Texas Instruments Inc (TXN) Q2 2025 Earnings Call Highlights: Strong Revenue Growth Amid Market ...

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Revenue: $4.4 billion, up 9% sequentially and 16% year-over-year.
Analog Revenue Growth: 18% year-over-year.
Embedded Processing Growth: 10% year-over-year.
Other Segment Growth: 14% year-over-year.
Gross Profit: $2.6 billion, 58% of revenue.
Operating Expenses: $1.0 billion, up 5% year-over-year.
Operating Profit: $1.6 billion, 35% of revenue, up 25% year-over-year.
Net Income: $1.3 billion, $1.41 per share.
Cash Flow from Operations: $1.9 billion in the quarter.
Capital Expenditures: $1.3 billion in the quarter.
Free Cash Flow: $1.8 billion on a trailing 12-month basis.
Dividends Paid: $1.2 billion in the quarter.
Stock Repurchases: $302 million in the quarter.
Total Debt: $14.15 billion with a weighted average coupon of 4%.
Inventory: $4.8 billion, 231 days, down 9 days sequentially.
Third Quarter Revenue Guidance: $4.45 billion to $4.80 billion.
Third Quarter EPS Guidance: $1.36 to $1.60.
Warning! GuruFocus has detected 11 Warning Signs with TXN.
Release Date: July 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Revenue for the second quarter was $4.4 billion, marking a 9% sequential increase and a 16% year-over-year growth.
Analog revenue grew 18% year-over-year, and embedded processing grew 10%, indicating strong performance in key segments.
Enterprise systems revenue increased by about 40% year-over-year, showcasing significant growth in this sector.
Gross profit margin improved by 110 basis points sequentially, reaching 58% of revenue.
The company returned $6.7 billion to shareholders over the past 12 months through dividends and stock repurchases.
Negative Points
Automotive market revenue decreased slightly sequentially and showed only mid-single-digit growth year-over-year, indicating a slower recovery in this segment.
The company issued $1.2 billion of debt, increasing total debt outstanding to $14.15 billion.
Inventory levels increased to $4.8 billion, with days of inventory at 231, which could indicate potential overstocking.
Guidance for the third quarter suggests a typical seasonal quarter with revenue growth of only 11%, which is lower than previous expectations.
Concerns about tariffs and geopolitical uncertainties continue to impact supply chains, adding complexity to future planning.
Q & A Highlights
Q: Can you explain the change in tone regarding the cyclical recovery and the impact of tariffs on your outlook? A: Haviv Ilan, CEO, explained that while the cyclical recovery is ongoing, with four out of five markets showing recovery, the automotive market remains shallow. The geopolitical environment, including tariffs, continues to create uncertainty, necessitating flexibility in operations. The company is prepared to support customers despite these challenges.
Q: Are you expecting gross margins to decline in the next quarter despite revenue growth? A: Rafael Lizardi, CFO, clarified that gross margins are expected to remain flat despite higher depreciation costs. The net of other income and expenses, including interest expenses, will be unfavorable by about $20 million due to lower cash levels and increased debt interest expenses.
Q: How is the industrial segment performing, particularly in light of trade and tariff concerns? A: Mike Beckman, Head of Investor Relations, noted that the industrial segment showed broad recovery across all sectors, continuing the trend from the first quarter. The recovery was not significantly impacted by tariff concerns.
Q: What is the outlook for capital expenditures and depreciation for the coming years? A: Rafael Lizardi stated that there are no changes to the CapEx and depreciation framework. For 2025, CapEx is expected to be $5 billion, and for 2026, it will range between $2 billion and $5 billion. Depreciation for 2025 is expected to be between $1.8 billion and $2 billion, and for 2026, between $2.3 billion and $2.7 billion.
Q: How is the automotive market performing, particularly in China, and is there any share loss? A: Haviv Ilan explained that the automotive market in China ran hot last year, and current dynamics are more about inventory correction rather than share loss. The automotive market has not yet shown signs of broad recovery, but it is expected to follow the industrial market's recovery pattern.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.