Texas Instruments announces third-quarter earnings: Weak demand for orders spreads to industrial chips

Texas Instruments reported its third-quarter financials on Tuesday, local time, with net profit rising to $2.47 per share. Revenue rose 13% to $5.24 billion, the sixth straight quarter of double-digit percentage growth.

The company expects fourth-quarter revenue of $4.4 billion to $4.8 billion, missing analysts' average estimate of $4.93 billion. Earnings per share of $1.83 to $2.11 also missed expectations.

Texas Instruments has the largest customer list of its peers in the industry, making its forecast a bellwether for demand across the economy, but auto and industrial machinery makers contribute more than 60% of revenue. Some industrial customers are now slowing their orders, but the company said demand in the auto market remains strong.

"During the quarter, we experienced expected softness in personal electronics as well as weak expansion across the industrial segment," CEO Rich Templeton said in a statement. Overall, orders deteriorated as the current quarter progressed, TI said. , the phenomenon of order cancellations has increased.

Many of the industry's biggest companies -- including Samsung Electronics, Intel and Nvidia -- have warned that demand is falling sharply.

Shares of Texas Instruments have also fallen this year, even though they have outperformed most of their peers. They're down 14% in 2022, making Texas Instruments the fourth-best stock in this year's index.

Chief Financial Officer Rafael Lizardi said the jury was still out on whether the current drop in demand was simply customers cutting inventories to reduce inventory, or if there were deeper concerns about the economy.

"Even if the economy stabilizes, you're still in the semiconductor cycle, and I wouldn't be surprised if customers had excess inventory over the past two years," he said. "Now we're going the other way."

Texas Instruments makes 80 percent of its chips in its own factories, and the company is expanding its in-house foundry. The company said that would lead to higher levels of capital spending in the years ahead, leading some analysts to worry that those spending would squeeze its buyback budget.

Unlike its peers, TI has no plans to slow construction of new factories, Lizardi said.