TEXAS INSTRUMENTS INC Q1 FY2025 earnings call

Haviv provided an overview of the first quarter, noting revenue details and the recovery across end markets. He outlined three key ambitions to navigate uncertainty and analyzed the semiconductor cycle phase. Rafael reviewed financial results, including gross profit, operating expenses, operating profit, and capital management aspects such as cash flow, capital expenditures, dividends, stock repurchases, and inventory levels. He also mentioned the effective tax rate expectation for the second quarter.

Revenue for Texas Instruments Incorporated in the first quarter was $4.1 billion, an increase of 2% sequentially and 11% year over year. In the Analog segment, revenue grew 13% year over year. Embedded processing was approximately flat. The other segment saw a 23% year-over-year growth. Analog contributed a significant portion to the overall revenue, embedded processing was stable, and the other segment had a notable growth.

Management provided second-quarter guidance with Texas Instruments Incorporated's revenue expected to be in the range of $4.17 billion to $4.53 billion and earnings per share in the range of $1.21 to $1.47. They remain cautious due to evolving uncertainties and are prepared for various market scenarios.

Risks include tariffs and geopolitics disrupting global supply chains and creating unpredictable economic conditions, which impact semiconductor supply and customer inventories.

Q: So the guidance up 7%, that's even better than normal. Seasonal. I know this is a hard, you know, question to answer, but is there any way for you to know how much of this is pull-ins ahead of the tariffs? I mean, is there any way your discussions with customers, any of the tonality that's changed?

A: Tim, thanks for the question. So first, before I talk about our approach into the second quarter, just as I said in my prepared remarks, we are looking at two different categories of change in front of us. One is related to the cycle. And the cycle we saw in Q1 a continued recovery I think we mentioned before, I think it was in the last in the previous call, we have three markets now growing year over year and recovering. It was the DE or personal electronics market, enterprise, and comms. It's very obvious to us now that industrial is really joining the pack and it's a large market for us. We've seen some evidence in Q4, but based on what we've seen in Q1, I think this is a real recovery rather than, you know, the way I see it right now. Related to tariffs, at least not for the first quarter. Right? And the cycle has hit a bottom because we are seeing more and more evidence from customers that they are really, really short on their inventory. They have sometimes a few days of inventory. We've seen that age in phenomena or orders within the quarter turns as we call it. Strengthening in Q4. It continued to do the same in 1Q. So more and more evidence and signals that across all channels, all geographies, a recovery of the industrial market is here. But the automotive market was always correcting a very shallow manner So you can kind of say that the markets are now were pointing pre the trade challenges all up into the right. Now when you look at the second quarter, I think we have to stay very cautious as we said about the forecast. So we are seeing that many things are still changing. It's a very, very dynamic environment. And I say sometimes by the day, And there is a potential impact on our customers and on suppliers and also on our on our revenues. So it could is unclear and it will evolve, but as I need to call and we said spend a lot of time on it, looking at past examples, understanding where the site is, and looking at the data we have in front of us we don't see an immediate near term impact course, the customers wouldn't tell us why we see the orders come again. But I would guess that you know, a time like this when there is a a little bit of anxiety the do you wanna have a little bit of more inventory on your shelf or less? So my guess is more and that's what maybe why we are seeing kind of I would call it a seasonal maybe a little bit typical seasonal second quarter forecast. And then, Mike, you've looked at some more data on the second quarter. Maybe you can add a little bit more information on what we're seeing specifically for the second quarter.

Q: Is there a way to handicap sort of what your exposure is in China to these retaliatory tariffs? I know you report 19% as companies into China. But there's probably some added exposure from other companies that are that are, you know, domiciled beyond China that are building product in China. And I guess can you offset some of that by having product on consignment? Do you have a lot of inventory And to to sort of offset some of that?

A: Yeah. And again, Tim, as as said in my in my again, my prepared remarks, we are providing to dependable capacity to our customers and we are working every hour with them right now to navigating the changing goals. So as you said, we have a lot of capabilities. I think it is important to start and focus first on our China headquartered customers. As you said, it's a little bit maybe we was 19% of our revenue last year. I think it was 20% in Q1. Aligned with the GDP with our GDP shows. So nothing very special here. And I I think we said many times it's an important market. And our customers, we have long term relationship with them. Right? The value they value our product breadth, they value our quality, They also value our scale and service. To your point, sir, part of the service we provide is having inventory on hand, some of it consigned, of it very close to their manufacturing plant. So all of that is part of the way we serve our customers and have been serving them for years, especially in the last several years where we've taken more direct, in China and worldwide. Now you also remember saying that these guys, they wanna be they are and want to continue to be an even further grow their global play. You know, they are making end equipment that are sold into China, but they're all also making end equipments that are sold worldwide. And again, this is where our geopolitically dependable capacity is very, very important and valuable. This is where our immediate focus is right now. And this is where I'm sure we'll have some follow-up questions on that. I'll just say, at a high level, we do have flexibility. And it's a case by case, but we are working working with the customers. Everyone has different requirements of how we can support them on an immediate basis. And alleviate some of their concerns on what's gonna happen in the second half of 2025 or even into 2026.