Texas Instruments ($TXN) shares plummeted 13% on July 26, 2025, after the company issued a weaker-than-expected Q3 profit outlook, despite Q2 results surpassing Wall Street estimates. The analog chipmaker reported Q2 earnings per share of $1.22, beating forecasts of $1.17, with revenue of $3.82 billion, slightly above expectations.
However, guidance for Q3 EPS of $1.24 to $1.46 fell short of analyst projections of $1.55, reflecting challenges in the automotive and industrial chip markets.
Texas Instruments, a key player in analog and embedded processing chips, cited softening demand for automotive electronics, as electric vehicle production slows globally, impacting the semiconductor sector.
The company’s chips, used in automotive systems and industrial automation, face competition from ON Semiconductor ($ON) and Infineon ($IFNNY), which have also flagged demand weakness.
Despite the downturn, Texas Instruments maintained a strong balance sheet, with $9 billion in cash and a 3.2% dividend yield, appealing to income-focused investors.
Analysts remain cautious, with 12 of 20 rating $TXN a “hold,” citing cyclical risks in semiconductors. The stock’s decline contrasts with the broader market, where 80% of S&P 500 companies beat Q2 earnings.
Texas Instruments’ challenges highlight broader semiconductor headwinds, including tariff risks on imported chip components, which could raise costs.
Apple ($AAPL), a semiconductor player through its A-series and M-series chips, benefits from in-house design, potentially shielding it from some market pressures affecting Texas Instruments.
Investors should watch Texas Instruments’ Q3 earnings for signs of recovery in automotive demand, particularly as electric vehicle sales stabilize.
The company’s focus on analog chips, critical for sensors and power management, positions it for long-term growth despite short-term volatility. Market reports indicate a potential rebound in 2026, driven by industrial automation and 5G applications.
Texas Instruments’ conservative guidance reflects a cautious approach, but its $1.3 billion share repurchase in Q2 signals confidence in future cash flows.
This highlights the semiconductor sector’s sensitivity to economic cycles, offering investors a chance to buy $TXN at a lower valuation, with a forward P/E of 18 compared to the sector’s 22.
