By Arsheeya Bajwa
(Reuters) – Texas Instruments (NASDAQ:) on Tuesday forecast second-quarter revenue above analysts’ expectations, signaling a rebound in demand for its analog semiconductors after a prolonged slump that lifted the chipmaker’s shares during extended trading rose 6%.
The company’s optimistic forecast, along with improving consumer electronics demand, indicates that inventory corrections on analog chips may ease.
“Investors want to see signs of demand recovery or completion of the channel inventory correction. TI’s outlook gave them what they were looking for,” said Summit Insights analyst Kinngai Chan.
TI’s chips help power electronic devices and allow digital processors to communicate with the “real world.”
Global PC shipments grew about 3% in the first three months of 2024, following a downturn that lasted eight consecutive quarters, data from research firm Counterpoint shows.
While analog companies will still see a decline in sales, the industry will see more typical seasonal demand in the coming quarters, Chan said.
The Dallas, Texas-based company expects second-quarter revenue of $3.8 billion, compared to LSEG estimates of $3.77 billion.
TI’s earnings are closely watched as it is the first of the major U.S. semiconductor companies to report quarterly results.
The semiconductors are also used in industrial automation, while some chips are part of the circuits used in cars.
“The forecast suggests that downcycles in certain markets, such as automotive, may not be as bad as feared,” said Morningstar analyst Brian Colello. “The industrial sector may be starting to level off or recover from the recession.”
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Orders for TI’s semiconductors had taken a hit as the auto market began building up a chip supply for electric cars due to waning consumer interest in such vehicles.
GROSS PROFIT
TI reported first-quarter gross profit of $2.01 billion, which topped estimates but fell from the year before.
Profits fell due to reduced factory taxes, which relate to the quantity of products being manufactured.
Lower taxes lead to fixed costs being spread over smaller production, resulting in lower profits.
