Texas Instruments Tumbles as Weak Forecast Signals Deeper Chip Slowdown
A disappointing fourth-quarter outlook overshadows recent earnings beat, raising concerns over industrial demand and inventory correction across the semiconductor sector.
Texas Instruments shares fell on Tuesday after the chipmaker projected fourth-quarter revenue and profit that fell short of Wall Street estimates, signaling a more protracted downturn in demand for its industrial and automotive components.
The Dallas-based company, a bellwether for the semiconductor industry due to its broad portfolio of analog and embedded processing chips, saw its stock decline more than 4% in extended trading. The slide came despite third-quarter results that narrowly topped expectations, as investors focused squarely on the bleak forward-looking guidance.
For the upcoming fourth quarter, Texas Instruments forecast earnings per share between $1.13 and $1.39, with a midpoint well below the analyst consensus of $1.40. The company projected revenue in the range of $4.2 billion to $4.6 billion, missing the average estimate of $4.5 billion. The cautious outlook suggests the ongoing inventory correction among its customers has further to run, deepening concerns about the health of the global industrial economy.
"The midpoint of our fourth-quarter guidance reflects what we believe will be a continued market decline," said Dave Pahl, head of investor relations at Texas Instruments, on the company’s earnings call.
Industrial Sector Weakness and Inventory Glut
The forecast adds to a growing body of evidence that, outside of the boom in high-end chips for artificial intelligence, large segments of the semiconductor market are struggling. TI generates a significant portion of its revenue from the industrial and automotive sectors, which are experiencing slowing demand as customers burn through excess inventory built up during the post-pandemic supply chain crunch.
, the company has been particularly exposed to weakness in the industrial market. This sector, which includes everything from factory automation to medical equipment, is undergoing a broad-based inventory correction. While the company’s third-quarter revenue of $4.74 billion and earnings of $1.48 per share slightly exceeded analyst expectations, the positive results were completely overshadowed by the forward guidance.
Analyst Scrutiny and AI Exposure
Wall Street has grown increasingly cautious about Texas Instruments' trajectory. Several analysts have pointed to the company’s limited direct exposure to the generative AI boom that has propelled peers like Nvidia to record valuations. While AI applications require a host of supporting analog chips—a TI specialty—the company is not a primary beneficiary of the massive investment in high-performance computing.
Reflecting this sentiment, Mizuho recently downgraded the stock from "Hold" to "Sell," cutting its price target to $150. , citing concerns over the prolonged cyclical downturn. This contrasts with more optimistic views from firms like Citigroup, which maintained a buy rating but trimmed its price target, highlighting a divided but cautious Street.
As of Tuesday's close, TXN shares were trading around $180.84, down nearly 7% over the past year and significantly off their 52-week high of over $220. With a market capitalization of approximately $163 billion, Texas Instruments remains a heavyweight in the information technology sector, but its performance has lagged the broader semiconductor indices.
A Bellwether's Warning
Texas Instruments' extensive customer list and the use of its products in tens of thousands of different applications make its financial results a key indicator of economic health. The disappointing forecast is likely to have a ripple effect, prompting investors to reassess growth expectations for other chipmakers with significant exposure to industrial and consumer electronics markets.
The company is in the midst of a multi-year, multi-billion dollar capital expenditure plan to build new fabrication plants in the United States. While this strategy is aimed at capturing long-term market share and taking advantage of government incentives, the current downturn is pressuring near-term profitability and free cash flow.
For now, investors will be watching for signs that the inventory glut is easing and that demand in key end-markets is beginning to stabilize. Until then, Texas Instruments' latest guidance serves as a sobering reminder that the path out of the current chip cycle may be longer and more challenging than previously anticipated.