Texas Instruments Beats Forecast but Fails to Impress Investors, Shares Drop 4% After Hours

Texas Instruments (TXN-US), a bellwether for the semiconductor industry, released financial guidance that surpassed market expectations, but failed to rally investor sentiment, sending its shares lower in after-hours trading on Wednesday (22nd).

F2026 Q3 Guidance vs. Analyst Forecast

Revenue: $5.65–6.15 billion vs. $5.62 billion

EPS: $2.23–2.57 vs. $2.15

Texas Instruments is the first major U.S. semiconductor company to issue guidance this quarter and serves as a key barometer for the health of the AI chip market. The company boasts the industry's broadest product portfolio and customer base, and has made significant progress in the AI data center market in recent years. Its chips are widely used as critical components—such as power management—in high-performance computing equipment from companies like NVIDIA (NVDA-US).

The latest outlook indicates that Texas Instruments is benefiting from the surge in AI-related spending. At the same time, recovering demand for chips used in automotive and industrial equipment is supporting the company’s long-standing core operations.

However, the stock has already risen 70% this year. Even with strong guidance, it failed to meet sky-high investor expectations, causing shares to drop as much as 4% after the announcement. At the time of writing, the stock was down 3.1%. During regular trading on Wednesday, the stock closed at $294.19 per share.

F2026 Q2 (ended June 30) Financial Results vs. Analyst Expectations

Revenue: $5.46 billion vs. $5.26 billion

EPS: $2.14

Second-quarter revenue rose 23% year-over-year to $5.46 billion. CEO Haviv Ilan said the revenue growth was “driven by broad-based strength in industrial, data center, and automotive markets.”

Texas Instruments stated that the automotive market has become a current bright spot. After a prolonged period of digesting excess chip inventory, automakers have resumed component procurement, driving a rebound in demand.

Having invested heavily in new wafer fabs over many years, the company is now returning to a relatively low level of capital expenditure. Texas Instruments said this wave of capacity modernization investments will help reduce chip manufacturing costs and further enhance profitability.

Company executives also believe that, compared to competitors who outsource production, their in-house manufacturing capability provides greater operational flexibility. With major investments now winding down, Texas Instruments has pledged to resume its long-term strategy of returning more free cash flow to shareholders.

CFO Lizardi stated that the 2026 capital expenditure plan remains unchanged at $2–3 billion, a significant drop compared to the average annual capital spending of $4.8 billion over the past three years.

Lizardi said that even though overall revenue has not yet returned to previous peak levels, the company will have rare supply capacity among peers if market demand increases further from current levels. This is because Texas Instruments has already reserved sufficient factory space to quickly install equipment and ramp up production—a situation “entirely different” from the past.

Lizardi said, “It’s night and day. We have the ability to support any foreseeable market demand.”