$Texas Instruments(TXN)$ saw its stock tumble nearly 12% in after-hours trading despite reporting a strong Q2 earnings beat and an optimistic Q3 revenue outlook. The sell-off was primarily triggered by Wall Street analysts' intense questioning of the CEO's seemingly shifting tone regarding market recovery and demand.
Q2 Earnings Beat Expectations
TI's Q2 results exceeded forecasts across the board:
* Revenue: $4.45 billion (vs. $4.36 billion expected), a 16% year-over-year increase.
* Analog IC Revenue: $3.45 billion (vs. $3.41 billion expected), also up 16% year-over-year.
* EPS: $1.41 (vs. $1.35 expected).
Q3 Guidance Mixed, Sparking Concern
While TI's Q3 revenue guidance surpassed expectations, the profit outlook fell slightly short:
* Revenue Guidance: $4.45 billion to $4.80 billion (midpoint $4.625 billion), exceeding the $4.57 billion consensus and representing an 11.4% year-over-year increase.
* EPS Guidance: $1.36 to $1.60 (midpoint $1.48), falling below the $1.50 expectation and indicating only a 0.7% year-over-year growth.
Analysts Grill CEO Over Shifting Tone
The significant stock drop, despite the positive financial figures, stemmed from a heated exchange between TI's CEO and three prominent Wall Street analysts who challenged his seemingly inconsistent commentary on market conditions:
* Bernstein Analyst: Questioned the CEO's shift from a "very confident" stance on cyclical recovery in the last earnings call to a more cautious "maintain flexibility" tone in the current guidance, especially given a sequential decline in automotive revenue.
* Deutsche Bank Analyst: Also highlighted the CEO's changing narrative, pointing out that in April, the guidance suggested revenue would "significantly exceed normal seasonal effects," and pressed for an explanation of what had changed.
* Bank of America (BofA) Analyst: Directly confronted the CEO on the tone, noting that not only in April but also at a late May forum, the company indicated 2025 revenue growth would accelerate from 13% in the first half. However, the Q3 guidance showed only an 11% increase. The analyst demanded to know which market demand was slowing.
TI's CEO responded by stating he doesn't "control the tone" but acknowledged "that's what you heard." This response evidently frustrated the BofA analyst, who retorted, "You gave us the numbers, not just the tone, you gave us the numbers!"
Why Wall Street Reacted So Strongly
Analysts and investors closely scrutinize management's commentary and guidance, as it often provides crucial insights into future performance and market trends. The perceived inconsistency between the CEO's previous optimistic statements and the current, more tempered outlook, especially concerning growth rates, led analysts to feel misled. This breakdown in trust, coupled with the slightly disappointing EPS guidance, resulted in a swift and severe market penalty.
TI acknowledged it couldn't quantify how much of its Q2 revenue was due to customers pulling in orders ahead of potential semiconductor tariff changes. The company noted that the industrial sector is recovering and the automotive sector shows signs of recovery, but suggested that the current cycle's demand might be significantly weaker than previous cycles.
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