago. We certainly do feel that we're exiting fiscal '26 with great momentum across the customer base and a lot of product in design with those customers. So for sure, we believe we can deliver strong growth in fiscal '27. And we believe we can do that even in an environment where there is some pullback in the PC market. I'm sure you're aware of the same commentary that we're aware of that's out there in the wild about what might or might not happen with the PC market.

I wouldn't say we see lots of signals of that within our customer base. I think it's worth keeping in mind that we tend to be serving the largest OEMs in the PC world. So they're probably better positioned to secure memory and so on. And we tend to be skewed towards the upper tiers of their devices, which, again, I think, are potentially better insulated from some of what you're talking about. I think it's possible that we do see some pullback in the PC market overall over the course of the year, but that doesn't change our perspective that we believe we can continue to deliver strong growth in fiscal '27.

Got it. Great. As for my follow-up, you guys highlighted a closer collaboration with GlobalFoundries at the Malta, New York fab. And I believe they have 12-nanometer, 14-nanometer process. So can you talk about some of the products you see can best utilize this fab? And what are some of the opportunities you can leverage of this collaboration?

Sure. We have a close collaboration with GlobalFoundries going back many years, and that has served us and GlobalFoundries, I think, extremely well over the years. It is focused on process technologies for our high-voltage products, for example, amplifiers and power conversion and control chips. So those would not tend to be on the geometries that you just referred to. They, for example, would be centered typically around 55 nanometer. But I guess for us, as we look forward, we have a collaboration with Global that is focused on delivering the next generation of process technologies relative to what we've been using up until now for our high-voltage products. And those technologies and that process development will deliver higher performance, greater power efficiency, greater cost effectiveness for our customers. And that's something that we're very excited about bringing up in Malta as well because we know our customers want to have access to semiconductors fabricated in the U.S.

So for us, the high-voltage products today are obviously, as I said, amplifiers, haptics drivers, power conversion and control chips. We saw a press release over the past quarter from our largest customer, which referenced a product for the Face ID subsystem, which could be fabricated at that facility. And as I've indicated in the prepared remarks, we believe there are still many other opportunities for us around the power space that could also potentially be fabricated in the U.S. using this process that we're collaborating with GlobalFoundries.

Your next question comes from the line of Tore Svanberg of Stifel.

Yes. And congrats on the strong results. I wanted to come back to the new power product and just trying to understand a little bit more what this means longer term. I mean is this a beginning of more content, more opportunities? I'm just thinking about sort of when you got into the camera controller space, right, and there was a starting point, and then eventually, you were able to expand more content there. So any more visibility you could share with us, not just on the timing of this particular product ramp, but perhaps beyond this initial use case?

Thank you, Tore. I guess the truth is we don't have a lot to say about that right now, but I think your observation is very fair, and it's a good reflection of the way we work with our customers. In most of the products that we've delivered, we have then iterated on those products to deliver more value to integrate more of the components that sit around us on the board, which is something we're very, very well positioned to do by virtue of the processes we're on and our approach to design. And so I think we've done that very successfully in really literally every other domain where we've served that customer.

I think when we launched the new generation audio amplifier in the fall of calendar '24, we indicated that, that represented an ASP uplift for us but a lower system cost to our customer. And the way we achieved that was by integrating stuff around us as well, of course, as delivering higher performance. So this is definitely a very exciting new area for us, and we're thrilled to be serving the customer in a new part of the system. The first mission, obviously, is to execute flawlessly on the first product. But beyond that, we will look very hard at how we can deliver more value there and potentially iterate and expand from there.

I would also highlight, though, that this is a great reflection of a lot of the work we've been doing, investing in power over the past few years and that a lot of that investment led to us being very well positioned to win this socket and that we continue to believe there are other power sockets out there where we could bring innovation to the customer as well.

Very good. And as my follow-up and on your general market product portfolio, you listed a few new products in your shareholder letter. What are some of the milestones that we should be looking for here? I mean are you eventually going to tell us that it's become 10% of your revenues? Because obviously, these are longer time to revenue product cycles and so on and so forth. So any guidance on what to look out for, for milestones there would be really helpful.

Yes. I think we'll certainly give that some thought on the milestone front. I would say your characterization is absolutely right. These kind of products are long lifestyle -- sorry, long life cycle products that are going to be very solid contributors to us for the long term and typically have significantly higher margins than our corporate average. But no single one of them moves the needle that much for us in the space of 1 year.

But I think the way to think about this for you and our investors is that over the years, we've built a really formidable portfolio of IP. And when we have been entirely focused on serving our largest customer and not going far beyond that, then we haven't had the ability in the past to leverage that IP into other segments. But this -- the products that we announced that you referred to, so we recently announced a new scanning and imaging products, but that came on the back of other announcements we've made around prosumer audio, around timing products and so on. And they all fall into the same category of leveraging some very advanced IP we have, being comparatively economical investments and addressing segments where the profitability is great, and those products will continue to run for a very long time.

So when we look at the aggregate, we're by no means done in that space, I should say. And when we look at the aggregate of that over time, it gives us a really, really nice addition to the business, and we expect that part of the business to grow.

Yes, I think I'd just add, Tore, while it does take time, we are continuing to invest in this area because we think there are more opportunities so we will continue to broaden out that portfolio. And while it does take time, the products we have launched, we have been very positively received by customers, and we're very encouraged by the opportunities.

Okay. Well, with that, we'll turn the call back over to John for his final remarks.

Thank you, Chelsea. In summary, we are very proud to have delivered record financial results for the fiscal year 2026 while also making excellent progress on our strategy to drive application and market diversification.

I'd like to thank everyone who is a part of the Cirrus team worldwide for the amazing level of execution and customer focus that has delivered these results. And I'd also like to express our gratitude to all of our customers for the trust and support they place in Cirrus Logic. We're very excited about the opportunities ahead, and we believe the company is well positioned to drive further future growth and value creation. Finally, thank you all for participating today. Goodbye.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic Third Quarter Fiscal Year 2026 Financial Results Q&A session. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference call over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.

Thank you, and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer; and Jeff Woolard, our Chief Financial Officer. Today, at approximately 4:00 p.m. Eastern Time, we announced our financial results for the third quarter fiscal year 2026. The shareholder letter discussing our financial results, the earnings press release and the webcast of this Q&A session are all available at the company's Investor Relations website.

This call will feature questions from the analysts covering our company. Additionally, the results and guidance we will discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release and are all available on the company's Investor Relations website.

Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise. Please refer to the press release and the shareholder letter issued today, which are available on the Cirrus Logic website and the latest Form 10-K as well as other corporate filings registered with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations.

Now I'd like to turn the call over to John.

Thank you, Chelsea, and welcome to everyone joining today's call. As you've seen in the press release, Cirrus Logic reported outstanding results for the December quarter, delivering revenue of $580.6 million, above the top end of our guidance range. This was driven by stronger-than-anticipated demand for components shipping into smartphones and a favorable mix of end devices.

We are also proud to have delivered record GAAP and non-GAAP earnings per share in the third quarter. In a few moments, I'll hand the call over to Jeff to discuss the financial results for the December quarter in detail, along with our outlook for the March quarter.

Before we get to that, I'd like to provide an update on the recent progress we have been making across the key pillars of our strategy. As I have outlined previously, our long-term strategy for growth at Cirrus is based around 3 principles. First, we seek to maintain a strong leadership position in our core flagship smartphone audio business. Second, we aim to expand the value and range of high-performance mixed-signal solutions with which we serve our customers in smartphones and similar products. And third, we aim to leverage our world-class expertise and IP in both audio and high-performance mixed signal to grow and broaden our business in new markets.

I want to say a few words now about the progress we've made in the past quarter in each of these areas. In our flagship smartphone audio business, we saw very strong demand for our latest generation custom-boosted amplifier and 22-nanometer smart codec. These products are based on innovative new architectures that are designed to enable system-level improvements with each new smartphone generation, extending our product life cycles while also providing longer-term visibility and sustained revenue contribution.

In our high-performance mixed-signal business, customer engagement around our camera controller road map remained strong during the December quarter. We are actively developing next-generation camera products that will deliver enhanced features, improved performance and greater system efficiency, and we are excited about the opportunities in this space for the future. We also continue to invest R&D dollars in IP and capabilities around advanced battery and power applications, where we believe there is both opportunity to enhance existing content and grow content further. Across a range of areas, we see considerable opportunity to expand our value in smartphones with HPMS solutions, and believe this will be an important driver for shareholder value creation in the coming years.

Our third strategic priority is to leverage our audio and high-performance mixed-signal expertise into new applications and markets outside of smartphones. We've made great progress here, particularly in PCs, where we continue to build momentum. Our progress in the December quarter included ramping the first shipments of our latest generation amplifier and codec in mainstream PC platforms ahead of new customer product launches, an important milestone as we focus on expanding our footprint in higher-volume mainstream PCs and capturing a larger share of our serviceable addressable market.

During the quarter, we also sampled a new component designed to enable and enhance the use of voice as an interface for future AI-enabled PCs. And we were pleased to see strong interest in this product from several leading OEMs and PC platform vendors.

Finally, we were excited to see multiple new customer products introduced at the Consumer Electronics Show in January that use a variety of our amplifiers, codecs and haptic drivers. These product launches included our first win with a new customer in their high-end laptop platform that features up to 6 Cirrus Logic amplifiers and our latest generation codec, setting a new standard for the audio experiences end users can expect from PCs.

While we are very pleased with our achievements in PCs, the company also continued to gain momentum in other applications within our general market business. A growing number of our new general market components span the professional audio, automotive, industrial and imaging end markets. Leveraging our world-class IP, these products typically enjoy long product life cycles and gross margins that are well above our corporate average and hence, act as a strong complement to the rest of our business.

In the December quarter, we began sampling a new prosumer audio product family that will expand our addressable market by delivering solutions that span additional tiers and categories of products. This builds upon our portfolio of class-leading components that already service many of these markets today, particularly in professional audio and prosumer applications.

Further, we also announced a new series of automotive haptic components that are designed to consistently deliver a range of tactile responses in real time for applications across a wide range of in-cabin interfaces. Although we are in the early stages of participation in the automotive haptic market, we believe this represents an important growth opportunity for Cirrus Logic.

In summary, we are proud of our progress this past quarter as we continue to execute on our strategy to diversify our product portfolio and drive growth in new applications and markets.

And that concludes the latest update on our long-term growth strategy. So let me now turn the call over to Jeff to provide an overview of our financial results as well as the outlook.

Thank you, John. Good afternoon, everyone. I'll now walk through our Q3 financial results and provide guidance for Q4. In Q3 fiscal 2026, we delivered revenue of $580.6 million, which was above the top end of our guidance range, driven by demand for components shipping into smartphones and a favorable mix of end devices. On a sequential basis, revenue was up 4% due to higher smartphone unit volumes, partially offset by a decline in general market sales. On a year-over-year basis, sales were also up 4%, primarily driven by higher smartphone unit volumes. This was partially offset by previously anticipated pricing reductions and lower general market sales.

Turning to gross profit and gross margin. Non-GAAP gross profit in the December quarter was $308.2 million and non-GAAP gross margin was 53.1%. On a sequential basis, the 60 basis point increase in gross margin reflects the benefit of a reduction in inventory reserves and to a lesser extent, supply chain efficiencies. On a year-over-year basis, the 50 basis point decrease in gross margin was largely due to the impact of previously anticipated pricing reductions, which were mostly offset by cost reductions.

Now I'll turn to operating expenses. Our non-GAAP operating expense for the third quarter was $133 million. On a sequential basis, OpEx was up $5.3 million, primarily due to higher employee-related expenses. This was partially offset by lower product development costs, largely associated with the timing of tape-outs. On a year-over-year basis, operating expense was up $3.8 million, primarily due to higher employee-related expenses and to a lesser extent, professional expenses. This was partially offset by a decrease in product development costs associated with lower wafer and tape-out expenses. Non-GAAP operating income for the quarter was $175.1 million or 30.2% of revenue.

Turning now to taxes. For the December quarter, our non-GAAP tax rate was 15.1%, which incorporates the impact of the One Big Beautiful Bill Act. And lastly, on the P&L, non-GAAP net income was $156.7 million, resulting in record earnings per share for the December quarter of $2.97.

Let me now turn to the balance sheet. Our balance sheet continues to be strong, and we ended the December quarter with $1.08 billion in cash and investments. Our ending cash and investments balance was up $185.9 million from the prior quarter as cash generated from operations was partially offset by share repurchases. We continue to have no debt outstanding. Inventory at the end of the third quarter was $189.5 million, down from $236.4 million in the prior quarter. Days of inventory were down sequentially, and we ended the quarter with approximately 63 days of inventory.

Turning to cash flow. Cash flow from operations was $290.8 million in the December quarter, and CapEx was $5.2 million, resulting in a non-GAAP free cash flow margin of 49%. For the trailing 12-month period, cash flow from operations was $629.6 million and CapEx was $21.6 million. This resulted in non-GAAP free cash flow margin of 31%. On the share buybacks, in Q3, we utilized $70 million to repurchase approximately 591,000 shares of our common stock at an average price of $118.33. At the end of Q3 fiscal 2026, the company had $344.1 million remaining on its share repurchase authorization.

Now on to guidance. For Q4 fiscal 2026, we expect revenue in the range of $410 million to $470 million. GAAP gross margin is expected to range from 51% to 53%. Non-GAAP operating expense is expected to range from $124 million to $130 million. The fiscal year 2026 non-GAAP effective tax rate is expected to range from 16% to 18%.

In closing, we delivered strong results for the December quarter. We remain focused on executing our strategy to drive long-term growth across our business and deliver shareholder value.

Before we begin the Q&A, I would like to note that while we understand there is intense interest related to our largest customer, in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship.

With that, let me turn the call over to Chelsea to start the Q&A session.

Thanks, Jeff. We will now start the Q&A portion of our earnings call. [Operator Instructions] Operator, we are now ready to take questions.

[Operator Instructions] Your first question comes from the line of Tore Svanberg with Stifel.

Congrats on the record earnings and especially those impressive cash flows. First question is you came in $50 million higher for this quarter. You're guiding quite a bit better than seasonal for the March quarter. So I was hoping you could just add a little bit more color on what's going on. I mean, I understand, obviously, your largest customer and the higher mix. But any more color you could share with us because those are pretty big beats.

Yes. Sorry, it's Jeff. I think from a seasonality perspective, it does still look like from Q3 to Q4 in the range of where we've been historically transitioning between those 2 quarters. I think the color commentary is really while the seasonal shape is the same, we just were further away from the peak than we thought when we gave guidance last quarter. So I think the peak of units and a favorable mix is really the story there. It really is just we were not -- we just didn't call the peak, and we were a little further away from the top than we thought.

Sounds good. And as my follow-up for you, John, you mentioned some interest in the voice as an interface for AI. I mean I assume that's primarily in the notebook market, but perhaps there's some interest in other applications as well. And when should we expect the company to start seeing revenues from a technology like that?

Yes. Thanks, Tore. In the first instance, yes, I was referring to, in particular, a product that we've been sampling to DC OEMs, which is focused on really significantly enhancing the voice interface for interaction with conversational agents and AI through their laptops. So that's something that today is obviously pretty limited. We believe we can bring a lot in terms of new features and performance improvements to that. We started sampling the first product targeting the PC market, which is aiming to do that for customers. And the interest has been really strong. That obviously gives us the opportunity to grow the value of some of the products that we ship into the PC space.

Specifically, when you look at that voice product, it's a codec with a lot of smart voice features and processing capability on it. That could represent anywhere up to something of the order of double the value of the preceding generation of codec when you look at it from an ASP perspective. It also has a potential, I think, to be just stickier and obviously have a direct impact on the user experience. So we're excited about that in the PC space.

Sampling it right now means that that's really going to be something that we see in calendar '27 and '28. It's obviously part of a road map of products that we're working on and looking at around that area. And yes, to your broader point, although that's something which specifically I was referring to in the context of the PC market, I think those are features which are going to be relevant elsewhere as well. And one of the areas where we've had some great engagement with customers is around AI devices that we're anticipating coming to market over the next couple of years. And I think, again, that's a place where over time, we'd like to be bringing voice and voice-enabling features.

Your next question comes from the line of David Williams with StoneX. Sorry, just one moment here. Your next question actually comes from Christopher Rolland with Susquehanna International Group.

This is Dylan Ollivier on for Chris. Congrats on the great result. So for my first question, it seems so from your shareholder letter, it seems like your -- the revenue at your largest customer represented a higher percentage of your mix at 94%. So this would imply that your revenue outside of this flagship declined pretty significantly quarter-over-quarter. I was wondering if you had any color on what sort of caused that decline? And if you anticipate it to remain at that run rate or tick back up?

Thanks, Dylan. I'll start it off here, and Jeff can chime in if he has additional commentary. But yes, definitely, this is an area we'd like to add color on. Partly, of course, that proportion of our revenue is very high because of the strength of the product launch from our largest customer. But there have been some other temporary factors that have acted as headwinds in our general market business, which we're mostly through now, but I think are worth calling out for our investor community.

One of those, when you look at the strategic shift that we made away from focusing on Android a few years back, that obviously has led to a decline over time in our Android revenues. That's the single biggest contributor to the year-over-year decline from our general market revenue perspective there. There is another factor, which is that we have a long tail of products. There's a rather large number of products, which are -- which address automotive, industrial, prosumer, imaging segments where the products themselves are 10-plus years old, and typically based on old process nodes in many cases, in facilities which are no longer going to be functioning. So a number of those have been coming to the -- their end of life, which resulted in customers ordering ahead, giving us some sales momentum, but ultimately, that gets unwound as those products are end of life.

Now we've been -- in parallel to all that, of course, we've been strategically investing in new growth markets like the PC market and in new product families in the past few years that will more than make up for those headwinds. So that's all the PC opportunity that I've talked about, other opportunities in AI devices that I alluded to. And then these products, which we've been announcing periodically and sampling to customers and beginning to ramp around pro audio, imaging, timing and so on. So I think the positive thing is that where we're at now between FY '26 and FY '27, that -- those are the points where a lot of those new products are starting to shift. And so when we look out over the next few years, we have a very healthy growth ramp for our general market business, which, of course, includes the PC space, but goes well beyond that as well.

Yes. I think -- the only thing I'd add is we're still very pleased with where we're at from a PC perspective and how we're growing there per our plans and think there is a lot of runway for us to continue to grow that business. And the product that we've refreshed that John mentioned, while early, we're very pleased with the customer traction we're getting and the design wins we're getting. I think, again, there's a lot of room to grow there. And it's just against those headwinds, but we're very pleased with the progress in those segments.

Yes. That's helpful. And that's actually a nice segue for my next question because I wanted to pivot to the PC opportunity. So first of all, I mean, you addressed it a little bit, but I was wondering if you had any color on how you're tracking to what you've previously said for your revenue opportunity in PCs in fiscal '26, and to see if you had any expectations for fiscal '27?

Yes. I think it's a little early to put something on the scoreboard for fiscal '27, and we'll see how the next quarter goes. But I previously said that we expected PC revenue in fiscal '26 to roughly double from the low tens of millions that we saw in fiscal '25. And I think that continues to be our ballpark expectation there. I think we'll exit the fiscal year with very good growth momentum into fiscal '27. So I don't want to put a number on that yet, but we're feeling very good about the momentum that we've got across the customer base there. And that's really -- that optimism is driven by what we see when we look at key indicators around the PC space. So firstly, we're shipping with the top 6 PC vendors at this point -- or laptop vendors, I should say. And then we also look at penetration of the mainstream category or mainstream tier. I've highlighted that as being important. In fiscal '27, we expect that our -- the revenue driven by mainstream platforms will roughly double for us. That will be a very significant proportion of the overall revenue that we see from this PC space.

And then another indicator that is a really good kind of leading indicator for our market penetration, I think, is the adoption of the SDCA interface, the SoundWire Device Class Audio. Because coming into this year, SDCA represented only about 15% to 20% of the overall PC market. By the end of this calendar year, we expect that to be closer to 50%, and that will continue to increase. And in those SDCA slots, we've been winning to date somewhere of the order of 75% of the sockets. So certainly, even if that figure gets diluted a bit as it goes more across the portfolio, it indicates how well positioned we are to take advantage of the SDCA opportunity. So we see that transition underway now at scale. And that's also visible in the sheer number of programs that we're active in, in the PC space.

If you look back to fiscal '25, we had 19 SDCA programs that came to market. In fiscal '27, there'll be over 60. So when we look across those indicators and the momentum that we're exiting the fiscal year with, we feel really good about the opportunity and what's ahead of us there.

Your next question comes from the line of David Williams with StoneX.

Congrats on the really solid results here. And I guess maybe first, just kind of thinking about the guidance where you guys are. Are you seeing any major supply constraints that could have impacted either the quarter or the outlook?

We don't currently see any supply constraints. I think things are tighter in the industry. And so we'll continue to manage that. We do have the benefits. A lot of our products are -- have a fairly long life. So if we need to shuffle things around to make sure we can manage that capacity on both sides, we're able to do that. But right now, there's no constraints.

Okay. Great. And then maybe a little bit longer term, but just thinking about the automotive opportunity, it sounds like the zonal architectures and just the increased haptics maybe in the in-cabin would be a big opportunity. Is there a way to kind of think about when you could start seeing the revenue real contribution from that? And then how do you think that market plays out over the next 2 to 3 years in terms of dollar content for Cirrus?

One of the things you're alluding to there, I think, is that during the quarter, we announced the family of haptic products that deliver high-definition haptic experiences for automotive. So that's part of a range of products that are either in development or announced or sampling to customers for the automotive space, covering timing, audio, haptics, telematics and some other areas where we believe we can innovate and really bring some highly differentiated solutions to market.

I haven't put a time frame or a revenue target for us out there publicly yet in the automotive market. But I'd say a couple of things. One is that we think there's a really healthy SAM when you look across those areas that I talked about. We're in '26 today. If you look out to '29, we think the SAM is, for our products, is certainly north of $800 million.

And the other thing I'd say is just a general philosophical and strategic point about how we approach going after new markets. We have to be able to see multiple pathways to our participation in a new market becoming at least a 10% business for us over time. So we -- anything that we're going after and talking about, then you can be sure that we've got various ideas and grounds for belief that we can ultimately build that into a 10% business.

[Operator Instructions] Your next question comes from the line of Gary Mobley with Loop Capital.

This is Alek on for Gary. My question for you is, how should we think about your seasonality in fiscal '27, given your biggest customer staggered product launch across the high end and low end of the models?

Well, we're only giving guidance for the next quarter. But at this point in time, when we look at the long-term forecast signals we have, we don't see anything that significantly changes our historic seasonality.

Got it. And just as a quick follow-up, do you -- how do you view the rising cost of your largest customer? And how does that influence negotiations -- how does that influence component price negotiations for you?

I'm going to assume you're referring to the much talked about increase in memory pricing there and what the knock-on effect might be for us. I think it comes down to this. Look, I've highlighted previously that we've been in a normalized pricing environment for some time now. So that means we've been working collaboratively with our customers on pricing over the past several quarters and we'll continue to do so. That's really a standard part of our business.

Actually, on a year-over-year basis, as you've seen in the shareholder letter, the 50 basis points that gross margin contracted by was largely due to pricing reductions, anticipated pricing reductions, which are obviously greater than that, but we have to work very hard to offset those pricing reductions with cost reductions and efficiencies in our supply chain and so on.

I guess I'd also -- so we're very much in the kind of normal pricing environment where I would say some of our larger customers are not exactly known for being gentle in pricing negotiations no matter what's happening with commodity prices. So this is very much business as usual for us. I think over time, as we look forward, we anticipate we'll see further pricing adjustments to our products. We'll continue to work on the supply chain to drive cost improvements that will help maintain gross margin. And the effects of that will continue to be reflected in our guidance as they have been today.

There are no further questions at this time. I will now turn the call back to Chelsea Heffernan.

Thank you, operator. With that, we will end the Q&A session, and I will now turn the call back to John for his final remarks.

Thank you, Chelsea. In summary, Cirrus Logic delivered outstanding results for the December quarter, driven by strong demand for smartphones. We're extremely pleased with our progress on each pillar of our long-term strategy and remain focused on executing our technology road map to drive profitable growth across our business and to deliver long-term shareholder value. I'd like to thank everyone for participating today. Thank you. Good bye.

This concludes today's call. Thank you for attending. You may now disconnect.

All right. Welcome back, everyone. I'm Tom O'Malley, semi and semi-cap analyst here at Barclays. Very pleased to have Cirrus Logic with us. We've got John Forsyth, CEO; and Jeff Woolard, the CFO. Thank you being here.

Thank you. Thanks for having us.

So forgive me, but I must ask the question that is floating around on everyone's minds. At this time. You've got this big spending trend in AI, right? And today, it's very data center focused, right? $3 trillion plus in announced data center spend. You've got companies that are very data center-centric that are addressing this first. And they're doing that through retimers, cabling, memory, et cetera. But over time, the idea is that you're moving away from data center-centric compute and potentially to the edge. The edge seems like a place in which Cirrus can play a lot more effectively. Correct me if I'm wrong, one.

And two, where do you see yourself potentially intersecting this trend kind of longer term?

Yes. So first of all, yes, like I think we're very much at the edge. I believe that AI will become more and more of a thing of the edge. I don't think it's quite that yet and the kind of boundaries between what takes place at the edge versus the data center is not completely clear.

But at a high level, I would say a couple of things. Firstly, anything that squeezes power and space is favorable to us. And what I mean by that is you can be doing a lot more intensive compute at the edge, just going to put a lot of pressure on the power consumption of the device. You're going to want bigger batteries, you're going to need to have more memory in there.

And 2 things that we do extremely well, create very, very power-efficient chips. So we can help the system optimize for that level of power consumption. And also by the standards of our peer companies, we tend to produce chips that are not overly more power-efficient, but they're also in smaller packages. So again, we can be a part of the design solution for devices doing AI at the edge.

The other thing I'd say is that I really believe, however AI at the edge ends up being used, a lot of it will be done through voice. And so whether it's on the input side, the output side around voice or in fact, when it comes to the image path as well, we are part of the basic I/O of the device. And we have a lot of voice-enabling IP great amount of history in delivering enablers for the voice interface.

And I think that's the natural mode for using a lot of AI functionality is the conversational interface in the end. So I think that creates great opportunities for us in devices that you see as in today, whether that's phones or PCs but also in new categories of AI devices that we're going to see in the coming years.

That's perfectly lead-in. So I saw an announcement around auto earlier this week. Obviously, in the midst of all this, I would be better to have you fill me in on the details here. But it seems like when you think about voice at the edge, auto is the perfect place to kind of see that intersection because a lot of times, at least today, your hands are busy, right? So why is this an interesting future path for you guys? And how real is that in terms of revenue contribution in the near term?

Well, thanks for highlighting the announcement this week. We announced some automotive haptics product this week. We didn't say anything about voice and AI in the car this week, but that is something that we think a lot about as well.

I'll begin with that because the car actually brings lots of really interesting audio and acoustic challenges, whether that's noise cancellation or isolation and having different audio zones for different people in the car, all of whom are potentially speaking to each other or speaking to the AI and so on. So lots of really interesting challenges for us in that space. And I think you'll see more from us in that area as we go forward.

This week, and I think this is very complementary to that. We announced a family of automotive haptic pots. And that's really us kind of signaling our entry into automotive haptics, where I think it's fair to say the end user experience up until now has been really disappointing. So much so that as you probably know, auto makers have received a fair amount of pushback from consumers on the transition away from traditional buttons and so on.

And that's -- not purely because consumers don't want to use buttons on the screen. It's partly because the actual experience and the feedback is so poor, and it can be hard to determine whether you pressed it properly. Sometimes it's laggy which is an absolute killer for any kind of haptic experience. So we've obviously been leaders in haptics in the consumer device space and cell phones and so on for a long time now.

In my opinion, it's not really an exaggeration to say that automotive haptics is somewhere around 20 years behind the haptics experience in consumer devices today. And we want to do our part to help address that. So the products we announced earlier this week are bringing a kind of cutting-edge haptic experience to auto cabins, which means highly responsive, stuff that really feels like you're genuinely clicking on something stuff where the click experience adapts to the speed to the road conditions and so on. So you'll always get a really great user experience that we've been delivering on other products.

So auto supply chain is very different than consumer supply chains. Can you talk about the certifications first that you need to get into automotive-grade products. That takes a long period of time. Where are you in that certification process? And then two, design in cycles 3 years -- 2 to 3 years. If you're on to these products today, should we be thinking kind of the '27 -- like '27, '28 time frame for revenue?

Well, I think, as you mentioned, the auto does take a long time, even in the quick design cycle. So we're still a ways off from where we'll start giving color commentary on that. But as John said, we think there are a lot of exciting opportunities for us there. We're actively investing in pursuing those and feel good about where we're at, but it will take some time for it to materially show up.

Helpful...

But to be clear, the products we announced are auto-qualified. And this is a public announcement. It doesn't mean we've just started working on the -- these products have been in some fantastic demonstration platforms which have been going around OEMs and Tier 1 integrators for quite some time now.

Can you explain the difference to me? Obviously, you use an amplifier to do the haptics in smartphone from a design perspective, is there a major difference in the automotive ecosystem. I would assume there needs to be reliability around being qualified in auto?

So you have reliability and quality considerations with the temperature ranges and so on. But it's also aspects like the user experience, like, as I said, being able to have a system that adapts to -- that adapts the feel of the click to the speed or the road conditions and so on. So actually delivering stuff at an algorithmic level, not just the chip level that really makes it fit for purpose in the car.

So another area that you've been diversifying the business is on the PC side. You had a reference design with Intel, which is proliferating, which is helpful for your suite of products. Looking into next year, I think you've talked about tens of millions, and that's growing substantially into next year as well. Remind us what the 2026 outlook looks like there?

But then you've got this other dynamic PCs actually sound better next year. OEMs are kind of talking low single-digit growth. But then there's this counterbalance that's associated with memory, where there's a fear around consumer devices of potentially slower sales given guys can't get memory. How do you balance that all out for what you're thinking about the PC business?

Well, First of all, what I'd say is that for us, we're starting from a small base, it's all growth. I mean the overall units picture affects us much less than many of the other guys right now because we're going -- we're growing quite significantly within the PC space.

Yes. And I think just to give you color on the outlook. Yes, in fiscal '25, which ended in March for us, we said low tens of millions of dollars revenue and that we expected that to double in fiscal '26, which we're tracking to. And then that we would anticipate coming out of fiscal '26 with still a very good growth momentum as we go into FY '27. And we'll give more of an update on that as we go forward. But I think you can see now in the market, some of the transition taking place that we think is very favorable to us.

So one of the factors that is driving our adoption in the PC market is the transition from a legacy interface called HDA, the high-definition audio interface to a new audio architecture called SDCA. And that transition has been kind of slowly underway for a couple of years now. It's gathering momentum. We estimate that somewhere between 15% and 20% of laptops today are using SDCA. That's ultimately -- that's going to be practically 100%, and that transition is going to complete over the next over the next 2 or 3 years.

Today, out of those 15% to 20% where people have migrated to SDCA, we estimate that 75% of those products are using Cirrus silicon. So that's a big driver for adoption of our content.

Super helpful. Okay. We saved the fun for last, so smartphone side. So I think going into this year, particularly with your largest customer, but just generally in the model, you talked about front-end weighted cycle. And I think that there are multiple reasons for that, just given your camera controller content, given what you saw from like a tariff perspective this year, it just seems like to be safe, people were building a little bit earlier.

And I think if you look at the trajectory that you guys saw, it really has mirrored that so far. Just a broader question. Like if you look at this cycle on a unit perspective and a content perspective versus kind of where you sat when you first started talking in the March, April, May, June time frame, anything materially different? Or is that largely tracked to kind of what you thought?

I think it's largely tracked to what we thought. I mean, as we pointed out in some of the other calls, so the shape was a little different. But I think largely pretty close to where we thought at the beginning of the year.

And then others have referenced older generations of phones? Or just like have you seen any of those trends as well? Like we've heard from other companies, RF providers in general that they've seen a mix of legacy phones, last year's phone or the year before on still selling a little bit better. Is that something you guys are seeing?

Those previous generations are still selling, but I think that's generally -- roughly with where we thought we would be.

Okay. And then just checking in, we get this question a lot as well. last generation, you talked about, the 22-nanometer more codec, some of the AMS as well. The cadence there has been every 5 or 6 generations. Is that still the right way to kind of think about the updates on those? Any reason why you would push that forward faster?

There's a little bit of a balancing act to be done between getting on with other things, getting leverage out of the very substantial investments that we made to bring those products to market versus not allowing there to be any room for somebody to come in sniping for those sockets.

So the way we approach that is we have a fairly steady ongoing dialogue with our customer about what features an IP will be valued and useful when it comes to making the next generation without needing to put a tenant which year that's going to be in.

And so our working assumption is something along the lines of what you said. The last generation of codec [ and apps ] were shipping for 5 years and 6 years when they were superseded, but to be clear, they continue to shift. And in fact, were in the mid-price device that was launched earlier this year.

So they still have some runway ahead of them as well and lifespan of 1 of these devices could easily be 7, 8 years, I think. They're designed with that in mind. So something like the codec typically has a lot of capability that isn't necessarily all exploited fully in the first product cycle that's incorporating that codec. This is one of the things that people don't always appreciate about our largest customer is, a, how much thought goes into that, like planning ahead so that the silicon doesn't need to constantly be turn.

But secondly, also just how that -- how atypical that is of the consumer electronics business. It really doesn't look like consumer when you step back from it and say, well, these parts are going to run for 7 years. We can say with a reasonably high degree of certainty, how many hundreds of millions of them we're going to need each year. And that's an extremely strong and stable part of our business.

But I think -- so you would expect us to always have some innovation and research going on what the next generation of those products look like, the bulk of the R&D resource is actually available for us to target at other new areas where we want to develop novel IP and expand our content.

So it almost helps you in the middle of those cycles where you're like this is pretty secure at this point. And in time, we can allocate elsewhere. And as we get a little bit closer to a period of time, which you know you need to upgrade then redirect dollars?

Exactly.

Okay. Camera controllers is an area where you definitely see content proliferation across devices. I know in the lowest version of the phone, you have as little as 1 and then the highest version of the phone. I believe it's 4. So a vast array of different content per device.

How do you see that content moving on a go-forward basis? Is it kind of top-down or bottom-up meaning like. You have the Pro Max, which has the largest met of camera controllers. Is the pro quickly to follow and then your base model relatively to follow or do you see kind of like the lowest volume phones kind of going up to scale.

Obviously, it's associated with image stabilization and cameras, whatever moves first. Where do you see that content waterfall going?

So we're doing a few things, order focus, image stabilization and some other elements of mechanical control within the camera system. And then closely aligned to each of those functions is a bunch of digital processing to kind of figure out what the corrective actions are for stabilization, for example.

That's -- in all of those areas, I think we see opportunity to continue to expand the feature set and increase the performance of the devices. So if you look back to the first generation that we introduced, which is in 5 years ago in the 2020 cycle. The current generation of devices have something like 6x the amount of processing those first channel devices did, all of which translates into a superior user experience for the camera.

I think from the kind of go-forward perspective, I would anticipate it probably following a similar pattern to what's happened in the past, which is we see features introduced in the kind of pro level devices. That is the area with not only the greatest attach rate, but also the latest and greatest camera controllers from us. And then we see a pretty reliable waterfall down year after year.

There have been cases where between those 2 Pro level devices, the content is different. Actually, right now, as you're saying, yes, it's equaled up. But one of the challenges we have talking about this area is people often ask the question, we get it a fair amount is, aren't we done on the camera? Like isn't it good enough?

And the short answer is no. It's not good enough. It can always be better. It can be meaningfully better. And then people say, well, like, how like what's going to happen? You say, well, I can't tell you that. But there are a lot of things in our road map and within the plans of our customers that are going to continue to drive the camera experience. to be significantly better than where it is today. And so we plan to be a part of that.

I know you can't talk about your largest customer, but we can talk a little bit about design schematics and where you've seen increased content in the past. So rumors around potential foldable phone in 2026. Two things that strike me when I think about foldable phones is you've got more beachfront area when you are thinking about handling device that's bigger, that calls to me like something that would require potentially more speakers.

And then two, if you're looking at a larger phone in general, perhaps you have something related to power that may increase. You guys haven't talked about content increases for this year. But generally, in the past, has device size changed anything in terms of the content that's required from an amplification perspective?

Not really or not necessarily, I would say, we've been in a number of -- I'm not saying anything about unannounced products with other customers of ours, we've been in a number of foldable products. Many of them have exactly the same hardware configuration or almost identical. Some of them are slightly different. But there's a number of ways of skinning that gap.

Yes. On the power conversion control side, it's been an area where people have been focused for continued development. I think there was a start and we've been kind of waiting for the follow-on there.

When you think about like the technology and what sort of enablement that you can offer for smartphone, I think many people have run to, you talked about this like high-power non-plug-in devices, if you add processing power, it seems like a perfect fit for more power conversion and control in general.

What kind of transition needs to occur in smartphones or what kind of technology do you need to solve in order to see that increased content there?

I think we -- I've been pretty transparent. I think that we're interested in developing innovative and differentiated IP around the battery. We think that's a good opportunity where we can improve system performance, improve power efficiency and potentially mitigate some of the factors that affect and accelerate battery aging.

And so we've been working on a number of IP areas in that space around the battery. As you've said, we have one product shipping today. which I think is in its fourth year of shipping. So hugely successful from a revenue point of view, but at the same time, still V1. So we have, as you would expect, an active dialogue with our customer about how that platform evolves and what other areas we can contribute in.

I'm not going to put a time frame on like how that translates into revenue for us. But we remain really optimistic that, that is a space where we have some very compelling differentiated IP and we hope to see that in products.

This year was a year where you didn't have the big content uplift, but you had a waterfall of content effect, which helped you kind of offset. As investors look forward, is there a way for us to mark to market? You've done a good job in the past of kind of highlighting to us as early as you humanly can, when you would see content uplift you have more of that waterfall that's going to exist over time. But where should investors be focused from a content perspective, not just at the largest customer, but across your content portfolio over the next couple of years?

Well, I think the areas -- with our largest customer, I think you've got the phone products, obviously, within the phone products, I think it's pretty clear as the -- we just had a big refresh of audio. Camera continues to be a really healthy space, which has kind of shown pretty steady growth since we first introduced camera products, and we continue to expect that to be the case in the future.

And then you've got power and other stuff. And so I appreciate it from an investor perspective, that's probably the most opaque. But we believe there are good opportunities there that will bear fruit in good time. There are, of course, I think, really good opportunities outside of the phone. And then in our across our broader customer base, I think there are a number of interesting things happening.

One, of course, we mentioned PC. From a revenue and growth point of view, I think it's worth pointing out that one of the most significant things in penetrating the PC market is getting into the mainstream devices because the volumes of those are so much larger than the kind of flagship devices when we enter the market.

So to give you a sense of that, and by mainstream, we typically are referring to devices that are kind of between $800 and $1,000 in both the consumer and the enterprise space. If you go back to when we first started talking about the PC in fiscal '24, the total amount of revenue from mainstream devices was -- it was effectively 0, it rounds to to 0. In fiscal '26, approximately 50% of our PC-related revenue is going to be driven by mainstream products.

So it's a huge growth trajectory that we're on there. And that's very exciting because I think when we're -- we're in those products, we can continue to expand the content over time. And then beyond that, something I would throw out as an exciting category for us is AI-enabled devices because I think the -- I don't know that anybody has like kind of split the atom there yet, we'd like exactly what -- what that device what those AI devices are going to look like, but there's a lot of people trying and there's a lot of really interesting innovation potential there. we think that voice is going to play a big thought in that. And so we see that space as being a really exciting category that we should be participating.

And not to mention, I think you mentioned with the camera controller, a 6x of performance generation over generation, I would imagine that you also are going to get paid V2, V3, V4 of other sockets as well. You've talked about being V1 control, you would imagine that there is probably some waterfall there as well over time.

I would hope so. Yes.

Okay. Pivoting a little bit to the M&A side, capital return side. clearly, announcing new wins and new chipsets into auto is a diversification direction of the business. But in terms of organic versus inorganic, activity.

Do you feel like at this point with the cash balance that you have, which is quite nice that you would go out and need to do any sort of bolt-on acquisition that would kind of take you further down that road?

Yes. We're excited about our growth opportunities in some of the non-phone segments, and we've talked about some of those. So certainly, we look for M&A opportunities that will help us accelerate in those different segments. Looking for places we can have some true value creation and also leverage what we think is a really great IP asset to help us accelerate in some of these segments.

And then capital returns, investing in the business, you guys have always been very consistent on that. But in terms of your ability to maybe buy back share, any kind of outlook on your priorities?

Well, our capital allocation strategy remains unchanged. We want to make sure all of our organic opportunities are funded and that we will look for inorganic opportunities to accelerate that growth and buybacks will be third. We do still have over $400 million left on our buyback authorization. And we'll look at that. We look at it on a quarter-by-quarter basis to see what does the environment look like? What are our opportunities look like?

As we go into next year, where should investors get excited about Cirrus Logic. Clearly, there's diversification effort, which is always exciting. But where should we be paying attention here as the year turns?

Yes. I think the reason I highlighted that leading indicator of SDCA penetration in laptop in the PC market as a whole is I think like that's a very good tailwind for us as we go forward. And then I think you're going to continue to see more from us in terms of products for the PC space, automotive. And of course, we continue to work on expanding our content at our largest customer.

Very helpful. Thank you very much, guys, for joining us, and happy holiday season. Hope to see you in the new year.

Happy holidays.

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic Second Quarter Fiscal Year 2026 Financial Results Q&A Session.

[Operator Instructions]

As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the conference call over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.

Thank you, and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer; and Jeff Woolard, our Chief Financial Officer. Today, at approximately 4:00 p.m. Eastern Time, we announced our financial results for the second quarter of fiscal '26. The shareholder letter discussing our financial results, the earnings press release and the webcast of this Q&A session are all available at the company's Investor Relations website. This call will feature questions from the analysts covering our company.

Additionally, the results and guidance we will discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release and are all available on the company's Investor Relations website.

Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise. Please refer to the press release and shareholder letter issued today, which are available on the Cirrus Logic website and the latest Form 10-K as well as other corporate filings registered with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations.

Now I'd like to turn the call over to John.

Thank you, Chelsea, and welcome to everyone joining today's call. As you've seen in the press release, Cirrus Logic delivered record September quarter revenue of $561 million, towards the top end of our guidance range driven by demand for components shipping into smartphones. In a few moments, I'll hand the call over to Jeff to discuss the financial results for the September quarter in detail, along with our outlook for the December quarter.

Before we get to that, I'd like to make a few comments about the recent progress we have been making across key areas of our business. As we have outlined previously, our long-term strategy for growth at Cirrus is based around 3 principles. First, we seek to maintain a strong leadership position in our core flagship smartphone audio business. Second, we aim to expand the value and range of high-performance mixed-signal solutions with which we serve our customers in smartphones and similar products. And third, we aim to leverage our world-class expertise and IP in both audio and high-performance mixed signal to grow and broaden our business in new markets.

I want to say a few words now about the progress we've made in the past quarter in each of these areas. In our flagship smartphone audio business, during the quarter, we experienced strong demand for our latest generation custom-boosted amplifier and first 22-nanometer smart codec. These products introduced in the fall last year, represent years of engineering effort and a deep and collaborative relationship with our customer. We are proud of the crucial role they play in enhancing the power efficiency and exceptional audio quality of our customers' latest products.

I think it is also worth highlighting a characteristic of this area of our business that isn't always apparent to those outside of the company. While we ship custom products into many consumer end devices, much of our custom silicon business offers returns over a significantly longer period than is typical of consumer products. For example, these latest generation audio components that I've referred to superseded a codec and amplifiers that have been shipping in high-volume flagship phones for 5 and 6 years, respectively. We consider this longevity a significant strength of our business as it provides solid long-term visibility and sustained revenue contribution, along with the ability to leverage our R&D resources in new areas that can drive further innovation and growth.

Outside of our custom audio solutions, we also continue to serve a number of customers in the Android ecosystem. This past quarter, a leading Android OEM introduced its latest flagship smartphone featuring 2 Cirrus Logic boosted amplifiers and a haptic driver. While the majority of our general market R&D investments are focused on developing products for new markets beyond smartphones, we continue to engage with customers on next-generation flagship smartphone products and expect additional designs from various customers to come to market in the future.

Looking beyond audio, we continue to diversify our revenue and expand our smartphone content with high-performance mixed-signal solutions. Customer engagement around our camera controllers remains strong, and we were excited to see this technology stand out as a key differentiator in the latest generation of devices. Today, we are engaged on a number of projects that we believe will bring even more feature and performance enhancements to this area in the future.

Moreover, we also have several R&D programs that are focused on battery performance and health, and we continue to believe these areas represent an excellent opportunity for our mixed-signal expertise to bring innovation and value to our customers. Our third strategic priority is to leverage our audio and high-performance mixed-signal expertise into new applications and markets outside of smartphones. We're making excellent progress here, especially in the PC market, where we are focused on continuing to grow our share across customers and product tiers. During the quarter, we saw strong design activity across our PC portfolio and expect a range of consumer and commercial laptops featuring our components to come to market over the next year as the adoption of SoundWire device class audio accelerates. After establishing early success in high-end laptops, we are now expanding into mainstream programs to reach higher volume opportunities and capture a larger share of the addressable market.

Building on our recent wins in mainstream commercial laptops, this quarter, we were particularly excited to secure our first mainstream consumer design, which is expected to ship next year. This success demonstrates the excellent progress we are making in our long-term strategy to grow beyond smartphones and positions us well for the continued momentum in the broader PC space. Additionally, we are excited about the long-term opportunity that voice represents as a natural way to interact with AI-enabled PCs, and we increasingly see PC OEMs turning to voice as a means to enhance their products. In this area, we are able to leverage our audio and voice expertise, which has been developed and refined in the smartphone market over many years to develop PC-specific products that deliver enhanced voice capabilities and performance, enabling features such as voice wake for AI applications even while the device is in an ultra-low power standby state. Our first product featuring this technology is expected to sample to customers in the December quarter.

Finally, in the PC space, we have in the last quarter, deepened and expanded our engagement across multiple PC platform vendors in order to accelerate our customers' time to market. We believe that our ability to provide consistent audio architectures and advanced features across multiple PC platforms is a great benefit to OEMs. Overall, we are very encouraged by the traction we are seeing in PCs and believe there is a meaningful opportunity ahead for us to grow in this market.

Beyond PCs, we are also seeing strong interest in our general market products, which serve a wide range of customers across professional audio, automotive, industrial and imaging end markets. These products typically have long life cycles and gross margins well above our corporate average and moreover, can frequently leverage the world-class low-power IP that we have developed in other areas of our business. Our progress in this space was exemplified during the quarter in several areas. First, we gained design momentum with prosumer and automotive customers on all 14 variants of our latest generation ADCs, DACs and ultra-high performance audio codecs and expect new end products utilizing these components to come to market over the next 12 months.

Second, we had increased engagement with automotive and professional audio customers on our latest timing product family, which began shipping last quarter. And third, we are now sampling a family of high-performance analog front-end components targeting imaging applications, and the initial response has been positive. We are proud of our execution to date in these areas, and we'll continue to expand our product portfolios in order to drive profitable growth opportunities in these segments.

And that concludes the latest progress update on our long-term growth strategy. So let me now turn the call over to Jeff to provide an overview of our financial results as well as the outlook.

Thank you, John. Good afternoon, everyone. I'll now walk through our Q2 financial performance and provide guidance for Q3, including tax updates. In Q2 fiscal 2026, we delivered revenue of $561 million, which was toward the top end of our guidance range, driven by demand for components shipping into smartphones. On a sequential basis, revenue was up 38% due to higher smartphone unit volumes. On a year-over-year basis, sales were up 4%, primarily driven by higher smartphone unit volumes and sales associated with our latest generation products.

Turning to gross profit and gross margin. Non-GAAP gross profit in the September quarter was $294.7 million and non-GAAP gross margin was 52.5%. On a year-over-year basis, the increase in gross margin was largely due to a more favorable product mix. This was partially offset by higher inventory reserves.

Now I'll turn to operating expenses. Our non-GAAP operating expense for the second quarter was $127.7 million, coming in below the low end of our guidance range. This was due to lower product development costs, mostly driven by shifts in project time lines. Employee-related expenses were also lower than expected. On a sequential basis, OpEx was up $8.2 million, primarily due to higher variable compensation, product development costs, mostly due to tape-outs and facilities-related costs. This was partially offset by a reduction in employee-related expenses.

On a year-over-year basis, operating expense was up $0.9 million, primarily due to an increase in employee-related expenses, which are mostly related to annual merit increases. This was partially offset by lower product development costs. Non-GAAP operating income for the quarter was $167 million or 29.8% of revenue.

Turning now to taxes. During Q2, we recorded the favorable tax impact of the One Big Beautiful Bill Act, which reinstated immediate expensing of domestic R&D. This change was retroactive to the start of fiscal year '26 and contributed to our lower non-GAAP tax rate of 14.6% for the quarter. And lastly, on the P&L, non-GAAP net income was $150 million, resulting in an earnings per share for the September quarter of $2.83.

Let me now turn to the balance sheet. Our balance sheet continues to be strong, and we ended the September quarter with $896 million in cash and investments. Our ending cash and investments balance was up $48.3 million from the prior quarter as cash generated from operations was partially offset by share repurchases. We continue to have no debt outstanding. Inventory at the end of the second quarter was $236.4 million, down from $279 million in the prior quarter. Days of inventory were down sequentially, and we ended the quarter with approximately 81 days of inventory. Looking ahead, in Q3 fiscal 2026, we expect inventory to decrease slightly quarter-over-quarter.

Turning to cash flow. Cash flow from operations was $92.2 million in the September quarter and CapEx was $4.5 million, resulting in non-GAAP free cash flow margin of 16%. For the trailing 12-month period, cash flow from operations was $557.3 million and CapEx was $23.1 million. This resulted in a non-GAAP free cash flow margin of 27%. On the share buybacks, in Q2, we utilized $40 million to repurchase approximately 362,000 shares of our common stock at an average price of $110.55. At the end of Q2 fiscal 2026, the company had $414.1 million remaining on its share repurchase authorization.

Now on to guidance. For Q3 fiscal 2026, we expect revenue in the range of $500 million to $560 million. Gross margin is expected to range from 51% to 53%. Non-GAAP operating expense is expected to range from $128 million to $134 million. The fiscal year non-GAAP effective tax rate is expected to range from approximately 16% to 18%.

In closing, we delivered strong results for the September quarter. We remain focused on executing to our strategy and delivering long-term value to shareholders. Before we begin Q&A, I would like to note that while we understand there is intense interest related to our largest customer in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship.

With that, let me turn the call to Chelsea to start the Q&A session.

Thanks, Jeff. We will now start the Q&A portion of the call. Operator, we are now ready to take questions.

[Operator Instructions]

Your first question comes from the line of Tore Svanberg with Stifel.

Congratulations on the results. I know you can't obviously talk specifically about your largest customers' business. But this year has been quite unusual from a seasonality perspective. So I was just wondering if you could share any thoughts with us on seasonality going forward. I mean, 2026 potentially be sort of back to normal? Again, anything you could share with us would be really helpful.

Yes, Tore, this is Jeff. I think if you recall, we talked about last quarter, a change in the seasonality shape of our business, primarily driven by the camera content becoming a bigger portion of the total revenue, which shifts a little earlier as well as, as we talked about some pull-ins at the last quarter call. I think if you look at our results this quarter and our guidance for next quarter, that story remains the same that the shape is a little bit pushed into the first half versus what has been traditionally, and that's driven by just camera content being a greater piece.

While we did give some insight last quarter, our view for the year because we thought it was important for everyone to understand that change. That has played out between our results and our guidance. And at this point, we are only giving guidance for the next quarter, but we don't see anything from here out that would change historically what that seasonality looks like for the rest of the fiscal year.

Great. That's very helpful. And as my follow-up for you, John, in the shareholder letter, you stated again, there's potential opportunities on the power/battery side in the smartphone market. Any updates there? Again, I know you can't talk about specific design wins, but clearly, battery management is becoming quite crucial for next-generation smartphones. So any updates there would be helpful.

Yes, that continues to be an area that we're excited about. And as you know, we've been investing in for some time. We do think that we have some really compelling IP in that space. And I think we've seen some validation of that from the comments reflected back to us from customers when we've been sharing silicon with them and details on what we've been developing. We've got a number of irons in the fire there. And as you alluded to, the majority of those are related to those areas around the battery where we think we can make a difference to power efficiency as a whole to system performance as batteries go through their life cycle, both on a daily basis and a long-term basis and to battery health, long term as well.

So we don't have anything to say today concretely about design wins and how that's going to get commercialized, but we continue to believe that we've got some very valuable IP, and we are obviously itching to get that out into the market.

The next question comes from David Williams with The Benchmark Company.

Maybe first just on the OpEx side, you kind of mentioned that it was lower in this quarter for some pushouts. And it looks like some of that's kind of coming into the third quarter. Is it fair to assume that all of the OpEx expected in the second quarter is pushed into that third quarter? Or is there anything else maybe funny going on that we should be thinking about there?

No, I think that's a reasonable take. We are pretty disciplined in our OpEx. And what we saw, we did obviously come in below the guide and some of that was just delays in our spending, not necessarily delays in execution. So that product development cost can be a little lumpy. It's not a miss because it wasn't low because of execution. Some expenses that we had planned, we were just actually able to avoid. And so that came also drove our results, OpEx results being below guide. So a lot of that is just a timing issue. So we will continue to stay disciplined on that.

But that being said, it was a push. But if we see other opportunities that we think have. We have high confidence in to create value, we will be comfortable increasing that in the future.

Okay. Good. And then maybe just on the non-flagship customer, your largest customer revenue, that contribution in the quarter was maybe a little bit lower than we had anticipated. But just trying to get a sense of the progress in the general markets and in that computing space, how we should think about that revenue trending maybe through this year? And just generally, what that growth trajectory should look like outside of your largest customer?

Yes. I think on the picture for this quarter, in particular, there are a number of things going on there. And I think the softness in the Android space is certainly part of it, and that's been widely reported. We don't invest a huge amount in Android as a strategic business area for us, but it still remains a valuable contributor. So to some extent, we saw some impact from that. And then when we look to the rest of our general market business, certainly, the biggest kind of growth area that we see there right now is the PC, as you alluded to. And we're continuing to track the way we expected there or broadly in line with that. We're still kind of early in the ramp for that as regards the business it can become for us in the future.

But we've passed a number of really, really excellent milestones this year and then in this past quarter as well, which kind of indicate the great progress we're making there, and we continue to be very excited about what's going on in the PC space. I think one of the things we called out in the shareholder letter that's a particular highlight is the win in mainstream consumer laptop because those mainstream devices, as I've highlighted previously, they really deliver so many more units than the devices in the flagship and premium tiers. And so a big part of our objective is to penetrate down through the tiers and be well penetrated in both the commercial and the consumer mainstream segment and then obviously expand to as much content in those devices as we can get.

This year, earlier in the year, we reported that we won our first mainstream commercial laptop and then we've now added to that with success in the consumer space. So I think that proves we can do it, and that's going to be one of multiple drivers that help us continue to accelerate in the PC space.

Your next question comes from Christopher Rolland with Susquehanna.

This is Dylan Ollivier on for Chris Rolland. So for my first question, so last quarter, you said that you didn't have any material changes to your smartphone unit outlook for the year despite your better results. Would you now have any changes to your unit outlook? Or are units still tracking in line?

Yes. I'm going to stick with sort of that previous answer of -- we obviously had a good quarter here driven by smartphone units, and we explained the shape between the last quarter -- last 2 quarters. And we're only guiding for the next quarter, but we see -- at this point, we think seasonality looks like it historically has. We don't see anything to change our view on the upcoming seasonality.

Great. So secondly, I'd love to hear more about these new products that you talked about that you're developing for AI PCs. So does this expand your SAM? And when can we expect revenue here? Are you getting a lot of initial interest from customers?

Yes. Actually, that's an area which I think has become much more significant in our modeling of our PC SAM more recently rather than -- or at least compared to when we set off down the road of getting into the PC market. The interest across our customer base in voice-related features is really pretty significant as a major enabler for AI. So I mean, I think if you step back just for a second to look at all the drivers, which are currently kind of accelerating our momentum in the PC space. There's one I alluded to in the previous answer, which is just our penetration down through product tiers to get into higher volume segments. There's another factor which we alluded to in the shareholder letter, which is the propagation of the SoundWire device class audio interface and standard. So we're seeing that increasingly propagate across designs that generally is something that's favorable to us, and that's something that we've designed to and that we can deliver a lot of features around.

Then as we also mentioned in the prepared remarks, we've also been expanding our support across multiple PC platform vendors. So again, that's kind of expanding our reach and the number of devices that our products can get into and the number of reference designs that enable our customers to pick up our silicon and create products around very rapidly. And then the fourth of these drivers would really be the voice features that we see coming over the horizon. And that's been a more recent topic of conversation with OEMs, but it's a significant one, and it's one where our IP is really best-in-class.

We're able to provide significantly better voice and audio capture, noise reduction, voice cleanup, voice detection, speaker detection and so on. And then you combine that with our low-power codec technologies, we can enable features like waking up the entire system, being able to speak to the system even when it's in an ultra-low power standby state and so on.

So this is -- I mean, this is all part of the SAM that we model out in the investor presentation out into the future that we think can continue to be really significant for us in the PC space. But I think given where we're at and the IP we have in the voice area, in particular, I would expect us to really benefit from that. Specifically in the last quarter, we started sampling the first device specifically focused on enabling those features to customers. So it will be a while before those start showing up in end products, but we have a great road map around those features in particular.

Thanks, Dylan. And with that, we will end the Q&A session. I will now turn the call back to John for his final remarks.

Thank you, Chelsea. In summary, Cirrus Logic delivered record revenue for the September quarter while also continuing to make excellent progress on each pillar of our long-term strategy. I'd like to extend my appreciation to all of our employees worldwide for the hard work and commitment to excellence that has delivered these results. And I'd like to thank our customers for their trust and support.

We're excited about the opportunities ahead for Cirrus, and we thank you for your continued interest in the company. Before we close, I'd also like to note that we will be participating in the Barclays Global Technology Conference on December 11. Please check our investor website for the details. Thank you, everyone, for participating in our call today. Goodbye.

This concludes today's conference call. Thank you for joining. You may now disconnect.

Okay. Good morning, everybody. My name is John Vinh. I cover semis here at KeyBanc Capital Markets. We're pleased to have Cirrus Logic with us this morning. We have Jeff Woolard, CFO; and Carl Alberty, VP of Mixed-Signal. Welcome, guys.

Thank you.

Thank you.

Thanks for having us.

Maybe the first thing we can just talk through is when you kind of reported your results, you talked about maybe seeing some pull forward of demand of smartphones and talked about how that kind of shaped kind of the back half of your fiscal year. I was just wondering if we could just kind of recap that and talk about kind of the dynamics that are driving that?

Yes. I think there were a couple of dynamics. We do think there was some pull-ins. It's hard for us in the value chain to know exactly how much. I think it's probably hard for anybody to know exactly how much. So that was certainly one factor. Another factor for our business that impacts what would be our seasonality is camera content. So as camera content becomes a bigger piece of the total revenue pie, that has to be shipped earlier. So it's -- there's another step in the manufacturing process. The camera content goes to a module maker and then goes to the end assembly.

So as -- even if you remove any kind of pull-in impacts, that's just a structural difference as camera content becomes a bigger piece of the total revenue. You'll start to see that earlier -- in earlier quarters than when it was a smaller piece. And that was showing up this year that started to show up last year. But that was really one of the other driving pieces. So that was really impacting the timing versus our outlook for the year, which we think remains relatively the same.

Okay. Thanks for walking us through that, Jeff. Just a follow-up on that. You have been obviously shipping camera controller content for several generations right now. So if you've been shipping for several generations, why is it impacting the seasonality of this year versus previous years?

Yes. It's really -- it's a percentage of the total. So as we've generated more -- shipped more and more generations and those start to waterfall through different products, they just become a bigger piece of the total. And that's really what you're seeing. And that -- as it waterfalls through, that does take time for that to develop. And I said we started to see that last year, see it this year. So it's just more of a structural change as the camera content grows as a percentage of the total.

Okay. Carl, this question for you. Mixed-signal has been a truly success story for you guys. You've done extremely well. You've seen a lot of growth in camera controllers. It seems like historically, the drivers have been increasing attach rates, maybe higher ASPs as you migrate to latest generation camera controllers. When we think about growth going forward, do you still see growth driven in camera controllers? And what are the dynamics that you expect to drive that growth?

Yes. I mean I think we expect to see what's been happening since we started this business about 5 years ago, we expect to see that continue. We're shipping 3 different generations of products, the latest of which has higher functionality, higher performance, a 6x increase and processing capability and the customers continuing to take advantage of that. So I think we see that in the road map. So on a device-to-device basis, we see content expansion.

And then obviously, we see the attach rate and the kind of flow down through the portfolio to be kind of drivers of growth. And the road map, like I said, is very robust. It's super exciting. And the customer is obviously still investing quite a bit in innovation in this particular application, which is good for us. And like that partnership is super strong, both on the hardware side as we, again, are developing multiple products that further performance capabilities, channel counts, processing, et cetera, coupled with the algorithmic kind of firmware work and kind of the partnership we've got working with them to ultimately net out to a slow and steady kind of expansion of the content opportunity and therefore, the revenue over time, very exciting.

Great. Can you talk about what your strategy to expand HPMS content beyond camera controllers and smartphones?

Yes, sure. So I mean, obviously, we started by moving into haptics and then camera control. Power conversion and control was another big thing. We're super excited about the road map for the power conversion and control IC, especially with AI use cases showing up more and more and that driving kind of peak power demands on the system. The function of that power conversion and control IC is really to be able to sit between the battery and the system and deal with peak power demand such that the downstream performance of the actual device is not compromised. Obviously, a brownout or the phone not being able to handle the power demands is not good for the user experience.

And so we're trying to build on that capability, not just in terms of that like system-level know-how, but also application of that, including beyond the current application in phones. And then there's certainly a whole lot of know-how we've built up in terms of sitting between the battery and the system and looking at all the different requirements around safety for the battery, health of the battery, how you intelligently charge and discharge that battery and subsequently deliver power into the system. And that plays really well into our strengths around like ultra-low power sensing, the data conversion for, again, measuring and monitoring what's happening both with the battery and the downstream power delivery.

And so much like a lot of the custom things we do, we have to build and prove that IP out in silicon before really engaging on a custom product. And so we've been working on that in a variety of areas in this kind of battery and power kind of compute space. And so it's definitely a long-term endeavor. And so we're still super excited with that content expansion opportunity in camera and then building beyond that with the kind of battery and power sensing and the battery kind of power conversion and control IC. So that strategy is deliberate.

It's long term in nature because we do have to build out the IP ahead of time and build it in silicon to kind of prove it works to kind of derisk and kind of jointly tie up with the customer in terms of how we do a custom product. So that's something we're working on quite actively.

Great. Maybe just related to that, I think it's the AI smartphone replacement opportunity, I think, has been a little bit underwhelming right now. But obviously, there are certain requirements around the concept of an AI smartphones. Is that something that you see kind of playing into kind of the increasing requirements around battery and power management and things like that?

Yes, certainly. I mean we think we're well positioned. I mean, obviously, we've launched and ramped new devices last fall, including a 22-nanometer codec, which brought incremental value and covers off not just audio and kind of voice input capabilities, but other sensor inputs as well. And we think that's positioned really well to capitalize on new use cases and interfaces as it relates to AI.

So we're certainly excited to kind of support that and look forward to kind of those consumer experiences just getting better and better. And certainly, in the power and battery space, as I was just talking about, there's a lot of demands on the system and peak power. And just frankly, the amount of power consumed by doing these kind of on-device processing for AI kind of use cases, will just put more demands on battery life for the phone, which kind of plays again to our strengths around how do you optimize power delivery, how do you manage battery life efficiently. And I mean, for our low-power signal processing IP in that portfolio, it plays really well into our strengths to kind of continue to capitalize on that as AI grows.

That's great. Maybe we can talk about the PC opportunity. That's been another emerging success story for you guys. I think you've done tens of millions this year and are on track to kind of double it in the next year. It looks like if you look at the 2 platforms between mobile and PCs, you've been able to leverage the fact that you're selling similar products into both platforms, amplifiers, haptics, codecs. Can you just talk through what you see as maybe the obvious similarities and maybe what are some of the differences when you look at these 2 different platforms?

Well, certainly, the kind of design trends and form factors are common. So thinner, lighter form factors. I mean, laptops are -- have been going through that kind of thinner and lighter form factor and how do you do that without compromising battery life and user experiences. You could argue that the laptop OEMs have maybe been slightly slower to realize the importance of the audio and video or the audio and voice kind of user experiences.

We've been shipping boosted amplifiers in smartphones for over a decade, and that's really just started in laptops. So for us, it's an exciting like greenfield opportunity, reinforced with like actual like OEM customers like pulling on we just need better audio and voice solutions. So there's a lot of similarity in terms of the underpinning kind of acoustic and audio challenges to deliver a really good audio experience. Laptop speakers are on the order of twice as big as a smartphone speaker. But there's still a whole host of design and systematic kind of challenges around how do you make what fundamentally really small speakers sound good. And frankly speaking, from our perspective, the solutions available to customers were just insufficient relative to delivering that experience.

And we view that as like continuing to just move forward and customers won't go backwards, right? I mean, especially when they're all competing for market share and see other competitive brands doing certain things in audio and getting really favorable reviews and feedback based on technology we're enabling, we see that to just accelerate. And to the point on the last question around AI, like voice as an interface and like that context awareness and user experience with voice as an interface to -- as one alternative to a keyboard, we just think that accelerates and drives an expansion of content opportunity for Cirrus that's super exciting.

So certainly, there's a lot of commonality from that perspective. The design process and the design kind of -- well, the design process is different just with ODMs and OEMs and the kind of reliance on Intel and AMD and chipset partners and the emergence of ARM. So there's definitely complexity in the ecosystem that's different from smartphones. But the underpinning technology kind of commonality is really strong, and the customer pull is great.

That's great. Maybe we could take a step back. As you know, if you look at the PC notebook opportunity, you kind of displaced kind of a long-time entrenched incumbent who's Taiwan company who's very focused on cost optimization. Maybe just talk about how you were able to kind of come in and displace such a well-entrenched incumbent there?

Yes. I mean, certainly, they are a well-entrenched incumbent shipping a variety of different technologies, of which audio is obviously one of them. To my point, I think the bar has been raised. And I think there are certain brands in the market that spend a lot on audio, and that shines through in that user experience. And a lot of customers were getting kind of left behind in terms of that benchmark for audio and voice, exacerbated by people working remotely in Zoom and Webex and kind of other things that we experienced during the pandemic.

And again, there's really -- it's hard to go backwards. And so we look at it as not like what is your chip cost versus the incumbents, but what does the total cost of ownership look like for a company to do business with Cirrus. So it's the chip, but it's also the algorithms and the audio and voice software that we can embed on our chip that can eliminate royalties of software and other branded things. When you consider the quality, the reliability, the return rates and just what that means for OEMs dealing with returns on like bad quality or vibrations and mechanical rattle-induced kind of distortions and people just return them, like that total cost of ownership, coupled with our ability to enable customers to use cheaper transducers, cheaper speakers with our amplifiers, when you net all that out and look at the total cost of ownership, we actually think it's a win for customers.

And with that, they also get premium audio and voice experiences that we feel are unmatched in the market.

On the last call, you talked about kind of a milestone about being able to penetrate into the mainstream notebook market, right? Which you felt was a big win for you. Your gross margins continue to tick up. Can you just talk about the differences and what you did to kind of get to that next milestone of going mainstream versus high-performance, high end?

Yes. I mean, certainly, we've started at the top. And again, I think it is partly to do with customers wanting and needing that same level of experience and audio performance across their portfolio to not lose pace with other brands. And obviously, we've also purpose -- we've repurposed parts that were built for smartphones. And then we've also introduced multiple new families of codecs and amplifiers that are specifically built around laptops. And that obviously includes kind of broadening the portfolio to offer solutions that are more tailored for mainstream applications.

So a slightly lower cost point, different configurations and different optionality for integrated amps versus external boosted amps. So again, I think it's a statement of broadening the portfolio of being mindful and super close and collaborative with customers on what they can afford and where they're willing to spend money and also contemplating the total cost of ownership, like, okay, we can build you this amplifier, you can use a cheaper speaker and like the total cost for the mainstream actually makes sense. And so we've been able to win on that. And then it's just close collaboration and close road mapping alignment with customers to really dial in budgets and functionality and capabilities again, with an aim to deliver really premium experiences, not just in the flagship, but also in kind of the mainstream commercial and consumer side of the notebook space.

Great. Are there any questions? Great. Maybe another question for you is if you think about the market for the PC notebook market, obviously, the entrenching comment, you're probably not going to want to go after the kind of low end of the market. So can you talk about just what percentage of the -- or what part of the PC note market is actually addressable for you guys?

Yes. I mean we view it as kind of the mainstream and app. So we don't really target the $600 kind of retail price point and below, which roughly is maybe 120 million laptops, give or take. And certainly, as I mentioned, we've been building a portfolio of products on codecs and amplifiers for audio and voice.

We've been building out that portfolio to address a bigger part of the market. And again, we're seeing content expansion opportunities already in the mainstream, kind of building beyond the codec to include amplifiers. And so certainly, the baseline is audio and voice. But beyond that, we're shipping haptics drivers into really premium kind of flagship models. And we've got some power components as well for power delivery also in some of the AI models. So when you put that all together, it's like roughly 1 billion unit or $1 billion SAM for Cirrus. And so again, we started basically from [ 0 ]. So we're seeing a lot of good design momentum and like starting to get new products and filling out the portfolio to address these different technology areas, both audio and HPMS. So yes, I mean, $1 billion market in total for us, it's quite good.

Very nice. Can you talk about the Compal partnership and how that's helping you scale your business?

Yes. I mean, as I mentioned earlier, in terms of like cost of ownership of using a company like Cirrus, the Compal is a new collaboration really aiming to kind of to deal with systemic kind of challenges around audibility of distortion things induced typically by mechanical rattle. So there's a lot of moving pieces in a laptop, the keyboard and a variety of different subsystems. And those over time or even on the production line can introduce vibrations and that will distort the audio signal.

And that will not only cause bad user experience, but it can be variable across the manufacturing line, which can result in the same product having a different user experience. And often, it's not really optimized. And so we've used machine learning techniques and AI to model and predict where these frequencies are going to be in terms of mechanical rattle distortion, and we can automatically kind of tune that out to, again, have a uniform and consistent user experience across the manufacturing process and kind of up and down the portfolio. And then over time, we expect to continue expanding on that. So it's still early in terms of that collaboration, really not about scaling the business.

This message is about scaling and optimizing the user experience across the manufacturing process and ultimately kind of reducing the total cost of ownership and not compromise on audio.

Right. Jeff, your long-term gross margin target is 49% to 51%. You've been running meaningfully above it for several quarters now. Is this sustainable?

What's been driving kind of that outperformance? And is there potentially an upward bias to your long-term gross margin targets?

Yes. I think a couple of things drive the gross margin as we have different product mix during the quarter, can be the timing of when we introduce new products and then also the timing of some of our supply chain cost reductions.

And so that can cause us to move sort of quarter-to-quarter. I think the other thing we look at for long term, what would be some of the growth of other diversification efforts that would cause us to change that long-term goal. Those are sort of the elements we're looking at. But structurally, we're very comfortable with where we sit today with being able to sustain the gross margin target we've given.

Okay. Does HPMS just on average, have an accretive gross margin profile in general for your business?

It's difficult for us to say that. We don't necessarily look at it on an audio and HPMS from a gross margin target. We're more looking at the blended portfolio and making sure that the places we're at in the segments we're at are fitting in that long-term target.

Okay. Maybe switching to operating margins. You've been running kind of in the mid-20s over the last several years. What's kind of the right target that you're looking at? And how do you kind of balance that against making the necessary investments in R&D to continue to drive growth?

Yes. When we look at that, we're obviously seeing where can we invest and some of these opportunities that Carl has talked about, how can we balance our resources internally to make sure that we are hitting the different development cycles we need for all of these different segments. Right now, we're comfortable with where our footprint is, but we will continue to look at different opportunities. And if we see something that is very attractive and requires us to increase investment, we'll do that. So we're really not necessarily looking at trying to hit a target as much as we're trying to make sure that we have real operational discipline into where we're investing our dollars and balancing that with the opportunities we see.

But with the end goal of, hey, we're trying to grow the company, we're trying to grow revenue, we're trying to grow long-term profit. And if we have to balance that or invest more in a quarter, we're certainly willing to do that.

Great. Jeff, you come in with an extensive background in M&A I'm just wondering if you could just talk about kind of your framework in terms of how you're looking at targets at Cirrus Logic. Maybe talk about scale. Are you looking at tuck-ins or larger size deals? And is this something that you've been asked to maybe take a closer look at?

Yes. We are certainly looking at some M&A opportunities. So not necessarily trying to categorize that as a tuck-in or a larger size. We'll look at both. What we're really looking for are combinations where we think we can really grow value, right? Really have some value accretion. certainly, in the segments that we're going into, as we're trying to diversify away from mobile, those are more of a target of more of a focus of where we're looking, how can we accelerate that, but really looking at where can our IP, which we're very proud of, where can we get some synergies to accelerate that or where can our IP accelerate a potential acquisition.

Great. I get this question a lot. Just when you guys think strategically about customer concentration, how do you guys think about that? Is that a goal of yours to diversify away from that longer term? Or are you just focused on doing everything possible to grow revenues and to service that customer concentration to your best of your ability?

Well, we'd like to think those aren't mutually exclusive. So yes, I wouldn't call it necessarily thinking of it as customer concentration, maybe as mobile concentration. And yes, we are actively trying to diversify that away. I mean, Carl's talked about certainly the PC opportunity that's been exciting for us. We're not running away from that. And if we can grow the mobile market, we'll continue to do that. So it's not an and/or for us. It's both. But yes, diversification away from that segment is certainly a goal of ours.

Great. Maybe just to follow up on that. Historically, the Android markets, you've had kind of some fits and starts there. How are you looking at the Android market these days? Is that still going to be something you're going to be focusing on growing?

Yes. I think we've actually pulled back in terms of investments in Android for the purpose of it not really representing a good exciting growth market for us. Certainly, we've talked about PC. We've talked about incubating other businesses beyond smartphones as like really important, exciting long-term options for us. We certainly still have competitive products for audio and haptics in the Android space. But it's just -- as a total market, especially with a big chunk of the customers residing in China and that just having a bit of risk inherently with the geopolitical kind of climate as it is.

We're opportunistically selling what we have, but not really focusing the R&D investments on Android so that we can invest in, again, just expanding the HPMS content, but also building businesses beyond smartphones, especially in markets that have a bigger growth factor that's exciting for us long term.

Great. Speaking about other markets, I think you recently talked about ramping some timing parts into the automotive market. That's a very kind of different animal compared to what you're shipping into. Just talk about the decision to kind of go after automotive and how big could that opportunity be over the next several years?

I mean Cirrus has actually shipped into automotive systems for the better part of 2 decades, primarily with kind of traditional data converter products for audio applications. We've also shipped timing products on Ethernet-based systems through collaboration with other chipset vendors. And certainly, the core of that being audio related. I think we have a lot of kind of brand permission, if you will, to kind of reengage. And we certainly see the in-cabin experience for entertainment tactile experiences. So audio, voice, kind of touch and sensing and haptic, all that part of the in-cabin experience as being pretty disrupted right now with the kind of transition over time to zonal architectures and basically having kind of smartphones on wheels as some people like to call it.

So we think it's an interesting long-term option for us, and we think there's a lot of interesting technology in audio and voice and haptics and sensing similar to these other markets that are very relevant to the automotive space. The timing product, I think, is capitalizing on that as well. So it's replaced an older device that was built in a process node that has gone end of life. And so we've updated that product. We've added functionality to kind of increase the application of it. And we're now already shipping that device into multiple kind of OEMs in the kind of premium audio space, or the premium kind of car space.

So again, it's definitely a long-term endeavor, but the underpinning technology we've got for the in-cabin experience and the timing stuff that will just get more prevalent as these zonal architectures take root is exciting kind of long-term option for us to build a new market.

Great. It looks like we're out of time. Thanks, guys.

Okay. Thanks, John.

Ladies and gentlemen, thank you for standing by. Welcome to the Cirrus Logic First Quarter Fiscal Year 2026 Financial Results Q&A session. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the conference over to Ms. Chelsea Heffernan, Vice President of Investor Relations. Ms. Heffernan, you may begin.

Thank you, and good afternoon. Joining me on today's call is John Forsyth, Cirrus Logic's Chief Executive Officer; and Jeff Woolard, our Chief Financial Officer. Today, at approximately 4:00 p.m. Eastern Time, we announced our financial results for the first quarter of fiscal year 2026. The shareholder letter discussing our financial results, the earnings press release and the webcast of this Q&A session are all available at the company's Investor Relations website. This call will feature questions from the analysts covering our company. Additionally, the results and guidance we will discuss on this call will include non-GAAP financial measures that exclude certain items. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release and are all available on the company's Investor Relations website.

Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company expressly disclaims any obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise. Please refer to the press release and the shareholder letter issued today, which are available on the Cirrus Logic's website and the latest Form 10-K as well as other corporate filings registered with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations.

Now I'd like to turn the call over to John.

Thank you, Chelsea, and welcome to everyone joining today's call. As you have seen in the press release, in the June quarter, Cirrus Logic delivered revenue of $407.3 million, above the top end of our guidance range, driven primarily by strong end demand for smartphones incorporating our silicon. In a moment, I'll hand the call over to Jeff to discuss the financial results for the June quarter in detail, along with our outlook for the September quarter.

Before we get to that, I'd like to make a few comments about the recent progress we've been making across our business. As many of you are aware, our long-term strategy for growth at Cirrus is based around 3 principles. First, we seek to maintain a strong leadership position in our core flagship smartphone audio business. Second, we aim to expand the value and range of high-performance mixed signal solutions with which we serve our customers in smartphones and similar products. And third, we are increasingly leveraging our world-class expertise and IP in both audio and high-performance mixed signal areas to grow and broaden our business in new markets.

I want to now speak to our recent progress in each of these areas. In our flagship smartphone audio business, during the quarter, we were pleased with the positive impact of our latest generation custom boosted amplifier at our first 22-nanometer smart codec. These components enable exceptional audio and voice experiences, along with significant power and efficiency improvements over previous generation products. We are proud to see these new devices contribute to the remarkable performance of our customers' products.

Outside of our custom audio solutions, we also continue to serve customers in the Android ecosystem. While the majority of our general market R&D efforts are directed toward developing products to new markets, we continue to enjoy success and strong customer relationships in Android, and expect new flagship smartphones featuring our components to launch in the second half of the calendar year.

Looking beyond audio, we're excited about the potential to grow content in smartphones with our high-performance mixed signal solutions, where we see a meaningful opportunity to not only expand our addressable market, but also to diversify our revenue. Our progress in this area has been demonstrated through the continued success of our camera controller product line. We see considerable potential to add further value in this area as we identify more opportunities to enhance system performance and help enable advanced camera functionality. Beyond camera controllers, we also continue to invest in developing our capabilities around battery, power, sensing and other domains, and have a number of R&D programs underway in these areas. We anticipate that the investments that we are making in this space today will contribute to product diversification and expand our high-performance mixed-signal footprint in the future.

The third principle of our strategy is to leverage our audio and high-performance mixed signal expertise into new applications and markets outside of smartphones, for example, in laptops. During the quarter, engagement with our laptop customers was strong, and we saw our next-generation PC amplifier and PC codec designed into several new laptops that are expected to begin initial shipments in late calendar '25. These components expand our product portfolio's reach across price points and architectures, enabling us to support our customers' higher-volume mainstream programs. This, in turn, allows us to capture more of our serviceable addressable market and build additional revenue opportunities.

In the June quarter, we also announced a collaboration with Compal, a leading electronic design and manufacturing services company to address persistent audio challenges in laptops. Notably the mechanical rattle and audio distortion that often leads to poor and inconsistent audio quality. Further, we're also developing multiple new products that aim to significantly improve voice and audio capture functionality across a wide range of laptops. Beyond laptops, we also believe that there are great opportunities to expand our general market business, which spans a large number of customers across the professional audio, automotive, industrial and imaging end markets. As part of this effort, during the quarter, we ramped production of our latest generation ADCs, stacks and an ultra-high-performance audio codec.

Additionally, we expanded our professional audio portfolio with the launch of 4 new high-performance ADC and DAC products, making our high levels of performance and advanced features accessible across a wider range of applications and price points. Lastly, we recently began shipping our latest timing product to a leading automotive customer and to professional audio customers. We continue to be encouraged by the high level of customer interest across these areas of our business and by the strategic opportunities ahead of us.

And with that, let me now turn the call over to Jeff to provide an overview of our financial results as well as the outlook.

Thank you, John. Good afternoon, everyone. I'll start with a summary of our financial results for our fiscal Q1 and then provide guidance for our Q2 fiscal 2026. In Q1 fiscal 2026, we delivered revenue of $407.3 million, above the top end of our guidance range due to stronger-than-expected smartphone unit volumes. On a sequential basis, revenue was down 4%, primarily due to lower smartphone unit volumes. On a year-over-year basis, sales were up 9%, primarily driven by sales associated with our latest generation products and higher smartphone unit volumes.

Turning to gross profit and gross margin. Non-GAAP gross profit in the June quarter was $214.3 million, and non-GAAP gross margin was 52.6%. On a sequential basis, the decrease was mostly driven by a less favorable product mix and a return to a more typical pricing environment. On a year-over-year basis, the increase in gross margin was largely due to a more favorable product mix.

Now I'll turn to operating expenses. Non-GAAP operating expense for the first quarter was $119.5 million. On a sequential basis, OpEx was down $0.5 million, primarily due to a reduction in product development costs, largely due to the timing of expenses for new products. The decrease also reflects a reduction in variable compensation and lower facilities-related expenses. This was offset by higher employee-related expenses, mostly due to annual salary increases. On a year-over-year basis, operating expense was up $1.5 million, largely due to higher employee-related costs, mostly associated with annual salary increases. This is offset by lower product development costs. Non-GAAP operating income for the quarter was $94.9 million or 23.3% of revenue.

Turning now to taxes. For the June quarter, our non-GAAP tax rate was 22.1%, in line with our previous guidance. And lastly, on the P&L, non-GAAP net income was $80.3 million, resulting in earnings per share for the June quarter of $1.51. Let me now turn to the balance sheet. Our balance sheet continues to be strong, and we ended the June quarter with $847.8 million in cash and investments. Our ending cash and investment balance was up $12.9 million from the prior quarter as cash generated from operations was partially offset by share repurchases. We continue to have no debt outstanding. Inventory at the end of the first quarter was $279 million, down from $299.1 million from the prior quarter.

Days of inventory were down sequentially, and we ended the quarter with approximately 132 days of inventory. Looking ahead, in Q2 fiscal '26, we expect inventory to decrease as we continue to fulfill demand and manage our wafer purchase commitment for our long-term capacity agreement with GlobalFoundries.

Turning to cash flow. Cash flow from operations was $116.1 million in the June quarter, and CapEx was $2.8 million, resulting in non-GAAP free cash flow margin of 28%. For the trailing 12-month period, cash flow from operations was $473.3 million and CapEx was $21.4 million. This resulted in a non-GAAP free cash flow margin of 23%. On share buybacks in Q1, we utilized $100 million to repurchase approximately 1 million shares of our common stock at an average price of $98.66. At the end of Q1 fiscal year 2026, the company had $454.1 million remaining on its share repurchase authorization.

Now on to guidance. For Q2 fiscal 2026, we expect revenue in the range of $510 million to $570 million. While we only provide guidance for 1 quarter, given our strong Q1 results and Q2 guidance, we want to share additional color on seasonality. We now anticipate that our sales will be more weighted towards the first half of the fiscal year. We would note that our unit and revenue forecast for the full fiscal year are relatively unchanged from previous expectations. GAAP gross margin is expected to range from 51% to 53%. Non-GAAP operating expense is expected to range from $131 million to $137 million.

Turning to taxes. On July 4, the One Big Beautiful Bill Act was signed into law. Among other provisions, this bill permanently eliminates the requirement to capitalize and amortize U.S. R&D expenditures and makes modifications to international tax rules. The effects of the new law are not reflected in our guidance for September quarter as we are evaluating the impact of the legislation.

In closing, we delivered strong results for the June quarter as we continue to execute on our strategy to grow our business and drive long-term shareholder value.

Before we begin the Q&A, I would like to note that while we understand there is intense interest related to our largest customer, in accordance with Cirrus Logic company policy, we will not discuss specifics about our business relationship.

With that, let me now turn the call over to Chelsea to start the Q&A session.

Thanks, Jeff. We will now start the Q&A portion of the earnings call. [Operator Instructions] Operator, we are now ready to take questions.

[Operator Instructions] Your first question comes from Christopher Rolland with Susquehanna.

Congrats on the results. I guess, with the results and guidance here, the results in particular, there's just a very big delta between what you're expecting and what actually happened. And so I just wanted to understand what's driving that delta? Was it just conservatism in the guide? Or is this better units or better content or a better inventory build or tariff-related pull-ins. What was driving this delta?

Thanks, Chris. Yes, obviously, big picture is strong demand for smartphones, primarily, and there are no content surprises to us at this point in the cycle, but it is true that we're shipping more content in smartphones than ever before. So that strong demand had a significant effect on us. Obviously, when we guide, we guide based on our judgment using all the information we have available. Relative to guidance, I would say that in the last quarter, we saw demand remain really robust and sustained during a period of the year where that is not something that we typically see. And so also factored into that, there was the launch of a lower-cost product earlier in the year, which contributed to an extent. So we obviously shipped to customer demand. That means we don't have perfect visibility of how much might be related to, for example, tariff-related pull-ins or pull ahead of demand. We think that contributed somewhat to it, but it's difficult for us to put a number on.

I guess, secondly, I wanted to kind of check in on your diversification efforts outside of your largest customer. On the PC side, I wanted to know how big the Compal thing was in driving new designs and then check in with the auto opportunity as well. And anything else that you can point to there? Is it going better than you would expect, that diversification effort?

Yes. Thanks, Chris. We're certainly very excited about the progress that we're making. Auto, I'll cover off first. That's still very early stage for us. To be clear, we've been shipping in the automotive market for some time, but it's really not something we've been investing in. It's been legacy products and so on. We've started reinvigorating that. It's going to take some time given the design cycles that we're all familiar with in that market. But I think we see plenty of opportunity there. There's fairly obvious ones that you would associate with us around audio and haptics and so on, just improving the in-cabin experience. And that's an area where we do have great engagement with customers. We also mentioned in the commentary for this quarter, the design-in of the timing products that we -- I think we just launched late last year. Again, that's not a needle mover today revenue-wise, but it will -- those products will ship for a long time.

Automotive is one of the target markets for them. And I think it's a great indicator of one of the strengths of the company given that we have a vast array of IP and capability at pretty advanced geometries for the kind of mixed signal stuff that we do, most of which has been targeted and develop for our major markets around smartphones. But we're able to take a lot of that IP and a lot of that design capability, and refresh and upgrade existing kind of legacy product segments and see very positive adoption and response from our customers to that. And that's what we've seen with timing, where we went from, I think, publicly launching those products not that long ago to talking this quarter about those being designed in to a Tier 1 automotive customer and there is plenty of other activity around those products, within both automotive and other segments as well.

On the PC side, yes, we continue to track to the kind of progress path and milestones that I've talked about previously. I think we're very excited about what that can turn into for us over time. So we previously mentioned we were low tens of millions of revenue in fiscal '25, expecting that to roughly double in fiscal '26 based on the designs that have already been secured. In the past quarter, we saw design activity around new codec and amplifier products, which we talked about sampling previously, but it's great to see those getting designed into products which -- the very first of which will hit the market even later this calendar year.

The Compal thing, I think we just demonstrated that in May. So yet to see how that translates into kind of top line impact, but it is addressing a persistent, long-standing challenge in PC design. Obviously, relative to, for example, our largest customer, the way products are designed and manufactured in the PC space is quite different. You end up with a lot of challenges when it comes to getting the best audio around mechanical rattle distortion and so on. And we've got a lot of expertise in tuning. We'd really like to vastly improve the audio experience in laptops because it's been subpar for so long. And that announcement we did with Compal is squarely aimed at helping customers do that and deliver much better experiences to their customers in audio.

And just one final -- I guess, one final milestone to talk to on the PC side, just to give a little more color of the progress. I think one of the most important things in the PC space is getting into the mainstream category. So you've got the kind of horizontal axis, which is getting across the customers, getting across as many customers as we can. So we're shipping in the top 6 laptop OEMs. But then the vertical axis is very important for volume getting down into the mainstream category. If you look back at FY '24 when we were kind of starting this laptop strategy and starting to see that customer engagement, we had very little revenue at that time, roughly like $2 million or something came from mainstream devices, it was effectively rounded to 0. In this fiscal year, we expect that to be more like closer to 10x that, driven by mainstream. And I highlight that because that's a really good milestone and indicator of the fact that we can break into the high-volume product tiers, which are really going to be significant for driving revenue.

Your next question comes from David Williams with The Benchmark Company.

Lots of great color there on the last question. I guess, if we kind of think about the volumes and the content and just kind of the puts and takes around the first half being more weighted versus the second half, is there a way to kind of, I guess, qualify the magnitude of that? And maybe what -- how to think about the difference between the content and the volume differential?

Let me give a bit of color. Obviously, we just guide 1 quarter at a time, but I do want to give color to this. Clearly, we're coming off a record June and then a very strong September guide, which overall reflects strong demand for our smartphone products generally -- which is generally a very, very positive picture for us, but there are a few factors which we think are giving a somewhat different shape to the seasonality this year that you should keep in mind when thinking about your models for the rest of the year. So I'll just touch on each of the factors that we think are playing a part there. One of them I mentioned already, we think the pull-ins contributed to some extent from our position in the value chain. It's pretty much impossible to say precisely how much because we ship to customer demand. But we believe we've likely seen a pull forward of some level of demand and common sense says that has to come from somewhere.

Secondly, although we don't have the perfect visibility of this, we do think it's possible that with a more complex and diverse global manufacturing supply chain on the part of certain of our customers, that we may have seen and maybe seeing a need for parts to be available and on hand a little earlier than normal, which again, would just pull forward some of the revenue ramp. And then finally, and this is certainly, I think, perhaps a secular trend for us. As you know, the quantity of our camera content has been growing over time. And that content is part of the longer supply chain process than our other products because it's typically incorporated into modules and the manufacturing time lines associated with that longer. Which means that we ship the camera parts earlier than we ship the other parts that don't go into modules, and that pulls a larger part of our revenue forward.

So if you look actually last year, we also saw a comparatively stronger September quarter, and that, again, in part, reflected this trend. So I think we just guide to what we can see. But as we commented and Jeff commented in his prepared remarks, we do see these factors all playing a part in tilting the demand pattern more towards the first half of the calendar year rather than the back half as it perhaps used to be for us. That said, as Jeff mentioned, there's nothing about that shift in patent has changed our overall view and expectations for the full year.

Great. Lots of great color there. I appreciate it. And then just kind of thinking about the AI opportunities, and you've talked to this before, but just kind of curious if there's new areas or new products potentially that you could work into the AI trend or especially at your largest customer, but even beyond that, maybe in the laptop space or even on the Android side, anything, I think, to that future opportunity would be helpful.

Yes. I think on the product side, all of the above. I think we definitely want to be a part of the set of enablers that our largest customer uses critical for AI features. We, for sure, see that as being potentially something that brings a kind of paradigm shift in how people use laptops. I think it can be very significant there. And I think other device categories are going to emerge around these technologies, which we haven't seen yet. And we really want to be addressing all of those. So first and foremost, I think we're big fans of voice-centric devices and enabling voice technology.

We think AI is fundamentally really unlocks the conversational interface, and that can be -- whether that's through your phone, through your laptop or through some of the yet to be invented or announced device, we believe that we can play a very important part in that. That's absolutely our wheelhouse voice capture, voice processing and so on. And then the other area where we think we can make a big impact is power. Everybody is fully aware of the amount of power that's running AI features at the edge, inference and so on consumes. And we both provide technologies which are incredibly power-efficient on the voice and audio side and power specific products which help customers get more out of batteries.

Your next question comes from Tore Svanberg with Stifel.

So I just had a follow-up question on where you talked about seasonality there, John. And maybe I missed this from Jeff's comments, but I mean typically, first half, first calendar is 40% and then second half 60%. So are we kind of looking more sort of at a 45-50 profile? Is that how we should think about it -- sorry 45-55 profile versus 40-60?

Well, I think -- as you want to think about it is just to reiterate what John said, what has been typical as we have more camera content, and that becomes a bigger piece of the total revenue pie. It is shipped earlier. So if you think about that trend of -- it is a change what you had seen in years past, the camera content, bigger piece of the pie gets shipped earlier. And then certainly, there was some amount of pull-in, which is hard for us to determine. So I think as you think about that moving forward, it's not -- it's really a mix of the camera content in the total pie and how that has just shifted forward from where we have to place in our customer supply chain.

Got it. And related to that, you mentioned you expect inventories to be down sequentially in the September quarter. So does that also have something to do with that? Or is it just purely the GlobalFoundries commitments that are sort of trailing off?

Yes. It's mostly the GlobalFoundries commitments trailing off as we continue to work through that and manage both our customer demand and our GF contract. So we'll continue to see that going down. As we said in the last call, we had a peak there. And that's really all that is. And we'll get closer to our inventory sweet spot as we work through that.

That was the last question. So now I'll turn the call back to John for final comments.

Thank you, Chelsea. In summary, Cirrus Logic delivered outstanding results for the June quarter driven by strong demand for components shipping into smartphones. We also continue to make great progress in each major area of our long-term strategy, and the team at Cirrus remains very excited about the opportunities in front of us.

I'd like to thank you for your continued interest in our progress, and I'd like to thank all of our employees around the world for their incredible dedication to innovation and to supporting our customers' success.

Before we close, I'd also like to note that we will be participating in the KeyBanc Technology Leadership Forum in Deer Valley on August 12. Please check our investor website for the details. I'd like to thank everybody for participating today. Goodbye.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.