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TI forecasts Q2 revenue above estimates as analog chip demand improves

A Texas Instruments Office is shown in San Diego, California

By Arsheeya Bajwa

(Reuters) - Texas Instruments forecast second-quarter revenue above analysts' estimates on Tuesday, signaling an uptick in demand for its analog semiconductors after a prolonged slump, sending the chipmaker's shares up 6% in extended trading.

The company's upbeat forecast, together with improving consumer electronics demand, indicates that analog chip inventory corrections might be easing.

"Investors want to see signs of demand recovery or the completion of channel inventory correction. TI's outlook gave them what they were looking for," said Summit Insights analyst Kinngai Chan.

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TI's chips help power electronic devices and allow digital processors to communicate with the "real world".

Global PC shipments grew around 3% in the first three months of 2024, after a downturn that lasted eight consecutive quarters, data from research firm Counterpoint showed.

While analog companies are still going to see sales decline, the sector will see more typical seasonal demand in the coming quarters, Chan said.

The Dallas, Texas-based company expects revenue with a midpoint of $3.8 billion for the second quarter, compared with LSEG estimates of $3.77 billion.

TI's earnings are closely watched as it is the first among major U.S. semiconductor firms to report quarterly results.

Its semiconductors are also used in industrial automation, while some of its chips form a part of the circuitry used in automobiles.

"The forecast suggests that downcycles in certain markets, like automotive, might not be as bad as feared," Morningstar analyst Brian Colello said. "Industrial, might be starting to flat-line or recover from the downturn."

Orders for TI's semiconductors had taken a hit as the automotive market was beginning to see a chip inventory build up for EVs on account of dwindling consumer appetite for such vehicles.

GROSS PROFIT

TI reported gross profit of $2.01 billion for the first quarter, which beat estimates but fell from the year earlier.

Profit fell on the back of reduced factory loadings, which refer to the quantity of products being manufactured.

Lower loadings lead to fixed costs being spread over lesser output, resulting in lower profit.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)