Texas Instruments (TXN.O) exceeded second-quarter profit expectations on Tuesday, driven by stable demand for analog chips from sectors like personal electronics and reduced manufacturing costs.
A rebound in sales of smartphones and personal computers has helped companies clear excess inventory built up during the pandemic, leading to increased orders for Texas Instruments’ chips.
“Analog demand has reached its lowest point and is beginning to show incremental growth,” noted Logan Purk, an analyst at Edward Jones.
Texas Instruments’ shares rose 3% in extended trading, adding to a roughly 16% gain year-to-date. This positive reaction came despite a 3.7% decline during regular trading hours, following a cautious forecast from NXP Semiconductors (NXPI.O). Angelo Zino, senior equity analyst at CFRA Research, attributed the after-hours gain to TI’s in-line third-quarter guidance, which alleviated concerns about weaker analog demand.
CEO Haviv Ilan reported a 20% sequential growth in TI’s business in China during the second quarter, noting that customers have ceased managing their inventories in that region.
Earnings for the second quarter were reported at $1.22 per share, surpassing the $1.16 estimate. TI’s third-quarter revenue forecast midpoint of $4.1 billion was consistent with analysts’ expectations. The profit increase was also aided by higher factory loadings, which allowed fixed costs to be spread across more output.
CFO Rafael Lizardi attributed lower manufacturing costs to increased internal production and a greater focus on 300-millimeter wafer technology. Elliott Investment Management, which had previously pushed TI to improve free cash flow and reduce large investments in 300-millimeter fabs, welcomed the company’s recent capital allocation measures. Capital expenditure for the quarter was $1.06 billion, below the anticipated $1.25 billion.
Despite this, some analysts believe TI will likely maintain its capital investment strategy.
