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

Semiconductor specialist Cirrus Logic (KRUZ) 3.35%) may not be as well-known a brand as some of its industry peers, but the company has been doing impressively well in the market this year, growing by 69% at the time of writing.

Cirrus, known for supplying integrated circuits to Apple‘S (NASDAQ:AAPL) products, has surpassed the wider Nasdaq-100 Technology Sector the index up 10% by a wide margin. The good news is that Cirrus’s remarkable growth is sustainable, and the company can finish the year strong with its largest customer. What’s more, the emergence of artificial intelligence (AI)-enabled smartphones is likely to open up a huge long-term growth opportunity for Cirrus Logic.

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

Cirrus Logic’s Latest Results Point to Bright Future

Cirrus Logic reported its fiscal first-quarter 2025 results (the three months ended June 29) on August 6. The company’s revenue rose 18% year over year to $374 million, far exceeding consensus estimates of $318 million. What’s more, Cirrus’ adjusted earnings rose a solid 67% year over year to $1.12 per share, crushing Wall Street estimates of $0.61 per share.

The positive news doesn’t stop there, as Cirrus expects its fiscal second-quarter revenue to be between $490 million and $550 million. The midpoint of the guidance range is $520 million, which is well above Wall Street’s estimate of $485 million. Cirrus reported revenue of $481 million in the same quarter last year, indicating that its top line is on track for 8% year-over-year growth.

Cirrus’ top line could land closer to the top end of its guidance range thanks to its largest customer, Apple, which accounted for a whopping 88% of its top line last quarter. Cirrus management indicated on its latest earnings conference call that its revenue topped the top end of its original guidance range thanks to “stronger-than-expected smartphone shipments.”

Since Apple is Cirrus’s largest customer, the stronger-than-expected results mean that Cirrus received more orders for its chips in the latest quarter. This is not surprising, as Apple appears to be preparing for an aggressive rollout of its next-generation iPhones, which are ready to support generative AI features.

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

If that’s the case, Cirrus Logic’s growth in the current quarter will likely once again exceed expectations. But more importantly, the integration of Apple’s generative AI Intelligence suite into the tech giant’s upcoming smartphones is expected to trigger a solid update cycle. Apple’s smartphone shipments are expected to grow by 10% in fiscal 2025 and 2026, according to JPMorganestimates.

Cirrus is expected to land more dollar content in the next generation of iPhones, meaning it should be able to extract more revenue from each iPhone unit that Apple produces. So it looks like Cirrus Logic will finish the year strong, and it should also be able to maintain its newfound momentum going forward thanks to Apple’s entry into the AI ​​smartphone market, a space that is currently in the early growth phase.

A few more reasons to buy stocks

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

CRUS EPS estimates for the current fiscal year as reported by YCharts

Cirrus Logic ended fiscal 2024 (ended March 30) with non-GAAP earnings of $6.59 per share. The above chart shows that analysts were not expecting Cirrus’ earnings to grow in the current fiscal year, but that has recently changed. Additionally, the company’s net income growth forecast for the next fiscal year indicates an improvement in the growth rate.

However, if Apple does decide to increase production of its upcoming iPhone models and Cirrus starts providing more content to the tech giant, there is a high probability that Cirrus’ profits will easily exceed analysts’ expectations in the future.

So now would be a good time for investors to buy shares of this semiconductor company. It is trading at just 26 times earnings for the past few months, which is a discount to Nasdaq-100 The index’s earnings ratio is 31. And AI-driven growth in the smartphone market and Cirrus’ close partnership with one of the industry’s biggest players could lead to better-than-expected growth in the future.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and JPMorgan Chase. The Motley Fool recommends Cirrus Logic. The Motley Fool has a disclosure policy.