Texas Instruments (TXN, Financial) saw a 6% stock increase as it reported strong Q1 earnings and revenue, surpassing expectations. The company issued optimistic guidance for Q2, noting no significant tariff impacts so far. Management highlighted a recovery in its end markets, especially industrial, which returned to growth after seven consecutive quarters of declines.
Despite the uncertain macroeconomic environment, TXN's positive results sparked a relief rally, helping shares bounce back from a 25% drop since February.
- TXN achieved year-over-year consolidated revenue growth for the first time since Q3 2022, with an 11.1% increase to $4.07 billion. Revenue also rose 1.5% sequentially. Excluding a one-time $0.05 benefit, EPS increased to $1.23, marking the company's largest beat in nearly three years.
- All end markets, except personal electronics, which faced seasonal declines, showed sequential gains in Q1. Industrial, accounting for 35% of revenue, grew by upper-single digits. Automotive, also 35% of sales, increased by low single digits. Enterprise systems and communications equipment grew by mid-single digits and around 10%, respectively.
- TXN takes a cautiously optimistic view of current market conditions. While trade policy remains fluid and unpredictable, the company believes it is at the bottom of the semiconductor cycle, with low customer inventories across all end markets. Management emphasized the importance of having adequate capacity and inventory during this period and stated that TXN is well-prepared.
- For Q2, TXN projects EPS of $1.21-1.47 and revenue of $4.17-4.53 billion, both exceeding analyst forecasts at their midpoints. Although TXN currently sees no short-term impacts on Q2 figures, it remains cautious about the latter half of 2025 and into 2026, preparing for various scenarios.
Following signs of recovery last quarter, TXN confirmed progress in Q1. Management reiterated that the cycle has bottomed out, with customers reporting significantly low inventory levels. The recovery is expanding across channels and geographies, positively impacting TXN's crucial industrial market. While tariffs remain a concern, the company appears to be overcoming an extended inventory correction cycle.
