Analog chip manufacturer Texas Instruments (NASDAQ:TXN) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 11.1% year on year to $4.07 billion. The company expects next quarter’s revenue to be around $4.35 billion, close to analysts’ estimates. Its GAAP profit of $1.28 per share was 20.2% above analysts’ consensus estimates.
Revenue: $4.07 billion vs analyst estimates of $3.91 billion (11.1% year-on-year growth, 4.1% beat)
EPS (GAAP): $1.28 vs analyst estimates of $1.06 (20.2% beat)
Adjusted EBITDA: $1.77 billion vs analyst estimates of $1.66 billion (43.5% margin, 6.2% beat)
Revenue Guidance for Q2 CY2025 is $4.35 billion at the midpoint, roughly in line with what analysts were expecting
EPS (GAAP) guidance for Q2 CY2025 is $1.34 at the midpoint, beating analyst estimates by 11.9%
Operating Margin: 32.5%, down from 35.1% in the same quarter last year
Free Cash Flow was -$274 million compared to -$231 million in the same quarter last year
Inventory Days Outstanding: 243, in line with the previous quarter
Market Capitalization: $148 billion
StockStory’s Take
Texas Instruments’ first quarter results reflected improvement across key end markets, particularly in industrial and automotive. Management attributed the revenue growth to broad-based recovery, with CEO Haviv Ilan noting, “We continue to see recovery across our end markets, with industrial showing broad recovery across sectors and geographies.” The company also highlighted that customer inventories are at low levels, which contributed to stronger ordering activity and sequential growth in both Analog and Embedded Processing segments.
Looking ahead, management’s guidance for the next quarter remains cautious due to ongoing global uncertainty, including tariffs and geopolitical risks affecting supply chains. Ilan emphasized the unpredictable environment, stating, “We remain cautious as there are many things still changing, and we are working with our customers to understand and support their needs.” The company is preparing for multiple market scenarios and will continue to focus on dependable capacity and supply chain flexibility to address customers’ evolving requirements.
Key Insights from Management’s Remarks
Management focused on the interplay between broad market recovery and ongoing uncertainty driven by tariffs and supply chain volatility. The quarter’s performance benefited from industrial sector strength, while the company’s operational flexibility was highlighted as a core advantage.
Industrial Market Recovery: Industrial end markets showed broad-based sequential and year-over-year growth, ending a seven-quarter decline. Management described customer orders as reflecting genuinely improved demand rather than one-off or anxious purchasing.
Low Customer Inventories: Executives noted that customers across all end markets are running lean on inventory, increasing the likelihood of replenishment orders and contributing to recent revenue gains.
Tariff and Geopolitical Impact: Management discussed the challenges posed by new tariffs and evolving trade policies, emphasizing the need for "geopolitically dependable capacity" and the company’s ability to shift manufacturing and logistics to support customers globally.
Operational Flexibility: Texas Instruments outlined its manufacturing footprint, including dual-sourcing capabilities and rapid logistics adaptation, as a key factor in maintaining customer support despite changing external conditions.
Competitive Dynamics in China: Leadership acknowledged intensifying competition from Chinese firms, particularly in complex, application-specific analog products, but asserted that Texas Instruments’ portfolio breadth and supply chain dependability remain differentiators.
Drivers of Future Performance
Management’s outlook for the coming quarters centers on ongoing industrial recovery, the company’s flexible manufacturing approach, and the risks posed by tariffs and global supply chain shifts.
Continued Industrial Demand: The industrial segment is expected to remain a growth driver as customers maintain low inventories and replenish stock, but management cautions that this trend could shift if economic anxiety increases.
Tariff and Supply Chain Uncertainty: New and potential tariffs create risks for both revenue predictability and cost structure. The company’s ability to shift production and logistics is positioned as a partial mitigation, but management acknowledges that further changes are possible.
Competitive Pressures: Intensifying competition in China, especially from local analog chipmakers, represents an ongoing risk. Management believes Texas Instruments’ diverse product offering and manufacturing scale will help defend its market share, but the landscape remains dynamic.
Top Analyst Questions
Timothy Arcuri (UBS): Asked about the impact of tariffs and whether recent order strength reflected pull-ins. CEO Haviv Ilan clarified that industrial growth appeared consistent and broad-based, not a result of anxious buying ahead of tariffs.
Vivek Arya (Bank of America Securities): Queried inventory trends and gross margin direction. CFO Rafael Lizardi said gross margin outperformed expectations due to higher revenue and a greater mix of industrial sales, with factory loadings expected to increase modestly next quarter.
Stacy Rasgon (Bernstein Research): Sought clarification on whether customers were pulling forward orders in anticipation of tariffs. Ilan responded that the data pointed to a normal cycle recovery, with no signs of panic ordering.
Tore Svanberg (Stifel): Asked about regional disparities in demand due to tariff differences. Ilan explained that Texas Instruments is working closely with customers to optimize manufacturing flows and logistics, leveraging its global footprint.
William Stein (Truist Securities): Inquired about growth drivers between pricing and volume, and the competitive environment in China. Ilan stated growth was primarily volume-driven and acknowledged that Chinese competitors are becoming more capable, especially in application-specific areas.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will monitor (1) the pace and durability of industrial market recovery and any signs of changing customer inventory strategies, (2) Texas Instruments’ execution on shifting manufacturing and logistics to mitigate tariff and supply chain risks, and (3) the impact of intensifying competition in China on both revenue mix and pricing. We are also attentive to how ongoing investments in manufacturing flexibility and product breadth contribute to long-term free cash flow growth.
Texas Instruments currently trades at a forward P/E ratio of 28.3×. Is the company at an inflection point that warrants a buy or sell? Find out in our free research report.
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