Key Highlights

  • Texas Instruments (NASDAQ:TXN) reported third-quarter diluted earnings of USD 2.62 per share on Wednesday, October 21, 2026, against the consensus estimate of USD 2.43, as trailing free cash flow rose 249%.
  • Free cash flow for the 12 months to September reached USD 8.42 billion, or 40.6% of revenue, against USD 2.42 billion, or 14.0%, a year earlier.
  • Capital expenditures fell to USD 2.58 billion over 12 months from USD 4.82 billion, while CHIPS Act proceeds, meaning federal grants for US chip plants, rose to USD 1.10 billion from USD 335 million.
  • Gross margin widened to about 64.2% from about 57.4%, on simple arithmetic, and Analog operating profit rose 69% to USD 2.51 billion on revenue up 32%.

The Cash Turn in the Numbers

Texas Instruments (NASDAQ:TXN), the Dallas-based maker of analog and embedded processing chips, reported third-quarter results after the close on Wednesday, October 21, 2026. Diluted earnings were USD 2.62 per share, against the consensus estimate of USD 2.43 and USD 1.48 a year earlier, including a 1-cent reduction not in original guidance. Revenue rose 28% to USD 6.06 billion. Cash flow from operations over 12 months reached USD 9.90 billion, up 43%. Capital expenditures over the same period fell to USD 2.58 billion from USD 4.82 billion, and CHIPS Act proceeds added USD 1.10 billion. Free cash flow therefore rose 249% to USD 8.42 billion. In the third quarter alone, capital spending was USD 463 million, against USD 1.20 billion a year earlier.

Why Lower Spending and Higher Margins Compound

For Texas Instruments (NASDAQ:TXN), free cash flow jumped because three forces arrived together. The heavy phase of fab construction is easing, so capital spending fell by about 46% over 12 months, on simple arithmetic. Government grants then offset part of what remained. Meanwhile, plants already built are filling up, and gross margin rose about 6.8 points as more output spread over largely fixed costs. Analog shows the effect most clearly: segment operating margin rose to about 51% from about 40%, calculated from reported revenue and profit. Inventory fell to USD 4.67 billion from USD 4.83 billion, with finished goods down to USD 1.69 billion, so the cash was not absorbed by stockpiling. Dividends of USD 5.17 billion and buybacks of USD 636 million took about 69% of free cash flow.

Risks and What to Watch

The first risk for Texas Instruments (NASDAQ:TXN) is that grant receipts are uneven, so free cash flow could look weaker once CHIPS Act proceeds slow, even if operations stay strong. The second is cyclical: the margin gain depends on high factory loading, and a downturn in industrial, automotive or data centre demand would reverse that leverage quickly. The third is capital allocation, since buybacks fell 61% over 12 months while cash and short-term investments rose to about USD 8.14 billion. Investors should watch fourth-quarter revenue against guidance of USD 5.80 to USD 6.30 billion, earnings against the USD 2.45 to USD 2.79 range and the next quarterly dividend declaration, after USD 1.42 per share in the third quarter.

Where Things Stand

The answer is that Texas Instruments (NASDAQ:TXN) turned its fab build-out into cash as capital spending fell, grants arrived and fuller factories lifted margins. Trailing free cash flow of USD 8.42 billion is 40.6% of revenue, against 14.0% a year ago. Earnings of USD 2.62 also beat the consensus estimate of USD 2.43. The next catalysts are fourth-quarter results against guidance of USD 5.80 to USD 6.30 billion and any change in buybacks. Guidance is a company forecast, not a guarantee, and this is not investment advice.