TI Q3 Analog Chip Demand Disappoints, Shares Drop 11.4%

According to reports, Texas Instruments (TI) faced investor concerns after its quarterly earnings forecast fell short of expectations, citing softer-than-anticipated demand for its analog chips from some customers and ongoing tariff-related uncertainties. Following the announcement on Tuesday, the company's shares plunged 11.4% in after-hours trading. Despite this drop, TI's stock has gained over 13% year-to-date.

While chip manufacturers like TI have not yet been directly impacted by U.S. President Donald Trump's tariff increases, the cost of semiconductor manufacturing equipment has risen, and some end-market customers have reduced their spending.

TI's CEO, Haviv Ilan, highlighted that “tariffs and geopolitical tensions are disrupting and reshaping global supply chains,” adding that the automotive sector's recovery remains sluggish.

According to data compiled by the London Stock Exchange, TI projects third-quarter earnings per share (EPS) between $1.36 and $1.60, with the midpoint falling slightly below analysts' consensus estimate of $1.49. The company anticipates revenue in the range of $4.45 billion to $4.8 billion, compared to market expectations of $4.59 billion. For the second quarter, TI reported sales of $4.45 billion, surpassing forecasts.

When asked whether tariffs might have prompted customers to increase orders and boost revenues, CEO Ilan acknowledged, “We cannot rule out that possibility, especially given the strong performance in Q2, which may partly be attributed to the tariff environment.”

TI continues to invest heavily to expand capacity for its cost-efficient 300mm wafer manufacturing technology and plans to allocate more than $60 billion to broaden its U.S.-based manufacturing operations.

The company also expects factory utilization in the third quarter to remain flat compared to Q2, which could pressure profit margins. Higher factory utilization typically spreads fixed costs over greater output, improving profitability.

Chief Financial Officer Rafael Lizardi noted that third-quarter gross margin growth is expected to be flat, falling short of analyst projections.

TI clarified that its profit outlook does not include any changes resulting from recent U.S. tax legislation. President Trump signed a major tax cut and spending reduction bill in early July.

CEO Ilan indicated that the new tax framework is expected to raise the company's tax rate for Q3 and 2025, with a decline anticipated starting in 2026 and beyond.