Texas Instruments (TI) exceeded third-quarter profit expectations, driven by a recovery in demand for its analog chips, particularly in the automotive sector in China.
This strong performance pushed the company’s shares up 4% in extended trading. However, the chipmaker issued a cautious outlook for the fourth quarter due to continued weakness in its industrial segment, its largest revenue source.
TI reported third-quarter revenue of $4.15 billion, down 8.4% year-over-year but slightly above analyst forecasts of $4.12 billion. Earnings per share stood at $1.47, surpassing the estimated $1.37. The company’s performance benefited from a resurgence in orders for analog chips used in smartphones, PCs, and electric vehicles (EVs), especially in China’s expanding EV market.
Despite these gains, Texas Instruments’ outlook for the fourth quarter fell short of market expectations. The company projected revenue between $3.7 billion and $4 billion, below the analyst consensus of $4.08 billion. Likewise, expected earnings per share were forecast at $1.07 to $1.29, lower than the $1.35 analysts had anticipated.
The automotive sector, fueled by China’s growing EV demand, has been a bright spot for the company. However, TI’s industrial market, which accounts for a significant portion of its sales, continued to weaken, contributing to the company’s subdued forecast. CEO Haviv Ilan acknowledged this challenge, noting that while other segments saw growth, the industrial business continued to decline sequentially.
Texas Instruments, the largest producer of analog chips, is seen as a bellwether for the broader semiconductor industry. Investors often look to its earnings for insight into overall chip demand. The company’s analog chips are essential for numerous electronic devices, performing functions such as power conversion and signal processing.
Despite the near-term concerns about industrial demand, TI remains focused on long-term investments. The company is investing heavily in new manufacturing plants to bring more production in-house, a strategy aimed at gaining a cost advantage over competitors. While these investments are currently weighing on profitability, TI expects them to boost its competitiveness in the future.
Although the company’s stock is up 14% year-to-date, it fell slightly in after-hours trading following its downbeat fourth-quarter forecast. This mixed performance reflects the ongoing uncertainty in the semiconductor market, which has been characterized by fluctuating demand and uneven recovery across various sectors.
Reuters, Bloomberg, and Market Watch contributed to this report.
