TXN Earnings Preview: ASML raises concerns in industrial and auto chip markets

Texas Instruments (TXN) is set to report its Q3 earnings today after the market closes, with a consensus expectation for adjusted EPS of $1.38, a 23% year-over-year decline, and revenue of $4.12 billion, down 9% year-over-year. The company previously guided for Q3 EPS in the range of $1.24-$1.48 and revenue between $3.94 billion and $4.26 billion. Analysts are particularly interested in how TXN navigates ongoing challenges in its key industrial and automotive markets, which together account for around 70% of its total revenue. Investors are looking for any indication of recovery in these segments, as well as insights on the company’s investments in expanding its manufacturing capacity.

TXN has delivered solid results in previous quarters, meeting expectations, but the company's stock has seen some volatility, partly due to concerns about a sluggish recovery in semiconductor demand outside of AI. The Q3 results from peer ASML, which reflected slower-than-expected demand recovery, have added to the cautious sentiment surrounding TXN’s performance. Analysts are also monitoring TXN's personal electronics segment, which showed mid-teens growth last quarter, along with communications equipment and enterprise systems, which both demonstrated robust performance. Maintaining momentum in these areas will be key for another quarter of sequential growth.

Another major focus will be TXN's capacity investments, particularly in its 300-millimeter manufacturing. These investments highlight the company’s long-term confidence in the growth of semiconductor content, especially in industrial and automotive applications. However, with industrial demand closely tied to global PMI, which has been stagnant, there are concerns about the near-term outlook for this market. TXN’s investments in U.S.-based fabs also provide a geopolitical advantage, potentially mitigating risks related to global supply chain disruptions.

TXN has only issued quarterly guidance thus far, and its Q2 outlook for Q3 indicated further sequential improvements, which initially boosted investor sentiment. However, market expectations have been tempered by macroeconomic uncertainty, with investors awaiting more clarity on whether TXN’s industrial and automotive markets have bottomed out. Analysts are also keeping a close eye on how TXN’s outlook will set the tone for upcoming earnings from its semiconductor peers, including ON Semiconductor, STMicroelectronics, Microchip, and Analog Devices.

As analysts expect TXN to remain cautious in its commentary on the auto and industrial markets, which have seen further degradation in production and demand, the company’s forecast for Q4 will be crucial. TXN’s commentary on its automotive business will be particularly scrutinized, as the company has yet to fully echo the trough signals reported by some auto component peers. Any positive outlook here could be a catalyst for the stock, especially considering that TXN has been heavily investing in capacity to position itself for long-term growth.

Lastly, TXN’s capital management updates, including its reduced CAPEX spending scenario for 2026, have garnered attention from investors. Citigroup recently upgraded the stock to Buy, citing that TXN’s gross margins appear to be bottoming, and there is potential for significant EPS growth once margins rebound. Investors will be watching closely for any further updates on margin recovery and capital allocation during TXN’s earnings call today.

Texas Instruments reported solid Q2 results, achieving its earnings and sales forecasts, marking its first quarter of sequential growth after several periods of declining demand. The company’s Q2 revenue grew by 4% from Q1 to $3.82 billion, with adjusted EPS rising by $0.07 sequentially to $1.17. While TXN didn’t signal a definitive recovery in its key industrial and automotive markets, which account for 75% of its revenue, other segments like personal electronics, communications equipment, and enterprise systems experienced robust growth, helping to offset declines in its primary markets.

For Q3, TXN provided encouraging guidance, projecting EPS between $1.24 and $1.48 and revenue between $3.94 billion and $4.26 billion, indicating another quarter of sequential growth. However, management stopped short of declaring a clear bottom in its industrial and automotive sectors, leading to a muted reaction from investors despite strong guidance. Although TXN’s overall outlook is positive, with secular growth drivers like automation and electrification ahead, the lack of clarity on a recovery in its largest markets tempered investor enthusiasm, especially after shares recently reached record highs.