Near the end of Texas Instruments' (TXN) July 22 earnings call, CEO Haviv Ilan made a casual promise. “Let's meet again in October,” he told analysts, and he would again share how things went.
In the Q2 earnings call, Ilan had called demand “very strong and broad.” His team had delivered a quarter that beat its own forecast. Now investors want to know one thing. Did the momentum last?
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www.barchart.com TXN's Last Quarter Changed the Mood
Texas Instruments makes analog and embedded processing chips, and both segments grew in the second quarter.
In Q2, the tech company reported revenue of $5.5 billion, an increase of 23% year-over-year (YoY) and 13% sequentially. It also landed above the management guidance. Texas Instruments reported gross profits of $3.4 billion, which translated to a margin of 61%, while operating profit grew 48% to $2.3 billion.
TXN reported adjusted earnings per share of $2.14, 10.5% above estimates of $1.94. Q1 EPS of $1.68 also beat estimates by 22.76%. Before that, it missed Wall Street estimates for two quarters.
Industrial and Data Centers Led the Way
Ilan said demand built through the quarter. Here is how it looked by the end of Q2, per TI:
Industrial: up about 30% from a year ago. Data center: doubled from a year ago. Automotive: up in the mid-teens from a year ago. Personal electronics: flat from a year ago.Automotive could be a key driver of long-term sales. Ilan said demand in this segment picked up as the quarter went on, led by China. He pointed to EVs and hybrids, plus fuel costs, as tailwinds. He also said automakers had cut their inventories to very low levels.
Industrial may have room left, and Ilan said it is still five or six points below its 2022 peak. For the next quarter, he kept it simple. “It's everywhere,” he said.
What Wall Street Expects on Oct. 21
Here is the bar for the report, based on analyst consensus estimates compiled from Yahoo Finance.
TI guided third-quarter revenue to $5.65 billion to $6.15 billion, while analysts average $5.93 billion, around the midpoint guidance of $5.9 billion. Basically, sales are projected to increase by 25% YoY from $4.74 billion.
On earnings, TI guided to $2.23 to $2.57 per share, while the consensus estimate stands at $2.43 per share, above the year-ago earnings of $1.48 per share. The third-quarter EPS estimate was $2.16 three months ago.
Analysts forecast 2026 revenue at $21.97 billion, up 24.24%. For 2027, the revenue estimate is around $25 billion. Analysts expect fourth-quarter revenue of $5.75 billion, below the third-quarter figure of $5.93 billion. The outlook on Oct. 21 will show if that view holds.
Pricing and Margins are the Next Test
For the first half of 2026, Ilan said TI’s prices stayed flat. Chip prices usually fall a couple of points every year, so holding steady could be a minor win.
Texas Instruments has now begun raising prices. Ilan said it handles the hikes with each customer directly, so the timing varies. Some increases start in the third quarter and continue into the fourth. Other customers only set prices once a year, at the end of the fourth quarter, so those increases could stretch into 2027.
On margins, management said operating expenses should stay flat from the second to the third quarter. It also said 70% to 85% of added revenue should fall through to profit, excluding depreciation, while adding that gross margin should be a little higher.
Lead times are creeping up too and were below 13 weeks in the second quarter. Ilan said they are now a couple of weeks longer.
Free cash flow over the past 12 months was $6.5 billion, up from $1.8 billion a year earlier. Over this period, the company returned $5.8 billion to shareholders.
Analysts forecast free cash flow to expand from $2.60 billion in 2025 to $17 billion in 2030. If TXN stock is priced at 25x forward FCF, below the 10-year average of 31x, it could return around 75% within the next 40 months, after adjusting for dividends.
Out of the 33 analysts covering TXN stock, 18 recommend “Strong Buy,” 12 recommend “Hold,” one recommends “Moderate Sell,” and two recommend “Strong Sell.” The average TXN stock price target is $325, above the current price of $280.
www.barchart.com What Next for TXN Stock?
Ilan said Texas Instruments has clean room space available and is set for the next three years. CFO Rafael Lizardi said 2026 capital spending stays at $2 billion to $3 billion, and it could land on the higher end.
TI still expects to close its Silicon Labs deal in the first half of next year, using cash and debt. It ended the second quarter with $7 billion in cash and $14 billion of debt.
The CFO seat has changed by now, too. Lizardi retired at the end of August, and Julie Knecht took over the role on Aug. 1.
Here’s what you need to look for on Oct. 21.
Does revenue top $5.93 billion? Does pricing show up in the outlook? Do auto and personal electronics keep pace? Ilan said shortages are pressuring personal electronics customers. Ilan promised to tell us how it went. Oct. 21 is when we find out.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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