Texas Instruments Q2 Revenue Grows 16% Year-Over-Year, Exceeding Expectations

On July 22, Texas Instruments Inc., an American chip manufacturer, announced that in the second quarter of this year, its revenue increased by 16% year-on-year and 9% quarter-on-quarter, reaching $4.448 billion, which was higher than analysts' previous estimate of $4.36 billion. Operating profit increased by 25% year-on-year to $1.563 billion; net profit increased by 15% year-on-year to $1.295 billion; earnings per share increased by 16% year-on-year to $1.41, also higher than analysts' previous estimate of $1.35.

Image source: Texas Instruments

Texas Instruments indicated that over the past 12 months, the company generated $6.439 billion in operating cash flow, which further highlights the advantages of its business model, the quality of its product portfolio, and the benefits of 300mm wafer production; its free cash flow over the past 12 months reached $1.763 billion.

It is reported that in the past 12 months, Texas Instruments has invested $3.9 billion in research and development and administration, spent $4.9 billion on capital expenditures, and returned $6.7 billion to shareholders.

At the same time, Texas Instruments expects its revenue for the third quarter of this year to be between $4.45 billion and $4.8 billion; although analysts' average revenue forecast for the company's Q3 is $4.57 billion, some estimates go as high as $4.8 billion. Earnings per share are expected to range from $1.36 to $1.60 (this forecast does not include the impact of recent adjustments to the U.S. tax law), with the midpoint of $1.48 slightly below the analysts' average expectation.

According to the median forecast, Texas Instruments' sales in the third quarter of this year will increase by 11% year-on-year, although this represents a slowdown compared to the second quarter of this year.Chief Financial Officer of Texas InstrumentsRafael Lizardi stated that the company remains confident in surpassing the historic revenue peak of $20 billion this year. "We have great confidence in our own strategy and also believe that opportunities outweigh challenges."

Texas Instruments shares plunge 11% as uncertainty clouds recovery in automotive chip demand.

As a key chip supplier for automakers and factory equipment manufacturers, Texas Instruments plunged sharply in early trading on July 23, amid market concerns that the demand surge triggered by tariffs may be short-lived.

Although Texas Instruments' financial forecast for the third quarter of this year exceeded the range predicted by most analysts, it was still more conservative than some investors had expected. During the conference call, the company's stock price fell further as Texas Instruments executives struggled to convince analysts. Analysts pointed out that the company's outlook on the market has turned pessimistic.

The main concern in the market is whether tariffs and trade disputes will hinder Texas Instruments' nascent sales recovery. Although the company's revenue grew by 16% year-over-year in the second quarter, executives admitted they cannot determine how much of this growth was due to "pre-buying" triggered by tariffs, where customers completed purchases ahead of tariff implementation. Rafael Lizardi stated in an interview that the company has 100,000 customers and cannot make an accurate judgment on this.

Texas Instruments executives stated during a conference call that they observed strong order growth at the beginning of the second quarter this year, with some customers possibly increasing inventory to avoid the impact of tariffs. However, order levels have since returned to the expected range for a normal recovery cycle.

Analysts repeatedly asked Texas Instruments management whether they had shifted to a pessimistic outlook on demand prospects. The company responded that, except for the automotive market, all segments it covers are improving. Texas Instruments CEO Haviv Ilan explicitly stated, "The automotive market has not yet recovered."

In the second quarter of this year, Texas Instruments’ revenue in the Chinese market grew by 32% year-on-year. In response, Haviv Ilan stated that this growth was “too strong,” prompting him to take a more cautious view regarding the current quarter’s performance. About one-fifth of Texas Instruments’ revenue comes from the Chinese market, but local chip competitors are on the rise. To reduce reliance on imported semiconductors, Chinese companies have been actively investing in production. Texas Instruments admits that, as the world’s largest semiconductor market, competition in China is extremely fierce.

After the above report was released, Texas Instruments' stock price fell more than 11% in pre-market trading on July 23. Previously, benefiting from the overall rise in semiconductor stocks this year, Texas Instruments' stock price had gained 15% year-to-date as of the close on July 22.

Expansion Game under Growth Expectations and Trade Barriers

Texas Instruments leads the analog chip market, with such chips capable of converting real-world signals like sound and pressure into electronic signals. The company boasts the broadest product portfolio and the largest customer base in the semiconductor industry, making its financial reports an important indicator of demand across multiple industries.

In the long run, Texas Instruments expects chip demand to continue growing, thanks to the increasing prevalence of semiconductors in more products. However, the intensifying competition between China and the United States has cast a shadow over the semiconductor industry, and the tariff policies of the Trump administration have raised concerns about rising prices and slowing demand.

Texas Instruments has invested heavily in building new capacity to enhance supply chain resilience and provide flexible options for the increasingly trade-barrier-laden global environment. The company has four factories outside the United States (including one in China) and is constructing new production facilities around its headquarters in Dallas, Texas, and in Utah, USA.

The downside is that the investment in new factories and equipment has impacted Texas Instruments' cash flow and profitability. The company has pledged to refocus on shareholder returns once the facilities are completed.