Texas Instruments Inc Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Timothy Arcuri - UBS - Analyst : Thanks a lot. I guess the first question is, autos grew. I think that was a little bit of a surprise to a lot of us. Can you talk about what's going on there? You did cite China, but did orders weaken late in the quarter at all? I mean, we saw pretty much every automaker negative preannounce. So can you talk about maybe what you're seeing in autos and maybe if you can provide a little commentary for December, what the outlook is there. Is it sort of anything you'd call out in December in terms of end markets?

Question: Timothy Arcuri - UBS - Analyst : Rafael, so if I look at the guidance, OpEx is usually I think down low to mid-single digits for December. So if you assume even down mid singles, you get gross margin sort of in the mid-50s. It's down like 200 basis points, stripping out deep depreciation. So that's a pretty big decline. So I guess you're taking down loadings in December. I do see that finished goods was up a lot. So, if you can talk about that. Thanks.

Question: Vivek Arya - Bank of America - Analyst : Thanks for taking my question. Haviv, you -- so first, thanks for providing the end market commentary. I think you mentioned personal electronic demand went up I think 30% sequentially is what I recall; it was up mid-teens in Q2 also. How do we square your strength in personal electronics with the more kind of sluggish demand that we see for PCs and phones? Is it something outside of those areas, or are those areas doing better? Just what do you attribute the strength in personal electronics, or you think the market just kind of bottomed from a cyclical perspective?

Question: Vivek Arya - Bank of America - Analyst : So a bigger picture question, Haviv, is on -- in the last few calls, there's been a suggestion that perhaps by calendar '26, TI will conceptually be close, if not more than what you were in calendar '22. And people have kind of rightly then pushed back and said, well, that requires mid-teens sales growth in the next two years, you know, well above the trend line. At what point do you think you will start to see those above seasonal quarters to help us get to that above trend growth for the next two years? So I understand you're not giving guidance, but what are you seeing in the broader end markets? And do you think TI is at a point where those kinds of above seasonal quarters are line of sight, or is it too early to make that judgment? Thank you.

Question: CJ Muse - Cantor Fitzgerald - Analyst : Yeah. Good afternoon, thank you for taking the question. I guess, first question, bigger picture, I guess given the cyclical uncertainty, how are you thinking about kind of running utilization rates into Q4, first half of '25? And as part of that, with inventory at $4.3 billion, are you looking to continue to grow that and elevate utilization or keep it where it is until you really see signs of that cyclical recovery? Would love to hear your thoughts there.

Question: CJ Muse - Cantor Fitzgerald - Analyst : I do. I would hope to follow up on auto. You talked about that as a surprise in China. I'm curious if you could speak to Chinese OEMs taking share in Europe. That's something that, that we've kind of picked up and curious perhaps maybe the data points we're picking up in Europe, related a little more to share loss there to some of the Chinese OEMs. Are you seeing that?

Question: Ross Seymore - Deutsche Bank - Analyst : Hi guys, thanks for letting me ask a question. Haviv, you talked a couple of times about China going up 20% sequentially two quarters in a row. Is there any reason that the other 80% of the business shouldn't have that sort of a cyclical rebound at some point? Is there something that's unique about China that allows it to be more volatile, or is the expectation that you would have that the other 80% of your business at some point in time should do the same thing?

Question: Ross Seymore - Deutsche Bank - Analyst : Yeah, I do one for Rafael. On the OpEx side of things. Just a conceptual question as we look into 2025, kind of what would be the puts and takes on OpEx? And I guess the punch line is you guys have kept OpEx in certain periods of time barely growing year over year, and other years inflation has been something you guys have had to endure as well. So how do we think about OpEx kind of structurally in 2025?

Question: Stacy Aaron Rasgon - Sanford C. Bernstein & Co., LLC. - Analyst : Hi guys. Thanks for taking my question. I wanted to drill a little bit more into that China strength. So you're seeing it in auto? Are you seeing any signs of like China strength in analog or anywhere else in any other end market? Is it just completely focused on automotive at this point? And I guess, what I'm getting at is I'm trying to judge the propensity of some of the Chinese guys maybe to be buying more. We've got an election coming up. Nobody exactly knows what's going on with the general geopolitical environment. Just what do you see more broadly in China, both in and outside of auto?

Question: Stacy Aaron Rasgon - Sanford C. Bernstein & Co., LLC. - Analyst : I do. Thank you. I know you guys don't guide two quarters ahead, but just mathematically, we've been sort of looking at performance versus normal seasonality. How would you guys define typical seasonality for Q1? And, maybe like, what is it over the last several years? And how would you define it like, versus like pre-COVID levels?

Question: Tom O'Malley - Barclays - Analyst : Hey, thanks for taking the question. Haviv, I just wanted to clarify some comments you made in the preamble. You kind of talked about the three markets enterprise, PE and comms still correcting but showing momentum. So not finished but showing some progress. Are those still sequentially declining, or are one or two of those actually coming off of the bottom and improving?

Question: Tom O'Malley - Barclays - Analyst : Thank you for clarifying. And then just broadly kind of during the pandemic, you saw a lot of growth, and I think most of your peers and yourself started being more vocal about describing both auto and industrial as double-digit growers. So as this kind of correction continues, you're seeing the strength from China in your auto business, and obviously that's a part of the broader business and contributes to that double-digit growth. But, looking back now, and as you see the recovery, would you think any differently about the growth profiles of those two businesses? You obviously have your competitors coming up in a couple weeks, kind of going to restate their long-term CAGRs as well. Do you still see that double-digit growth profile as the right way to look at those two businesses?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Thank you. I wonder if you could help characterize industrial, and I know you've talked about the various subsegments underneath of that, but is that -- is there an inventory correction that's uniform? Are there areas of strength and just any sense of inventory versus demand issues that are kind of dragging that business down?

Question: Joseph Moore - Morgan Stanley - Analyst : Yeah, I do. That's helpful. Thank you. In terms of analog versus embedded, there's a, that's been happening for a while, that Embedded has underperformed and there's a focus on kind of turning that around, around a narrower focus area. I wonder if you could just characterize what's different about the Embedded market on a sequential basis that it's weaker?

Question: William Stein - Turist Securities - Analyst : Great. Thanks for taking my question. I think earlier in the call, the question was asked. Haviv, you answered it for one or two end markets, but I'm hoping you can talk about how the pacing of orders progressed in the last couple of months. I wonder if you might have seen things accelerate to then only re-decelerate, if there's been any sort of ups and downs that have surprised you. And then I have a follow up, please.

Question: William Stein - Turist Securities - Analyst : If I can follow up. It actually dovetails with the follow on which is when you all have inventory, your customers may not be all charged up about placing tons of backlog, and when they have inventory, even more so. Our checks recently revealed that customers have more inventory than many suppliers thought like what they were. They were not sort of really close to the end of the inventory digestion at end customers. And I wonder if you could either dispel that or provide any insight as TI sees it. Thank you.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Thank you for squeezing me in. I had a follow-up question on the industrial market. Obviously, lead times are short, and you have inventory. But I'm just wondering from an end market or a sell-through perspective, is it fair to say that market is stabilizing? Is it getting worse? Is it better? I know you called out those two segments that are perhaps starting to stabilize, but any further read on the end consumption there actually getting better or worse?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Just one last question. So going back to the whole topic about visibility orders and sort of, so forth. When you talk to your customers, especially some of your non-Chinese customers, is there a sense that everyone's just waiting for rates to come down, getting through the U.S. election? Because it does feel like there's like some sort of a CapEx cycle coming, but everyone's just waiting on the sidelines. When you talk to some of your biggest industrial customers, do you get a sense that they're waiting for that, or is this is more just about, hey, you know, once spending comes back with better rates and sort of, so forth, we're sort of back to the races.