I'll research TXN before writing the preview. Let me gather recent earnings materials, guidance, and news.Let me get recent news and stock price action heading into the print.Let me pull the Capital Markets Day highlights and compute some price/valuation context.# Texas Instruments (TXN) — Q2 2026 Earnings Preview
TXN heads into this print red-hot on fundamentals but with a rich stock and one dominant question hanging over it: is the 2026 recovery for real this time, or another "false start" like 2025? Management has repeatedly framed the second half as the swing factor, and this report — plus the Q3 guide — is where they finally have to show their cards.
The April quarter was a blowout that reset expectations sharply higher:
| Metric | Q1 2026 | Y/Y |
|---|---|---|
| Revenue | $4.83B | +19% |
| Analog | $3.92B | +22% |
| Embedded Processing | $723M | +12% |
| Gross margin | 58.0% | +210 bps q/q |
| Operating profit | $1.81B (37%) | +37% |
| EPS | $1.68 (incl. ~$0.05 discrete tax benefit) | +31% |
By end market, Q1 growth was led by industrial (+30% y/y, +20% q/q) and data center (~+90% y/y, +25% q/q), with communications equipment (+25% y/y) also strong, automotive roughly flat (up mid-single-digits y/y, with China down), and personal electronics flat y/y.
The market reaction was violent: TXN jumped ~19% the day after the April report. That single session tells you how positioned/short the name was into 2026, and how much the beat re-rated the stock.
Company guide (given April 22): - Revenue: $5.00B–$5.40B (midpoint $5.2B; ~+8% q/q, ~+17% y/y — management called this "slightly above seasonal") - EPS: $1.77–$2.05 - Tax rate: ~13%
Street consensus (as of mid-July): - Revenue: ~$5.21B (~+17% y/y) - Gross margin: ~59.6% (+170 bps y/y) - EPS: ~$1.92 - Free cash flow: ~$1.77B (+~220% y/y)
Consensus sits just above the guidance midpoint, so a simple "beat-and-raise" is essentially the baseline expectation. Given the strength of Q1 and the positive semiconductor tape since, the bar is not low.
Management has been unusually candid that 2025 started strong and then "took a breather" — Haviv Ilan called it a "head fake" / "false start." They deliberately guided Q2 without committing to the back half, saying they want to "let 2Q play out." The Q3 guide is the single most important number in this release. An above-seasonal Q3 guide would validate a genuine broad upcycle; an in-line or soft one revives the 2025 déjà-vu fear.
The bull case rests here. Industrial grew broadly across "all sectors, all regions, all customer sizes" in Q1 — notably the long-dormant "tail" of small customers waking up. Crucially, industrial is still running ~15–25% below its 2022 peak, so management argues there's substantial runway before hitting trend. Watch whether that broad-based momentum continued through Q2 or narrowed.
Data center exited 2025 around ~$450M/quarter (~10% of revenue) and grew ~90% y/y in Q1. TI's edge is the combination of a broad general-purpose analog catalog (tens of thousands of sockets per rack), plus ramping application-specific parts (VRMs, GaN-based high-voltage power) that management expects to kick in more in H2 2026 and into 2027. The read-through from TSMC (raised capex to $60–64B, +$100B Arizona) and ASML (raised guidance twice) is that AI capex remains robust — a tailwind for this segment.
Pricing was flat sequentially and y/y in Q1 — better than the usual low-single-digit Q1 decline. Management flagged that if demand sustains, prices "may go up in the second half." With the broader analog/foundry complex signaling increases (TSMC reportedly seeking up to ~10% price hikes for next year) and OSAT/assembly-test capacity tightening, any commentary on TI moving from "following the market" to actively raising price would be a meaningful margin catalyst.
Gross margin should tick up toward ~59% on incremental fall-through of 75–85% (ex-depreciation). The offsets to watch: - Depreciation headwind of $2.2–2.4B for 2026 (up from $1.9B in 2025), with more pressure in 2027. - Silicon Labs acquisition charges now recurring each quarter until the deal closes (expected 1H 2027).
The bigger story is free cash flow. With CapEx moderating to $2–3B in 2026 (from $4.6B in 2025) as the 300mm build-out (Sherman, Lehi, Richardson) nears completion, TTM FCF has already snapped back to $4.4B. Management says $8+ FCF/share in 2026 is "highly probable" and hinted at upside given H1 growth tracking ~15–20%. Any explicit framing of full-year FCF is the number long-term owners care most about.
Bull case: Broad industrial recovery still early (well below prior peak) + secular data-center ramp + pricing turning up + CapEx falling = a powerful FCF/share inflection with operating leverage. Peer data points (TSMC, ASML, Micron) corroborate strong demand.
Bear case: Stock is up ~64% YTD at a premium multiple; the 2025 "false start" is fresh; automotive/China remains soft; depreciation and Silicon Labs charges weigh on GAAP EPS; and macro/tariff noise (fresh trade-policy headlines) clouds the H2 industrial trajectory. A merely in-line Q3 guide could trigger a "sell the news" reaction.
Expect strong Q2 numbers — a beat on the ~$5.2B / ~$1.92 EPS bar is the base case. But the reaction will be dictated by the Q3 outlook and management's tone on second-half sustainability, pricing, and industrial breadth. Given how far and fast the stock has run, TXN likely needs to guide above seasonal and sound confident that this cycle — unlike 2025 — has legs. Anything less risks a pullback even on a headline beat.
Key items to watch on the call: the Q3 revenue/EPS guide vs. seasonal, industrial order breadth and book trends, data-center ASSP ramp timing, any concrete pricing actions for H2, updated gross-margin/depreciation cadence, and full-year FCF/share framing.