Chipmaker Texas Instruments Beats Earnings Estimates, but Forecast Disappoints
Texas Instruments, the leading manufacturer of analog chips, has reported better-than-expected earnings for the third quarter. However, the company’s downbeat forecast for the current period has sparked concerns about sluggish demand in the industry.
Mixed Signals in the Chip Industry
The Dallas-based company’s revenue fell 8.4% to $4.15 billion in the third quarter, marking the eighth consecutive contraction. Despite this, profit was $1.47 a share, beating analysts’ estimates of $1.37 per share. The company’s executives attributed the decline in revenue to weakness in its industrial segment, which accounts for the largest share of its sales.
Weak Forecast Raises Concerns
Texas Instruments’ forecast for the fourth quarter was disappointing, with sales expected to be between $3.7 billion and $4 billion. This is lower than analysts’ estimates of $4.08 billion. Profit is expected to be between $1.07 and $1.29 a share, compared to an average projection of $1.35.
Impact on the Industry
As the largest maker of analog chips, Texas Instruments’ forecast is closely watched by investors as an indicator of demand across the industry. The company’s products are used in a wide range of electronic devices, from industrial equipment to vehicles.
Conflicting Signals from Other Chipmakers
Other chip companies have been giving conflicting signals about the industry. Equipment maker ASML Holding NV reported weak orders for its gear, while Taiwan Semiconductor Manufacturing Co. delivered a strong forecast. Demand for advanced chips used in artificial intelligence computing is a bright spot for both companies.
Texas Instruments’ Strategy
Texas Instruments is spending heavily on new plants in an effort to bring most production back in-house. While this is weighing down its profit in the meantime, the company believes it will give it a cost advantage over rivals once complete.
Share Price Impact
Texas Instruments’ shares, which have risen 14% this year, fell more than 1% in extended trading following the announcement. The company’s downbeat forecast has raised concerns about the industry’s prospects, and investors will be watching closely for any signs of improvement.
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