Image source: National Instruments. 

A weaker global economy and volatile foreign currencies blew against National Instruments (NATI) in the second quarter. Those headwinds kept revenue growth to the low single digits while pushing earnings in reverse. The company does not expect those headwinds to abate next quarter, though it remains optimistic on its long-term goals as its investments in two major strategic initiatives start to bear fruit.

National Instruments results: The raw numbers


Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)


$306.1 million

$301.8 million


Net Income

$19.8 million

$24.9 million






YOY = year over year. Data source: National Instruments Corp.

What happened with National Instruments this quarter? 

The quarter was in line with expectations:

  • Revenue was right in the middle of its guidance range of $287 million to $323 million. Earnings, likewise, landed right around the midpoint of its projection both on a GAAP basis ($0.08 to $0.24) and non-GAAP basis ($0.16 to $0.32) with the company reporting non-GAAP earnings of $0.23 per share.
  • Foreign currency volatility kept a lid on revenue growth. While revenue grew a mere 1% in U.S. dollar terms, core revenue would have been up 3% if currency held constant. Additionally, FX volatility hit earnings by $0.01 per share.
  • Sales in the U.S. and EMEIA were weak, down 10% and 2% year over year, respectively. This was offset by robust sales growth in APAC, with sales surging 23% over last year's second quarter.
  • Orders at its largest customer jumped $8 million year-over-year to $18 million. Sales would have been down 1% without the impact of that one customer.
  • Gross margins slipped from 76% in the year-ago quarter to 75% last quarter due in part to a 6% increase in total operating expenses.

What management had to say 

Alex Davern, both the COO and CFO, had this to say about the quarter:

I am pleased with our execution in the second quarter despite the revenue headwinds from a weak PMI and currency. Looking forward, we will be focused on increasing our net income while gaining market share through our differentiated platform. We plan to utilize the strategic investments we have already made while managing expenses carefully, and we remain committed to our long-term operating margin targets.

While it is facing some fierce headwinds right now, the company sees better days ahead. In particular, it is excited about the upcoming rollout of 5G wireless systems and the connected car. The company's strategic investments in both areas are starting to pay off with co-founder and CEO James Truchard saying that he was "particularly excited about our success in customer applications for prototyping next-generation 5G wireless algorithms and our work with automotive radar for the connected car."

Looking forward 

Unfortunately, it will be a while before those initiatives start to drive growth. Instead, the company will continue to contend with the same economic and currency headwinds that have been weighing on its results. For the third quarter, that leads it to believe that sales will be in the range of $291 million to $321 million, with the company estimating the strengthening of the U.S. dollar will reduce its year-over-year revenue growth rate by 3%. Meanwhile, GAAP earnings are expected to range anywhere from $0.11 to $0.27 per share while non-GAAP earnings should be in the range of $0.18 to $0.34 per share.