For the first time in four years, Texas Instruments Inc.’s industrial customers bought more chips in a quarter than at any point in the company’s history. The line sat in a routine earnings release, and it explains why the Dallas chip maker’s fourth-quarter forecast came in above what Wall Street had modeled.
TI reported revenue of $6.06 billion for the three months through September, up 28% from $4.74 billion a year earlier and 11% from the prior quarter. Net income rose 78% to $2.43 billion, or $2.62 a share, against $1.48 a year ago. Operating profit climbed 73% to $2.87 billion, a margin of roughly 47% on sales.
Both product lines grew. Analog, the larger of the two and the source of most of TI’s gross profit, rose 32% from a year earlier. Embedded Processing, which sells the microcontrollers and processors that sit inside machines, added 21%. The small “Other” segment fell 6%.
Demand arrived from three directions at once. Industrial revenue rose more than 40% year over year and about 10% sequentially, reaching the record. Data-center sales nearly doubled, up about 95%, as builders of AI computing racks bought the power-conversion and signal-conditioning parts that surround every accelerator. Automotive grew in the mid-teens.
That mix is the point. TI does not sell the chips that train models; it sells the components that deliver current to them, measure temperature, isolate high voltages and keep motors turning. When a data center adds megawatts of compute, the count of those parts rises with it. The same catalog feeds factory automation, grid equipment and electric-vehicle platforms.
“We’ve seen continued broad growth in industrial, automotive and data center,” Chief Executive Haviv Ilan told investors on the company’s call. Broad is the operative word for a business that sells tens of thousands of part numbers to a customer base stretching across most of the industrial economy.
Guidance continued the pattern. TI told investors to expect fourth-quarter revenue of $5.80 billion to $6.30 billion and earnings of $2.45 to $2.79 a share. The midpoint of both ranges sits above the average analyst estimate, a reversal from the cautious tone that defined the company’s outlooks through the downturn.
Cash generation has tracked the recovery. Cash flow from operations was $9.9 billion over the trailing 12 months, and free cash flow was $8.4 billion, or 40.6% of revenue. The company spent $2.6 billion on capital projects and $4.0 billion on research, development and administrative costs over the same period, then returned $5.8 billion to shareholders.
The income statement shows how much of each new dollar of sales flows through to profit. Gross profit rose to $3.89 billion from $2.72 billion, while cost of revenue grew 7% against a 28% increase in sales, the pattern of a fab-heavy manufacturer running its plants harder. The same fixed base works in reverse when orders stall, which is why the company’s inventory position draws as much attention as its bookings.
The capital spending is the residue of a decision TI made while orders were falling. Rather than idle its fabs, the company kept building—300-millimeter capacity in Sherman and Richardson, Texas, and a converted plant in Lehi, Utah—on the argument that owning its own manufacturing would lower unit costs for a decade once demand returned. Depreciation from those plants weighed on earnings through the trough.
Inventory remains high at 196 days, a level that would unsettle most semiconductor investors. TI has defended it as a service commitment. Customers sourcing a handful of inexpensive components for a production line pay for availability, and the company would rather hold stock than lose a design slot that runs for years.
The quarter carries weight beyond Dallas. TI’s catalog touches so many industrial end markets that its order trends are read as a proxy for capital spending in general, and its results land days before those of larger peers. Analysts said the industrial figure in particular suggests that factory and infrastructure customers have moved past destocking and are rebuilding.
The risks are equally plain. A 28% comparison flatters a company coming off a weak base, and the data-center contribution, while growing fastest, remains a minority of sales tied to the spending plans of a few large customers. TI also faces intensifying price competition from Chinese analog suppliers, analysts said, particularly in the commodity parts that make up the bulk of its unit volume.
For the wider chip industry, a broad analog recovery would be the strongest evidence yet that demand has spread past the data-center build-out that has carried the sector. Power-management suppliers, connector makers and distributors take their cues from the same order patterns, and each has spent two years waiting for the industrial side of the market to stop shrinking.
The question for the next two quarters is whether the recovery reflects genuine consumption at factories or distributors refilling shelves they let run down—a distinction that tends to show up in order cancellations rather than in revenue.
