Beware of the Earnings Season Landmines in U.S. Stocks.

Due to weaker-than-expected earnings guidance, Texas Instruments (TI), the global leader in analog chips, saw its stock plunge over 12% in pre-market trading on July 23. This dragged down other U.S. chip stocks, with ON Semiconductor dropping over 6%, and Analog Devices and NXP Semiconductor both falling more than 4%. After European markets opened, STMicroelectronics, listed in Milan, also tumbled over 3%. TI’s Q3 earnings guidance midpoint of $1.48 per share fell short of analyst expectations.

Analysts noted that TI’s quarterly performance is considered a "barometer of semiconductor demand" on Wall Street, and its financial reports and outlook serve as a key indicator for demand across industries. The company’s pessimistic outlook has raised concerns about the semiconductor sector’s prospects.

The Earnings Season Landmine

On July 23, shares of U.S. chip giant Texas Instruments plummeted over 12% in pre-market trading.

By Tuesday’s close, TI’s stock had gained more than 16% year-to-date, with a market cap of $195.249 billion (~¥1.4 trillion). The pre-market plunge would erase most of this year’s gains.

The company’s post-market earnings guidance on Tuesday disappointed investors. TI forecasted Q3 revenue between $4.45 billion and $4.8 billion, with a midpoint of $4.625 billion, slightly above the expected $4.59 billion. However, its EPS guidance midpoint of $1.48 missed the $1.50 analyst estimate. TI also warned that tariff uncertainties would impact customer demand and that the automotive sector’s recovery would be slow.

Analysts pointed out that this cautious outlook failed to satisfy the market, adding uncertainty to TI’s growth trajectory and the recovery of analog chip demand.

TI’s management also struck a pessimistic tone. CEO Haviv Ilan emphasized during the earnings call that tariffs and geopolitics are disrupting and reshaping global supply chains, while the automotive recovery remains weak.

When asked if tariffs prompted customers to place orders early, boosting revenue, Ilan admitted, "We can’t rule that out," adding, "When you see such a strong Q2 compared to Q1, you have to attribute some of that to the tariff environment."

Summit Insights analysts noted that TI’s management appeared cautious due to signs of order normalization (i.e., slowing growth) in Q2.

Wall Street analysts repeatedly questioned whether TI’s outlook on analog chips and MCU demand had turned bearish. Management maintained long-term optimism for all segments except automotive.

TI’s latest earnings report exceeded expectations, with Q2 revenue at $4.45 billion (up 16% YoY) and net profit at $1.3 billion (up 15% YoY).

Notably, TI’s analog chip business contributed $3.5 billion in Q2 revenue, up 18% YoY, beating estimates. This segment primarily serves automotive and industrial markets.

TI plans to invest $60 billion to expand chip fabrication plants in Texas and Utah, focusing on 300mm wafer technology.

Stifel analyst Tore Svanberg said the stock plunge reflected heightened investor expectations, particularly for Q3 margins. However, Haviv Ilan’s comment that Q3 margins would remain flat disappointed the market.