Why Is Texas Instruments (TXN) Down 8% Since Last Earnings Report?

Texas Instruments beat Q3 2025 estimates with EPS of $1.48 (0.7% above consensus) and revenue of $4.74bn (+14% YoY), driven by Analog sales of $3.73bn (+16%), but experienced margin compression (gross margin down 220bps to 57.4%, operating margin down 240bps to 35.1%). Management guided Q4 revenue of $4.22–4.58bn and EPS of $1.13–1.39; the company generated ~$2.19bn in Q3 operating cash flow, returned $1.24bn in dividends and $119m in buybacks in the quarter, and ended with $5.19bn in cash and $13.55bn of long-term debt. Despite the beat, the stock is down ~8% since the release as analysts have cut estimates (consensus down ~8.5%), the composite VGM score is weak (D) and Zacks assigns a #4 (Sell), reflecting concern that margin pressure and waning estimate momentum will weigh on near-term returns.

Analysis

Texas Instruments reported Q3 2025 EPS of $1.48, beating the Zacks consensus by 0.7% and landing at the midpoint of guidance, while revenue rose 14% year‑over‑year to $4.74 billion driven by Analog sales of $3.73 billion (+16%), Embedded Processing $709 million (+9%) and Other $304 million (+11%). Despite the beat, the stock has fallen roughly 8% since the release, signaling investor concern about forward momentum rather than the quarter itself.

Profitability showed mixed signals: gross profit increased to $2.72 billion but gross margin contracted 220 basis points to 57.4%; operating profit rose 7% to $1.66 billion but operating margin compressed 240 basis points to 35.1%. SG&A rose to $457 million (9.6% of revenue) and R&D to $518 million (10.9% of revenue), while operating cash flow was approximately $2.19 billion in Q3 and the company returned $1.24 billion in dividends plus $119 million in buybacks during the quarter.

Management guided Q4 revenue $4.22–$4.58 billion and EPS $1.13–$1.39 with an effective tax rate near 13–14%, but consensus estimates have since been revised down ~8.5%; the stock carries a weak aggregate VGM score of D and a Zacks Rank #4 (Sell). The combination of margin pressure, downward estimate revisions and limited buyback activity in the quarter supports a cautious near‑term outlook despite solid cash generation and top‑line beats.

Key Decisions for Investors

• Trim or underweight TXN in near term until guidance produces upward revisions or margin stabilization is evident,
• Monitor Q4 guide versus updated consensus and watch gross and operating margin trends as the primary trigger for reassessing conviction,
• Income‑oriented investors may maintain a reduced position to capture the dividend but avoid adding size given estimate downgrades and a Zacks Sell ranking,
• Use hedges or options (protective puts or collars) if maintaining larger exposure to protect against further downside while awaiting clearer signals on margins and analyst revisions