Texas Instruments slumps as tariff uncertainty hits demand
Shares in the company slumped 12% in early European trading on Wednesday, tracking losses in extended trading on Wall Street on Tuesday. The shares have risen more than 13% this year.
Chipmakers such as Texas Instruments do not directly face U.S. President Donald Trump's elevated tariffs yet, but the cost of chip-making tools has risen, and some of their end customers have pared back spending.
"Tariffs and geopolitics are disrupting and reshaping global supply chains," CEO Haviv Ilan said on a post-earnings call. "Automotive recovery has been shallow."
TI expects third-quarter earnings between $1.36 per share and $1.60 per share, the midpoint of which was below analysts' estimates of $1.49 per share, according to data compiled by LSEG.
It expects revenue between $4.45 billion and $4.80 billion, compared with market expectations of $4.59 billion. The chipmaker reported sales of $4.45 billion for the second quarter, beating estimates.
ASML (ASML.AS), opens new tab, the biggest supplier of chip-making equipment globally, warned last week that it might not achieve revenue growth in 2026, as uncertainty in tariff talks has spurred U.S. chipmakers to delay finalizing investments.
TSMC, the world's biggest chipmaking factory, said last week that it was being conservative with its outlook to account for tariff-related disruption.
In response to analysts' questions on a post-earnings call about whether tariffs were prompting customers to pull in orders and bumping up revenue, TI CEO Ilan said he "can't rule out the possibility."
"When you see such a strong behavior in quarter two versus quarter one, you have to attribute some of it to the tariff environment," he said.
Analysts also grilled TI executives on what they characterized as a change in tone in remarks from the previous quarter, when leadership had touted indications of a significant demand rebound, independent of tariff-related factors.
"Management voiced caution as they saw some normalization of orders through the second quarter," said Summit Insights analyst Kinngai Chan.
TI has made big investments to expand its capacity for cost-effective 300-millimeter wafer manufacturing technology and plans to shell out more than $60 billion to expand its U.S. manufacturing footprint.
The company also expects factory loadings in the third quarter to remain at the same level as the second quarter, which could hurt margins, Stifel analyst Tore Svanberg said, referring to the volume of chips being manufactured. Increasing factory loadings spreads out fixed costs over more output, typically improving margins.
Svanberg said TI's stock fell post-market because "investors were expecting somewhat more, especially for the third quarter outlook," including for gross margins.
CFO Rafael Lizardi said TI expects gross margin growth to be flat in the third quarter.
The company's profit outlook does not include changes related to recently enacted U.S. tax legislation, TI said, after Trump signed into law a massive package of tax and spending cuts earlier this month.
TI expects the new tax regime to result in a higher tax rate in the third quarter and through 2025, which will eventually decrease in 2026 and beyond, Ilan said.
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