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Updated: 23-Jul-25 11:14 ET
Texas Instruments under pressure despite upside Q2 results, tone seemed more subdued (TXN)

Texas Instruments (TXN -12.5%) is under pressure today despite reporting upside Q2 results last night and guiding in-line for Q3. The issue was not so much in the numbers, we think investors are more concerned about the more cautious tone on the earnings call last night. In fact, management fielded some questions directly related to the change in tone.

  • Let's dig into the quarter a bit. This semiconductor giant posted Q2 revs of $4.45 bln, which was up 16.4% yr/yr, and was at the high end of $4.17-4.53 bln prior guidance. This was TXN's strongest yr/yr growth since 3Q21. Analog revenue grew 18% yr/yr while Embedded Processing grew 10%.
  • TXN continues to see two distinct dynamics at play: First, tariffs and geopolitics are disrupting and reshaping global supply chains. TXN is working closely with customers by leveraging its global manufacturing flexibility. Second, the semiconductor cycle is playing out. The cyclical recovery is continuing and customer inventories remain at low levels. In times like these, it is important to have capacity and inventory, and TXN feels well positioned.
  • Breaking it down by end market, Industrial grew in the upper teens yr/yr and mid-teens sequentially, with recovery across all sectors. Automotive increased mid-single digits yr/yr, but was down low-single digits sequentially. Personal Electronics grew 25% yr/yr and upper single digits sequentially. Enterprise Systems grew about 40% yr/yr and 10% sequentially. And lastly, Communications Equipment grew more than 50% yr/yr and was up about 10% sequentially.
  • On its Q1 call in April, TXN talked about seeing a recovery across its end markets with industrial showing broad recovery. It also said it felt it was at the bottom of the semiconductor cycle. However, in Q2, TXN saw a sequential decline in automotive. And on its Q2 call, while management said the cyclical recovery is continuing, it also said it was preparing for a range of scenarios.
  • TXN responded saying that it continues to see a cyclical recovery. It said Industrial is already recovering and actually accelerated a bit. PE, Enterprise and Comms are also recovering. Regarding Automotive, TXN concedes it has not recovered yet. Overall, the call seemed a bit more subdued to us and some analysts noticed and asked about it.

The Q2 results and Q3 guidance was decent. However, we think two things are driving the stock lower today. First, the stock had rallied more than 50% from its April lows as concerns about the tariffs have faded somewhat. Second, TXN sounded more upbeat on the Q1 call in April. As such, we think sentiment was running high heading into this report. We think the perhaps the more subdued tone and the big run in the stock prompted investors to lock in some profits.

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