TXN slides on weak Q4 guidance, rebounds on conference call
2min read Texas Instruments (TXN) reported Q3 earnings per share of $1.47, beating analysts’ expectations of $1.37, while revenue came in at $4.15 billion, slightly above the $4.12 billion estimate. This represents an 8% year-over-year decline in revenue, but a 9% sequential increase. Despite the earnings beat, TXN's guidance for Q4 was weaker than expected, with projected revenue between $3.7 billion and $4 billion, compared to the consensus of $4.08 billion, and EPS guidance of $1.07 to $1.29, below the expected $1.35. This led to initial volatility in the stock, which fell by 2% after the report but later rallied by 3% in after-hours trading.
In terms of segment performance, TXN’s analog revenue was $3.22 billion, down 3.9% year-over-year but slightly above the $3.17 billion estimate. Embedded processing revenue declined sharply by 27% year-over-year to $653 million, just under the $659.5 million estimate. The company’s “Other” revenue, which includes revenue from smaller business lines, fell 4.8% to $275 million, missing estimates of $295 million. Despite these declines, TXN’s operating profit of $1.55 billion exceeded the $1.46 billion estimate, while capital expenditures reached $1.32 billion, slightly above the $1.27 billion estimate.
CEO Haviv Ilan noted that while industrial demand continued to decline sequentially, other end markets, such as personal electronics, saw demand rise. Automotive revenue grew by upper single digits, particularly driven by strength in China’s electric vehicle market, though other auto markets remained weaker. Despite these challenges, TXN emphasized its continued investment in long-term growth, particularly in R&D, capital expenditures, and expanding its 300-millimeter chip production capacity, which supports its confidence in future opportunities.
The company’s guidance for Q4 was more cautious, with projected revenue below expectations and EPS forecasted to be weaker than anticipated. Management reiterated that they have not yet seen a clear bottom in the semiconductor downturn, particularly in key markets such as automotive and industrials. However, Ilan noted that the ongoing inventory correction is nearing its end, which could provide some relief in the near future.
On the call with investors, management highlighted China as a bright spot for automotive demand, particularly in the electric vehicle segment. However, they acknowledged that broader global demand in the auto sector, especially outside of China, remains subdued. The company also noted that personal electronics demand continued to rise, contributing to overall growth in non-industrial segments.
Looking ahead, investors will be closely monitoring how TXN navigates the continued weakness in its key end markets, as well as the broader semiconductor industry’s recovery. As the first major semiconductor company to report Q3 earnings, TXN’s results and cautious outlook set the stage for upcoming earnings reports from peers like STMicroelectronics, Microchip, and Analog Devices. Despite some concerns, TXN’s strong cash flow, capital investments, and solid earnings performance this quarter provided some optimism for long-term growth.
