Texas Instruments Inc (NASDAQ:TXN) stock plunges 12.39% (As on July 23, 11:19:38 AM UTC-4, Source: Google Finance) after the company reported second-quarter results that beat analysts’ expectations for revenue and earnings but a third-quarter forecast missed estimates. Sales in the company’s analog chip business, its largest, rose 18% to $3.5 billion, surpassing the StreetAccount estimate of $3.39 billion for the segment. Net income rose 15% to $1.3 billion from $1.13 billion a year ago. Chipmakers such as Texas Instruments do not directly face U.S. President Donald Trump’s elevated tariffs yet, but the cost of chip-making tools has risen, and some of their end customers have pared back spending.
Moreover, the Embedded Processing segment, which grew by 10%. The data center segment also showed impressive growth, expanding over 50%. The industrial market increased upper teens year on year and mid teens sequentially, with recovery across all sectors. The automotive market increased mid single digits year on year and decreased low single digits sequentially. Personal electronics grew around 25% year on year and grew upper single digits sequentially. Enterprise systems grew about 40% year on year and grew about 10% sequentially. And lastly, communications equipment grew more than 50% year on year and was up about 10% sequentially.
Meanwhile, TXN has made big investments to expand its capacity for cost-effective 300-millimeter wafer manufacturing technology and plans to shell out more than $60 billion to expand its U.S. manufacturing footprint. The company also expects factory loadings in the third quarter to remain at the same level as the second quarter, which could hurt margins.
TXN in the second quarter of FY25 has reported the adjusted earnings per share of $1.41, beating the analysts’ estimates for the adjusted earnings per share of $1.35. The company had reported the adjusted revenue growth of 16 percent to $4.45 billion in the second quarter of FY25, beating the analysts’ estimates for revenue of $4.36 billion.
Texas Instruments said it expects current-quarter earnings between $1.36 and $1.60 per share, while analysts were looking for $1.50 per share. The company forecast revenue of $4.45 billion to $4.8 billion, for a midpoint of $4.625 billion. Analysts were expecting revenue of $4.59 billion. TXN expects the new tax regime to result in a higher tax rate in the third quarter and through 2025, which will eventually decrease in 2026 and beyond. The company expects gross margin growth to be flat in the third quarter.