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Texas Instruments (TXN) is lower after reporting strong Q3 results last night that provided further evidence of an increasingly broad-based semiconductor recovery. EPS of $2.62 comfortably exceeded expectations, while revenue increased 27.7% yr/yr to $6.06 bln, also above consensus and reaching a new quarterly high. TXN also guided Q4 above expectations, marking its third consecutive above-consensus quarterly outlook. The company expects EPS of $2.45-2.79 on revenue of $5.80-6.30 bln.

• Analog revenue increased 32% yr/yr to $4.91 bln, while Embedded Processing grew 21% to $858 mln. TXN saw broad demand, with revenue growth across all end markets and regions, reflecting both a strengthening cyclical recovery and continued growth in semiconductor content across customer applications.
• Industrial demand was particularly strong, with revenue increasing more than 40% yr/yr and approximately 10% sequentially. Automotive grew mid-teens yr/yr and roughly 10% sequentially, while data center continued its exceptional momentum, climbing approximately 95% yr/yr and 20% sequentially.
• Margins were another bright spot, with gross margin expanding 280 bps sequentially to 64.2%, primarily driven by higher revenue, alongside benefits from pricing, increased manufacturing utilization, and favorable product and end-market mix. Pricing began improving modestly in the second half of 2026, particularly within analog, following a flat environment during the first half. Management is currently negotiating 2027 pricing agreements, with stronger demand and tightening industry supply creating opportunities for further improvement.
• Cash generation also improved considerably, with trailing 12-month free cash flow reaching $8.4 bln from $2.4 bln a year earlier, reflecting stronger operating cash flow and reduced capital expenditures. Previous investments in inventory and manufacturing capacity have also positioned TXN to support growing demand as industry supply tightens.

Briefing.com Analyst Insight

TXN shares are holding up relatively well amid broader weakness, particularly across semiconductor stocks, which appears to reflect the overall strength of its Q3 report. The company comfortably exceeded expectations and issued another above-consensus quarterly outlook, supported by a semiconductor recovery that continues to broaden across its core markets. Importantly, industrial revenue only recently surpassed its previous 2022 peak, with some sectors still below prior highs, suggesting further room for recovery. Management's commentary on backlog and modestly longer lead times also reinforces the strong demand environment, while previous investments in inventory and manufacturing capacity have positioned TXN well to support continued growth as industry supply tightens. These investments are also beginning to pay off, with improving factory utilization supporting margin expansion and reduced capital spending contributing to stronger free cash flow. Overall, TXN delivered strong execution against a favorable demand backdrop, with the muted stock performance appearing to reflect broader market weakness rather than any significant shortcomings in the report.