TXN • 10-Q • Q2 2022 • Positive

TI Shows Resilient Growth with 13.8% Revenue Jump Despite Supply Chain Pressures

July 27, 2022 • 1 min read

TL;DR

Texas Instruments delivered strong Q2 2022 results with revenue growing 13.8% YoY to $5.21B, demonstrating resilience in semiconductor demand. Gross margins expanded 180bps YoY to 69.6% despite inflationary pressures, driven by improved product mix and pricing power. The company's strategic investments in 300mm manufacturing capacity are progressing well, with capex reaching nearly $800M in Q2. Looking ahead, TI's focus on automotive and industrial markets positions it well for secular growth, t

Financial Performance Overview: Revenue grew 13.8% YoY to $5.21B, with gross margin expanding to 69.6% from 67.8% in Q2 2021. Operating profit increased 23% YoY to $2.72B, reflecting strong operational leverage. Operating margin improved 250bps to 52.2%, demonstrating TI's ability to maintain pricing power and control costs. Free cash flow generation remained robust at over 30% of revenue, supporting continued capital returns to shareholders.
Strategic Initiatives and Operational Changes: TI continues executing its long-term capacity expansion strategy, with significant investments in 300mm manufacturing. The company recorded $66M in restructuring charges related to manufacturing optimization. Inventory levels increased 15.1% to $2.2B, reflecting strategic build-up to support customer demand and buffer against supply chain disruptions. These investments position TI for improved cost structure and market share gains in key growth segments.
Market Position and Competitive Dynamics: The company maintains leadership in analog and embedded processing, with particularly strong positions in automotive and industrial markets. Accounts receivable increased 28.7% YoY, indicating strong demand but potential lengthening of payment cycles. R&D investment grew 5.9% YoY to $414M, focusing on next-generation products for emerging applications in electrification and automation.
Operational Efficiency and Profitability: Gross profit increased 17.8% YoY to $3.63B, outpacing revenue growth and demonstrating strong pricing power. SG&A expenses decreased slightly YoY despite revenue growth, showing improved operational efficiency. The company's 300mm manufacturing transition continues to drive structural margin improvements, with additional benefits expected as new capacity comes online.
Growth Catalysts and Material Risks: Key growth drivers include automotive semiconductor content expansion, industrial automation, and 5G infrastructure deployment. Primary risks include potential demand softening in consumer electronics, ongoing supply chain constraints, and increasing competition in core markets. The company's strong balance sheet with $8.39B in cash and investments provides flexibility to navigate uncertainties while maintaining strategic investments.

Revenue

$5.21B ( YoY, QoQ)

↑ +13.8%

Gross Margin

(+180bps YoY)

↑ 69.6%

Free Cash Flow

~$1.6B ( of revenue)

↑ 30%

Operating Margin

(+250bps YoY)

↑ 52.2%

Growth Indicators

~$800M in Q2

Inventory ↑$2.2B (+15.1% YoY)

R&D Investment ↑$414M (+5.9% YoY)

Key Risks

Potential demand softening in consumer electronics
Supply chain constraints and inventory management
Increasing competition in core markets
Geopolitical tensions affecting global operations

Key Opportunities

Automotive semiconductor content expansion ($2000+ per vehicle potential)
Industrial automation growth (double-digit CAGR expected)
5G infrastructure deployment
Manufacturing cost advantages from 300mm transition

Bottom Line

Texas Instruments' Q2 2022 results demonstrate the company's strong execution and strategic positioning in key growth markets. The combination of revenue growth, margin expansion, and strategic investments sets the foundation for sustained long-term performance. While near-term macro uncertainties exist, TI's focus on automotive and industrial markets, coupled with manufacturing scale advantages, provides resilience. Key metrics to watch include inventory levels, pricing trends, and capacity expansion progress.