Texas Instruments Surges as Chip Recovery Accelerates

Texas Instruments Surges on Strong First-Quarter Forecast

Photographer: Desiree Rios/Bloomberg

Texas Instruments Inc. saw its shares jump in after-hours trading following the release of an unexpectedly positive outlook for the first quarter, suggesting that demand for industrial and automotive products is rebounding.

The company announced that it anticipates revenue between $4.32 billion and $4.68 billion for the upcoming quarter, surpassing the average analyst forecast of $4.42 billion. Earnings per share are projected to reach up to $1.48, outpacing the expected $1.26.

Photographer: Desiree Rios/Bloomberg

This optimistic guidance suggests that customers have cleared excess inventory and are resuming purchases. CEO Haviv Ilan, who leads the world’s largest analog chip manufacturer, noted that order volumes improved throughout the last quarter.

Following the announcement, Texas Instruments’ stock climbed roughly 8% in after-market trading. Prior to the report, shares had already risen 13% this year, closing at $196.63 on Tuesday.

Analog semiconductors, which translate physical signals into electronic data, are essential in vehicles, industrial machinery, and many other applications. As a result, Texas Instruments’ performance is often seen as a reflection of broader economic trends and business confidence.

Manufacturers of industrial equipment and automobiles typically place chip orders well in advance, given the lengthy production and assembly timelines for electronic components.

During a call with analysts, Ilan highlighted progress in the industrial sector, where Texas Instruments supplies chips for factory automation. However, he acknowledged that this segment has not yet fully recovered to previous highs.

“The market remains unsettled,” Ilan remarked. “We’ll have to watch how things develop.”

The company’s data center division, once a minor contributor, is now expanding rapidly and becoming a more significant part of the business, according to Ilan, who expects this growth to persist.

Texas Instruments’ upbeat forecast also boosted shares of other analog chipmakers. Analog Devices Inc. rose as much as 5.3% on Tuesday, while On Semiconductor Corp. gained 6%.

For the fourth quarter, Texas Instruments reported a 10% increase in sales to $4.42 billion, with earnings of $1.27 per share. These results were close to analyst expectations of $4.43 billion in revenue and $1.30 in earnings per share.

Although the company’s revenue has been rising compared to the previous year—when excess inventory weighed on sales—the recovery has taken longer than many on Wall Street anticipated. The stock had declined after the last two earnings releases as investors waited for clearer signs of a turnaround.

Analyst Insights and Company Strategy

Jay Goldberg, an analyst at Seaport Group LLC, commented that the recovery now appears to be gaining momentum. “It looks like they’re catching the upswing,” he said in a Bloomberg Television interview. “Sales are finally outpacing inventory growth for the first time in a long while.”

To manage the slowdown, the Dallas-based firm reduced production at certain facilities to prevent overstocking. As the oldest company in the semiconductor sector, Texas Instruments is emerging from a period of significant investment in new U.S. plants. Unlike many peers, the company is moving away from outsourcing and is working to bring most of its manufacturing capacity in-house.

For 2024, Texas Instruments plans to spend between $2 billion and $3 billion on capital expenditures, a decrease from the previous year.

The company is also navigating ongoing trade disputes and the risk of tariffs. A longer-term challenge is China’s effort to strengthen its domestic chip industry, which could reduce its reliance on U.S. suppliers like Texas Instruments.

With reporting by Katie Greifeld and Romaine Bostick.

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