Investors have started to see signs of a slowing economy across several industrial sectors. National Instruments (NASDAQ:NATI) has exposure to business cycles because of its role in providing scientists and engineers with the tools they need to conduct measurements and tests, and some disruptions across its customer base have put pressure on the company's growth recently.

Coming into Tuesday's second-quarter financial report, National Instruments investors weren't expecting a whole lot from the company, projecting relatively flat numbers compared to year-ago levels. Falling revenue wasn't a mark in NI's favor, but a strong bottom-line performance once again rewarded the testing and measurement equipment provider's efforts to control costs and boost efficiency.

Engine fire test shown on three mobile devices.

Image source: National Instruments.

Can National Instruments measure up?

National Instruments' second-quarter results weren't quite what investors had wanted to see. Revenue actually dropped 2% to $334 million, which was weaker than the unchanged top-line numbers that most of those following the stock were expecting. Adjusted net income once again climbed, rising 3% to $46.2 million. The resulting $0.35 per share in adjusted earnings was still weaker than the $0.36-per-share consensus forecast among investors.

One somewhat disturbing part of NI's sales performance was that it came after what had seemed to be issues related to order timing last quarter. Investors had hoped that the company's sales would make back some of the shortfall it saw three months ago, but the order backlog increase back then didn't seem to translate into greater revenue in the second quarter.

In addition, the order flows that National Instruments has traditionally relied on didn't behave the way they have in past quarters. Small orders below $20,000 were down 6% year over year, which was consistent with what we've seen before. However, large orders of more than $20,000 also saw declines, falling 2%, and that was a big departure from the more favorable performance NI has managed in the past.

NI's geographical performance showed a lot of variation. The Asia-Pacific region looked extremely strong, with revenue gains of 5% despite 3 percentage points of currency headwinds. The Americas suffered a 1% drop in segment sales, but Europe is where the company took the biggest hit, as revenue dropped 10% due in part to 4 percentage points of pressure from the stronger U.S. dollar.

CEO Alex Davern celebrated NI's successes. "I am pleased with our execution this quarter," Davern said, "despite external disruptions in our industry." CFO Karen Rapp added, "We delivered record non-GAAP net income for a second quarter due to our increased scalability and strong culture of operational efficiency." The CEO pointed to record adjusted net income for any first quarter in NI's history as particularly encouraging.

NI's hopes for the future

Optimism is still evident at National Instruments. In Davern's words, "We are on a journey to position NI for long-term growth, and I believe we have an opportunity to deliver significant operating leverage when the market dynamics recover."

Yet NI's guidance continued to deliver mixed expectations. The measurement and testing specialist sees revenue for the third quarter coming in between $325 million and $355 million, which would be disappointing compared to the current consensus forecast. However, adjusted earnings of $0.36 to $0.50 per share look good next to projections for $0.32 per share from those following the stock. Even without adjusting the figures, guidance for GAAP earnings of $0.30 to $0.44 per share would look favorable.

National Instruments investors seemed uncertain as to how to react to the news, as the stock stayed unchanged in after-hours trading following the announcement. In the long run, NI needs to boost both revenue and profit if it wants to convince its shareholders that the business can thrive and produce strong returns.