Texas Instruments Profit, Revenue Likely Hurt by Slowdown in Semiconductor Sales

Semiconductor manufacturing with robotic arms making silicon wafers

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Texas Instruments Inc. (TXN), among the largest semiconductor companies by market value, will probably will report that profit slid in the year's first quarter, reflecting an industrywide drop in semiconductor sales.

Key Takeaways

  • Texas Instruments (TI) probably will report adjusted EPS of $1.78 for the 2023 first quarter versus $2.36 a year earlier.
  • Texas Instruments' net income and revenue are expected to fall on weak semiconductor sales across its industry.
  • TI is investing heavily in expanding production capacity through 2025, which is likely to chip away at its gross profit margin.

The tech stalwart could post a net income drop of 26% to $1.6 billion, the least since the third quarter of 2020, according to Visible Alpha analyst estimates. That translates to adjusted earnings per share (EPS) of $1.78, down from $2.36 a year prior. Revenue could fall 11% to $4.4 billion. Texas Instruments will report first-quarter earnings results Tuesday afternoon.

The results are fallout from a slowdown in semiconductor sales across the industry, the result of excess inventory, short-term market cycles, inflation, and macroeconomic headwinds.

Semiconductor sales industrywide plunged more than 20% year-over-year in February to $39.7 billion, the worst month in 14 years. Semiconductor Industry Association CEO John Neuffer said, though, that "medium- and long-term prospects remain bright, thanks to growing demand across a range of end markets."

Texas Instruments stock is down less than 1% over the last year, slightly outperforming the S&P 500 Information Technology Index, which is down 1%.

One-Year Trailing Total Return for S&P 500 Information Technology Index and Texas Instruments
Source: TradingView.
Texas Instruments Key Stats
  Estimate for Q1 FY 2023 Actual for Q1 FY 2022 Actual for Q1 FY 2021
Adjusted Earnings Per Share ($) 1.78 2.36 1.87
Revenue ($B) 4.4 4.9 4.3
Gross Margin (%) 64.1 70.2 65.2

Source: Visible Alpha

The Key Metric

Texas Instruments is in the midst of a costly project to expand its production capacity. In early 2022, the company said it planned to spend $3.5 billion each year to add capacity through 2025, surpassing analysts' estimates for the expenditures by $1 billion annually. In February 2023, the company announced an $11 billion investment in a new chip fabrication plant in Utah.

The added spending is likely to lower Texas Instruments' gross profit margin. Based on analyst estimates of revenue and gross profit, TI is likely to say that margin declined in the first quarter to 64.1% from 70.2% a year earlier.

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Article Sources
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  1. Yahoo! "16 Largest Semiconductor Companies by Market Cap."

  2. Visible Alpha. "Financial Data."

  3. Texas Instruments Inc. "Texas Instruments To Webcast Q1 2023 Earnings Conference Call."

  4. MarketWatch. "Semiconductor Sales Suffer Steepest Decline Since 2009."

  5. Semiconductor Industry Association. "Global Semiconductor Sales Decrease 4% Month-to-Month in February."

  6. The Wall Street Journal. "Texas Instruments Messes With Its Own Formula"

  7. PR Newswire. "Texas Instruments selects Lehi, Utah, for its next 300-millimeter semiconductor wafer fab."

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