Texas Instruments reported third-quarter 2026 results on Wednesday, October 21, after the close. Revenue: $6.06 billion, up 28% year over year and 11% from the previous quarter. Operating profit jumped 73% to $2.87 billion - a pace two and a half times that of revenue, and that is the core story of the report.
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What was reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Revenue (millions of dollars) | 6,055 | 4,742 | +28% |
| Cost of revenue | 2,168 | 2,019 | +7.4% |
| Gross profit | 3,887 | 2,723 | +42.7% |
| Gross margin* | 64.2% | 57.4% | +6.8 pts |
| Research and development | 530 | 518 | +2.3% |
| Selling, general and administrative | 476 | 457 | +4.2% |
| Operating profit | 2,874 | 1,663 | +73% |
| Operating margin* | 47.5% | 35.1% | +12.4 pts |
| Net income | 2,425 | 1,364 | +78% |
| Diluted earnings per share (dollars) | 2.62 | 1.48 | +77% |
Source: Texas Instruments' third-quarter 2026 press release, October 21, 2026, filed with the SEC on Form 8-K as Exhibit 99.
* Margins are calculated from the figures in the release and are not stated in it.
How profit rose two and a half times faster than revenue
The answer is in one line: cost of revenue rose 7.4% while revenue rose 28%. That is what lifted gross margin to 64.2% from 57.4%, an increase of about 680 basis points.
Beyond that, operating expenses barely moved: research and development rose just 2.3% to $530 million, and selling, general and administrative 4.2% to $476 million. The year-ago quarter also carried $85 million of restructuring charges that did not repeat. The result: operating margin rose 12.4 points, to 47.5%.
Chief executive Haviv Ilan attributes the growth to continued broad expansion in industrial, automotive and data centre, and notes the contribution of 300-millimetre production to the business model.
The segments
| Segment | Revenue | Change | Operating profit | Change |
|---|---|---|---|---|
| Analog | 4,911 | +32% | 2,505 | +69% |
| Embedded Processing | 858 | +21% | 227 | +110% |
| Other | 286 | -6% | 142 | +106% |
In millions of dollars. The "Other" segment includes acquisition charges and restructuring charges.
Analog is 81% of revenue and 87% of the segments' operating profit. Embedded Processing, the smaller of the two, posted the sharper jump in profit - 110% - on revenue up 21%, meaning even greater operating leverage.
Cash flow, and what was done with it
| Trailing twelve months | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Cash flow from operations | 9,896 | 6,897 | +43% |
| Free cash flow | 8,422 | 2,415 | +249% |
| Free cash flow as a percentage of revenue | 40.6% | 14.0% | +26.6 pts |
| Dividends paid | 5,174 | 4,949 | +5% |
| Share repurchases | 636 | 1,611 | -61% |
| Total cash returned | 5,810 | 6,560 | -11% |
In millions of dollars. Free cash flow, as the company defines it, is cash flow from operations less capital expenditures plus proceeds from the CHIPS Act. That is a non-GAAP definition.
In the quarter itself: cash flow from operations of $3.42 billion and free cash flow of $2.96 billion. According to the company, over the trailing twelve months it invested $4.0 billion in research and development and administrative expenses, $2.6 billion in capital expenditures, and returned $5.8 billion to owners.
And here is the line worth putting a finger on: total cash returned to shareholders fell 11%, while free cash flow rose 249%. The dividend rose 5%, but share repurchases were cut 61% - to $636 million from $1.61 billion. In the third quarter itself they were just $48 million, against a dividend of $1.30 billion.
Guidance
For the fourth quarter the company guides revenue of $5.80 billion to $6.30 billion, and earnings per share of $2.45 to $2.79. The midpoint of the revenue range, $6.05 billion, is almost identical to third-quarter revenue - meaning the guidance does not assume the 11% sequential growth continues.
The stock
The report was published after the close on Wednesday. The last close before the report: $284.65 on Wednesday, October 21, up 2.47% from the prior close of $277.78. The trading reaction to the report falls in the after-hours session and in Thursday's session, October 22. I was not able to verify that day's close at the time of writing, so I am not reporting it - the data provider reached its daily request limit. A figure that has not been verified does not get written, and I will update it when I have it.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
This is a report of operating leverage in its cleanest form. Revenue +28%, cost of revenue +7.4%, operating profit +73%. When a company with its own fabs puts volume through a fixed cost base that is already paid for, this is what happens to the profit line - and research and development spending up just 2.3% shows the company did not have to spend more to get it.
But two lines restrain the reading.
The first, the guidance. The midpoint for the fourth quarter, $6.05 billion, is almost identical to third-quarter revenue. After a quarter in which revenue rose 11% sequentially, the company is not assuming that pace continues.
The second, what was done with the cash. Free cash flow jumped to $8.42 billion - 40.6% of revenue, versus 14.0% a year ago - and over exactly the same period cash returned to shareholders fell 11%, and repurchases were cut 61%. In the quarter itself only $48 million of shares were bought back. A company generating more cash and returning less is holding it for something - construction, an acquisition, or simple caution. The release does not say why.
And it is worth knowing what is inside the number: the company's free cash flow definition adds proceeds from the CHIPS Act, so the 249% jump is not all operational.
What I will follow: whether the repurchases come back, and the midpoint of the fourth-quarter range - which will say whether the third quarter was a step up or a temporary peak.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
