Amid AI bubble concerns, Texas Instruments Incorporated (TXN.US) delivers solid results: Q3 revenue and profit both beat expectations, Q4 guidance unexpectedly strong.

Analog chipmaker Texas Instruments Incorporated (TXN.US) reported fiscal 2026 third-quarter results, with revenue of $6.06 billion, above analysts' expectation of $5.90 billion, up 27.7% year-over-year and 2.6% above expectations; GAAP earnings per share were $2.62, 8% higher than analysts' expectation of $2.43. In addition, the company's revenue guidance for the next quarter (midpoint $6.05 billion) was unexpectedly strong, 5.6% above analysts' expectations. Data showed that Texas Instruments Incorporated's fiscal 2026 third-quarter GAAP earnings per share guidance midpoint was $2.62, 14.7% above analysts' expectations. Earnings quality improved in tandem, 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 substantial increase from 22.5% in the same period last year. Inventory days stood at 196 days, down from 199 days in the previous quarter, indicating no excessive inventory buildup. The company's guidance for the fourth quarter was likewise strong, with revenue guidance midpoint of $6.05 billion, above analysts' expectation of $5.73 billion. Amid AI bubble concerns weighing on the entire chip sector, this outlook constitutes a positive signal for the broader chip market. Texas Instruments Incorporated said it saw "broad growth in industrial, automotive and data center businesses," and it particularly benefits from a diversified customer basenot all of its customers are at the core of AI infrastructure buildout. The stock closed at $284.65 in New York, and as of publication, it was up 1.07% after hours. As of the close, the stock has surged 64% year-to-date. The company's current market capitalization is $253.7 billion. Texas Instruments Incorporated, headquartered in Dallas, Texas, has been the world's largest analog semiconductor producer since the 1950s. The company is the largest manufacturer of "essential chips," components that use less advanced manufacturing processes but are key parts of products ranging from aerospace hardware to home electronics. Its two major markets are automotive and industrial, so its financial reports are viewed as an indicator of demand conditions across the entire economy. Although Texas Instruments Incorporated does not produce the large digital semiconductors used for processing work in AI data centers, its power management-related chips and other components play important roles in servers and networks, which increasingly benefits the company from the massive expansion of AI infrastructure. Analog chips and embedded processors convert real-world inputs into electronic signals and are widely used in all kinds of devicesgenerally, anything with a switch uses them. But the technology is also part of data center equipment, where chips perform critical functions such as regulating power supply to high-end processors. CEO Haviv Ilan said the company plans to expand capacity to meet growing orders, and capital expenditure on new plants and equipment in 2026 may be at the high end of the $2 billion to $3 billion budget. He said the ability to add supply is constrained by long lead times for new chip manufacturing equipment and strong demand. Over the past five years, Texas Instruments Incorporated's sales compound annual growth rate was 3.4%, a lackluster performance. Annualized revenue growth over the past two years was 15%, above its five-year trend, suggesting some bright spots. In addition to beating revenue expectations, Texas Instruments Incorporated achieved seven consecutive quarters of growth, indicating that the current upcycle is performing wella typical upcycle usually lasts 8 to 10 quarters. Company management currently guides next-quarter sales to grow 36.8% year-over-year. Looking further ahead, sell-side analysts expect revenue growth of 17.8% over the next 12 months. Although this forecast implies that newer products and services will drive better revenue performance, it remains below the industry average. Days inventory outstanding (DIO) is an important metric for chipmakers, reflecting a company's capital intensity and the cyclicality of semiconductor supply and demand. In a tight supply environment, inventory tends to stabilize, allowing chipmakers to exercise pricing power. A steady rise in DIO can be a warning sign of weak demand; if inventory continues to rise, the company may have to cut production. This quarter, Texas Instruments Incorporated's DIO was 196 days, 2 days below its five-year average. At present, these figures do not show signs of excessive inventory buildup.