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TXN's Gross Margin Crosses 64% in Q3: Can It Improve Further?
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Key Takeaways
Texas Instruments' Q3 gross margin reached 64.2%, up from 57.4% a year ago and 61.4% in the prior quarter.
Higher sales volumes, factory utilization, pricing and product mix lifted gross profit 43% to $3.89 billion.
Data center revenues rose 95% YoY, while TXN's 300-mm wafer strategy could boost efficiency as output rises.
Texas Instruments Incorporated (TXN - Free Report) delivered a strong improvement in profitability in the third quarter of 2026, raising hopes that its gross margin can climb further. The semiconductor maker reported a gross margin of 64.2%, up from 57.4% in the year-ago quarter and 61.4% in the previous quarter.
Texas Instruments’ third-quarter gross profit rose 43% year over year to $3.89 billion, outpacing the 28% increase in revenues to $6.06 billion. Higher sales volumes supported the improvement, while better factory utilization, pricing and product mix also helped. These trends suggest that stronger demand can translate into better profitability when production facilities operate more efficiently.
Growth across key markets offers additional support. Industrial revenues increased more than 40% year over year, while automotive revenues grew at a mid-teens rate. Data center revenues surged about 95%, reflecting rising demand for chips used in expanding computing infrastructure. Continued strength in these markets could help TXN maintain higher production levels and spread manufacturing costs across more units.
Texas Instruments' 300-millimeter wafer manufacturing strategy could also support cost efficiency as output rises. Per the company, an unpackaged chip built on 300-millimeter wafers costs approximately 40% less than one built on 200-millimeter wafers. Texas Instruments has available cleanroom capacity in its Richardson, Sherman and Lehi facilities. Management plans to install additional equipment according to demand, supporting dependable supply and cost efficiency as production volumes increase.
For the fourth quarter of 2026, the Zacks Consensus Estimate for revenues and earnings indicates year-over-year growth of 37.7% and 94.5%, respectively. These projections imply continued business activity, which could further expand Texas Instruments’ margins.
How Do TXN’s Competitors Compare on Gross Margin?
Analog Devices, Inc. (ADI - Free Report) is a close competitor in analog chips and signal-processing technology. In the third quarter of fiscal 2026, ADI’s revenues rose 40% year over year to $4.02 billion, while its GAAP gross margin increased to 67.3% from 62.1% in the year-ago quarter.
Its adjusted gross margin reached 72.5% from 69.2% in the year-ago quarter, highlighting strong profitability. These results put Analog Devices ahead of TXN’s 64.2% gross margin.
Microchip Technology Incorporated (MCHP - Free Report) is another competitor, supplying microcontrollers and embedded-control chips. In the first quarter of fiscal 2027, revenues grew 38% year over year to $1.49 billion.
Microchip Technology’s GAAP gross margin improved to 63.2% from 53.6% in the year-ago quarter, while its non-GAAP gross margin reached 63.8% from 54.3%. Higher factory utilization and recovering demand supported the improvement.
Both companies show how stronger demand and manufacturing efficiency can lift margins. Analog Devices’ higher reported margin sets a competitive benchmark, while Microchip Technology’s performance highlights the benefits of better factory utilization.
TXN’s Price Performance, Valuation and Estimates
Shares of Texas Instruments have surged 78.1% year to date compared with the Zacks Semiconductor - General industry’s 22.6% growth.
Texas Instruments YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, TXN trades at a forward price-to-earnings ratio of 29.83, significantly higher than the industry’s average of 16.66.
Texas Instruments Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Texas Instruments’ 2026 and 2027 earnings implies a year-over-year increase of 62.4% and 24.7%, respectively. Estimates for 2026 and 2027 have been revised upward over the past seven days.
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TXN's Gross Margin Crosses 64% in Q3: Can It Improve Further?
Key Takeaways
Texas Instruments Incorporated (TXN - Free Report) delivered a strong improvement in profitability in the third quarter of 2026, raising hopes that its gross margin can climb further. The semiconductor maker reported a gross margin of 64.2%, up from 57.4% in the year-ago quarter and 61.4% in the previous quarter.
Texas Instruments’ third-quarter gross profit rose 43% year over year to $3.89 billion, outpacing the 28% increase in revenues to $6.06 billion. Higher sales volumes supported the improvement, while better factory utilization, pricing and product mix also helped. These trends suggest that stronger demand can translate into better profitability when production facilities operate more efficiently.
Growth across key markets offers additional support. Industrial revenues increased more than 40% year over year, while automotive revenues grew at a mid-teens rate. Data center revenues surged about 95%, reflecting rising demand for chips used in expanding computing infrastructure. Continued strength in these markets could help TXN maintain higher production levels and spread manufacturing costs across more units.
Texas Instruments' 300-millimeter wafer manufacturing strategy could also support cost efficiency as output rises. Per the company, an unpackaged chip built on 300-millimeter wafers costs approximately 40% less than one built on 200-millimeter wafers. Texas Instruments has available cleanroom capacity in its Richardson, Sherman and Lehi facilities. Management plans to install additional equipment according to demand, supporting dependable supply and cost efficiency as production volumes increase.
For the fourth quarter of 2026, the Zacks Consensus Estimate for revenues and earnings indicates year-over-year growth of 37.7% and 94.5%, respectively. These projections imply continued business activity, which could further expand Texas Instruments’ margins.
How Do TXN’s Competitors Compare on Gross Margin?
Analog Devices, Inc. (ADI - Free Report) is a close competitor in analog chips and signal-processing technology. In the third quarter of fiscal 2026, ADI’s revenues rose 40% year over year to $4.02 billion, while its GAAP gross margin increased to 67.3% from 62.1% in the year-ago quarter.
Its adjusted gross margin reached 72.5% from 69.2% in the year-ago quarter, highlighting strong profitability. These results put Analog Devices ahead of TXN’s 64.2% gross margin.
Microchip Technology Incorporated (MCHP - Free Report) is another competitor, supplying microcontrollers and embedded-control chips. In the first quarter of fiscal 2027, revenues grew 38% year over year to $1.49 billion.
Microchip Technology’s GAAP gross margin improved to 63.2% from 53.6% in the year-ago quarter, while its non-GAAP gross margin reached 63.8% from 54.3%. Higher factory utilization and recovering demand supported the improvement.
Both companies show how stronger demand and manufacturing efficiency can lift margins. Analog Devices’ higher reported margin sets a competitive benchmark, while Microchip Technology’s performance highlights the benefits of better factory utilization.
TXN’s Price Performance, Valuation and Estimates
Shares of Texas Instruments have surged 78.1% year to date compared with the Zacks Semiconductor - General industry’s 22.6% growth.
Texas Instruments YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, TXN trades at a forward price-to-earnings ratio of 29.83, significantly higher than the industry’s average of 16.66.
Texas Instruments Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Texas Instruments’ 2026 and 2027 earnings implies a year-over-year increase of 62.4% and 24.7%, respectively. Estimates for 2026 and 2027 have been revised upward over the past seven days.
Image Source: Zacks Investment Research
Texas Instruments currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.