Texas Instruments Q2 2025 Earnings Call Transcript

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ETCALL PARTICIPANTSChief Executive Officer — Haviv IlanChief Financial Officer — Rafael LizardiHead of Investor Relations — Mike BeckmanNeed a quote from one of our analysts, in this volatile climate

Moreover, In contrast, [ tected] RISKSManagement noted that the industrial segment "ran a little hot" in Q2 2025, and cited increased caution for future periods, suggesting possible normalization in subsequent quarters

Furthermore, China's sequential (up 19%) and year-over-year (up 32%) revenue spike in Q2 2025 raised management's concern over possible short-term "pull-ins," complicating efforts to distinguish structural from temporary demand

On the other hand, Management repeatedly identified tariff and geopolitical risks as disruptive for supply chains, highlighting the unpredictability in customer ordering behavior

Automotive revenue decreased by low single digits sequentially in Q2 2025, and management described recovery as "shallow," emphasizing continued lack of broad-based rebound in this segment

Industrial Market: Revenue increased by upper teens percent year over year and mid-teens sequentially in Q2 2025, with growth reported across all subsegments (an important development)

Capital Return Policy: Management stated intention to continue returning all free cash flow to holders via dividends and buybacks

SUMMARYTexas Instruments Incorporated (TXN 0 (remarkable data), given the current landscape. 16%) reported double-digit top-line and bottom-line year-over-year growth for fiscal Q2 2025, with each core end market except automotive contributing to sequential revenue expansion

Management declined to forecast Q4, citing seasonal historical trends of sequential slowing and the need for more real-time data, in today's market environment

CFO Rafael Lizardi clarified that gross margin guidance for Q3 is expected to be flat sequentially despite higher expected depreciation, and operating expenses are expected to remain stable (fascinating analysis)

Moreover, CEO Haviv Ilan said, "We're and will remain flexible to navigate, especially in the immediate term. " referring to the company's manufacturing and supply chain strategy amid global uncertainty

Management noted delayed recovery in automotive, emphasizing real-time, consignment-driven inventory management and current lack of restocking from OEMs and Tier 1s, considering recent developments

INDUSTRY GLOSSARYTurns : Semiconductor industry orders dered in a short window, indicating real-time demand rather than advance booking

Fab Loading: The degree to which manufacturing plant (fabrication facility) capacity is utilized, impacting inventory and cost structure

ITC (Investment Tax Credit): US federal tax credit incentivizing capital investment; recent legislation increased the credit percentage for eligible jects

Full Conference Call TranscriptHaviv Ilan: Thanks, Mike

Furthermore, Let me start with a quick overview of the second quarter

Additionally, Both analog and embedded grew year on year and sequentially

Let me vide some s on the current environment and what we saw in the second quarter

We continue to see two distinct dynamics at play

Moreover, First, tariffs and geo are disrupting and reshaping global supply chains

As we work closely with our customers, we are leveraging our global manufacturing capabilities to support their needs

We have flexibility and are prepared to navigate as things evolve

Second, the semiconductor cycle is playing out

Cyclical recovery is continuing

While customer inventories remain at low levels (which is quite significant)

In times this, it is important to have capacity and inventory, and we are well-positioned

Now I'll some additional insights into second quarter revenue by end market

First, the industrial market increased upper teens year on year and mid-teens sequentially, with recovery across all sectors

The automotive market increased mid-single digits year on year and decreased low single digits sequentially, in today's financial world

With that, let me turn it over to Rafael to review fitability and capital management

However, Rafael Lizardi: Thanks, Haviv, and good afternoon, everyone

Let me now on our capital management results starting with our cash generation (an important development)

Moreover, We're and will remain flexible to navigate, especially in the immediate term

We will stay focused in the areas that add value in the long term

We continue to invest in our competitive advantages, which are manufacturing and nology, a broad duct portfolio, reach of our channels, and diverse and long-d positions, in light of current trends

We will continue to strengthen these advantages through disciplined capital allocation, and by focusing on the best opportunities

Which we believe will enable us to continue to der free cash flow per growth over the long term (fascinating analysis)

With that, let me turn it back to Mike, in today's financial world

Additionally, Mike Beckman: Thanks, Rafael

Operator, you can now open the line for questions

On the other hand, In order to vide as many of you as possible an opportunity to ask your questions please limit yourself to a single question

After our response, we'll vide you an opportunity for an additional -up

Moreover, Operator: Thank you

We will now be conducting a question and answer session

If you would to ask a question, please press 1 on your telephone keypad

Nevertheless, A confirmation tone will indicate your line is in the question queue

You may press 2 to remove yourself from the queue, in light of current trends

Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys, in this volatile climate

One moment, while we pull for questions

Our first question comes from the line of Stacy Rasgon with Bernstein Re, given current economic conditions

Please ceed with your question (this bears monitoring), in today's market environment

Stacy Rasgon: Hi, guys

Thanks for taking my questions, in today's market environment

Conversely, First, if I think how your tone sounded last quarter and frankly, even how you sounded kind of mid-quarter, you seemed really confident that the cyclical recovery was here, and we were kind of off to the races (which is quite significant)

Moreover, And now I'm hearing you kinda saying you're staying flexible, to go a range of scenarios

And, even in the quarter, auto was down sequentially

On the other hand, I guess, what's going on. , how is your I guess, outlook and feeling where things are

Furthermore, How has that changed, over the last three months, given the current landscape

Because it you sound I guess, based on tone and everything else, it doesn't sound maybe quite exuberant as maybe you sounded a few months ago. , what's going on, amid market uncertainty

Haviv Ilan: Hey, Stacy

Furthermore, I'll I'll take this one

So first, as I said in my prepared remarks, we are seeing two dynamics at play (something worth watching), considering recent developments

Moreover, And one of them is the cyclical recovery I think we talked through it in the second quarter call May back in April, in today's financial world

And the discussion was all, you know, is joining the pack (which is quite significant)

We're now one more quarter in

However, And this is the third quarter that we see a signal of industrial recovering

Nevertheless, It's actually accelerated

So I can say we support five

However, We now have it started with PE, then enterprise and comp, in light of current trends

Joined, and industrial is already in, in this volatile climate

We have four out of five recovering in a in a nice pace

And this is part of the reason we've added ary on year over year performance to just show the dynamics over there

In contrast, In terms of automotive, to your question, look, automotive, let's let's just remember that it's it's kind of a year delayed versus industrial

Nevertheless, Industrial fixed for us at least in the third quarter of, of twenty two, automotive peaked one year later in the third quarter of twenty three

At the same time, So one could expect automotive to be joining last The automotive recovery has been shallow, meaning we are running, you know, single digits versus the peak (quite telling)

Are running year over year

We're actually having some growth in second quarter

Additionally, From a near over year perspective, but at a very low level

Moreover, So I will say that automotive is not recovered yet

On the other hand, But because of, you know, content growth, I think the cycle here is gonna be less nounced and more shallow

Furthermore, Furthermore, The second point related to getting ready

On the other hand, We had some taste of it in the beginning of the second quarter, and we talked through it a lot during the call

But I think all the situation of tariffs and geo is rough supply chains, I think that's that's not over

True that we pause right now on the semiconductor tariffs, both in The US and in China

But, you know, we have to be prepared for what the future may hold

So we wanna make sure, and this is also the message to our customers, that we'll remain flexible

On the other hand, And we'll know how to support our customers whatever the environment is moving forward

Maybe just a -up (this bears monitoring)

On the other hand, Actually, I think I wanna ask you gross m, given the current landscape.