Texas Instruments turned $6.06 billion of third quarter revenue into $2.87 billion of operating profit, a 47 percent operating margin. Revenue rose 28 percent from a year earlier and 11 percent from the second quarter. Net income climbed 78 percent to $2.43 billion, or $2.62 a share, against $1.48 a year ago. Analysts had expected about $5.92 billion and $2.42.
CEO Haviv Ilan pointed to “continued broad growth in industrial, automotive and data center” when TI reported on October 21. The old customer base is waking up, with a new one stacked on top.
Industrial hits a new peak and data center nearly doubles
Industrial revenue grew more than 40 percent year over year and about 10 percent sequentially. It passed its prior high from the third quarter of 2022. Automotive grew in the mid-teens, with China and the U.S. both firmer, and Ilan said he saw no inventory build at car customers. “On the contrary, I wish they had a little bit more.”
Data center is the line people will circle. It rose about 95 percent and 20 percent sequentially, and now makes up about 13 percent of revenue. TI sells roughly 10,000 generic part numbers into that market, and it’s starting early 300mm ramps for parts built for specific data center sockets. Personal electronics was about flat.
By segment, Analog revenue rose 32 percent to $4.91 billion and its operating profit jumped 69 percent to $2.51 billion. Embedded Processing grew 21 percent to $858 million, and its operating profit more than doubled to $227 million. Gross margin reached 64 percent, up 280 basis points from the second quarter on volume, pricing, factory loadings and mix. Analog prices were flat in the first half, then ticked up as some customers paid for urgent supply. Talks on 2027 pricing are underway, with details due in January.
The capex cliff is now showing up as cash
The 300mm fab buildout squeezed TI’s free cash flow to $2.4 billion over the 12 months to September 2025. That’s reversing fast. Trailing capital spending fell to $2.58 billion from $4.82 billion, third quarter capex was only $463 million, and operating cash flow rose 43 percent to $9.9 billion.
Free cash flow came in at $8.42 billion for the trailing year, up 249 percent, or 40.6 percent of revenue against 14.0 percent a year before. One caveat. TI counts CHIPS Act incentives in its free cash flow. The release adds $1.10 billion of CHIPS proceeds to the trailing figure (none in the third quarter itself), and management put the total CHIPS benefit, tax credit included, at $1.6 billion. Strip out the larger number and free cash flow is still about $6.8 billion. Ilan credited “the benefit of 300mm production.” The expensive fabs are built, and now they’re loaded.
Management kept 2026 capex in its $2 billion to $3 billion range, possibly near the top if equipment arrives on time. The 2027 number comes in February. Inventory sat at $4.7 billion, or 194 days. That’s a lot of stock, and a buffer while lead times stretch.
Shareholder returns and a guide above the Street
TI paid $1.30 billion in dividends in the quarter but bought back only $48 million of stock. Over 12 months it returned $5.81 billion, down 11 percent, as buybacks fell 61 percent. In September it lifted the quarterly dividend 7 percent to $1.52, its 23rd straight annual increase.
Fourth quarter guidance calls for revenue of $5.80 billion to $6.30 billion and EPS of $2.45 to $2.79. Analysts had pencilled in about $5.75 billion and $2.27, so even the low end clears the bar. The $6.05 billion midpoint is roughly flat with the third quarter, and management said industrial is running above seasonal norms.
The stock didn’t run with it. Shares had closed up 2.47 percent at $284.65 before the release, edged higher after hours, then finished the next session about 1.8 percent lower. They’re up about 67 percent this year and trade near 28 times forward earnings, so a clean beat was partly priced in. The dip didn’t last. Jefferies raised its target to $300 from $260, and by October 27 the stock was at $307.37, still below its 52 week high of $334.03.
The number to watch next is the 2027 capex figure in February. If spending stays near $2 billion to $3 billion while industrial keeps climbing, TI’s cash machine has more room to run.