Shares of Texas Instruments (TXN) are sliding following a mixed third-quarter earnings report in which it warned of a "softer market" ahead for the semiconductors it makes.
Shares of Dallas-based Texas Instruments were down around 6% in trading before Wednesday's opening bell.
For the quarter, Texas Instruments reported $4.26 billion in revenue, missing the consensus estimate of analysts by $40 million, while delivering on earnings of $1.58 per share, ahead of the expected $1.53 a share.
"Demand for our products slowed across most markets during the quarter," CFO Rafael Lizardi said.
Sector Softness Ahead
Texas Instruments did not depict the slowing market as a momentary problem, either.
Instead, guidance for the fourth quarter set a revenue range of $3.6 billion to $3.9 billion, below the analyst consensus of $4 billion, and put earnings per share in a range of $1.14 to $1.34, well under the consensus of $1.38.
"We are heading into a softer market," Lizardi said. "Most end markets have slowed, that's what we know. And we believe this is mostly driven by a slowdown in semiconductors, meaning we really can't speak to any macro-driven event here."
Analysts had warned that the company's outlook would be the key factor to watch earlier this week, and the market has homed in on this disappointing forecast.
"TI's outlook will be key in terms of helping to answer the 'semi cycle question' given the company's leading market share in analog and its 'pure' business model that de-emphasizes distribution or channel," Rosenblatt Securities analyst Hans Mosesmann said in his earnings preview Monday.
To be sure, the company's Analog business was a bright spot as it exceeded analyst estimates on segment revenue, which grew 8% in the quarter.
However, that improvement was offset by material weakness in the embedded processing unit that is expected to persist. While Analog revenues beat estimates by $30 million, embedded processing missed by $90 million.
"Embedded processing revenue decreased by 4% from the year-ago quarter due to processors," CFO Lizardi said. "Analog and Embedded performed about the same directionally within most end markets."
Cycle Fears Mount for Sliding Sector
The results will add to the pain for semiconductor sector that has been battered by ominous cycle news.
The Philadelphia Semiconductor Index (SOXX) , which tracks some of the largest semiconductor stocks, has dropped double digits in just the past month.