Updated From 5:17 p.m. EDT

Texas Instruments ( TXN) turned in record profit margins in the second quarter, even as its bottom line was bruised by the lingering effects of the chip industry's recent downturn.

The chipmaker said Monday that sales increased 7% sequentially to $3.42 billion in the three months ended June 30, in line with analysts' expectations. On a year-over-year basis, TI's sales were down 7%, due to what it said was lower demand across a broad range of products.

TI posted a net income of $610 million, or 42 cents a share, also in line with the average analyst expectation, according to Thomson Financial.

At this time a year ago, TI posted a net income of $2.39 billion, or $1.50 a share, although those results included gains from the sale of its sensors and controls business. Excluding those gains, TI's net income last year was $739 million, or 47 cents a share.

After hours, shares recently fell 3.3%, or $1.28, to $36.90.

"Our attention to customers and growing focus on analog continue to help us deliver stronger financial results," CEO Rich Templeton said in a statement. "Moreover, we see even greater opportunities ahead as the market regains momentum."

Templeton said the company sees potential to expand its profit margins, and noted that TI expects to meet is recently issued profitability goals of 55% gross margins and 30% operating margins within the next few years.

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