- TI said its earnings for the third quarter of the fiscal year 2025 included a $0.10 reduction that was not included in its original guidance.
- Baird analyst Tristan Gerra said the ongoing recovery is proceeding at a muted pace, and the gross margin outlook was dismal.
- The midpoint of the fourth-quarter and full-year guidance is below the consensus estimates.
Texas Instruments, Inc. (TXN) stock fell over 8.5% in Tuesday’s extended session following the company’s mixed quarterly results and the lackluster forward guidance, but retail traders remained upbeat on the company’s fundamentals and the stock
TI’s Q3 Snapshot
Dallas, Texas-based TI said its earnings for the third quarter of the fiscal year 2025 included a $0.10 reduction that was not included in its original guidance. The charges were related to restructuring ($0.08) intended to drive operational efficiency, including the planned closures of 250-millimeter fabs, according to a transcript of the call provided by Koyfin.
The key numbers are as follows:
– Earnings per share (EPS): $1.48 Vs $1.51 consensus (Fiscal.ai)’
– Revenue: $4.74 billion Vs. $4.65 billion consensus
Revenue climbed 7% sequentially and 14% year-over-year (YoY), reflecting growth across all end markets. Gross margin was at 57.4%.
TI CEO Haviv Ilan said, “Our cash flow from operations of $6.9 billion for the trailing 12 months again underscored the strength of our business model, the quality of our product portfolio, and the benefit of 300mm production. He added that free cash flow was $2.4 billion.
Among segments, analog revenue (79% of the total revenue) climbed 16% YoY, and the operating profit of the segment was up 13%, while embedded processing revenue rose a more modest 9%.
While speaking on the earnings call, Ilan said, “The overall semiconductor market recovery is continuing, though, at a slower pace than prior upturns, likely related to the broader macroeconomic dynamics and overall uncertainty.” That said, the executive said customer inventories remained at low levels.
Ilan noted that the industrial end market grew 25% YoY, while automotive and personal electronics saw upper-single-digit and low-single-digit growth, respectively. Enterprise systems revenue jumped 35%.
The company stated that capital expenditure (Capex) was at $1.2 billion in the third quarter, with the trailing-twelve-month capex at $4.8 billion.
Commenting on the results, Baird analyst Tristan Gerra said the ongoing recovery is proceeding at a muted pace and the gross margin outlook was dismal. TI’s gross margin is heading toward 55% in the fourth quarter, a 47-quarter low, he noted. “In an environment of muted end-demand recovery, it will take years before the analog industry reaches full utilization rates again,” Gerra said. “We continue to question the very significant capacity investments, at a cycle peak, from TI and peer analog companies.”
TI’s Forward Outlook
The company guided fourth-quarter revenue to a range of $4.22 billion to $4.58 billion and adjusted EPS in the range of $1.13 to $1.139. It clarified that the outlook included changes related to the new U.S. tax legislation. The consensus estimates call for revenue and EPS of $4.52 billion and $1.44, respectively.
Baird’s Gerra noted that the midpoint of the fourth-quarter and full-year guidance is below Baird’s and the consensus estimates.
What Retail Feels About TI’s Q3 Print
Retail optimism toward TI stock abounded following the company’s quarterly results. On Stocktwits, retail sentiment toward the stock shifted to ‘extremely bullish’ as of late Tuesday from ‘bullish’ the day before. The message volume also increased to an ‘extremely high’ level, with the measure rising over 2,400% over the 24 hours leading up to late Tuesday. The stock was among the top 10 trending equity tickers on Stocktwits.
A bullish user said it was a great time to buy TI stock. Another user said the earnings report was “pretty much expected,” adding that they wished they had cash to buy the stock.
A third user said they expected a pop on Wednesday.
The TI Stock
Including Tuesday’s 0.70% gain, TI stock has lost 1.31% this year, grossly underperforming the broader market, the tech sector, and the semiconductor industry. It has traded in a 52-week range of $139.95-$221.69. According to Koyfin, the average price target for the stock is $201.33, implying 11% upside from its Tuesday’s close.
Following the Q3 print, Baird reiterated an ‘Outperform’ rating and $195 price target for the stock.
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