A tale of two cyclicals: Texas Instruments and ASML earnings
Both companies reported earnings these last few days with widely different results. Let's talk about them and see if any is a compelling buy right now to add to my position.
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Two of my portfolio companies reported earnings this week. Both of them are currently going through the cyclical semiconductor downturn and are showing negative earnings growth. The market’s reaction was wildly different however: While ASML is up 5% on the news, Texas Instruments is down 9% since reporting last Thursday. ASML also dropped sharply in line with other AI benefactors after the recent news from deepseek depressed prices. I can recommend this article from my friend
on the topic.While both companies are in the semiconductor space, they are in very different parts of it. Texas Instruments is the leading analog player, while ASML is a semi-equipment manufacturer and has a monopoly in extreme ultraviolet light lithography needed to produce the most advanced chips. In case you aren’t familiar with both companies, here are my articles on the businesses:
Texas Instruments (TXN): Investing through a downturn
Texas Instruments, best known for the graphical calculators, is the leading manufacturer of analog semiconductors. The company goes back to 1930 and has existed as Texas Instruments since 1951. The company revolutionized the world when it produced the
The world's most important monopoly
I decided to write up all of my current portfolio companies, regardless of the company's size. ASML is a Dutch technology company in the semiconductor equipment industry and my second largest company with over $340 billion in enterprise value. It is also one of my longest held companies, since October 2020. ASML is probably the most important monopoly to the global economy and has one of the deepest moats on the planet.
Texas Instruments earnings
TI Q4 sales of $4.01 billion beat by $134 million/3.5% and EPS of $1.21 by $0.1/8.3%. This represents a 3% sequential and 2% Y/Y decline in revenues. While this is a good beat, the focus, as is normal with a cyclical company, was on the guidance. TI expects the first quarter to come in between $3.74 and $4.06 billion and $0.94-$1.16 EPS. This spooked investors because the management made comments throughout the year that the worst might’ve been behind us and that the bottom was reached. Analyst revenue estimates have trended up after the market was relieved by the bottom call. Going back to sequential declines goes against this narrative and makes the sector recovery questionable. TI reports very early in the earnings season, so it will be interesting to see if peers like Analog Devices report similarly. We’ll get into more details and interpretations later.
ASML Earnings
ASML beat revenue expectations of 9.26 billion € by 200 million and 6.85€ EPS, a 0.12€ beat. Quarterly net bookings were 7.1 billion, while management previously said that they’d need above 4 billion in orders to meet the 2025 guidance midpoint. CFO Roger Dassen announced that they’d continue giving guidance on net bookings for the year but won’t continue afterward. The reason is that bookings can be very lumpy. ASML sells machines worth hundreds of millions each in many cases. Just a few delays or forwards can have massive implications on this and do not represent the growth trajectory of the business well. That’s why investors should focus even more than usual on the long-term trajectory instead of quarterly earnings on ASML.
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