Texas Instruments Incorporated Q2 FY2025 earnings call

• Haviv Ilan provided an overview of the second quarter, noting revenue was as expected, with growth in Analog, Embedded, and other segments, and discussed 2 dynamics: tariffs/geopolitics disrupting supply chains and semiconductor cycle recovery with low customer inventories.
• Rafael Lizardi reviewed profitability and capital management: gross profit was $2.6 billion (58% of revenue), operating expenses were $1 billion, operating profit was $1.6 billion (35% of revenue), net income was $1.3 billion. Capital management included cash flow from operations of $1.9 billion, CapEx of $1.3 billion, dividends and stock repurchases of $1.5 billion, and a strong balance sheet with $5.4 billion in cash.

Revenue for the second quarter was $4.4 billion. Analog revenue grew 18% year-over-year and 9% sequentially. Embedded Processing grew 10% year-over-year and 9% sequentially. The other segment grew 14% year-over-year. By end market: Industrial market increased upper teens year-on-year and mid-teens sequentially; Automotive market increased mid-single digits year-on-year and decreased low single digits sequentially; Personal electronics grew around 25% year-on-year and upper single digits sequentially; Enterprise systems grew about 40% year-on-year and about 10% sequentially; Communications equipment grew more than 50% year-on-year and was up about 10% sequentially.

• Expected third quarter revenue in the range of $4.45 billion to $4.80 billion and earnings per share in the range of $1.36 to $1.60, assuming an effective tax rate of about 12% to 13% and not including recent U.S. tax legislation changes.
• CapEx for 2025 expected to be $5 billion; for 2026, between $2 billion and $5 billion depending on revenue and growth expectations. Depreciation for 2025 expected to be $1.8 billion to $2 billion; for 2026, $2.3 billion to $2.7 billion, likely at the lower end of that range.

• Tariffs and geopolitics disrupting and reshaping global supply chains.
• Semiconductor cycle uncertainties with customer inventories remaining at low levels.
• Automotive market recovery being shallow with growth in single digits and a slow recovery.

Q: Stacy Rasgon asked about the tone change and outlook, especially regarding auto being down sequentially.

A: Haviv Ilan said there are 2 dynamics, cyclical recovery with 4 out of 5 markets recovering, but automotive recovery is shallow due to being a year delayed and a shallow cycle, and tariffs/geopolitics add uncertainty.

Q: Harlan Sur asked about terms business and industrial segment sensitivity to tariffs.

A: Haviv Ilan said terms business continued with acceleration, and industrial segment recovery is broad but automotive in China had specific dynamics.

Q: Ross Seymore asked about CapEx and depreciation framework.

A: Rafael Lizardi said 2025 CapEx expected $5 billion, 2026 $2B-$5B; 2025 depreciation $1.8B-$2B, 2026 $2.3B-$2.7B, likely lower end.

Q: Vivek Arya asked about end market softening and guidance change.

A: Haviv Ilan said industrial ran hotter than expected in Q2, and China had higher pulls but automotive was consistent, leading to cautious guidance for Q3.

Q: Christopher Muse asked about gross margins and utilization.

A: Rafael Lizardi said third quarter gross margin expected flat to second quarter due to higher depreciation, with inventory growth at a slower rate.

Q: Jim Schneider asked about end markets at risk of reverting.

A: Haviv Ilan said industrial ran higher than expected in Q2, and automotive recovery is shallow, with caution for Q3.

Q: Chris Caso asked about fab loading and auto inventory.

A: Rafael Lizardi said ideal is stable fab loading, but automotive inventory is cautious with real-time orders; Haviv Ilan said automotive recovery is shallow with customers being cautious.

Q: Joshua Buchalter asked about China auto trends and share gains.

A: Haviv Ilan said China auto had inventory correction, and customers outside China's behavior is watched, with U.S. manufacturing potential for share gains in future.

Q: William Stein asked about reconciling guidance with previous view.

A: Haviv Ilan said Q2 was noisy with dynamics within the quarter, leading to responsible guidance, and cyclical recovery is strong but masked by tariff noise.