Texas Instruments Q1 results beat expectations, EPS exceeded estimates by 24%, data center sales surged 90% | Earnings Report News

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Texas Instruments' first quarter results exceeded expectations, with industrial and data center driving a recovery in profitability.

After the close of the U.S. stock market on April 22, Texas Instruments delivered a strong first quarter 2026 report card, with both revenue and profit significantly surpassing market expectations and a clear momentum in profit recovery:

The company's first quarter revenue was $4.825 billion, up 19% year-on-year and higher than the Wall Street consensus of about $4.5 billion;Earnings per share were $1.68, up 31% from $1.28 a year earlier, and notably higher than the market expectation of $1.36.Growth mainly came from the industrial and data center markets, with data center customer sales up as much as 90% year-on-year.Looking ahead to Q2, expected revenue is between $5.0 billion and $5.4 billion, with earnings per share guidance of $1.77 to $2.05, all above previous market expectations.

Benefiting from a cyclical decline in capital spending and the release of 300mm wafer capacity, the company's free cash flow improved significantly and its stock price rose over 11% after hours.

Performance Comprehensive Exceeds Expectations, Operating Margin Strongly Recovers

Texas Instruments' first quarter operating profit reached $1.808 billion, up 37% year-on-year, with operating margin rising to 37.5%, reflecting both scale effect and product portfolio optimization. Net profit was $1.545 billion, up 31% year-on-year.

By business segment, the Analog Chips department remains the core pillar. First quarter revenue was $3.924 billion, up 22% year-on-year; operating profit was $1.838 billion, up 36% year-on-year.

Embedded Processing department also performed impressively, with revenue of $723 million, up 12% year-on-year; operating profit jumped from $40 million a year ago to $122 million, a 205% increase.

Other business segments had revenue of $178 million, down 16% year-on-year, with operating profit shrinking as well.

The company’s chairman, president and CEO, Haviv Ilan, stated that revenue increased 9% quarter-on-quarter and 19% year-on-year, with growth mainly driven by the industrial and data center markets.

He also pointed out:

The company’s operating cash flow over the past 12 months reached $7.824 billion, again demonstrating the resilience of its business model, the quality of its product portfolio, and the cost advantages of its 300mm capacity.

Capital Expenditure Declines, Free Cash Flow Improves Significantly

One of the key financial highlights this quarter is the significant recovery of free cash flow.

First quarter free cash flow was $1.399 billion, compared with a loss of $274 million a year ago.

First quarter capital expenditure dropped to $676 million, down significantly from $1.123 billion a year ago, marking the end of the company’s multi-year large-scale plant upgrade investment cycle.

Over the past 12 months, the company’s accumulated free cash flow reached $4.351 billion, up 154% year-on-year, raising its free cash flow-to-revenue ratio from 10.7% a year ago to 23.6%.

The US “CHIPS Act” incentive contributed $555 million this quarter and about $630 million over the past 12 months.

Excluding the Act’s contributions, the company’s free cash flow margin in the first quarter was about 19%, still a marked improvement from last year.

During the prior years of capacity upgrades, Texas Instruments transitioned its factories from 200mm silicon wafers to 300mm wafers on a large scale.

300mm wafer production is more efficient and has lower per-chip costs, but the transition suppressed free cash flow for a period.

The company previously stated 2026 capital expenditure would be notably lower than the peaks of the prior three years. First quarter data confirms this outlook.

Stable Shareholder Returns, Stock Up 37% This Year

Over the past 12 months, Texas Instruments returned a total of $6.034 billion to shareholders, including $5.052 billion in dividends and $982 million in share repurchases.

The company declared a first quarter dividend of $1.42 per share, up from $1.36 a year ago.

With capital expenditure expected to decline this year, the market’s expectations for the company’s free cash flow improvement have already been reflected in the stock price trend.

Texas Instruments' stock has risen about 37% this year, and its current price-to-earnings ratio for the next 12 months is about 34 times, near the historical high of its valuation range.

Notably, despite the strong rebound in revenue, the company is still short of its historical quarterly peak of about $5.2 billion in 2022.

Trends in industrial and automotive demand, as well as potential changes in trade policy, remain key variables affecting the company’s medium-term revenue recovery.

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