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Texas Instruments (TXN) is trading sharply lower today after reporting its Q3 results last night. The company missed EPS expectations for the first time in two years, while revenue rose 14.2% yr/yr to $4.74 bln, topping estimates. The bigger disappointment came from its Q4 guidance, which was notably soft. Q4 EPS guidance of $1.13-1.39 fell below consensus, and the midpoint of its revenue range at $4.22-4.58 bln also came in short of expectations.

• Management said the semiconductor recovery continues but at a slower pace than prior cycles, as customers remain cautious amid macro and tariff uncertainty.
• Bookings were steady compared to Q2, and the quarter progressed largely as expected. Customer inventories remain low and noted that depletion "appears" to be behind them.
• By end market, industrial rose about 25% yr/yr, automotive increased upper-single digits, and personal electronics improved modestly. Enterprise systems and communications equipment were strongest, up roughly 35% and 45% yr/yr, respectively.
• In China, activity returned to normal following Q2's pull-forward, with management expecting that to continue. Industrial was the only market that didn't grow sequentially but was still up 40% yr/yr.
• The softer Q4 guide reflects moderating wafer starts after ramping inventory (plans to keep levels flat-to-down), softer revenue tied to a slower recovery, and higher depreciation, all weighing on fab loadings and gross margins, which declined about 50 bps sequentially.

Briefing.com Analyst Insight

TXN is facing renewed selling pressure as investors focus on the softer outlook rather than the solid top-line growth in Q3. Management's tone remained cautious, describing the recovery as more moderate than past cycles while emphasizing flexibility to navigate a wide range of outcomes. Automotive trends improved, but broader trends remain uneven, and profitability is being squeezed by lower factory utilization and rising depreciation. While TXN continues to emphasize free cash flow growth and sees long-term opportunity in data-center applications, near-term performance is defined by slower revenue momentum and margin compression.