Texas Instruments Beats Q3: Profit Up 77 Percent, Sales Guide Tops Forecasts

Texas Instruments closed out the first big night of chip earnings with a quarter that beat Wall Street on both lines, then forecast fourth quarter sales above what analysts had penciled in. The stock still slipped in after hours trading, a sign of how much good news investors had already priced in.

The headline numbers

Revenue rose 28 percent from a year earlier to 6.06 billion dollars, ahead of the 5.92 to 5.94 billion dollars analysts expected. Profit jumped 77 percent to 2.62 dollars a share, up from 1.48 dollars a year ago and ahead of the 2.44 dollar consensus tracked by FactSet. The company pointed to growth across its industrial, automotive and data center markets.

Texas Instruments makes analog chips, the parts that manage power and turn real world signals like sound, light and temperature into digital data, along with embedded processors that run cars, factory equipment, phones and laptops. Because it sells into nearly every corner of electronics, investors treat the Dallas company as an early read on the whole chip industry, and it is usually one of the first big names to report each season.

The forecast did the heavy lifting

For the fourth quarter, the company expects revenue of 5.80 billion to 6.30 billion dollars, above the average analyst estimate of about 5.73 billion dollars. It put quarterly profit at 2.45 to 2.79 dollars a share, well above the 2.31 dollar consensus. Barron's noted that investors had feared a soft guide from a stock trading at a premium to its peers, and the print removed that worry.

Chief Executive Haviv Ilan pointed to cash generation in the company's statement. "Our cash flow from operations of 9.9 billion dollars 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 said, referring to the larger wafer size at the center of the company's factory buildout.

Analysts took the quarter as steady rather than spectacular. "It's not a blowout quarter," Chandler Willison, a research analyst at M Science, told Barron's, but the report shows "competent, continued execution."

Why it matters

Shares slipped 0.5 percent to 283.10 dollars in after hours trading. The stock had climbed about 94 percent in the first half of the year before cooling, and it sits about 14 percent below the all time high it set in June. The read from the first chip bellwether of the season is that industrial demand, the soft spot for two years, is recovering while AI data center orders keep growing, a combination the rest of the sector will now be measured against.