Up 69% in 2024, this rising artificial intelligence (AI) stock could continue to grow

Semiconductor specialist Cirrus Logic (CROSS 3.35%) it might not be a household name like some of its industry peers, but the company has done impressively well in the market so far this year, with gains of 69% at the time of writing.

Cirrus, which is known for providing chips for Applehis (NASDAQ:AAPL) products, surpassed the widest Nasdaq-100 Technology Sector 10% index gains by a wide margin. The good news is that Cirrus’ tremendous growth is here to stay, and the company could end the year strong thanks to its biggest customer. Additionally, the advent of artificial intelligence (AI) smartphones is likely to unlock a massive long-term growth opportunity for Cirrus Logic.

Let’s take a closer look at why investors should consider buying Cirrus Logic stock before it’s too late.

Cirrus Logic’s recent results point to a bright future

Cirrus Logic released its fiscal first quarter 2025 results (for the three months ended June 29) on August 6. The company’s revenue rose 18% year over year to $374 million and was well above the consensus estimate of $318 million. In addition, Cirrus’ adjusted earnings rose 67% year-over-year to $1.12 per share, crushing Wall Street’s estimate of $0.61 per share.

The positive news didn’t end there, as Cirrus expects its fiscal Q2 revenue to come in between $490 million and $550 million. The midpoint of the guidance range is at $520 million, which is well above the Wall Street estimate of $485 million. Cirrus posted revenue of $481 million in the same quarter last year, which indicates a positive top line growth rate of 8% year over year.

Cirrus’ top line could end up closer to the upper end of its guidance range thanks to its biggest customer, Apple, which accounted for 88% of the top line last quarter. Cirrus management pointed out on its recent earnings conference call that its revenue exceeded the upper end of its original guidance range due to “stronger-than-expected shipments in smartphones.”

Because Apple is Cirrus’ biggest customer, the stronger-than-expected performance means Cirrus received more orders for its chips last quarter. It’s not surprising, as Apple seems to be gearing up for an aggressive rollout of its next-generation iPhones, which are all set to support generative AI features.

Apple’s iPhone 16 is expected to hit the market next month, and the tech giant is expected to ship 90 million units of its updated smartphone lineup this year. That would be a 10% increase over last year. But at the same time, supply chain reports indicate that Apple is sourcing 120 million display panels, suggesting that it could end up producing more units than the market currently anticipates.

If that is indeed the case, Cirrus Logic’s growth in the current quarter is likely to beat expectations again. But more importantly, the integration of Apple’s Intelligence suite of generative AI features into the tech giant’s future smartphones will trigger a solid upgrade cycle. Apple’s smartphone shipments are expected to grow 10% in fiscal years 2025 and 2026, according to JPMorganhis estimates.

Cirrus is expected to get more content dollars in the next generation of iPhones, which means it should be able to receive more revenue from each iPhone unit that Apple makes. So the stage seems set for Cirrus Logic to finish the year strong and should be able to maintain its new momentum going forward thanks to Apple’s entry into the AI ​​smartphone market, a space that is currently in the early stages of growth.

A few more reasons to buy the stock

Analysts have been quick to raise their earnings growth expectations for Cirrus Logic, as seen in the chart below.

CRUS EPS estimates for current fiscal year data by YCharts

Cirrus Logic ended fiscal 2024 (ended March 30) with non-GAAP earnings of $6.59 per share. The chart above tells us that analysts weren’t expecting Cirrus’ earnings to grow in the current fiscal year, but that has changed lately. In addition, the company’s economic growth forecast for the next fiscal year indicates an improvement in the growth rate.

However, if Apple does indeed decide to ramp up production of its upcoming iPhones and Cirrus ends up providing more content to the tech giant, there’s a good chance Cirrus earnings will easily beat analysts’ expectations going forward.

Therefore, now would be a good time for investors to buy this semiconductor stock. It trades at just 26 times trailing earnings, a discount to Nasdaq-100 The earnings multiple of 31. And growth in the smartphone market driven by artificial intelligence and Cirrus’ close relationship with one of the biggest players in this space could lead to better-than-expected growth going forward.