Texas Instruments Plummets 5% on Q3 Earnings Disappointment and Cautious Outlook

Summary
• Texas Instruments (TXN) drops over 5% intraday to $171.78, a sharp reversal from its 52-week high of $221.69.
• Q3 earnings beat revenue estimates but missed EPS guidance, with embedded processing segment underperforming.
• Guidance for Q4 revenue ($4.22B–$4.58B) and EPS ($1.13–$1.39) falls below Wall Street expectations.

Today’s selloff in Texas Instruments reflects investor anxiety over mixed Q3 results and a bearish Q4 outlook. The stock’s intraday range of $163.04–$173.08 underscores heightened volatility, driven by underperformance in the embedded processing segment and cautious revenue forecasts. With the semiconductor sector in flux, TXN’s move highlights the fragility of earnings-driven optimism.

Q3 Earnings and Guidance Spark Investor Caution
Texas Instruments’ 5% intraday decline stems from a combination of underwhelming embedded processing results and a bearish Q4 outlook. While the analog segment outperformed with $3.73B in revenue (up 16% YoY), the embedded processing segment generated $709M (up 9% YoY), failing to meet expectations. Management’s Q4 revenue guidance of $4.22B–$4.58B and EPS of $1.13–$1.39 fell short of consensus estimates of $4.52B and $1.41, respectively. The embedded segment’s weakness, coupled with macroeconomic headwinds, triggered a sell-off as investors recalibrated expectations for the semiconductor giant.

Semiconductor Sector Volatility Amid Mixed Earnings
The semiconductor sector remains fragmented, with mixed earnings reports amplifying volatility. While TSMC (TSMC) and Intel (INTC) reported resilient AI-driven demand, peers like AMD (AMD) and NVIDIA (NVDA) face margin pressures. TXN’s 5% drop contrasts with the sector’s 1.2% average decline, reflecting its exposure to industrial and automotive markets, which are moderating. The embedded processing segment’s underperformance highlights sector-specific risks, as TXN’s cautious guidance signals prolonged industry recovery.

Options and ETF Strategies Amid Volatility
• RSI: 50.62 (neutral)
• MACD: -2.30 (bearish divergence)
• Bollinger Bands: Lower band at $171.92 (current price near support)
• 200D MA: $186.18 (price 7.7% below)

Technical indicators suggest a bearish near-term bias, with the 200-day average acting as a key resistance. The RSI hovering near 50 indicates neutral momentum, but the MACD’s bearish crossover and Bollinger Bands’ compression signal potential for a breakdown. For leveraged exposure, consider XLF (Financial Select Sector SPDR ETF) or XSD (Semiconductor Select Sector SPDR ETF), though TXN’s sector-specific risks may limit their efficacy.

Top Options Contracts:
1. TXN20251031P170 (Put, $170 strike, 10/31 expiration)
• IV: 33.98% (moderate)
• Leverage Ratio: 49.94%
• Delta: -0.454 (sensitive to price drops)
• Theta: -0.098 (moderate time decay)
• Gamma: 0.0412 (high sensitivity to price movement)
• Turnover: 1,002,185 (high liquidity)
• Payoff (5% downside): $3.22 (max(0, 163.19 - 170) = 6.81).
This put option offers high leverage and liquidity, ideal for capitalizing on a potential breakdown below $170. The moderate IV and high gamma ensure responsiveness to price swings.

2. TXN20251031P165 (Put, $165 strike, 10/31 expiration)
• IV: 35.10% (moderate)
• Leverage Ratio: 103.50%
• Delta: -0.265 (moderate sensitivity)
• Theta: -0.110 (high time decay)
• Gamma: 0.0330 (moderate sensitivity)
• Turnover: 346,988 (high liquidity)
• Payoff (5% downside): $8.59 (max(0, 163.19 - 165) = 1.81).
This contract balances leverage and time decay, suitable for a mid-term bearish trade. The high leverage ratio amplifies returns if the stock gaps down, while the moderate delta ensures it remains in play during a gradual decline.

Action Insight: Aggressive bears should prioritize TXN20251031P170 for a short-term trade, while TXN20251031P165 offers a safer, longer-term position. Both contracts benefit from elevated volatility and liquidity.

Backtest Texas Instruments Stock Performance
Intraday plunges of –5 % in Texas Instruments (TXN.O) have been rare since 2022 (18 instances). The event study shows:• Day +1: average return ≈ –1 %, win-rate ≈ 39 % – evidence of short-term weakness immediately after the plunge. • Day +15: average return turns to +3.7 %, win-rate ≈ 67 % – the stock typically recovers within three trading weeks. • Day +30: average return reaches +7.1 % versus the benchmark’s +0.5 %, win-rate ≈ 65 % – statistically significant out-performance persists for about a month.Interpretation 1. TXN has exhibited mean-reversion behaviour after sharp intraday sell-offs; buying the close of a –5 % day and holding 2-4 weeks has historically added roughly 6–7 % of excess return. 2. The first trading day after the plunge remains fragile; risk-averse traders may delay entry until day +2. 3. Only 18 events were available, so results could be sample-sensitive; always complement with fundamental/flow checks.Assumptions & automated choices • Price series: daily close, Jan-2022 – Oct-2025 (latest available). • Event trigger: day’s low ≤ previous-close × 0.95 (calculated automatically). • Holding-period window analysed: 30 trading days (default of Aime’s event module).View full interactive statistics below.Feel free to explore the module for full day-by-day curves and distribution charts.

Act Now: Position for Volatility or Rebound
Texas Instruments’ 5% drop reflects a bearish near-term outlook, driven by embedded segment underperformance and cautious guidance. Key levels to watch include the 200-day average at $186.18 and the Bollinger Bands’ lower bound at $171.92. A breakdown below $170 could trigger a retest of the 52-week low at $139.95, while a rebound above $179.45 (middle Bollinger Band) may signal a short-term bounce. Investors should monitor the embedded processing segment’s recovery and Q4 demand trends. With NVIDIA (NVDA) down 1.55%, sector-wide caution persists. Position now with the TXN20251031P170 put for a bearish trade or watch for a rebound above $179.45 to re-enter long positions.