TI revenue down, outlook better as it awaits CHIPS Act news

Texas Instruments did not deliver great news regarding revenue for its most recent quarter, but market observers appeared to like what TI had to say about its sales outlook for the current quarter and the general feeling that different market segments are gradually returning to pre-pandemic business patterns.

The company reported revenue for the first quarter 2024 of $3.7 billion, down 16% year-over-year. But, TI said things are looking up for the second quarter as it forecast $3.65 billion to $3.95 billion in revenue, which reportedly was above many analyst estimates. That outlook gave TI’s stock value a boost in early trading on Wednesday, the day after the earnings report, as TXN on the Nasdaq was up more than 6% to $176.08 at mid-day.

That outlook also gave observers of the broader semiconductor market some confidence mid-way through the current earnings season, with companies such as Micron Technology and TSMC already having reported and Intel due up Thursday, with AMD earnings looming April 30 and Nvidia lying in wait to report on May 22.

Looking more closely at TI’s revenue for the first quarter, it certainly was not inspiring. Every major revenue segment was down, with Analog unit revenue declining 14% year-over-year, Embedded Processing revenue sliding 22%, and TI’s Other segment revenue slipping 33% over the same period. But, pricing in many segments, as well as buying patterns, appear to be on the rebound.

Dave Pahl, head of investor relations at TI, said on the company’s first quarter earnings call, according to the Insider Monkey transcript, that “personal electronics was the first market that went into the correction. It really is–was–the first to come out in the last few quarters, I’d describe it as behaving more seasonal.”

While some industrial market segments have continued to decline, he added that “there are some that are beginning to slow in the declines, and even a couple that grew sequentially.”

As revenue activity crawls back toward normalcy, TI said it is continuing to invest in R&D and manufacturing. The company has watched some of its brethren, like Intel, TSMC, and others, win grants from the federal government’s CHIPS and Science Act program, and is among the firms still waiting for news on its own CHIPS applications.

TI CFO Rafael Lizardi was asked during the first quarter earnings call this week for an update, and stated, “We’re still going through that process. Submitted our application late last year, we are working through the details with the CHIPS Program Office. As we said before, we believe our investments in manufacturing in both Texas and Utah are well-positioned with the objectives of the CHIPS Program Office.”

Lizardi added that TI also will be leveraging Investment Tax Credit (ITC) funds. “To-date, we have accrued about $1.5 billion on that credit, and based on the recently released regulations, we will be receiving the ITC cash benefit throughout the year in 2024 and beyond… so in the second quarter, we expect to receive about $300 million and a total of $1 billion for all of 2024.”