Texas Instruments NASDAQ: TXN reported stronger-than-expected second-quarter 2026 results, with management citing broadening demand across industrial, data center and automotive markets, along with benefits from prior investments in inventory and manufacturing capacity.
Chief Executive Officer Haviv Ilan said revenue for the quarter was $5.5 billion, up 13% sequentially and 23% from a year earlier. Revenue came in above the company’s prior range as industrial and data center demand continued to grow and automotive demand accelerated during the quarter.
“Our investments in inventory and capacity are serving us well, which allows us to support our customers during this time of increased demand,” Ilan said. He added that Texas Instruments has clean room space available and is positioned to support continued growth.
Industrial, Data Center and Automotive Drive Growth
Ilan said both Analog and Embedded Processing grew sequentially and year over year. Analog revenue rose 26% from the year-ago quarter, while Embedded Processing increased 16%. The company’s other segment declined 2% year over year.
By end market, Ilan said industrial revenue increased about 30% year over year and roughly 10% sequentially, with broad growth across sectors and regions. Automotive revenue increased in the mid-teens from a year earlier and rose in the upper single digits from the prior quarter. Data center revenue doubled year over year and grew about 20% sequentially.
Personal electronics was flat year over year and grew in the upper single digits sequentially, while communications equipment increased both year over year and sequentially.
During the question-and-answer portion of the call, Ilan said demand is now broader than in recent quarters, when strength was concentrated in industrial and data center. He said automotive demand built during the second quarter, led by China and by demand tied to electric vehicles and hybrids. He also said some automotive customers had reduced inventories to very low levels.
“I think we are in the start of a cycle that is very broad,” Ilan said.
Profitability Improves; Free Cash Flow Rises
Chief Financial Officer Rafael Lizardi said gross profit was $3.4 billion, or 61% of revenue, with gross margin increasing 340 basis points sequentially. Operating expenses were $1 billion, about in line with expectations. Operating profit was $2.3 billion, or 42% of revenue, up 48% from the year-ago quarter.
Net income was $2 billion, or $2.14 per share. Lizardi said earnings per share included a $0.05 benefit from discrete tax items that was not included in the company’s original guidance.
Cash flow from operations was $2.7 billion in the quarter and $8.7 billion over the trailing 12 months. Capital expenditures were $514 million in the quarter and $3.3 billion over the past 12 months. Trailing 12-month free cash flow was $6.5 billion, up from $1.8 billion in the second quarter of 2025.
Lizardi said free cash flow over the past 12 months included $1.6 billion of CHIPS Act incentives, consisting of investment tax credits and direct funding. Texas Instruments received $549 million of ITC-related payments in the second quarter for qualifying capital expenditures.
The company paid $1.3 billion in dividends during the quarter and returned $5.8 billion to shareholders over the past 12 months. Texas Instruments ended the quarter with $7 billion in cash and short-term investments and $14 billion in total debt, with a weighted average coupon of 4%.
Inventory at quarter-end was $4.6 billion, down $90 million from the prior quarter. Days of inventory were 196, down 13 days sequentially.
Third-Quarter Guidance Points to Continued Momentum
For the third quarter of 2026, Texas Instruments expects revenue of $5.65 billion to $6.15 billion and earnings per share of $2.23 to $2.57. The company expects its effective tax rate to be about 13% in the quarter.
Asked about the demand outlook, Ilan said he expects strength across markets in the third quarter. He noted that personal electronics typically contributes meaningfully to third-quarter growth, but said the current outlook is broader, with industrial, data center and automotive also expected to contribute.
Ilan also said the company has begun executing price increases after pricing remained flat in the first half of the year. He said some increases will begin to affect results in the third quarter, with additional impact expected in the fourth quarter and into next year, depending on annual customer pricing discussions.
“If I think about the forecast for Q3, the vast majority of it is just unit growth and maybe a little contribution from pricing, but almost insignificant,” Ilan said.
Capacity and Lead Times Remain Key Focus Areas
Management emphasized that Texas Instruments is better positioned on capacity than in the prior cycle. Incoming CFO Julie Knecht said factory loadings increased from the first quarter to the second quarter and continued to rise throughout the second quarter. She said third-quarter loadings will depend on demand, but the company has clean room space available that it can equip and ramp.
Ilan said Texas Instruments has clean room capacity in Richardson and Sherman, as well as capacity plans tied to Lehi. He said the company is “in great shape” for Analog growth into its existing manufacturing footprint and that Lehi 2 will support Embedded Processing growth.
On lead times, Ilan said they remain competitive, though they have moved slightly higher as demand has increased. He said lead times were below the company’s core 13-week level in the second quarter but have risen by a couple of weeks.
“When I talk with customers, I do believe our lead times are the most competitive in the market,” Ilan said.
CFO Transition and Acquisition Update
The call also marked Lizardi’s final earnings call as CFO. Head of Investor Relations Mike Beckman said Lizardi plans to retire at the end of August after nearly a decade as finance chief. Julie Knecht, who has been with Texas Instruments for more than 25 years and has served as chief accounting officer since 2021, will become CFO on August 1.
Lizardi said it had been an honor to work at Texas Instruments for 25 years and to serve as CFO for the past decade. “Over that time, we have made TI stronger and positioned it for continued success,” he said.
Management also provided a brief update on the pending Silicon Labs transaction. Knecht said regulatory approvals are moving as planned and that Texas Instruments still expects the deal to close in the first half of next year. She said the company continues to expect to fund the transaction with cash on hand and debt.
About Texas Instruments (NASDAQ:TXN)
Texas Instruments Inc NASDAQ: TXN is a global semiconductor company headquartered in Dallas, Texas, that designs and manufactures analog and embedded processing chips. The company's products are used across a wide range of end markets, including industrial, automotive, personal electronics, communications and enterprise equipment. TI's business emphasizes components that condition, convert, manage and move electrical signals—capabilities that are foundational to modern electronic systems.
TI's product portfolio includes a broad array of analog integrated circuits—such as power management, amplifiers, data converters and interface devices—as well as embedded processors and microcontrollers used to control systems and run real-time applications.
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