Texas Instruments Q3 2026 Earnings: Revenue +28% to $6.06B as Free Cash Flow Hits $8.4B

On October 21, 2026, Texas Instruments (Nasdaq: TXN) reported third-quarter revenue of $6.06 billion, up 28% year over year, with net income of $2.43 billion and diluted EPS of $2.62, up 77%. The real story is below the revenue line: operating profit surged 73% to $2.87 billion, trailing-twelve-month free cash flow nearly tripled to $8.42 billion, and capital expenditures fell by almost half. After years of pouring concrete into 300mm fabs, TI is harvesting. This is the quarter the build cycle paid.

The Headline Numbers​

TI's fiscal year is the calendar year; Q3 2026 ended September 30, 2026. Every figure below comes from the Form 8-K and its earnings release (Exhibit 99), which carries full unaudited income statements, balance sheets and cash-flow statements — no Form 10-Q for the quarter had been filed as of October 21, so the 8-K exhibit is the primary source.

Read the deltas top to bottom and the quarter explains itself: revenue grew 28% while the two operating-expense lines grew 2–4% combined, so nearly every incremental revenue dollar fell through to profit. R&D plus SG&A together were just 16.6% of revenue, down from 20.6% a year ago — that 4 points of leverage, plus 6.8 points of gross-margin expansion and 1.8 points from last year's $85 million restructuring charge not repeating, is the entire 12.4-point operating-margin jump. EPS included a 1-cent reduction that was not in the company's original guidance, per the release; even so, $2.62 cleared the top end of TI's own $2.23–$2.57 guide range. Interest expense was flat at $141 million despite the debt paydown, and the tax provision ran at a 13.5% effective rate versus 13.9% a year ago, helped by $79 million of CHIPS Act investment tax credits used in the quarter.

Revenue Deep Dive​

TI discloses three segments, and the mix is the thesis: Analog is four-fifths of the company and essentially all of the profit growth.

Analog is the company. Revenue of $4.91 billion grew 32% while operating profit grew 69%, and the segment's 51.0% operating margin — up 11 points in a year — is the number the whole quarter turns on. Do the incremental math: $1,182 million of new Analog revenue produced $1,019 million of new Analog operating profit, an 86% incremental margin. That is what a fab running fuller looks like — TI's own framing credits "the benefit of 300mm production" — and it cuts both ways, as the bear case will note.

Embedded Processing is the quieter confirmation. Revenue grew 21% to $858 million and operating profit more than doubled to $227 million, with margin expanding from 15.2% to 26.5%. When both reportable segments expand margins by 11 points simultaneously, the driver is volume through fixed manufacturing cost, not mix tricks.

Other (DLP products, calculators, custom ASICs, plus unallocated corporate items) shrank 6% on revenue but more than doubled operating profit to $142 million — last year's $85 million of restructuring charges sat in this segment, so the comparison flatters it. Treat the profit jump as absence-of-charges, not operating improvement.

Now the management signal scan. CEO Haviv Ilan's comment on demand was one sentence: "Revenue increased 11% sequentially and 28% from the same quarter a year ago with continued broad growth in industrial, automotive and data center." That maps to exactly one of our seven themes — robust, broad-based demand — and the ledger confirms the breadth claim at the segment level, with Analog and Embedded both growing 20%+. But note what is absent: no "demand exceeds supply," no supply-constraint language, no pricing momentum, no upcycle vocabulary. "Broad growth" describes volume arriving, not customers queuing. The balance sheet backs the cautious reading over the euphoric one: finished-goods inventory fell 13% to $1,693 million while revenue grew 28%, which reads as strong sell-through — but TI said nothing about lead times, backlogs or bookings, so there is no order-book evidence that this pace continues. Absence is a finding.

The Margin Story​

Every margin in the table just printed a multi-year high by a distance. The mechanics are pure operating leverage, in three layers. First, gross margin gained 6.8 points year over year (57.4% to 64.2%) because cost of revenue grew only 7.4% against 27.7% revenue growth — fabs, once built, cost little extra to run fuller. Second, R&D and SG&A grew a combined 3.2% against that same 27.7%, contributing roughly 4 more points. Third, last year's $85 million restructuring charge did not repeat, adding about 1.4 points. There is no pricing story here at all: the release contains zero pricing language, so this expansion is volume and utilization, not price over cost.

The question the table asks is whether 47.5% operating margin is a new plateau or a peak-cycle print. Two full annuals at 34–35% say this business, run normally, earns mid-30s; 47.5% is what it earns when revenue snaps back 28% through a fixed cost base. Nothing in the release — no permanent cost removal, no mix shift toward higher-margin product lines disclosed — suggests the cost base itself changed. Enjoy the leverage; do not annualize it.

The One Big Question: Did TI Just Finish Its Build Cycle?​

For years the TI bear case was the capex: $4–5 billion a year into 300mm wafer fabs while free cash flow withered to $2.4 billion and the dividend consumed nearly all of it. This quarter that chart inverted. Walk the trailing-twelve-month cash bridge:

Free cash flow of $8.42 billion is 40.6% of trailing revenue — a higher conversion rate than most software companies manage. Three forces built it, in order of size: $3.0 billion from operating cash flow growth (the earnings snap-back), $2.2 billion from capex falling by nearly half, and $0.8 billion from CHIPS Act proceeds tripling to $1.1 billion. The balance sheet corroborates the harvest narrative: net PP&E fell from $12,320 million at year-end to $11,833 million, because quarterly depreciation of $555 million now runs well above quarterly capex of $463 million. TI is depreciating its fabs faster than it is building them. Cash plus short-term investments grew 57% year over year to $8.14 billion, and the company repaid $500 million of debt in the quarter.

How durable is it? The $3.0 billion operating leg is as durable as the revenue recovery. The $2.2 billion capex leg is a trough, not a plateau — TI will build again — but troughs last years in this industry, and every year of sub-depreciation capex is a year of harvest. The CHIPS leg deserves a haircut in any forward model: $1,104 million of incentive proceeds plus $469 million of investment tax credits used over the trailing twelve months means roughly $1.6 billion of the $8.4 billion FCF arrived via industrial policy with its own timetable. Ex-CHIPS free cash flow of about $6.9 billion is still nearly triple last year's total. The build cycle, at least this phase of it, is over — and the harvest is real even after discounting Washington's contribution.

What Wall Street Thinks​

TI beat on both lines against a $5.93 billion revenue / $2.40 EPS consensus (Seeking Alpha's preview), and the fourth-quarter guide — $5.80–$6.30 billion of revenue and $2.45–$2.79 of EPS — also topped estimates: StockStory put the $6.05 billion revenue midpoint 5.6% above what analysts expected. Seeking Alpha reported shares rose about 2% in extended trading after the print. Note the shape of that guide, though: the $6.05 billion midpoint is essentially flat with Q3's $6.055 billion actual, and the $2.62 EPS midpoint matches Q3's $2.62 to the cent. Wall Street got a beat followed by a hold — above consensus, flat sequentially — and read it as confirmation rather than warning.

Tracking a $36.8 Billion Balance Sheet in Plain Text​

A semiconductor company is the perfect business to model in Beancount: billions sunk into fabs that depreciate on schedule while each wafer's marginal cost rounds to zero, and double-entry forces every dollar of that operating leverage to reconcile. Our open ledger reconstructs TI line by line from its own filings — read how we model every company for the shared conventions. Income is negative (credit), expenses positive (debit), and the transaction sums to zero:

; FY2026Q3 Income Statement — three months ended September 30, 2026
; Check: −6,055 + 2,168 + 530 + 476 + 76 + 380 + 2,425 = 0 ✓
 
2026-09-30 * "Texas Instruments Incorporated" "FY2026Q3 Income Statement"
  Income:Revenue                          -6055 MUSD
  Expenses:CostOfRevenue                   2168 MUSD
  Expenses:ResearchAndDevelopment           530 MUSD
  Expenses:SellingGeneralAdministrative     476 MUSD
  Expenses:OtherNet                          76 MUSD  ; acquisition charges 7 + interest and debt expense 141 − OI&E 72
  Expenses:IncomeTax                        380 MUSD
  Equity:Adjustments                       2425 MUSD  ; net income offset (RE set by balance assertion)

The balance-sheet number that tells the narrative is the pair that frames the harvest: $11,833 million of net PP&E, down $487 million since year-end, against $8,422 million of trailing free cash flow. The fabs are shrinking on the books while the cash they throw off triples — depreciation exceeding capex is the accounting signature of a build cycle ending. Beside it sits the second tell: $41,955 million of treasury stock netted against just $6,943 million of par-plus-paid-in capital, the accumulated receipt of decades of buybacks that now run at a $636 million trailing trickle while the $5.2 billion dividend does the returning. Watch those two pairs each quarter — PP&E versus capex, and buybacks versus dividends — and you will know whether TI is still harvesting or building again.

The Multi-Year Arc​

* Period-end balance-sheet points. Annual free cash flow computed per TI's own definition (cash flow from operations less capex plus CHIPS proceeds) from the 10-K cash-flow statements.

Two annuals plus the trailing twelve months tell a compounding story with a hinge in it. Revenue compounds cleanly — $15.6 billion to $17.7 billion to $20.8 billion — the cyclical snap-back in full. But the real compounding is in cash conversion: free cash flow goes $1.5 billion to $2.9 billion to $8.4 billion as the two headwinds of FY2024 (peak capex, no CHIPS cash) both reverse. The balance sheet arc bends the right way: cash rebuilt from $4.9 billion at year-end to $8.1 billion, total debt paid down from $14.0 billion to $13.6 billion even while returning $5.8 billion to owners over the trailing twelve months. The one line moving against the story is the return mix — trailing buybacks collapsed 61% to $636 million while dividends grew 5% to $5.2 billion — which says management would rather commit to the dividend it just raised to $1.42 than buy its own snap-back at these prices. That restraint is arguably the most interesting capital-allocation signal in the release.

The Verdict: Bull vs. Bear​

Bull Case

• Analog operating leverage is violent and real. An 86% incremental margin on $1.18 billion of new Analog revenue — 51.0% segment margins, up 11 points — shows what 300mm fabs earn when they fill. Every further point of utilization is nearly pure profit.
• Demand breadth is management's word and the segments confirm it. "Continued broad growth in industrial, automotive and data center" plus Embedded's 21% revenue growth and doubled profit: two segments expanding margins 11 points together is volume, not mix.
• The cash machine covers everything now. TTM free cash flow of $8.42 billion covers the $5.17 billion dividend 1.6× with room for buybacks and deleveraging; cash plus short-term investments grew 57% to $8.14 billion.
• The guide beat consensus and the stock confirmed it. A $6.05 billion Q4 midpoint 5.6% above expectations (StockStory) with shares up ~2% after hours (Seeking Alpha) means the market endorses the "beat then hold" shape.
• Policy tailwinds are cash, not promises. $1.1 billion of CHIPS proceeds plus $469 million of investment tax credits over twelve months, with a 13.5% effective tax rate — Washington is co-funding the harvest.

Bear Case

• The guide is flat and says the snap-back pauses. Q4 midpoints of $6.05 billion and $2.62 essentially match Q3 actuals of $6.055 billion and $2.62 — management is guiding to zero sequential growth after an 11% sequential quarter.
• 47.5% operating margins are a peak-cycle print. Two annuals at 34–35% define normal; today's margin is utilization leverage that reverses symmetrically if industrial and automotive orders roll over.
• Management claims no pricing power and no tight supply. "Broad growth" with no demand-exceeds-supply language, no backlog disclosure and no pricing momentum means volume could be channel-fill as easily as end demand — the numbers cannot distinguish them.
• $1.6 billion of the FCF is CHIPS cash on its own timetable. Ex-CHIPS free cash flow is ~$6.9 billion — superb, but a fifth lower — and the capex trough (46% below last year) rebuilds eventually.
• Insiders of the capital allocation are voting dividend, not buyback. Trailing repurchases down 61% to $636 million while the dividend rises says management prefers the committed payout over its own shares at post-snap-back prices.

Our Take: Own the harvest, underwrite the trough. TI just proved the 300mm thesis in the only currency that matters — $8.4 billion of cash against a $2.6 billion capex bill — and the dividend is now covered 1.6× by free cash flow instead of consuming all of it. But $2.62 is not a run-rate quarter: it annualizes a 47.5% operating margin this business has never sustained, and management's own flat guide says as much. Value TXN on mid-30s margins through the cycle, treat everything above as cyclical rent, and watch Q4 revenue against the $5.80–$6.30 billion range — the low end would confirm the pause the guide is priced for.