Texas Instruments Incorporated Q3 FY2025 earnings call

• Haviv noted revenue came in as expected, with analog and embedded both growing year on year and sequentially. The overall semiconductor market recovery is continuing but at a slower pace, with customer inventories at low levels. - Rafael discussed third-quarter gross profit was $2.7 billion (57% of revenue), operating expenses were $975 million, operating profit was $1.7 billion (35% of revenue). Cash flow from operations was $2.2 billion, capital expenditures were $1.2 billion, free cash flow on a trailing twelve-month basis was $2.4 billion. Dividends paid and stock repurchases were mentioned. Restructuring charges related to plant closures and operational efficiencies were noted. - Inventory position was highlighted as strong, supporting customer service.

Revenue for the third quarter was $4.7 billion, an increase of 7% sequentially and 14% year over year. Analog revenue grew 16% year over year, embedded processing grew 9%, and the other segment grew 11% from the year-ago quarter. By end market: Industrial market increased about 25% year on year and was up low single digits sequentially; automotive market increased upper single digits year on year and around 10% sequentially; personal electronics grew low single digits year on year and upper single digits sequentially; enterprise systems grew about 35% year on year and about 20% sequentially; communications equipment grew about 45% year on year and was up about 10% sequentially.

• Fourth-quarter revenue is expected to be in the range of $4.22 billion to $4.58 billion and earnings per share in the range of $1.13 to $1.39. - Effective tax rate for 2025 is about 13%, and about 13-14% in 2026. - CapEx and free cash flow framework provided with flexibility based on market scenarios.

• Broader macroeconomic dynamics and uncertainty affecting the semiconductor market recovery pace. - Uncertainty regarding trade, tariffs, and final rules impacting customer investment decisions.

Q: Timothy Arcuri asked about the linearity of bookings through the quarter and loadings assumed in the fourth quarter, and cash margins.

A: Haviv and Rafael responded on bookings being as expected, loadings adjusted down in fourth quarter due to inventory and revenue, and discussed path to improve cash margins.

Q: Chris Danely inquired about restructuring catalyst and benefits to expenses.

A: Haviv explained restructuring related to winding down 150-millimeter fabs and consolidating R&D sites, with Rafael noting OpEx expected to be flat to third quarter and benefits from restructuring taking time.

Q: Joe Moore asked about pricing and lead times.

A: Mike and Haviv responded that pricing is trending with low single digit decline like expected, and lead times are consistent with prior quarter, competitive and supported by inventory position.

Q: Stacy Rasgon asked about gross margin expectations for Q4 and seasonality.

A: Rafael and Haviv discussed gross margin factors like loadings, tax rate, and seasonality being roughly in line with historical trends.

Q: Ross Seymore asked about depreciation, CapEx for next year.

A: Rafael and Haviv talked about depreciation range, CapEx flexibility based on market recovery, and OpEx disciplined allocation to best opportunities.

Q: Jim Snyder asked about China activity and CapEx for next year.

A: Haviv said China came back to normal, and CapEx for next year probability of being lower based on moderate recovery.

Q: Chris Caso asked about wafer starts, loadings, and what's needed to raise loadings.

A: Rafael explained loadings moderation due to revenue and inventory, and Haviv talked about market recovery pace influencing loadings.

Q: Blayne Curtis asked about inventory and loadings spilling into March.

A: Rafael stated some loading adjustments happened in third quarter with another step down in fourth, embedded in guidance.

Q: Tore Svanberg asked about enterprise/data center and end market outliers.

A: Haviv discussed data center being a growing market, with more color to be provided in Q1, and no specific outliers called out for fourth quarter.