Texas Instruments (TXN, Financial) is experiencing a downturn, despite reporting strong Q2 results and providing in-line guidance for Q3. Investors appear concerned about the cautious tone of the recent earnings call.
- In Q2, Texas Instruments reported revenue of $4.45 billion, marking a 16.4% year-over-year increase, reaching the high end of the $4.17-4.53 billion guidance. This represents the company's strongest year-over-year growth since Q3 2021. Analog revenue increased by 18% year-over-year, while Embedded Processing grew by 10%.
- The company is navigating two main dynamics: the impact of tariffs and geopolitics on global supply chains, and the ongoing semiconductor cycle. Texas Instruments is leveraging its global manufacturing flexibility to address these challenges and is well-positioned with current capacity and inventory.
- By end market, Industrial saw upper teens year-over-year growth and mid-teens sequential growth, with recovery across all sectors. Automotive increased by mid-single digits year-over-year but declined by low-single digits sequentially. Personal Electronics grew 25% year-over-year and upper single digits sequentially. Enterprise Systems rose about 40% year-over-year and 10% sequentially. Communications Equipment grew over 50% year-over-year and approximately 10% sequentially.
- In April, Texas Instruments noted a recovery across its end markets, particularly in industrial sectors, and believed it was at the bottom of the semiconductor cycle. However, Q2 saw a sequential decline in automotive, and management is now preparing for various scenarios, despite the ongoing cyclical recovery.
- Texas Instruments acknowledges the cyclical recovery, noting Industrial's acceleration and continued recovery in Personal Electronics, Enterprise, and Communications. Automotive, however, has not yet recovered. The subdued tone of the call was noted by some analysts.
The Q2 results and Q3 guidance were solid, but two factors are impacting the stock today. Firstly, the stock had surged over 50% since April due to easing tariff concerns. Secondly, the company projected a more optimistic tone in April, leading to high investor sentiment. The recent cautious tone and significant stock run-up have likely prompted profit-taking among investors.
