In the second quarter earnings conference call in 2025, Texas Instruments reported its revenue situation, with a year-on-year growth of 16% and a quarter-on-quarter growth of 9%, reaching approximately ten billion US dollars. The company's two core businesses, analog and embedded processors, both achieved year-on-year and quarter-on-quarter growth. In addition, the company also analyzed the performance of different markets, such as industrial, automotive, and consumer electronics, and pointed out current challenges, including disruptions in the global supply chain, the impact of the semiconductor cycle, and geopolitical factors. Chief Financial Officer Rafael Lazarte then presented the financial results, capital management strategy, and forecasts for the third quarter.

In the second quarter, the income was 40 billion US dollars, gross profit was 2.6 billion US dollars, operating expenses were 1 billion US dollars, and net profit was 14.1 US dollars per share. In terms of capital management, operating cash flow was in the billions of US dollars, capital expenditures were 1.3 billion US dollars, and free cash flow was in the billions of US dollars. At the same time, the company paid dividends of billions of US dollars and repurchased stocks worth billions of US dollars, returning a total of billions of US dollars to shareholders. The company's balance sheet remained strong, holding billions of US dollars in cash and short-term investments, and issuing 1.2 billion US dollars in debt. For the third quarter, revenue is expected to range in the billions of US dollars, with earnings per share expected to be between US dollars and US dollars.

During the phone conference, executives discussed the recovery situation in the industrial market, pointing out that four markets are showing signs of recovery, while the automotive market is growing but has not fully recovered yet. Additionally, they mentioned the impact of tariffs, geopolitics on the supply chain, and the company's readiness for future flexibility, emphasizing the ability to support customers in different environments. The issue of gross profit margin was also raised.

The company expects that the gross profit margin for the next quarter may decrease due to an increase in revenue and depreciation expenses, however, the gross profit margin is still expected to remain relatively stable. Operating expenses (Opex) are expected to remain unchanged, but unfavorable changes in net other income and interest expenses will affect financial performance, mainly due to a decrease in cash levels and an increase in debt interest expenses. The company continues to invest in inventory and delivery times to meet customer demand, with customer inventory currently at a low level.

The discussion mainly focuses on the industrial automation industry, particularly on how certain parts closely related to manufacturing activities are affected by tariffs and trade policies, as well as the recovery of orders and shipments from industrial customers in China. Additionally, it also explores inventory adjustments and accelerated market demand caused by changes in tariff policies in different quarters, and how to incorporate these factors into actual forecasting.

In the discussion, expectations for the capital expenditures (CapEx) and depreciation framework for 2025 were mentioned. It is expected that this year's CapEx will be $50 billion, while Lyric's CapEx will be between Ed billion and Ed billion, depending on the current revenues and growth expectations. As for depreciation, the expectation for 2025 is between $18 billion and $20 billion, with Lyric's depreciation expectations possibly towards the lower end of that range. A more detailed update on the range of CapEx is expected later this year.

In the discussion, it was mentioned that although sales for each remaining quarter were expected to accelerate, the latest sales guidance only shows slight growth. The questioner wants to know whether there has been a softening in a specific market area, such as industrial or automotive, or if this is due to the company adopting an extra conservative strategy. The discussion also touched on the company's adjustments to market expectations and potential conservative attitudes.

In the second quarter, there was significant growth in the industrial sector, close to 20%, and the Chinese market also showed strong growth, especially in the industrial sector, despite the stable automotive market. However, considering the strong performance of the Chinese market and the uncertainty in the global economy, caution is advised for the third quarter. The top Chinese enterprise clients account for approximately 20% of total revenue, and their performance will have a significant impact on the planning for the next quarter.

During the discussion, it was mentioned that companies typically do not provide performance guidance for the next quarter, but participants asked how to estimate the upcoming fourth quarter (Q4) performance, especially in the current conservative environment. Historical data shows that the second and third quarters are usually strong performance quarters, while the fourth and first quarters are relatively lower, but specific guidance for the fourth quarter will be determined after the third quarter results are released.

The company expects the gross profit margin in the third quarter to remain roughly the same as in the second quarter, despite an increase in revenue, but also faces higher depreciation costs. Inventory levels are expected to grow, but at a slower pace than in the second quarter. In the long term, the company's guided gross margin changes will be in line with the script (i.e. business activities), but may vary slightly in the short term, with specific details to be further explained once actual data is available.

Discussed the impact of the newly passed US federal tax law on companies, including increased research and development expenses, enhanced income tax credits (ICC), and changes to other tax provisions. These changes are expected to reduce the company's cash tax burden in the coming years, but the impact on GAAP tax rates will first rise and then fall. Additionally, the company stated that its capital expenditure plan remains unchanged and will be adjusted based on revenue circumstances.

The conversation discussed the cyclical recovery of personal electronic products and enterprise systems in the market, as well as the performance of different markets within the quarter and potential downside risks. It was particularly mentioned that the growth rate of the industrial market exceeded expectations in the second quarter, but normalized in the second half of the quarter, and a cautious attitude was maintained towards this.

During the discussion, the company mentioned the positive impact of tax benefits on free cash flow and provided guidance on capital expenditures (CapEx), while emphasizing how to consider capital return in a high capital expenditure environment, including stock buybacks and dividends, will depend on various factors such as the duration of capital expenditure, cash reserves, and stock price. The company's goal is to return all free cash flow to the owners through dividends and buybacks.

In an ideal environment, the company hopes to maintain a relatively stable capacity load of the wafer fab, and adjust by consuming inventory during industry uptrends and increasing inventory during downtrends. However, in actual operations, market fluctuations and uncertainty need to be considered, and measures need to be taken to ensure maximum opportunity utilization and maintain flexibility.

The conversation discussed the current status and future expectations of the automotive industry, pointing out that although the industry has not fully recovered from its previous peak, order demand is mainly based on actual needs rather than inventory replenishment, indicating that the industry is cautiously dealing with macroeconomic uncertainty. At the same time, the conversation mentioned the recovery time of the industrial sector as a reference, predicting that the automotive industry may begin to recover in a year.

The discussion points out that the Chinese automotive market is currently going through a period of inventory adjustment after experiencing strong growth last year, which has led to a slowdown in the automotive business. However, overall performance of the Chinese automotive market remains positive, with growth largely consistent with other major global markets such as the United States, Europe, and Japan. Due to an earlier recovery start, annual growth in China is ahead of other regions.

The discussion mainly revolves around the adjustment of manufacturing supply chains in the context of globalization and the impact of geopolitics on supply chains. The participants mentioned that, although the reasons for customer orders were not directly disclosed, it can be inferred from the data that tariffs and geopolitical environment may have affected order volumes. In addition, they emphasized different strategies in Chinese and non-Chinese markets, as well as how the company is responding to the constantly changing trade environment and geopolitical challenges through globally optimized manufacturing capabilities, particularly in the United States. The company started laying out manufacturing capabilities in the United States as early as five years ago, aiming to control its own destiny and adapt to the future reshaping of supply chains.

The company faces confusion from customers regarding tariff policies (including reciprocal and industry tariffs), as well as uncertainty in supply chain and manufacturing footprint, but believes that opportunities outweigh challenges. The company emphasizes its manufacturing footprint and supply chain diversity in the United States, particularly its performance in Asian and Chinese markets, demonstrating its capability to address future changes. Furthermore, if incentivized chip production is realized in the United States, the company believes it has a unique competitive advantage, including scale, cost efficiency, and competitiveness, and is prepared to face any changes in the second half of the year and beyond.

The company's performance in the last quarter showed a year-on-year growth of 16.5%, exceeding the guidance of 11.5%, which raised questions about the market environment and guidance. The management explained that the environment was more complex and noisy than expected, especially in the second half of the quarter. They took a cautious approach to setting guidance for the third quarter, emphasizing that the cyclical recovery remains strong despite the impact of tariffs and geopolitics. They also pointed out that, despite the challenges, the automotive market is expected to recover, and the current pace and pattern of market recovery are different from previous cycles, still below the trend line, indicating further room for growth.

Texas Instruments (TI) sees significant growth opportunities in the data center and rapidly growing artificial intelligence markets. Its main markets include data center computing, large enterprise printers, and projection devices. In the data center space, TI currently relies heavily on general components and is working with key customers to leverage new technologies to expand into application-specific opportunities in order to gain more market share in the AI market. These efforts are expected to be potential growth drivers for TI in current and future quarters.

In the summary of the meeting, the speaker emphasized that the company focuses on engineers and technology, while also pointing out that long-term growth in free cash flow is the best indicator to measure progress and create value for shareholders. Thanking all participants for their attendance, the speaker announced the end of the meeting.