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Investors are singing Texas Instruments' (TXN +6%) praises today after the analog and embedded chip manufacturer posted wide earnings and revenue beats in Q1 and issued upbeat Q2 guidance, mentioning that thus far, it has yet to see any material impact from tariffs. At the same time, management stated that it has continued to observe a recovery across its end markets, including industrial, its largest segment, which finally returned to sequential growth following seven straight quarters of declines.

Given the current uncertain macroeconomic environment, which TXN warned could still cause disruptions to its business, customers, and suppliers, these highlights were sufficient to ignite a relief rally today, helping shares rebound following a 25% sell-off from late February highs.

• Supported by a long-awaited return to growth in industrial, TXN delivered yr/yr consolidated revenue growth for the first time since 3Q22, posting an 11.1% improvement to $4.07 bln. Sequentially, revenue inched 1.5% higher. When backing out a one-time $0.05 benefit, EPS grew to $1.23, marking TXN's widest beat in almost three years.
• Outside of personal electronics, which endured typical seasonality, leading to a mid-teens decline, every end market registered sequential gains in Q1. Industrial, which comprises around 35% of overall revenue, expanded by upper-single digits. Automotive, which also accounts for 35% of total sales, increased by low single digits. Enterprise systems and communications equipment grew by mid-single digits and around 10%, respectively.
• TXN is approaching current market dynamics from a cautiously optimistic perspective. On the one hand, trade policy is fluid, changing weekly and sometimes daily, stirring unease across the global landscape. However, on the other hand, TXN commented that it is at the bottom of the semiconductor cycle with customer inventories at low levels across all end markets. Management stressed the importance of having capacity and inventory during a period like this, adding that it is well-positioned on those fronts.
• As a result, TXN issued upbeat Q2 guidance, projecting EPS of $1.21-1.47 and revs of $4.17-4.53 bln, the midpoints of both exceeding analyst forecasts. The company noted that, at the moment, it sees no near-term impacts to Q2 numbers but added that the future is cloudy, bracing for a range of possible scenarios for the back half of 2025 and going into 2026.

After hints of a broad recovery last quarter, TXN followed through in Q1. Management reiterated that the cycle has hit bottom, pointing to stacking evidence from customers that they are considerably short on inventory, with some reporting just a few days of inventory on hand. The most promising sign from Q1 is that the recovery is branching out to more channels and geographies as well as finally affecting TXN's critical industrial end market. While tariffs keep TXN cautious, the company may be finally turning a corner following an extended inventory correction cycle.