Texas Instruments’ forecasts miss estimates in sign of wider demand slump

Texas Instruments forecast first-quarter revenue and profit largely below Wall Street targets on Tuesday, as an economic downturn threatens to shackle demand from the chipmaker’s so far resilient markets.

Smartphones and personal computing products were the first to feel the pinch of customers cutting back on discretionary spending as interest rates rose, but segments such as industrial have started to come under pressure.

On Tuesday, Texas said revenue in its industrial business fell 10% in the fourth quarter from the previous period, while it plunged 20% in its communications equipment and enterprise systems businesses.

Order cancellations rose during the fourth quarter, head of investor relations Dave Pahl told analysts in an earnings call.

The company said it expects “weaker than seasonal decline” in demand during the current quarter as customers preferred to reduce their inventory pile.

“TI’s results show that even the more resilient analog markets are beginning to show weakness,” Edward Jones analyst Logan Purk said.

GRAPHIC: 2022 was worst year for chip stocks since 2008 crisis (https://www.reuters.com/graphics/TEXASINSTRUMENT-RESULTS/jnvwywdxqvw/chart.png)

The company’s shares reversed course in choppy trading to be down marginally after the bell. The stock had lost 12% of its value in 2022.

Total revenue fell 3% to $4.67 billion in the quarter, compared with estimates of $4.62 billion.

The automotive market was the only exception to weak demand, Chief Executive Rich Templeton, who will step down in April, said on Tuesday.

However, Summit Insights Group analyst Kinngai Chan said orders in the automotive market have begun to moderate but haven’t turned negative yet.

“We believe this order moderation is a result of the easing supply chain.”

Texas Instruments expects revenue of $4.17 billion to $4.53 billion in the first quarter, the mid-point of which is lower than estimates of $4.41 billion, according to Refinitiv data.

It expects current-quarter earnings per share between $1.64 and $1.90, the mid-point of which also fell short of expectations of $1.87. US News