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TXN Q3 Earnings Beat Estimates on Strong Analog, Data Center Demand
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Key Takeaways
TXN's Q3 earnings surged 77% to $2.62, beating estimates by 9.2%, while revenues rose 28% to $6.06B.
Analog revenues jumped 32%, while data center sales surged 95% and industrial revenues grew more than 40%.
TXN's operating margin expanded to 47.5%, while Q4 revenue guidance ranges from $5.80B to $6.30B.
Texas Instruments Incorporated (TXN - Free Report) reported third-quarter 2026 earnings of $2.62 per share, which increased 77% year over year. The bottom line beat the Zacks Consensus Estimate by 9.2%.
TXN posted revenues of $6.06 billion, which rose 28% from the year-ago quarter. The top line surpassed the consensus mark by 2.2%, driven by broad-based growth across industrial, automotive and data center markets. Data center revenues surged approximately 95% year over year.
TXN's Segment Mix Reflects Broad-Based Growth
Texas Instruments' third-quarter results reflected strong growth across its Analog and Embedded Processing segments, supported by improving demand conditions across key end markets.
Analog revenues came in at $4.91 billion (81.1% of total revenues), which grew 32% from the year-ago quarter. The figure came above our model estimate of $4.79 billion. The segment's operating profit increased 69% year over year to $2.51 billion, benefiting from stronger demand and improving manufacturing utilization.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Embedded Processing revenues totaled $858 million (14.2% of total revenues), reflecting 21% year-over-year growth. The figure surpassed our model estimate of $823.1 million. The segment's operating profit surged 110% to $227 million, supported by improving profitability as the business continued its cyclical recovery.
The Other segment generated $286 million in revenues (4.7% of total revenues), declining 6% from the prior-year quarter. The figure missed our model estimate of $293.9 million. The segment's operating profit increased 106% to $142 million.
Texas Instruments Benefits From End-Market Momentum
Industrial revenues increased more than 40% year over year and approximately 10% sequentially, supported by demand across aerospace and defense, energy infrastructure, test and measurement, and robotics.
Automotive revenues grew at a mid-teens percentage rate year over year and approximately 10% sequentially. Management highlighted improving customer demand, particularly in China and the United States, alongside increasing semiconductor content in hybrid electric and powertrain systems.
Data center revenues increased approximately 20% sequentially, reflecting sustained investments in computing infrastructure. Personal electronics revenues remained approximately flat year over year but increased at an upper-single-digit rate sequentially. Communications equipment revenues grew both year over year and sequentially.
TXN's Margins Expand on Higher Revenues
Texas Instruments' gross profit increased 42.7% year over year to $3.89 billion. Gross margin expanded approximately 680 basis points (bps) year over year to 64.2%, benefiting primarily from higher revenues, alongside favorable pricing, manufacturing loadings and product mix.
Selling, general and administrative expenses increased 4.2% year over year to $476 million. As a percentage of revenues, SG&A expenses contracted approximately 180 bps to 7.9%.
Research and development expenses increased 2.3% year over year to $530 million. As a percentage of revenues, R&D expenses declined approximately 220 bps to 8.8%.
Operating profit surged 72.8% year over year to $2.87 billion. Operating margin expanded approximately 1,240 bps to 47.5%.
Texas Instruments Strengthens Its Manufacturing Position
Texas Instruments continued expanding manufacturing capacity to support rising semiconductor demand. Management highlighted its investments in 300mm wafer manufacturing and assembly and test operations as key competitive advantages.
The company is ramping manufacturing operations in Malaysia while expanding capacity at its Lehi facilities. Management also highlighted improving Analog pricing during the second half of 2026, supported by stronger demand and tighter industry supply conditions.
Capital expenditure plans for 2026 remain between $2 billion and $3 billion, with spending potentially approaching the higher end depending on equipment delivery schedules.
As of Sept. 30, 2026, cash and short-term investments totaled $8.14 billion. Long-term debt stood at $12.91 billion, while the current portion of long-term debt was $650 million.
Texas Instruments generated operating cash flow of $3.42 billion during the quarter, while capital expenditures totaled $463 million. Quarterly free cash flow reached $2.96 billion.
During the quarter, TXN repurchased shares worth $48 million and paid $1.30 billion in dividends. The company also repaid $500 million in debt.
Trailing 12-month free cash flow increased 249% year over year to $8.42 billion. Management announced a 7% dividend increase to $1.52 per share, marking its 23rd consecutive annual dividend increase.
Texas Instruments Provides Q4 2026 Guidance
Management expects fourth-quarter 2026 revenues between $5.80 billion and $6.30 billion, with a midpoint of $6.05 billion.
Texas Instruments anticipates earnings per share between $2.45 and $2.79. The company expects an effective tax rate of approximately 13% for the fourth quarter and 13-14% for 2027.
Management expects industrial, automotive and data center demand to support fourth-quarter performance. Continued strength in data center infrastructure investments and industrial recovery underpins the company's outlook, while manufacturing capacity expansion remains a key operational priority.
Shares of Analog Devices have rallied 49.7% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $13 per share, up by 4 cents over the past seven days, indicating an increase of 66.9% year over year.
Shares of Applied Materials have jumped 59.1% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.79 per share, unchanged over the past 30 days, indicating a rise of 35.8% year over year.
Cisco Systems shares have surged 39.2% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2027 earnings is pegged at $5.11 per share, unchanged over the past 30 days, indicating an increase of 18% year over year.
View the Zacks #1 Rank List
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TXN Q3 Earnings Beat Estimates on Strong Analog, Data Center Demand
Key Takeaways
Texas Instruments Incorporated (TXN - Free Report) reported third-quarter 2026 earnings of $2.62 per share, which increased 77% year over year. The bottom line beat the Zacks Consensus Estimate by 9.2%.
TXN posted revenues of $6.06 billion, which rose 28% from the year-ago quarter. The top line surpassed the consensus mark by 2.2%, driven by broad-based growth across industrial, automotive and data center markets. Data center revenues surged approximately 95% year over year.
TXN's Segment Mix Reflects Broad-Based Growth
Texas Instruments' third-quarter results reflected strong growth across its Analog and Embedded Processing segments, supported by improving demand conditions across key end markets.
Analog revenues came in at $4.91 billion (81.1% of total revenues), which grew 32% from the year-ago quarter. The figure came above our model estimate of $4.79 billion. The segment's operating profit increased 69% year over year to $2.51 billion, benefiting from stronger demand and improving manufacturing utilization.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
Embedded Processing revenues totaled $858 million (14.2% of total revenues), reflecting 21% year-over-year growth. The figure surpassed our model estimate of $823.1 million. The segment's operating profit surged 110% to $227 million, supported by improving profitability as the business continued its cyclical recovery.
The Other segment generated $286 million in revenues (4.7% of total revenues), declining 6% from the prior-year quarter. The figure missed our model estimate of $293.9 million. The segment's operating profit increased 106% to $142 million.
Texas Instruments Benefits From End-Market Momentum
Industrial revenues increased more than 40% year over year and approximately 10% sequentially, supported by demand across aerospace and defense, energy infrastructure, test and measurement, and robotics.
Automotive revenues grew at a mid-teens percentage rate year over year and approximately 10% sequentially. Management highlighted improving customer demand, particularly in China and the United States, alongside increasing semiconductor content in hybrid electric and powertrain systems.
Data center revenues increased approximately 20% sequentially, reflecting sustained investments in computing infrastructure. Personal electronics revenues remained approximately flat year over year but increased at an upper-single-digit rate sequentially. Communications equipment revenues grew both year over year and sequentially.
TXN's Margins Expand on Higher Revenues
Texas Instruments' gross profit increased 42.7% year over year to $3.89 billion. Gross margin expanded approximately 680 basis points (bps) year over year to 64.2%, benefiting primarily from higher revenues, alongside favorable pricing, manufacturing loadings and product mix.
Selling, general and administrative expenses increased 4.2% year over year to $476 million. As a percentage of revenues, SG&A expenses contracted approximately 180 bps to 7.9%.
Research and development expenses increased 2.3% year over year to $530 million. As a percentage of revenues, R&D expenses declined approximately 220 bps to 8.8%.
Operating profit surged 72.8% year over year to $2.87 billion. Operating margin expanded approximately 1,240 bps to 47.5%.
Texas Instruments Strengthens Its Manufacturing Position
Texas Instruments continued expanding manufacturing capacity to support rising semiconductor demand. Management highlighted its investments in 300mm wafer manufacturing and assembly and test operations as key competitive advantages.
The company is ramping manufacturing operations in Malaysia while expanding capacity at its Lehi facilities. Management also highlighted improving Analog pricing during the second half of 2026, supported by stronger demand and tighter industry supply conditions.
Capital expenditure plans for 2026 remain between $2 billion and $3 billion, with spending potentially approaching the higher end depending on equipment delivery schedules.
TXN's Cash Generation Supports Shareholder Returns
As of Sept. 30, 2026, cash and short-term investments totaled $8.14 billion. Long-term debt stood at $12.91 billion, while the current portion of long-term debt was $650 million.
Texas Instruments generated operating cash flow of $3.42 billion during the quarter, while capital expenditures totaled $463 million. Quarterly free cash flow reached $2.96 billion.
During the quarter, TXN repurchased shares worth $48 million and paid $1.30 billion in dividends. The company also repaid $500 million in debt.
Trailing 12-month free cash flow increased 249% year over year to $8.42 billion. Management announced a 7% dividend increase to $1.52 per share, marking its 23rd consecutive annual dividend increase.
Texas Instruments Provides Q4 2026 Guidance
Management expects fourth-quarter 2026 revenues between $5.80 billion and $6.30 billion, with a midpoint of $6.05 billion.
Texas Instruments anticipates earnings per share between $2.45 and $2.79. The company expects an effective tax rate of approximately 13% for the fourth quarter and 13-14% for 2027.
Management expects industrial, automotive and data center demand to support fourth-quarter performance. Continued strength in data center infrastructure investments and industrial recovery underpins the company's outlook, while manufacturing capacity expansion remains a key operational priority.
Zacks Rank and Other Stocks to Consider
Currently, TXN carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices (ADI - Free Report) , Applied Materials (AMAT - Free Report) and Cisco Systems (CSCO - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Analog Devices have rallied 49.7% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $13 per share, up by 4 cents over the past seven days, indicating an increase of 66.9% year over year.
Shares of Applied Materials have jumped 59.1% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.79 per share, unchanged over the past 30 days, indicating a rise of 35.8% year over year.
Cisco Systems shares have surged 39.2% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2027 earnings is pegged at $5.11 per share, unchanged over the past 30 days, indicating an increase of 18% year over year.