Dive Brief:
- Texas Instruments, a maker of chips for automobiles and personal electronics, reported revenue of $4.7 billion in the third quarter, up 14% over last year, driven by growth in both its analog and embedded processing segments.
- The overall semiconductor market continues to recover, however, at a “slower pace than prior upturns,” Texas Instruments CEO Haviv Ilan said on the earnings call. He assured investors that conditions are improving, saying that customer inventories are low and stock depletion activity is behind them.
- Net income was $1.36 billion, unchanged from last year. Meanwhile, the company is moving forward with its Utah investments, while winding down its older 150-mm fabrication plants in Texas. It announced layoffs for 150 employees in the Dallas-Fort Worth area earlier this month, the Dallas Morning News reported.
Dive Insight:
The recovery update came after Texas Instruments reported Q2 results over the summer that were weaker than what analysts had expected.
Earlier this year, the company’s unseasonably strong Q1 results and positive messaging gave the impression for Wall Street to be bullish on the stock. However, Ilan tampered expectations on the July earnings call, saying that “I think the cycle is going to be less pronounced and more shallow.”
He had noted how the automotive sector, which makes up roughly 35% of Texas Instruments’ revenue, had not recovered yet compared to its other end markets such as industrial and enterprise systems. The automotive-related revenue increased 10% sequentially, Ilan said, adding that it’s “now, it’s kind of back to where it used to be.”
However, there is still hesitancy among industrial customers driven by tariffs. Ilan said there is a bit of a “wait-and-see mode” because they are wanting to “have clarity on what exactly are the final rules.”
In the quarter, Texas Instruments saw its analog segment, which includes power management devices and signal chain products, grow 16% year over year. The segment accounted for nearly 79% of the company’s quarterly revenue. Meanwhile, the embedded processing segment, which includes microcontrollers, processors and radar products, climbed 9% YoY.
Looking ahead, the Dallas-based company is expecting Q4 revenue between $4.22 billion and $4.58 billion, down from previous estimates. It also lowered its earnings per share outlook to a range of $1.13 to $1.39, down from last quarter’s $1.36 to $1.60 range.
CFO Rafael Lizardi said Texas Instruments will continue to invest in manufacturing and technology, as well as enhancing its broad portfolio of roughly 80,000 products and strengthening areas that deliver free cash flow.
“We will stay focused in the areas that add value in the long term,” Lizardi said.
