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Texas Instruments Gives Solid Forecast in Sign of Comeback

In Technology
April 24, 2024

(Bloomberg) — Texas Instruments Inc. gave a bullish revenue forecast for the current quarter, indicating that a slump in demand for industrial and automotive components may be easing.

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Sales in the period will be as much as $3.95 billion, the company said in a statement Tuesday. Analysts had estimated $3.78 billion, according to data compiled by Bloomberg. Profit will be $1.05 to $1.25 a share, versus a prediction of $1.17.

The report suggests that customers have begun to resume ordering chips after working through stockpiles of components — a good sign for the broader industry. Texas Instruments, which has the broadest customer base among chipmakers, serves as a bellwether for confidence in the economy — across industries ranging from space hardware to consumer electronics.

Texas Instruments shares rose more than 5% in extended trading following the announcement. They had closed at $165.42 in New York on Tuesday.

The forecast followed more than a year of shrinking sales. Revenue in first quarter declined 16% to $3.66 billion, marking the lowest level since 2020. Analysts had estimated $3.6 billion. Profit was $1.20 a share, down from $1.85 a year earlier.

The stock had lagged behind a rally by the Philadelphia Stock Exchange Semiconductor Index this year. Investors have poured money into companies such as Nvidia Corp., rewarding them for the surge in orders related to artificial intelligence computing.

Texas Instruments, meanwhile, is the biggest maker of analog semiconductors and embedded processors. Its products perform simple but vital functions, such as converting power to different voltages within electronics.

Though some of its chips are used in the same machinery as Nvidia’s processors, many more of its products perform more prosaic roles in household electronics, factory machinery and vehicles.

Such chips generally require less advanced production techniques than digital products, but the company has embarked on an ambitious plan to revamp its manufacturing facilities. As part that effort, Texas Instruments will all but end outsourcing of production.

That should give Texas Instruments an advantage over competitors, particularly nascent ones in China, the company has argued. It is budgeting about $5 billion a year for new plants and equipment through 2026, an outlay that is weighing on profitability.

(Updates with more from results in fifth paragraph.)

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