TI reports declining financial performance, anticipates slight sales growth in current quarter

Texas Instruments (TI) announced its third-quarter 2024 financial results on October 22. Revenue for the third quarter totaled US$4.15 billion, down 8.4% compared to the same period last year. Operating profit declined 18% compared to the same period last year to US$1.55 billion, while net income also decreased 18% compared to the same period last year to US$1.33 billion.

Sales performance varied across product segments in the third quarter. Analog revenue, which constitutes the majority of TI's sales, fell 3.9% compared to the same period last year to US$3.22 billion. Embedded processing revenue dropped 27% compared to the same period last year to US$653 million, and other revenue decreased 4.8% compared to the same period last year to US$275 million.

For the fourth quarter, TI forecasts revenue between US$3.70 billion and US$4.00 billion. The midpoint of this guidance, US$3.85 billion, falls below the current Bloomberg consensus estimate of US$4.08 billion. The company also anticipates earnings per share to range from US$1.07 to US$1.29.

Bloomberg Intelligence released a note suggesting that the outlook likely confirms increasing concerns about persistent weakness in the industrial end market and potential escalation in the automotive sector, serving as a significant sentiment driver for other analog semiconductor companies.

Bloomberg quoted Truist Securities' note reporting that the outlook is below expectations and aligns with weakening business conditions across the semiconductor market.

Haviv Ilan, president and CEO of TI, said in prepared remarks that the industrial market experienced a slight decline in low single digits as customers continued to reduce their inventory levels. In contrast, the automotive market saw an increase in upper single digits, primarily driven by strong demand in China. Personal electronics grew by approximately 30%, while enterprise systems and communications equipment rose by about 20% and 25%, respectively, reflecting a cyclical recovery in these three markets.

During the earnings call, Ilan elaborated on the company's automotive business performance. He noted that strong growth in China, driven by the increasing adoption of electric vehicles, offset weakness in other regions. While automotive revenue in China reached an all-time high in the third quarter, Ilan expects continued weakness in the rest of the automotive market, leading to a seasonal decline in revenue in the fourth quarter.

"Regarding the automotive market, yes, it did grow. We said high single digits, around 7% to 8%. Most of that growth was driven by our business in China," said Ilan.

Discussing the personal electronics market's performance, Ilan noted that revenue in this sector peaked in the third quarter of 2021, which typically represents the strongest quarter each year due to seasonal trends. After experiencing a downturn in early 2023, there has been continuous improvement; however, current levels remain about 20% below the 2021 peak, indicating potential for further growth.

During the earnings call, TI CFO Rafael Lizardi addressed questions about the company's strategy regarding utilization rates and inventory management amid cyclical uncertainty. He confirmed that the company plans to increase its inventory, currently at US$4.3 billion, to support anticipated revenue growth, particularly in 2025.

Lizardi added that while the company increased inventory by a couple of hundred million dollars in the third quarter, it expects to add several hundred million more in the fourth quarter. Despite a slight decrease in factory loading anticipated for the fourth quarter, the company remains confident in its inventory strategy.

Source: TI, October 2024

Source: TI, October 2024