Texas Instruments (TXN.O) surpassed third-quarter profit estimates on Tuesday, driven by a recovery in analog chip orders and improving demand from China’s automotive sector. The strong performance sent the company’s shares up 4% in extended trading.
The semiconductor giant, whose chips are used in a variety of electronic devices, benefited from rising orders from smartphone and PC manufacturers, boosted by a rebound in end-market demand. CEO Haviv Ilan noted that revenue from the automotive market saw upper-single-digit growth sequentially, largely due to the rising momentum of electric vehicles (EVs) in China.
“There is momentum for EVs in China, our content is growing there, and that’s what really drove the growth in the third quarter,” Ilan said during a post-earnings call. However, he cautioned that some weakness in the global automotive market is expected to persist.
Texas Instruments posted earnings of $1.47 per share for the quarter ending September 30, exceeding analysts’ estimates of $1.37, according to LSEG data. Revenue fell 8% year-over-year to $4.15 billion, marking the smallest decline in seven quarters.
“Texas Instruments now sees cyclical recovery in non-industrial markets and expects continued growth in the automotive sector, driven by EV adoption, despite mixed demand from non-Chinese auto manufacturers,” said Summit Insights analyst Kinngai Chan.
Texas Instruments’ results are closely monitored as a key indicator of demand across various industries, given its broad application of chips. It is also the first major U.S. chipmaker to report earnings for the September quarter.
Challenges in Industrial Sector
Despite the positive automotive performance, Texas Instruments offered a cautious outlook for the fourth quarter. The company forecast lower-than-expected revenue and profit due to ongoing struggles in the industrial market, where customers are still working to clear existing inventory.
While all other end markets grew during the third quarter, the industrial segment—which relies on chips for tasks such as factory automation—continued to decline sequentially, the company said.
For the fourth quarter, Texas Instruments projected revenue between $3.7 billion and $4.0 billion, falling short of analysts’ average estimate of $4.07 billion.
As the company navigates challenges in the industrial space, it remains focused on capitalizing on the growth in the automotive sector, particularly in China’s burgeoning EV market.
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