Texas Instruments Inc. (TXN), a leading semiconductor company, saw its stock plunge 6.55% in pre-market trading on Friday, following the company's disappointing earnings outlook for the first quarter of 2025.

The chipmaker forecasted earnings per share (EPS) in the range of $0.94 to $1.16 for the upcoming quarter, significantly below analysts' consensus estimate of $1.17. Additionally, Texas Instruments' revenue guidance of $3.74 billion to $4.06 billion fell short of expectations, reflecting the ongoing challenges faced by the semiconductor industry.

The weak guidance can be attributed to persistent weakness in the automotive and industrial markets, two of Texas Instruments' key end markets. According to the company, automotive sales in Europe, the United States, and Japan continued to decline in the fourth quarter of 2024, offsetting growth in China. Similarly, the industrial market remains sluggish, with sectors like industrial automation and energy infrastructure still struggling.

To manage inventory levels, Texas Instruments is operating some of its plants at less-than-full capacity, which is negatively impacting profitability and gross margins. The company expects gross margins to decrease by a few hundred basis points in the first quarter due to lower revenue, higher depreciation, and reduced factory loadings.

Despite the near-term challenges, Texas Instruments remains optimistic about its long-term prospects, emphasizing its strategic focus on the industrial and automotive markets, which now account for around 70% of the company's revenue. The company is also investing in manufacturing capabilities, having received a $1.6 billion CHIPS Act grant to support its new 300-millimeter wafer fabs.