Why Texas Instruments Plunged Double Digits Today

Key Points

• Texas Instruments beat analyst estimates in the second quarter.

• However, Q3 guidance was more conservative than optimists had anticipated.

• Still, analysts were mixed after results, with some actually raising their price targets even though the stock sold off.

• 10 stocks we like better than Texas Instruments ›

Shares of auto and industrial chip giant Texas Instruments (NASDAQ: TXN) plunged doubled digits on Wednesday, falling 13.3% as of 2:22 p.m. ET.

That's a pretty big drop for what is considered a stable, blue chip company, especially after an earnings "beat" last night. However, the stock had rallied hard since April on optimism over a strong cyclical recovery in the industrial chip arena. We're talking a 50% gain between the stock's April lows and recent highs.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Therefore, when the company guided for continued growth but perhaps not as much as some had hoped for in Q3, the lack of a "perfect" recovery sent the stock tumbling.

Four out of five TI markets are accelerating their recovery

In the second quarter, Texas Instruments reported 16.5% revenue growth to $4.45 billion, with earnings per share rallying 15.6% to $1.44. Both figures beat analyst expectations.

However, the problem came in management's third-quarter guidance, in which the company forecasts $4.45 billion to $4.80 billion in revenue and $1.36 to $1.60 in EPS. While those figures would mark quarter-over-quarter growth, the stock had apparently been pricing in a swifter recovery.

On the conference call with analysts, management elaborated that four out of the company's five main end markets were all recovering strongly, with industrial chips up in the high teens, personal electronics up 25%, enterprise chips up 40%, and communications equipment up more than 50% year over year. However, the company's auto chip segment -- its second-largest behind industrial chips -- only grew mid-single digits, and actually fell quarter over quarter.

CFO Haviv Ilan made the point that autos had gone into its downturn in 2023, about a year later than industrial chips, and that the recovery there was shallower. Recent tariff announcements have also greatly affected the auto sector, throwing a wrench into a cyclical recovery.

Image source: Getty Images.

TI receives mixed reviews in the aftermath

Sell-side analysts had a mixed reaction to TI's earnings report and guidance, with some raising their price targets and others lowering them. The most positive was Argus, which raised its price target on the stock from $210 to $250 relative to the stock's $187 stock price as of this writing. But DZ Bank slapped a $158 price target on the stock and a "sell" rating.

TI's stock doesn't look particularly cheap on the surface at 34 times this year's earnings estimates, but TI is also making a big investment in U.S. manufacturing, which is elevating costs today. Still, that investment could prove to be a great advantage and asset over the long term.

Therefore, investors in the stock should continue to hold, while those who don't own TI may want to investigate entering the newly discounted chip giant.

Should you invest $1,000 in Texas Instruments right now?

Before you buy stock in Texas Instruments, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Texas Instruments wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $641,800!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,023,813!*

Now, it’s worth noting Stock Advisor’s total average return is 1,034% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 21, 2025

Billy Duberstein and/or his clients has positions in Texas Instruments. The Motley Fool has positions in and recommends Texas Instruments. The Motley Fool has a disclosure policy.