Texas Instruments Incorporated (TXN) Earnings & Analysis

Latest quarter

Texas Instruments reported third-quarter revenue of $6.1 billion, above the $5.9 billion consensus, and adjusted earnings per share of $2.62, above the $2.40 consensus. Revenue rose from $4.7 billion a year earlier, while diluted earnings per share increased from $1.48.

The company attributed revenue growth primarily to increased Analog demand and, to a lesser extent, Embedded Processing demand. CEO Haviv Ilan said Analog revenue grew 32% year over year and Embedded Processing grew 21%, while Other revenue declined 6%.

The filing showed gross margin rose to 64.2% from 57.4%, primarily because of higher revenue. Operating margin increased to 47.5% from 35.1%, which the company attributed primarily to higher revenue and associated gross profit. CFO Julie Knecht said trailing-12-month free cash flow was $8.4 billion, including $1.6 billion of CHIPS Act incentives. Knecht also said quarterly earnings per share included a $0.01 reduction from tax items that was not in the original guidance.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Ilan said demand broadened across markets and regions. Industrial revenue rose more than 40% year over year, data center revenue grew about 95%, and automotive revenue increased in the mid-teens. He said personal electronics was about flat year over year, while communications equipment grew both year over year and sequentially.

Asked about industrial demand, Ilan said the market had just reached its prior revenue peak from Q3 2022. He pointed to increased chip content in customers’ equipment and growth in areas including aerospace and defense, energy infrastructure, test and measurement, and robotics. On automotive, he said customers had kept limited inventory and were seeking support as they increased production.

Analysts also pressed management on pricing and margins. Ilan said the company saw “some price movement,” mainly in Analog, during the second half after flat year-over-year pricing in the first half. He said customer discussions for 2027 were underway and had a pricing element. Knecht said higher revenue was the largest driver of the third-quarter margin increase, with additional benefits from pricing, factory loadings and product and end-market mix.

On supply and competition, Ilan said there had been limited additions to foundational-chip capacity, particularly Analog, since the previous market peak. He also said some Analog supply had gone offline and some foundries were shifting capacity to other products. Investor relations head Mike Beckman said lead times had risen and that Texas Instruments would continue to ramp its facilities.

Looking ahead, Ilan said industrial, automotive and data center demand were driving the fourth-quarter outlook. He expected 2026 capital spending of $2 billion to $3 billion, potentially toward the higher end if equipment arrived as planned. For 2027, he said spending would depend on demand and growth ambitions, adding that the company was “investing ahead of demand.”

Guidance

For the fourth quarter, Knecht said Texas Instruments expects revenue of $5.8 billion to $6.3 billion and earnings per share of $2.45 to $2.79. She expects operating expenses to be flat to slightly up from the third quarter, and the effective tax rate to be about 13% in the fourth quarter and about 13% to 14% in 2027.