Texas Instruments (TXN)

Investment Review After Q2 FY2026 Earnings (stock price as of 2026.07.22)

TL;DR

Texas Instruments is the world’s broadest analog and embedded-processing chipmaker, with in-house 300mm manufacturing. Just reported: Q2 FY2026 revenue $5.5B (+23% YoY), gross margin 61%, operating profit +48% — a strong, above-range beat led by industrial, data center (~2×) and an automotive inflection. Q3 guided to $5.65–6.15B revenue / $2.23–2.57 EPS with price increases beginning to take effect — a broad, accelerating upcycle. Stock at $294 with 39x P/E(ttm) — elevated on still-recovering trough earnings; prices in the cyclical recovery, leaving little room for a stumble.

Summary

Finding	Assessment
5-Year Stock Return	$100→$236. TTM OP +24% ($6.0B→$7.4B), non-linear: peaked $10.9B in 2022, troughed $5.2B. P/E(ttm) 36x vs 5-yr avg ~24x.
Business Model	Broadest analog & embedded chipmaker; ~80K products, 100K customers, in-house 300mm. Industrial, Auto, Data Center (~2× YoY).
Competitive Moat	WIDE Only analog co with multiple 300mm fabs (~40% cost edge). 80K SKUs, direct sales (ti.com 60%), 10-15yr product lifecycles.
Past 5-YR Drivers	300mm capacity buildout (Sherman ahead of schedule), data center emergence (~2× YoY), FCF inflection as capex moderates.
Recent Stock Move	$194→$294 (+~52% since Apr 2026). Q2 beat above the guide range; data center ~2×, OP +48%. Dipped ~3% after-hours on the print.
Revenue Trend	ACCELERATING Rev YoY: 23% (Q2 2026) → 29% (Q3 2026E).
Margin Trend	EXPANDING OM%: 42.6% (Q2 2026) → 45.6% (Q3 2026E).
TTM OP Trajectory	ACCELERATING TTM OP QoQ: 11.4% (Q2 2026) → 12.7% (Q3 2026E). TTM OP $7,490M.
Key Opportunities	Data center/AI power content ~2× YoY (800V = more conversion stages). Industrial still below 2022 peak. Pricing increases starting + 300mm capacity ahead of demand.
Key Risks	39x P/E on recovering trough earnings; slipped ~3% after-hours. Heavy CapEx + choppy ITC. New CFO Aug 1, Silicon Labs integration, rising competition.
Catalysts	Q3 guided $5.65–6.15B (above seasonal), pricing beginning. 300mm capacity ramp. CFO transition; Silicon Labs close H1 2027. FCF/share north star.
P/E(ttm) Valuation	39x on trough-recovery earnings, a premium for the cycle. Compresses toward ~25x if revenue scales to the $20–22B / $8–10B FCF framework.

Q2 FY2026 Key Data (Apr-Jun 2026), reported 2026.07.22

Revenue $5.5B (+23% YoY, +13% seq); Analog +26%, Embedded +16%; above the guide range.
GM 61% (+340bps seq); operating profit $2.3B (42% of rev, +48% YoY); EPS $2.14 (incl $0.05 tax benefit).
Q3 guide $5.65–6.15B rev / $2.23–2.57 EPS; data center ~2× YoY, industrial +30%, auto inflecting.

Key Takeaways from Earnings Call

Broad, accelerating upcycle — “it’s everywhere.” Q2 came in above the range with industrial, data center and automotive all inflecting up, and Q3 is guided above seasonal as demand broadens across every end market and region. CEO Haviv Ilan calls the demand signal “very strong and broad,” the start of a wide cycle.
Pricing is turning. H1 prices were flat (above-average — they usually fall a couple points/yr); TI has started executing increases customer-by-customer, analog first with embedded joining, weighted to Q4 and 2027. But Q3 growth is “the vast majority just unit growth,” pricing contribution “almost insignificant.”
Capacity and capital edge. Clean rooms are ready and ahead of demand (“good for the next three years”), giving 70–85% 300mm fall-through; CapEx $2–3B, FCF TTM $6.5B (incl CHIPS ITC), $5.8B returned to owners TTM. Long-term FCF-per-share growth is the north-star metric.
Leadership transition and M&A. CFO Rafael Lizardi retires end-August after a decade; Julie Knecht (25 yrs at TI) becomes CFO Aug 1. The Silicon Labs acquisition remains on track to close H1 2027, funded with cash on hand plus debt.

Key Segments and Revenue Mix (Q2 FY2026)

Segment	Q2 2026 Revenue	% of Total	Key Details
Analog	$4,365M	~80%	+26% YoY. Power management, signal chain, high-volume analog. Serves all end markets. 300mm wafer fabs in Texas (DMOS6, RFAB2, Sherman) provide structural cost advantage.
Embedded Processing	$788M	~14%	+16% YoY. Microcontrollers, processors. Industrial and automotive focus. Silicon Labs acquisition ($5.4B) will expand wireless connectivity portfolio.
Other	$310M	~6%	-2% YoY. DLP products, custom ASICs, calculators.

End markets: Industrial ~40% (broad recovery, +30% YoY), Automotive ~25% (mid-teens YoY, China EV inflection), Data Center ~10% (~2x YoY, secular), Personal Electronics ~15% (flat YoY), Comms ~10% (up YoY). ~100,000 customers served direct. Key competitors: Analog Devices (ADI), Infineon, STMicroelectronics, NXP, ON Semiconductor. Inventory: 209 days (down 13 days Q/Q).

Business Model

SUPPLIERS

Silicon wafers (200mm & 300mm)
Chemicals & gases
Assembly & test equipment
GaN & BCD process technology

Materials / Wafers →

TEXAS INSTRUMENTS

Analog chips (power, signal chain)
Embedded processors (MCUs)
300mm fabs in Texas (lowest cost)
Direct sales to ~100K customers
~80,000 products in catalog

Chips / Solutions → $ Revenue

CUSTOMERS

Industrial equipment makers
Automotive OEMs & Tier 1s
Data center operators
Consumer electronics OEMs
Telecom infrastructure

Moat Assessment: WIDE

Lowest-cost manufacturing from 300mm analog fabs: TI is the only analog company manufacturing at scale on 300mm wafers. The cost advantage is structural and widens with volume. Competitors (ADI, Infineon, NXP) remain on 200mm and would need $5-10B+ and 3-5 years to replicate. CHIPS Act funding further entrenches this advantage.
Product breadth and longevity create massive switching costs: 80,000 products with typical lifecycles of 10-15+ years. Once designed into an industrial controller or automotive ECU, TI’s chips stay for the life of that product. No single competitor can match the full catalog. Direct customer relationships (no distributors) give TI real-time demand visibility.
Capital discipline and owner-oriented management: TI’s stated objective is maximizing free cash flow per share over the long term. They built capacity during the downturn, maintained inventory, and kept lead times stable — exactly when competitors were cutting. This counter-cyclical investment strategy has delivered share gains in every upturn for the past decade.

Stock vs. Earnings — 5-Year Performance

Stock currently at $294 up ~53% from $192 (5 years ago). A steady compounder that nearly tripled through the semiconductor supercycle, then consolidated during the 2023-2024 downturn. The stock peaked at $206 in mid-2024 before pulling back, and has since reached new highs on the recovery.
TTM OP grew from $5,975M to $7,490M (+25%) but the journey was non-linear — TTM OP peaked at $10,886M in Q3 2022 during the supply-constrained supercycle, then contracted 52% to $5,226M as inventory corrections hit. Now recovering strongly with industrial broadening.
P/E(ttm) at 39x is above the 5-year average of ~24x, reflecting the market’s bet that this analog recovery is the beginning of a multi-year upturn, not another false start. TI’s 300mm capacity advantage and inventory positioning should drive operating leverage as revenue scales.

Past 5-Year Key Drivers

300mm wafer manufacturing creates structural cost advantage: TI’s Sherman, Texas fab (DMOS6, RFAB2) produces analog chips at ~40% lower cost per wafer than 200mm competitors. This advantage compounds as revenue scales — incremental gross margins of 75-85% on organic growth. CHIPS Act incentives ($1.6B direct funding + ITC) further subsidize the investment.
Broadest analog portfolio with direct customer relationships: ~80,000 products serving ~100,000 customers through direct channels (no distributor dependency). This breadth means TI wins on total solution, not just individual chip performance. Market share gains accelerate during upturns when competitors face supply constraints — TI’s inventory and capacity allow it to fulfill demand others cannot.
Secular growth in industrial, automotive, and data center: Industrial content per system rising (factory automation, energy infrastructure, grid hardening). Automotive content growing across all powertrains (ICE, hybrid, BEV). Data center power delivery expanding with AI GPU density. These are multi-year structural drivers independent of economic cycles.

Quarterly Key Metrics

	Q2 2024	Q3 2024	Q4 2024	Q1 2025	Q2 2025	Q3 2025	Q4 2025	Q1 2026	Q2 2026	Q3 2026E
Quarter End	Jun 2024	Sep 2024	Dec 2024	Mar 2025	Jun 2025	Sep 2025	Dec 2025	Mar 2026	Jun 2026	Sep 2026
Stock Price	$195	$207	$188	$180	$208	$184	$173	$194	$298	$294
Stock QoQ	+12%	+6%	-9%	-4%	+16%	-12%	-6%	+12%	+54%	-1%
Rev YoY	-16%	-8%	-2%	11%	16%	14%	10%	19%	23%	29%
OM%	33%	37%	35%	32%	35%	39%	34%	38%	43%	46%
R40 (Rev YoY + OM%)	17%	29%	33%	44%	52%	53%	44%	56%	65%	74%
TTM OP ($M)	$5,696	$5,359	$5,226	$5,512	$5,831	$6,114	$6,222	$6,726	$7,490	$8,442
TTM OP QoQ	-11%	-6%	-2%	+5%	+6%	+5%	+2%	+8%	+11%	+13%
FCF/OP ttm	26%	27%	29%	26%	26%	34%	42%	55%	71%	84%
Debt/EBITDA	1.9x	1.9x	1.9x	1.7x	1.8x	1.7x	1.6x	1.5x	1.4x	1.4x
P/E ttm	35x	39x	37x	34x	38x	33x	31x	32x	45x	39x

Recent Stock Performance & Drivers

Stock currently at $294, vs. $194 (Apr 2026). The rally reflects the broadening upcycle, data center roughly doubling YoY, and a Q2 beat above the guide range with operating profit +48%. The stock slipped ~3% after-hours on valuation.
TTM OP recovering as margins expand. Q2 gross margin hit 61% (+340bps seq) and operating profit reached $2.3B (42% of revenue) on 300mm cost leverage. FCF TTM climbed to $6.5B from $1.8B a year ago as growth returns.
P/E(ttm) at 39x vs 5-year average of ~24x. The premium prices in a sustained analog recovery. If revenue scales toward the $20–22B framework ($8–10B FCF), the multiple compresses on higher normalized earnings.

Opportunities

Data center / AI power content is scaling fast — roughly doubled YoY. The 800V rack transition adds conversion stages (AC→800V→48V→12V), expanding TI’s TAM across power and signal-chain parts and higher-value ASSPs.
Industrial secular recovery has room to run. Revenue is still ~5–6 points below the 2022 peak, driven by broad content growth across sectors and regions. Customer inventory depletion is done — new-systems demand is taking over.
Pricing plus 300mm margin leverage. Price increases are starting customer-by-customer while clean-room capacity sits ahead of demand, giving 70–85% incremental fall-through. Competitors quoting 52-week lead times = a share-gain opening for TI.

Challenges

Cyclicality and valuation. At 39x P/E(ttm) on still-recovering trough earnings, the stock prices in the upcycle and slipped ~3% after-hours. Any deceleration — as in 2025’s H2 false start — could drive a sharp de-rating.
Heavy CapEx and choppy ITC. 2026 CapEx runs $2–3B (possibly the higher end); the 35% ITC applies only to U.S. front-end (not assembly/test) and is lumpy year-to-year, so net cash-flow timing can swing quarter to quarter.
Execution and leadership transition. A new CFO takes over Aug 1, Silicon Labs must be integrated after an H1’27 close, and rivals are adding capacity too — TI must turn its lead-time edge into lasting share gains.

Next 12 Months

Q3 guided above seasonal — $5.65–6.15B revenue, $2.23–2.57 EPS. Growth is broad across industrial, data center and automotive, driven mostly by unit volume, with price increases just starting to contribute.
Capacity ramp on 300mm. Clean rooms (Sherman, RFAB2, Lehi) are ready and loadings are rising; TI is now in “phase 3” modulating equipment, positioned to fall product through at 70–85% incremental margins as utilization climbs.
CFO transition and Silicon Labs. Julie Knecht becomes CFO Aug 1 as Rafael Lizardi retires; the Silicon Labs deal is on track to close in H1 2027, funded with cash and debt, expanding embedded wireless connectivity.

Next 12-24 Months

Data center content scaling. As 800V racks phase in, each conversion stage lifts TI’s dollar content across power and signal chain, with higher-value ASSPs on top of its catalog base — a multi-year growth runway.
Industrial content-growth supercycle. Still ~5–6 points below the 2022 peak, industrial is riding a new generation of higher-content systems (automation, energy, robotics) after inventory depletion — a long secular runway.
FCF-per-share inflection. As utilization rises and pricing lifts margins, TI’s framework points to $8–9B FCF at $20B revenue and $9–10B at $22B — the earnings engine built over five years of 300mm investment.

Core Metrics Scorecard

	Q4'21	Q1'22	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26E
Quarter End	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24	Dec24	Mar25	Jun25	Sep25	Dec25	Mar26	Jun26	Sep26
R40 > 40%	✅	✅	✅	✅	✅									✅	✅	✅	✅	✅	✅	✅
R40 accelerate											✅	✅	✅	✅	✅	✅		✅	✅	✅
TTM OP QoQ > 10%																			✅	✅
TTM OP QoQ accelerate									✅		✅	✅	✅	✅				✅	✅	✅
TTM FCF/OP > 60%	✅	✅	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	❌	✅	✅
Debt/EBITDA < 3.5	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Total passes	3	3	2	2	2	1	1	1	2	1	3	3	3	4	3	3	2	4	6	6
Stock QoQ	-2%	-3%	-16%	+1%	+5%	+14%	-3%	-11%	+6%	+2%	+12%	+6%	-9%	-4%	+16%	-12%	-6%	+12%	+54%	-1%
P/E ttm	22x	20x	16x	16x	17x	20x	21x	21x	24x	28x	35x	39x	37x	34x	38x	33x	31x	32x	45x	39x

TXN just posted a perfect 6/6 scorecard in Q2 2026 — historically its strongest buy signal. The prior 6-pass stretch preceded the 2021 analog supercycle; Q2 2026 and Q3 2026E both score 6/6. R40 at 65% and accelerating is the strongest reading in years, confirming the growth inflection.
FCF/OP and Debt/EBITDA always pass — TI’s financial discipline is unwavering. Even during the CapEx-heavy investment phase (2023-2025), both metrics held. FCF/OP is now recovering rapidly (55% and rising) as CapEx moderates. This is the earnings leverage TI has been building toward.

Chart: R40 vs Stock Price (Since 2020)

Chart: Scorecard Total Passes vs Stock Price (Since 2020)

Q1 FY2026 Key Data

Revenue $4,825M (+19% YoY, +9% Q/Q), beat top of guidance. EPS $1.68 (+31%).
By end market: Industrial +30% (broad, all sectors/regions), Data Center +90% (8th straight quarter of sequential growth), Auto mid-single-digit, PE flat, Comms +25%.
Q2 guided at $5.0-5.4B revenue ($5.2B midpoint, ~8% Q/Q, slightly above seasonal). EPS $1.77-2.05.

Key Takeaways from Earnings Call

Industrial recovery broadening and accelerating: all sectors, all regions, all customer sizes growing. The “tail” (small/mid customers) starting to wake up after long hibernation. Still 15% below 2022 peak — secular growth means higher peaks ahead. But CEO cautious: “I want to see it playing out one more quarter” after last year’s false start.
Data center strength plus capacity advantage: +90% YoY, 8th consecutive sequential quarter of growth. TI’s broad analog portfolio uniquely serves both application-specific sockets (VRMs, power stages) and tens of thousands of general-purpose parts per rack. Investing more R&D in data center — GaN and advanced BCD nodes built in Texas. No shortages.
Silicon Labs acquisition announced ($5.4B) to expand embedded wireless connectivity. FCF/share likely to “easily beat” $8 target for 2026. CapEx moderating to $2-3B. Assembly & test capacity being internalized as external market tightens. Pricing environment improving — stable now, potential H2 increases if demand sustains.

Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.

Disclaimer: This report is for educational purposes only. NO investment advice.