Texas Instruments forecasts downbeat Q2 on demand weakness

DALLAS: Texas Instruments forecast second-quarter revenue and profit below Wall Street estimates on Tuesday (April 25), signalling demand weakness is spreading to most of the analog chipmaker’s end-markets.

A chip supply glut, which started from the consumer electronics market, has seeped into broader markets like enterprise and industrial as rising interest rates saps spending across the board.

The company’s revenue in both the personal electronics segment and the division that caters to data centre servers fell 30% in the first quarter from the fourth quarter. Industrial market revenue was flat.

For TI, which said overstocked customers were still purging excess inventory, this marks trouble as it derives about 70% of its revenue from these markets, with industrial comprising about 40%.

The glut has also hurt chip prices in the market, pressuring profit margins of chipmakers like Texas Instruments.

The company, which has forecast capital expenditure to average around US$5 billion )TM22.25 billion) per year from 2023 to 2026, sees current-quarter profit per share between US$1.62 and US$1.88, below Refinitiv estimates of US$1.82.

Still automotive was a bright spot in the first quarter, with revenue up mid-single digits, the company said. Quarterly earnings per share were US$1.85, beating estimates of US$1.78.

But Summit Insights Group analyst Kinngai Chan warned industry checks already indicated a weakening order in the automotive market.

The company forecast revenue in the current quarter in the range of US$4.17 billion to US$4.53 billion versus estimates of US$4.44 billion.

Revenue fell 11% to US$4.38 billion in the quarter ended March 31 from a year earlier in line with expectations, declining the most in the last ten quarters.

Shares of the Dallas, Texas-based company were up 1% in extended trading after closing down about 4%. – Reuters