Texas Instruments Inc (NASDAQ:TXN) shares plunged 12% as the semiconductor company issued a soft outlook for the third quarter, which overshadowed strong results for Q2.
The company guided Q3 revenue between $4.45 billion and $4.8 billion, compared to Street estimates of $4.59 billion.
Earnings per share (EPS) were guided to be between $1.36 and $1.60, at the midpoint of $1.48 below estimates of $1.50.
For Q2, revenue grew 16% year-over-year to $4.45 billion, ahead of Street estimates of $4.35 billion.
EPS also increased to $1.41 from $1.22 in the year-ago quarter, topping estimates of $1.35.
Analysts at Bank of America noted management’s more balanced tone on its earnings call contrasted with optimistic signals during the quarter.
“The change in tone is noticeable and we think driven by hotter-than-expected China industrial sales in Q2 and a more moderate recovery in autos,” they wrote.
“So overall a classic ‘crowded long’ investor positioning that is likely to unwind near-term in Texas Instruments and its industrial and auto peers.”
However, the analysts do not see management’s comments changing their thesis on the stock.
“Texas Instruments' call suggests the recovery more likely to be lumpy than V-shaped, given the dynamic nature of US tariffs and China order patterns,” they wrote.
“However, we are still comforted by the fact that the industry is shipping 10% to 15% below trendline growth. Nothing Texas Instruments said changes that view, though tempers the pace of how quickly the sub-sector catches back to trendline, perhaps more likely 2027 than 2026.”
US tax legislation that will place higher tariffs on non-US sourced semiconductors and that lower 2026 and beyond tax rates could provide a sentiment boost, the analysts added. However, they see these as one-off benefits.
Bank of America maintained its ‘Neutral’ rating and $218 price target on Texas Instruments. Shares traded down 12% at $189 on Wednesday.