Texas Instruments (TXN.US) Delivers Solid Results Amid AI Bubble Concerns: Q3 Revenue and Profit Surpass Expectations, Q4 Guidance Surprisingly Strong

According to Zhitong Finance APP, analog chip manufacturer Texas Instruments (TXN.US) announced its Q3 FY2026 results, with revenue reaching $6.06 billion, surpassing analysts’ expectations of $5.90 billion, a year-on-year increase of 27.7% and 2.6% above estimates. GAAP earnings per share came in at $2.62, 8% higher than analysts’ forecast of $2.43. In addition, the company’s revenue guidance midpoint for the next quarter was an unexpectedly strong $6.05 billion, 5.6% above analyst expectations.

Data shows that Texas Instruments’ midpoint guidance for GAAP earnings per share in Q3 FY2026 was $2.62, beating analyst expectations by 14.7%. Profit quality also improved, with operating margin rising to 47.5%, significantly higher than 35.1% in the same period last year. Free cash flow margin reached 48.8%, a considerable jump from 22.5% a year earlier.

Inventory turnover days stood at 196 days, down from 199 days last quarter, suggesting no excessive inventory buildup. The company’s guidance for the fourth quarter was also strong, with a revenue guidance midpoint of $6.05 billion, exceeding analyst expectations of $5.73 billion.

Amid concerns of an AI bubble dragging down the entire chip sector, this outlook sends a positive signal to the broader chip market. Texas Instruments notes it sees "broad-based growth in industrial, automotive, and data center businesses," notably benefiting from a diverse customer base—not all customers are at the core of AI infrastructure construction.

The stock closed at $284.65 on the New York market and was up 1.07% after hours at the time of publication. Year-to-date, the stock has surged 64%. The company’s current market capitalization stands at $253.7 billion.

Headquartered in Dallas, Texas, Texas Instruments has been the world’s largest analog semiconductor producer since the 1950s. The company is the largest manufacturer of “essential chips”—components produced with less sophisticated processes but crucial to everything from aerospace hardware to consumer electronics. Its two largest markets are automotive and industrial, making its financial reports a bellwether of overall economic demand.

Although Texas Instruments does not produce large digital semiconductors for AI data center workloads, its power management chips and other components play a vital role in servers and networks, making the company a growing beneficiary of large-scale AI infrastructure expansion.

Analog chips and embedded processors convert real-world inputs into electronic signals and are widely used in all types of devices—virtually anything with a switch. This technology is also part of data center equipment, where these chips perform critical functions such as regulating power supplies for high-end processors.

CEO Haviv Ilan stated that the company plans to expand capacity to meet growing order demand, with new factory and equipment expenditures in 2026 potentially at the upper end of their $2–3 billion budget. He noted that supply expansion is constrained due to lengthy lead times and strong demand for new chip manufacturing equipment.

Over the past five years, Texas Instruments’ sales compound annual growth rate was 3.4%, reflecting modest performance. However, the annualized revenue growth over the past two years was 15%, surpassing the five-year trend and suggesting some bright spots.

In addition to exceeding revenue expectations, Texas Instruments has achieved seven consecutive quarters of growth, indicating a solid performance in the current up-cycle—typical cycles last 8 to 10 quarters. Company management currently guides for next quarter’s sales to increase 36.8% year-on-year.

Looking further ahead, sell-side analysts expect revenue growth of 17.8% over the next 12 months. While this implies better revenue performance driven by newer products and services, it still trails the industry average.

Days Inventory Outstanding (DIO) is a key indicator for chip manufacturers, reflecting capital intensity and the cyclical nature of semiconductor supply and demand. In times of tight supply, stable inventories allow chipmakers to exercise pricing power. A steady rise in DIO may signal weakening demand; if inventories continue to build, companies may have to cut back on production.

This quarter, Texas Instruments’ DIO was 196 days, 2 days below its five-year average. Currently, there is no evidence of excessive inventory buildup in this data.