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Texas Instruments Stock Surges 70% YTD: Is the Rally Set to Continue?
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Key Takeaways
TXN has rallied 70% YTD, outperforming its industry, with strong earnings supporting further upside.
TXN's Q3 revenues grew 28% y/y, while earnings jumped 77%, driven partly by strong AI data center demand.
Texas Instruments' $8.42B FCF and manufacturing expansion support growth despite its premium valuation.
Texas Instruments Incorporated (TXN - Free Report) has emerged as one of the strongest performers in the semiconductor industry this year. The stock has gained 70% year to date (YTD), comfortably outperforming the Zacks Semiconductor – General industry’s 3.4% advance.
TXN has also left several major semiconductor players behind, including Broadcom Inc. (AVGO - Free Report) , QUALCOMM Incorporated (QCOM - Free Report) and NVIDIA Corporation (NVDA - Free Report) . During the same period, QUALCOMM gained 05%, while NVIDIA and Broadcom declined 3.8% and 7.3%, respectively.
Texas Instruments YTD Price Return Performance
Image Source: Zacks Investment Research
Following such an impressive rally, investors may question whether TXN still has room to run or most of the upside is already priced in.
We believe that Texas Instruments still deserves a place in investors' portfolios. Although its valuation is on the expensive side, accelerating earnings growth, rising AI-related demand, strong cash generation and significant manufacturing investments provide several reasons to remain bullish. These factors could support further gains, making the stock worth buying at the current level.
Strong Earnings Growth & Guidance Strengthen TXN's Outlook
Texas Instruments' latest financial results provide a strong reason for optimism. The company delivered impressive third-quarter 2026 results, with revenues rising 28% year over year to $6.06 billion. Non-GAAP earnings jumped 77% to $2.62 per share, reflecting stronger business momentum and improving profitability.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Management's fourth-quarter outlook suggests that this growth momentum could continue. Texas Instruments expects revenues between $5.80 billion and $6.30 billion. The midpoint of this range indicates 37% year-over-year growth. The midpoint of its earnings guidance is $2.62 per share, suggesting growth of more than 106% from the year-ago quarter’s actual.
This outlook points to continued strength across several end markets, with AI infrastructure emerging as an important growth driver.
Wall Street analysts are also optimistic about the company's prospects. The Zacks Consensus Estimate projects further revenue and earnings growth in 2026 and 2027. The consensus mark for 2026 and 2027 revenues indicates year-over-year growth of 26.4% and 15.4%, respectively. Earnings estimates for 2026 and 2027 signify year-over-year increases of 64.6% and 25.3%, respectively.
AI Infrastructure Creates Growth Opportunities for TXN
Texas Instruments may not manufacture advanced AI accelerators like NVIDIA and AMD, but that does not mean it is missing out on the AI opportunity.
The company produces analog and embedded processing chips that perform essential functions, including power management, signal processing and equipment control. These components are increasingly important as AI data centers become larger, and more powerful and energy-intensive.
The rapid expansion of AI infrastructure is creating demand for more sophisticated power-management solutions. This allows Texas Instruments to benefit from rising AI investments without competing directly in the highly competitive AI accelerator market.
The company's recent performance highlights this opportunity. Texas Instruments' data center business reached an annual revenue run rate of $1.2 billion in 2025, representing year-over-year growth of more than 50%. Momentum accelerated in the third quarter of 2026, when data center revenues surged approximately 95% year over year and increased 20% sequentially.
This growth is particularly encouraging because it shows that AI-related demand is already contributing meaningfully to the company's business. If hyperscalers continue expanding their data center capacity, TXN could see further gains from rising demand for its power-management and analog chips.
Manufacturing Investments to Fortify TXN’s Competitiveness
Another important growth driver is Texas Instruments' aggressive investment in domestic manufacturing capacity. Unlike several semiconductor companies that rely heavily on external foundries, TXN is working toward producing more than 95% of its wafers internally by 2030.
This strategy requires significant upfront investment, but it could provide important long-term benefits. Greater control over manufacturing would give Texas Instruments more flexibility in managing production, improving supply reliability and controlling costs. It could also reduce its dependence on external suppliers during periods of strong semiconductor demand.
Government incentives should help offset some of the expansion costs. Texas Instruments expects to receive up to $1.6 billion in direct CHIPS Act grants and another $6-$8 billion through the U.S. Treasury Department's Investment Tax Credit. The combined lifetime benefits are estimated at $7.5-$9.5 billion.
These incentives should help lower the financial burden of its manufacturing expansion. Over time, higher internal production capacity could improve operating efficiency and strengthen the company's competitive position.
Although the near-term capital requirements remain substantial, we believe that these investments could pay off as semiconductor demand expands over the coming years.
Texas Instruments' ability to generate substantial cash provides another reason to remain positive on the stock. Over the past 12 months, the company generated $9.9 billion in operating cash flow and $8.42 billion in free cash flow. It ended the third quarter with $8.12 billion in cash and short-term investments.
This strong cash generation gives TXN the financial flexibility to fund its manufacturing expansion without compromising shareholder returns.
The company has remained committed to rewarding investors through dividends and share repurchases. In the first three quarters of 2026, Texas Instruments returned $2.8 billion to shareholders through dividends and stock buybacks. Its total shareholder returns over the past 12 months reached $5.81 billion.
This combination of business investments and shareholder distributions makes TXN attractive to investors seeking earnings growth and consistent capital returns.
More importantly, its healthy cash position provides a cushion against potential market weakness while allowing the company to continue investing in growth.
Is Texas Instruments’ Premium Valuation Justifiable?
TXN is not a bargain stock. It currently carries a Value Score of D, reflecting its premium valuation. Texas Instruments currently trades at a forward 12-month P/E ratio of 27.07, well above the industry average of 13.98.
Texas Instruments Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
Compared with other semiconductor leaders, Texas Instruments also trades at a higher earnings multiple than NVIDIA, Broadcom and QUALCOMM. At present, NVIDIA, Broadcom and QUALCOMM are trading at P/E multiples of 12.50, 16.51 and 16.83, respectively.
However, premium valuations are often justified when a company consistently delivers earnings growth, generates strong cash flow and maintains durable competitive advantages.
Texas Instruments fits that profile. The company continues to benefit from expanding AI infrastructure spending, generates substantial free cash flow, maintains a healthy balance sheet and has a long track record of rewarding shareholders through dividends and share buybacks. Those strengths make its premium valuation easier to justify.
Texas Instruments has already delivered an impressive 60% gain YTD, but the investment story is not over.
Conclusion: Buy Texas Instruments Stock Now
While the stock is expensive, the underlying business remains strong enough to support the premium. The company's accelerating earnings, strong data center growth, expanding AI exposure and manufacturing investments point to long-term opportunities. Its strong cash generation also gives it flexibility to invest while continuing to reward shareholders.
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Texas Instruments Stock Surges 70% YTD: Is the Rally Set to Continue?
Key Takeaways
Texas Instruments Incorporated (TXN - Free Report) has emerged as one of the strongest performers in the semiconductor industry this year. The stock has gained 70% year to date (YTD), comfortably outperforming the Zacks Semiconductor – General industry’s 3.4% advance.
TXN has also left several major semiconductor players behind, including Broadcom Inc. (AVGO - Free Report) , QUALCOMM Incorporated (QCOM - Free Report) and NVIDIA Corporation (NVDA - Free Report) . During the same period, QUALCOMM gained 05%, while NVIDIA and Broadcom declined 3.8% and 7.3%, respectively.
Texas Instruments YTD Price Return Performance
Image Source: Zacks Investment Research
Following such an impressive rally, investors may question whether TXN still has room to run or most of the upside is already priced in.
We believe that Texas Instruments still deserves a place in investors' portfolios. Although its valuation is on the expensive side, accelerating earnings growth, rising AI-related demand, strong cash generation and significant manufacturing investments provide several reasons to remain bullish. These factors could support further gains, making the stock worth buying at the current level.
Strong Earnings Growth & Guidance Strengthen TXN's Outlook
Texas Instruments' latest financial results provide a strong reason for optimism. The company delivered impressive third-quarter 2026 results, with revenues rising 28% year over year to $6.06 billion. Non-GAAP earnings jumped 77% to $2.62 per share, reflecting stronger business momentum and improving profitability.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
Management's fourth-quarter outlook suggests that this growth momentum could continue. Texas Instruments expects revenues between $5.80 billion and $6.30 billion. The midpoint of this range indicates 37% year-over-year growth. The midpoint of its earnings guidance is $2.62 per share, suggesting growth of more than 106% from the year-ago quarter’s actual.
This outlook points to continued strength across several end markets, with AI infrastructure emerging as an important growth driver.
Wall Street analysts are also optimistic about the company's prospects. The Zacks Consensus Estimate projects further revenue and earnings growth in 2026 and 2027. The consensus mark for 2026 and 2027 revenues indicates year-over-year growth of 26.4% and 15.4%, respectively. Earnings estimates for 2026 and 2027 signify year-over-year increases of 64.6% and 25.3%, respectively.
AI Infrastructure Creates Growth Opportunities for TXN
Texas Instruments may not manufacture advanced AI accelerators like NVIDIA and AMD, but that does not mean it is missing out on the AI opportunity.
The company produces analog and embedded processing chips that perform essential functions, including power management, signal processing and equipment control. These components are increasingly important as AI data centers become larger, and more powerful and energy-intensive.
The rapid expansion of AI infrastructure is creating demand for more sophisticated power-management solutions. This allows Texas Instruments to benefit from rising AI investments without competing directly in the highly competitive AI accelerator market.
The company's recent performance highlights this opportunity. Texas Instruments' data center business reached an annual revenue run rate of $1.2 billion in 2025, representing year-over-year growth of more than 50%. Momentum accelerated in the third quarter of 2026, when data center revenues surged approximately 95% year over year and increased 20% sequentially.
This growth is particularly encouraging because it shows that AI-related demand is already contributing meaningfully to the company's business. If hyperscalers continue expanding their data center capacity, TXN could see further gains from rising demand for its power-management and analog chips.
Manufacturing Investments to Fortify TXN’s Competitiveness
Another important growth driver is Texas Instruments' aggressive investment in domestic manufacturing capacity. Unlike several semiconductor companies that rely heavily on external foundries, TXN is working toward producing more than 95% of its wafers internally by 2030.
This strategy requires significant upfront investment, but it could provide important long-term benefits. Greater control over manufacturing would give Texas Instruments more flexibility in managing production, improving supply reliability and controlling costs. It could also reduce its dependence on external suppliers during periods of strong semiconductor demand.
Government incentives should help offset some of the expansion costs. Texas Instruments expects to receive up to $1.6 billion in direct CHIPS Act grants and another $6-$8 billion through the U.S. Treasury Department's Investment Tax Credit. The combined lifetime benefits are estimated at $7.5-$9.5 billion.
These incentives should help lower the financial burden of its manufacturing expansion. Over time, higher internal production capacity could improve operating efficiency and strengthen the company's competitive position.
Although the near-term capital requirements remain substantial, we believe that these investments could pay off as semiconductor demand expands over the coming years.
TXN’s Cash Flow Supports Expansion & Shareholder Returns
Texas Instruments' ability to generate substantial cash provides another reason to remain positive on the stock. Over the past 12 months, the company generated $9.9 billion in operating cash flow and $8.42 billion in free cash flow. It ended the third quarter with $8.12 billion in cash and short-term investments.
This strong cash generation gives TXN the financial flexibility to fund its manufacturing expansion without compromising shareholder returns.
The company has remained committed to rewarding investors through dividends and share repurchases. In the first three quarters of 2026, Texas Instruments returned $2.8 billion to shareholders through dividends and stock buybacks. Its total shareholder returns over the past 12 months reached $5.81 billion.
This combination of business investments and shareholder distributions makes TXN attractive to investors seeking earnings growth and consistent capital returns.
More importantly, its healthy cash position provides a cushion against potential market weakness while allowing the company to continue investing in growth.
Is Texas Instruments’ Premium Valuation Justifiable?
TXN is not a bargain stock. It currently carries a Value Score of D, reflecting its premium valuation. Texas Instruments currently trades at a forward 12-month P/E ratio of 27.07, well above the industry average of 13.98.
Texas Instruments Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
Compared with other semiconductor leaders, Texas Instruments also trades at a higher earnings multiple than NVIDIA, Broadcom and QUALCOMM. At present, NVIDIA, Broadcom and QUALCOMM are trading at P/E multiples of 12.50, 16.51 and 16.83, respectively.
However, premium valuations are often justified when a company consistently delivers earnings growth, generates strong cash flow and maintains durable competitive advantages.
Texas Instruments fits that profile. The company continues to benefit from expanding AI infrastructure spending, generates substantial free cash flow, maintains a healthy balance sheet and has a long track record of rewarding shareholders through dividends and share buybacks. Those strengths make its premium valuation easier to justify.
Texas Instruments has already delivered an impressive 60% gain YTD, but the investment story is not over.
Conclusion: Buy Texas Instruments Stock Now
While the stock is expensive, the underlying business remains strong enough to support the premium. The company's accelerating earnings, strong data center growth, expanding AI exposure and manufacturing investments point to long-term opportunities. Its strong cash generation also gives it flexibility to invest while continuing to reward shareholders.
Currently, Texas Instruments carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.