On Wednesday, Texas Instruments (NASDAQ:TXN) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Texas Instruments Inc reported first-quarter revenue of $4.8 billion, marking a 9% sequential increase and a 19% year-over-year increase, with significant growth in the industrial and data center markets.
The company announced an agreement to acquire Silicon Labs to enhance its portfolio and global leadership in embedded wireless connectivity, expecting the transaction to close in the first half of 2027.
Future guidance suggests second-quarter revenue in the range of $5 billion to $5.4 billion and earnings per share between $1.77 and $2.05, indicating a positive outlook despite macroeconomic uncertainties.
Full Transcript
Mike Beckman (Head of Investor Relations)
Welcome to the Texas Instruments First Quarter 2026 Earnings Conference Call. I’m Mike Beckman, Head of Investor Relations and I’m joined by our Chief Executive Officer Haviv Vilan and our Chief Financial Officer Rafael Lazardi. For any of you who missed the release, you can find it on our website ti.com/ir. This call is being broadcast live over the web and can be accessed through our website. In addition, today’s call is being recorded and will be available via replay on our website. This call will include forward looking statements that involve risks and uncertainties that could cause TI’s results to differ materially from management’s current expectations. We encourage you to review the notice regarding forward looking statements contained in the earnings release published today, as well as TI’s most recent SEC filings. For a more complete description today we’ll provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he will provide insight into first quarter revenue results with some details on what we’re seeing with respect to our end markets. Lastly, Rafael will cover the financial results, give an update on capital management as well as share the guidance for second quarter 2026. With that, let me turn it over to Haviv.
Haviv Vilan
Thanks Mike. Before I go into the results, I want to highlight that in the first quarter we announced an agreement for TI to acquire Silicon Labs. This transaction enhances our global leadership in embedded wireless connectivity, expands TI’s portfolio and leverages TI’s internally owned technology and manufacturing and reach of market channels. We expect the transaction to close in the first half of 2027, subject to necessary approvals. Now let me provide a quick overview of the first quarter. Revenue was $4.8 billion, an increase of 9% sequentially and an increase of 19% year over year. Analog and embedded both grew sequentially and year on year. Analog revenue grew 22% year on year and embedded processing grew 12%. Our other segment declined 16% from the year ago quarter. Let me provide a few comments about the current market environment. In the first quarter revenue came in above the top of the range as we saw continued acceleration in industrial and data center. The overall semiconductor market recovery is continuing and we remain well positioned with inventory and capacity that allows us to support our customers with competitive lead times through the cycle. Now I’ll share some additional insights into first quarter revenue by end market. First industrial increased more than 30% year on year and was up more than 20% sequentially, growing broadly across all sectors and regions. Automotive increased mid single digits year on year and was about flat sequentially. Data center grew about 90% year on year and grew more than 25% sequentially. Personal electronics was flat year on year and grew low single digits sequentially. And lastly, Communications equipment grew about 25% year on year and grew more than 30% sequentially. With that, let me turn it over to Rafael to review profitability and capital management.
Rafael Lazardi (Chief Financial Officer)
Thanks Haviv and good afternoon everyone. As Aviv mentioned, first quarter revenue was $4.8 billion. Gross profit in the quarter was $2.8 billion or 58% of revenue sequentially. Gross profit margin increased 210 basis points. Operating expenses in the quarter were $974 million, about as expected on a trailing 12-month basis. Operating expenses were $3.9 billion or 21% of revenue. Operating profit was $1.8 billion in the quarter or 37% of revenue and was up 37% from the year over quarter. Net income in the quarter was $1.5 billion or $1.68 per share. Earnings per share included a 5 cent benefit for items not in our original guidance, primarily due to discrete tax benefits. Let me now comment on our Capital Management results starting with our cash generation. Cash flow from operations was $1.5 billion in the quarter and $7.8 billion on a trailing twelve month basis. Capital expenditures were $676 million in the quarter and $4.1 billion over the last twelve months. Free cash flow on a trailing twelve month basis was $4.4 billion up from $1.7 billion in the first quarter of 2025, trending up as growth returns and CapEx begins to moderate. Free cash flow in the trailing twelve months includes $965 million of CHIPS act incentives. This includes a $555 million payment received in the first quarter as part of our direct funding agreement related to the start of production at our newest 300 millimeter wafer fab in Sherman, Texas. In the quarter we paid $1.3 billion in dividends and repurchased $158 million of our stock. In total, we returned $6 billion to our owners in the past 12 months. Our balance sheet remains strong with $5.1 billion of cash and short term investments at the end of the first quarter. Total debt outstanding is $14 billion with a weighted average coupon of 4%. Inventory at the end of the quarter was $4.7 billion, down $109 million from the prior quarter and days were 209, down 13 days sequentially. Turning to our outlook for the second quarter, we expect TI’s revenue in the range of $5 billion to $5.4 billion and earnings per share to be in the range of $1.77 to $2.05. We expect our effective tax rate to be about 13% in the second quarter. In closing, we will stay focused in the areas that add value. In the long term, we continue to invest in our competitive advantages which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long lived positions. We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities which we believe will enable us to continue to deliver free cash per share growth over the long term. With that, let me turn it back to Mike Operator.
Mike Beckman (Head of Investor Relations)
You can now open the line for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response. We’ll provide you an opportunity for an additional follow up.
Operator
Operator. Thank you. We’ll now be conducting a question and answer session. If you would like to ask your question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question is from Tim Arkere with ubs.
Tim Arkere (Equity Analyst)
Thanks a lot, Haviv. I wonder if you can comment just on the behavior of customers. I know you’re guiding up a little better than seasonal off of a number in March that was very strong. So it sounds like it’s mostly industrial, but can you comment kind of on are there rush orders? I know we’re seeing signs of price increases and things like that, so is this impacting the customer’s behavior? Thanks.
Haviv Vilan
Yeah, thanks Tim. In General, I think Q1 was a continuation of what we saw in Q4. Very, very similar behavior, meaning growth coming from two main areas led by industrial, as you mentioned, and also supported by the data center market that, you know, we’ve seen the secular growth over there for the last couple of years. This was the eighth quarter of sequential growth just off of a higher number. So that also helps the overall growth of the company. I will say that the industrial signal was a little bit broader this time. So I would say all sectors, all geographies grew sequentially and it continued to accelerate through the quarter. So if you think about January, February, and then you always want to see how the exit from the lunar or the Chinese New Year break is going to look like, but it continued in March. So just a continuation. I would say it’s now five or six months of continued growth in industrial. We want to keep watching it. But I would say that what guides our forecast into the second quarter. Mike, anything to add on that?
Mike Beckman (Head of Investor Relations)
Yeah, I think just want to be mindful too, just the overall macro backdrop and want to see how sustainable the growth is and that was factored in the guide. Tim, do you have a follow up?
Tim Arkere (Equity Analyst)
I do, yeah. Mike, maybe you can comment on. You know, I know typically you don’t break the guidance down by segment, but just given how different it was in March and given that we’re hearing some choppiness in autos, particularly in China. I mean I would think that most of the sequential growth will be in industrial. But can you give any comments for what is being thought of in the June guidance for those two? Thanks.
Haviv Vilan
Let me take that, Tim. I think I can help you a little bit on the automotive side. But first I think as you said, we are not seeing a change from the previous quarter. So I expect growth to be led by industrial and data center. I won’t break it out between the two, but we see strength in both. Regarding automotive, you’re right that Q1 was, you know, it’s always the same in Q1 in China China was. The overall quarter was flat sequentially but China was down. The rest of the world was up. I want to see automotive and see how it develops in Q2. It’s too soon to call it. I will remind us though that during the COVID cycle even automotive was the last to join in. Also the last to pick. Right. So I’m not surprised by the behavior of this market. I will say that secular growth in automotive continues for the foreseeable future and that is my encouragement. We are seeing cars adding features. We are seeing more content added to vehicles across the power trains, whether it’s Bev or ICE or the hybrids. Anything to add on that, Mike, in terms of the guide?
Mike Beckman (Head of Investor Relations)
No. I think you characterize it well and as you know, auto has been steady at an elevated level for some time. It didn’t really have that steep correction that we saw on the other end market. So I think as Haviv called it out, these markets have been in the past have been transitioning out of phase. I don’t think it’s unrealistic to assume that could happen again. So we’ll have to see how it plays out.
Haviv Vilan
Yeah, I think it’s an important point that Mike said, Q1 was a quarter with flat growth, but very close to peak levels, maybe a point or two below its peak. So it’s holding very nicely at the high level.
Operator
All right, we’ll move on to our next caller. Thank you. Our next question is from Vivek Arya with Bank of America.
Vivek Arya (Equity Analyst)
Thanks for taking my question. Haviv, on this Industrial growth up 30%. I think you said year on year, this is obviously well above the long term trend line. Could you help us dissect which applications, which end markets are driving this? Is this still inventory replenishment? Is this pricing? Is it share gains? Just what kind of checks and balances do you have in place that this isn’t any kind of double ordering or hoarding of your product?
Haviv Vilan
No, I don’t see that way. At least I don’t have the evidence to show that, Vivek. But remember industrial you said, yeah, for one quarter that’s a lot of growth. But if you look at the long term trend line, we are still below the trend line. You know, if I, I just did the math in Q1, our industrial, we had a very good quarter in industrial growing at the rates that you’ve mentioned, but still 15% lower than the peak that was back in 2022. And as I say many times there is a secular growth continuing in industrials. So we deserve a higher peak. Right. Four years later. So I think there is a lot of room to grow. The encouragement I will have on industrial this time is that I see it at a broader application. So all of them, not only the data center related energy infrastructure or power delivery, not only aerospace and defense. And we know the geopolitical tensions in the market is establishing new peaks every quarter. I saw it across all sectors in industrial and also across all customers in terms of regions, but also the size of customers. It’s the first quarter where we saw the broad market, the tail starting to wake up again after a long hibernation period, I would call it. So I am encouraged about the fact that we are seeing growth over there, but I think there is, I mean I would like to see a secular growth in industrial continuing and then higher peaks establishing in 2026 or later versus the 2022 peak. So in that sense, trend line are
Vivek Arya (Equity Analyst)
suggesting we still have room to go. Hopefully that helps you have a follow up, Vivek. Yes, thank you, Mike. So last year we saw the overall analog industry do very well in the first half and then there were some level of deceleration in the second half. I realized every year is different. And I know you’re not …
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