Shares of Texas Instruments Inc. (NASDAQ: TXN) soared as much as 8.5% on Wednesday, marking the largest single-day rise in over four years, following the chipmaker’s upbeat revenue forecast, suggesting potential easing of declining demand.
The company announced that current period sales are expected to reach as high as $3.95 billion, surpassing analysts’ estimates of $3.78 billion, according to Bloomberg data. Profit is projected to range between $1.05 and $1.25 per share, compared to the forecast of $1.17 per share.
This positive report signals a resurgence in chip orders as customers begin replenishing depleted stockpiles of components, indicating a favorable trend for the broader industry. With its extensive customer base spanning various sectors from space hardware to consumer electronics, Texas Instruments serves as a key indicator of economic confidence.
The company’s shares surged to as high as $179.49 in New York, marking the largest increase since April 6, 2020. Despite a previous downtrend, with shares down nearly 3% for the year through Tuesday’s close, Texas Instruments is now witnessing a notable upturn in market sentiment.
According to Texas Instruments, most customers in its primary segment, industrial equipment makers, have completed inventory reduction efforts, although some are still in the process. This uneven recovery in demand reflects differing dynamics across various end markets, as explained by Chief Financial Officer Rafael Lizardi in an interview.
While acknowledging these positive early indicators, the company remains cautious about making broad predictions regarding future demand, recognizing the potential for false signals. The optimistic forecast comes after more than a year of declining sales, with first-quarter revenue decreasing by 16% to $3.66 billion, although surpassing analysts’ expectations.
Despite lagging behind the rally of the Philadelphia Stock Exchange Semiconductor Index earlier this year, Texas Instruments remains a prominent player in the semiconductor industry, specializing in analog semiconductors and embedded processors essential for various applications in electronics, machinery, and vehicles.
The company’s strategic decision to revamp its manufacturing facilities and reduce outsourcing is expected to bolster its competitiveness, particularly in the fiercely competitive Chinese market. Texas Instruments plans to invest approximately $5 billion annually in new plants and equipment through 2026, despite the impact on profitability, emphasizing its commitment to maintaining a leading position in the industry.