National Instruments Reports Fourth Consecutive Quarter of Revenue Growth

Company Announces First-Ever Dividend, Record Cash Balance

AUSTIN, Texas -- July 23, 2003 -- National Instruments (NASDAQ: NATI) today announced revenue of $100.2 million for the second quarter of 2003, a seven percent increase from the second quarter of 2002, and the fourth consecutive quarter of year-over-year revenue growth. Fully diluted earnings per share (EPS) for Q2 were 14 cents, including patent litigation expenses of $0.7 million, which amounts to $0.01 per share. NI also reported net income of $7.4 million and a record cash balance of $168 million for Q2 2003, up $10 million from last quarter.

With more than 42 consecutive quarters of profitable operation, a record cash balance and the recent reduction to the dividend tax rate, the NI Board of Directors has declared the company's first-ever quarterly cash dividend of 5 cents per common share, payable Aug. 29, 2003 to shareholders of record Aug. 4, 2003.

"Our investment in R&D continues to pay off. In Q2, we released more new products than in any quarter in the past six years, including LabVIEW 7 Express, the most significant upgrade to our flagship software product in a decade. LabVIEW 7 Express positions us for continued technical leadership well into the next decade," said Dr. James Truchard, NI CEO. "Additionally, with the company's track record of strong profitability, we are pleased to declare our first-ever dividend payment as another way of delivering long-term value to our shareholders."

Q2 2003 Highlights

• Fourth consecutive quarter of year-over-year revenue growth; solid profitability with diluted EPS of 14 cents
• First-ever quarterly dividend payment of 5 cents per common share, record cash balance of $168 million
• Major product introductions, including entire LabVIEW 7 Express product family, Compact Vision System for industrial machine vision, and the NI ELVIS instrumentation system for higher education
• Record number of visits to ni.com and record revenue generated through the Web store
• Successful upgrade of North American ERP Systems to Oracle 11i
• Court ruling confirmed jury verdict finding three LabVIEW patents valid and infringed by The MathWorks Inc.'s Simulink product

"With almost $200 million in revenue for the first six months of this year, we are on target to set a new revenue record in 2003," said Alex Davern, NI CFO. "We are especially pleased to see our growth increase in Q2 given that U.S. industrial production decreased at an annual rate of more than three percent in Q2. We believe this growth is a result of our significant new product introductions."

Geographically, the growth of revenue in U.S. dollar terms for Q2 2003 as compared to Q2 2002 was as follows: Asia, up 32 percent; Europe, up seven percent; and flat in the Americas giving overall growth of seven percent, up from five percent last quarter. In local currency terms, revenue was up 40 percent in Asia, down seven percent in Europe, and flat in the Americas.

Given the continued uncertainty in global economic conditions, NI anticipates mid to high single digit, year-over-year revenue growth in Q3 2003. In addition, the company estimates earnings per share will be in the range of 12 to 16 cents per share for Q3 2003. This EPS estimate is net of the $1 million NI expects in patent litigation expenses in Q3.

In conjunction with NIWeek 2003, the company's annual customer and technology conference, NI will host an analyst conference on Thurs., Aug. 14. More information about the conference is available by contacting the NI investor relations department at (512) 683-5242.

Interested parties can listen to a conference call today, July 23, 2003, beginning at 4 p.m. CDT, at ni.com/call. Replay information will be available by calling (719) 457-0820, confirmation code #764588, from 7 p.m. CDT July 23, 2003, through July 30, 2003, at 12 a.m. CDT.

This release contains "forward-looking statements," including the company's ability to deliver record revenue, return on R&D investment, and expected revenue, earnings, and litigation expenses. These are subject to a number of risks and uncertainties, including the risk of adverse changes in the global economy, delays in the release of new products, unforeseen developments in litigation, fluctuations in customer demand for NI products, manufacturing inefficiencies, and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs you to documents filed with the SEC for other risks associated with the company's future performance.

About National Instruments
National Instruments (www.ni.com) is a technology pioneer and leader in virtual instrumentation -- a revolutionary concept that has changed the way engineers and scientists approach measurement and automation. Leveraging the PC and its related technologies, virtual instrumentation increases productivity and lowers costs for customers worldwide through easy-to-integrate software, such as the NI LabVIEW graphical development environment, and modular hardware, such as PXI modules for data acquisition, instrument control, and machine vision. Headquartered in Austin, Texas, NI has more than 3,000 employees and direct operations in 40 countries. In 2002, the company sold products to more than 25,000 different companies in more than 80 countries around the world. For the past four consecutive years, FORTUNE magazine has named NI one of the 100 best companies to work for in America.

Readers may obtain investment information from the company's investor relations department at (512) 683-5090, by sending e-mail to nati@ni.com, or on the Web at www.ni.com/nati.

The condensed consolidated balance sheets, statements of income, and cash flows to follow.

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National Instruments
Condensed Consolidated Balance Sheets
(in thousands)

	June 30, 2003 (unaudited)	December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents	$ 28,062	$ 40,240
Short-term investments	140,029	113,638
Accounts receivable, net	61,760	62,981
Inventories	35,896	39,247
Other current assets	18,787	21,860
Total current assets	284,534	277,966
Property and equipment, net	150,395	152,133
Intangibles, net and other assets	38,835	28,615
Total assets	$473,764	$458,714
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	25,436	25,578
Accrued expenses	34,099	40,935
Total current liabilities	59,535	66,513
Deferred income taxes	5,140	5,738
Total liabilities	64,675	72,251
Stockholders' equity:
Common stock	516	511
Additional paid-in capital	79,773	72,063
Retained earnings	335,980	321,813
Other	(7,180)	(7,924)
Total stockholders' equity	409,089	386,463
Total liabilities and stockholders' equity	$473,764	$458,714

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National Instruments
Condensed Consolidated Statements of Income
(in thousands, except per share data)

	Three Months Ended June 30, (unaudited)		Six Months Ended June 30, (unaudited)
	2003	2002	2003	2002
Net sales	$100,165	$93,505	$199,338	$188,244
Cost of sales	27,150	26,603	53,163	51,961
Gross profit	73,015	66,902	146,175	136,283
Sales and marketing	38,124	33,566	76,669	68,974
Research and development	16,876	15,734	32,127	31,667
General and administrative	8,469	7,528	16,806	14,809
Patent litigation	732	1,314	3,434	1,819
Total operating expenses	64,201	58,142	129,036	117,269
Operating income	8,814	8,760	17,139	19,014
Interest income, net	620	839	1,306	1,635
Foreign exchange, net	340	217	325	(677)
Other income, net	98	445	119	522
Income before income taxes	9,872	10,261	18,889	20,494
Provision for income taxes	2,468	2,873	4,722	5,738
Net income	$7,404	$7,388	$14,167	$14,756
Earnings per share:
Basic	$0.14	$0.14	$0.28	$0.29
Diluted	$0.14	$0.14	$0.27	$0.27
Weighted average shares
Outstanding:
Basic	51,490	51,449	51,324	51,331
Diluted	53,633	53,974	53,453	53,966

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National Instruments
Consolidated Statements of Cash Flows
(in thousands)

	Six Months Ended June 30, (unaudited)
	2003	2002
Cash flow from operating activities:
Net income	$14,167	$14,756
Adjustments to reconcile net income to cash from operating activities:
Charges to income not requiring cash outlays:
Depreciation and amortization	12,390	9,922
Benefit from deferred income taxes	(965)	(3,620)
Tax benefit from stock option plans	1,315	1,011
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	1,221	(6,036)
Decrease in inventory	3,351	97
Decrease in prepaid expense and other assets	2,511	336
Increase (decrease) in current liabilities	(6,978)	5,024
Net cash provided by operating activities	27,012	21,490
Cash flow from investing activities:
Capital expenditures	(7,759)	(15,607)
Capitalization of internally developed software	(8,432)	(1,386)
Additions to other intangibles	(4,323)	(1,489)
Purchases of short-term investments	(77,042)	(81,026)
Sales of short-term investments	50,651	83,414
Net cash used in investing activities	(46,905)	(16,094)
Cash flow from financing activities:
Proceeds from issuance of common stock, net of repurchases	7,715	6,095
Net cash provided by financing activities	7,715	6,095
Net (decrease) increase in cash and cash equivalents	(12,178)	11,491
Cash and cash equivalents at beginning of period	40,240	49,089
Cash and cash equivalents at end of period	$ 28,062	$ 60,580

Contact:

Kimberly Allen Investor Relations Manager National Instruments (512) 683-6873

Jennifer Howard-Brown Media Relations Manager National Instruments (512) 683-8713

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