• Kura Sushi USA (KRUS) is trading sharply lower today after reporting Q3 (May) results last night.
• This Japanese restaurant chain reported upside results for EPS and revs.
• KRUS was navigating some issues in Q3, including integrating a new reservation system, investigating new market opportunities, and building out its IP pipeline.
• A key negative from the quarter was the Q3 comp coming in at -2.1%, comprised of traffic at -2.9% and price/mix of +0.8%.
• That was better than Q2's -5.3% comp, but still in negative territory.

• Cirrus Logic (CRUS) is a new addition to our VALUE rankings this week. Cirrus Logic is a fabless supplier of chips. Its largest customer by far is Apple (AAPL), which represented 89% of FY25 sales (up from 87% in FY24 and 83% in FY23), so there is a high correlation between the two companies.
• The company is employing a 3-point strategy: it's committed to maintaining its leadership position in smartphone audio; increasing its content in smartphones; and it wants to expand into adjacent areas. In particular, it's excited about its emerging laptop business and camera controllers.
• On May 6, CRUS reported a huge EPS beat for Q4 (Mar), its eighth consecutive beat of at least $0.23. Revenue grew 14.2% yr/yr to $424.5 mln, which was above the high end of guidance. The guidance was probably even more important to investors as CRUS expects Q1 (Jun) revs of $330-390 mln.
• Looking back at FY25, most notably, CRUS began shipping two new-generation products in its flagship smartphone audio business, a boosted amplifier and a smart codec. CRUS said the boosted amplifier significantly improves system performance and efficiency.
• A key goal for CRUS has been to target new applications and new markets outside of smartphones. CRUS remains excited about its burgeoning laptop business. CRUS reported low tens of millions of dollars of revenue in laptops in FY25.
• In FY26, CRUS expects to double FY25 revenue in the laptop space as it sees more designs coming to market.
• Finally, the stock has been mostly trading sideways since November 2024 ahead of its Q1 report in late July. It seems investors do not have a lot of conviction either way right now. As always, a stop loss limit in the 15-20% is a good idea.

Last night, RxSight (RXST -41%), a medical technology company which focuses on light adjustable lenses (LAL) and light delivery devices (LDD) used in cataract vision correction, issued Q2 revenue guidance, which was a good bit below analyst expectations. Q2 guidance shows a decline of 4% yr/yr to $33.6 mln, which would be its first decline in six quarters. RXST also lowered FY25 revenue guidance significantly to $120-130 mln from $160-175 mln. The new guidance represents an expected 7%-14% decline from FY24, sparking a very negative reaction from investors.

• What is shocking to investors is that this is the second quarter in a row that this has happened. On April 3, the company missed on Q1 revs and lowered full year revenue guidance. The stock gapped down then and is gapping down sharply again today. To have this happen two quarters in a row is spooking investors.
• The Q2 underperformance was caused by a sharp decline in LDD sales (down 49% yr/yr), along with softer-than-expected LAL procedures. While longer capital equipment acquisition cycles may have contributed to the drop in LDD sales, management feels the underlying cause is a slower ramp in LAL utilization. This trend was first observed in 2024, following a period of rapid growth in RXST's installed based. Investor concern now centers on whether growth has reached its peak and whether RXST can reignite LAL adoption.
• RXST feels that its return to growth will depend on its clinical partners highlighting the visual outcomes and customer success from LAL. RXST will implement a more proactive data-driven customer support model by analyzing utilization trends, adoption tiers, and clinical outcomes. The hope is to close the adoption gaps and enhance customer satisfaction; however, investors will be in wait-and-see mode before buying back into RXST.

Overall, the results this quarter show a slowdown in RXST's growth, driven by weaker LDD sales and softer LAL utilization. Investors are clearly spooked by having this happen in back-to-back quarters. Investors are going to want to see some stabilization before considering getting back into the stock. The company will report full Q2 results on August 7. Investors will keenly listen for Q3 guidance to see if RXST can show signs of stabilization.

Penguin Solutions (PENG) is flat today despite a healthy Q3 (May) EPS beat. It also raised FY25 EPS guidance by a good amount. The main issue is that revenue rose just 7.8% yr/yr to $324 mln, which was light of analyst expectations. The good news is that PENG reaffirmed the mid-point of FY25 top line guidance at +15-19% vs +14-20% prior guidance, which implies the Q3 miss was more of a timing issue and Q4 (Aug) revenue should be better.

• This company helps hyperscalers, neo-cloud service providers and enterprise customers manage the complexity (power, cooling, AI compute, memory, storage) of AI Adoption by helping them design and build AI infrastructure. Its expertise lies in large-scale deployments, which has been developed over a 25+ year history implementing complex data center clusters beginning with HPC in its early days.
• PENG continues to see signs of early-stage Enterprise AI adoption across vertical markets such as financial services, energy, defense, education and neo-cloud segments. PENG's belief is that investment in AI-powered systems deployed throughout the industry in 2023-24 would lead to growth in full production installs in 2025-26. PENG says it's now seeing signs that as the industry has entered the initial stages of that growth with build-outs at scale.
• In terms of the top line miss, PENG concedes that the timing of actual deployments and associated revenue recognition can be unpredictable and concentrated. This was the case in Q3 when its Advanced Computing revenue declined yr/yr to $132 mln. AC revenue, in particular, tends to be lumpy due to customer concentration and the timing of large project implementation.
• PENG continues to see increased interest at enterprise customers, as well as in neo-cloud customer opportunities due to increased investments in large-scale AI infrastructure. PENG noted some exciting wins at existing customers in Q3 and closed five new customer bookings, highlighted by wins in the federal, energy and biotech segments.

The stock had an initial sharp drop following its earnings last night, but it recovered during the call and now shares are trading around unchanged. We think the earnings call helped to calm investor nerves. The initial reaction was caused by the top line miss, but we think the FY25 guidance helped to assuage fears as the Q3 miss looks more like a timing issue rather than a demand pullback.

On a final note, the stock came under pressure in early April following the announcement of the reciprocal tariffs. Investors were right to be concerned that this may cause PENG's clients to pause AI deployments. However, the stock has recovered nicely since then as investors seem less concerned that the tariffs will be implemented.