Texas Instruments Q1 Beats Expectations, Data Center Revenue Soars by 90%

On April 22, after the U.S. market closed, Texas Instruments released its Q1 2026 financial report, with revenue and profit exceeding market expectations across the board. Industrial and data center dual drivers led to a strong recovery in profits, and the company's stock price increased by more than 11% after the financial report was released.

Core performance exceeds expectations, Q2 guidance surpasses the market once again

The company achieved a revenue of $4.825 billion in Q1, a year-on-year increase of 19%, higher than Wall Street's consensus expectation of $4.5 billion; earnings per share were $1.68, a year-on-year increase of 31%, 24% higher than the market expected $1.36.

Profit performance is also eye-catching, with operating profit reaching $1.808 billion in Q1, a year-on-year increase of 37%, and the operating profit margin rising to 37.5%, with significant effects of economies of scale and product structure optimization; net profit achieved $1.545 billion, a year-on-year increase of 31%.

Looking forward to Q2, the company provides guidance for revenue of $5.0 billion - $5.4 billion and earnings per share of $1.77-$2.05, with the overall range higher than the market's previous expectations.

Dual main businesses are working together, and the data center has become the core growth engine

The growth momentum mainly comes from the two major markets of industry and data centers, among which the sales volume of data center customers increased by as much as 90% year-on-year, becoming the biggest highlight.

By business, the analog chip department, as a core pillar, achieved a revenue of $3.924 billion in Q1, a year-on-year increase of 22%, and operating profit of $1.838 billion, a year-on-year increase of 36%; the embedded processing department also performed brightly, with revenue of $723 million, a year-on-year increase of 12%, and operating profit soaring from $40 million in the same period last year to $122 million, a year-on-year increase of 205%. Other business revenues were $178 million, a year-on-year decrease of 16%, and profits correspondingly shrank.

The end of the capacity cycle, a substantial recovery in free cash flow

One of the biggest financial highlights of this quarter is the significant improvement in free cash flow. In Q1, the company's free cash flow reached $1.399 billion, compared with a loss of $274 million in the same period last year; capital expenditure was reduced to $676 million, a significant reduction from $1.123 billion in the same period last year, marking the end of the investment cycle for the multi-year 300mm wafer factory upgrade.

Over the past 12 months, the company's cumulative free cash flow has reached $4.351 billion, a year-on-year increase of 154%, with the proportion of free cash flow to revenue increasing from 10.7% a year ago to 23.6%. Among them, the U.S. "CHIPS and Science Act" incentive fund contributed $555 million this quarter, and after excluding this part, the company's Q1 free cash flow profit margin still significantly improved compared to the same period last year.

Solid shareholder returns, stock price has risen by 37% this year

Over the past 12 months, Texas Instruments has returned a total of $6.034 billion in cash to shareholders, including dividends of $5.052 billion and stock buybacks of $982 million, with Q1 dividends per share at $1.42, steadily increasing compared to the same period last year.

The anticipated improvement in cash flow driven by the decline in capital expenditure has already been reflected in the stock price, with the company's cumulative increase this year being about 37%, and the current stock price corresponds to a PE ratio of about 34 times for the next 12 months, at the high end of the historical valuation range. It is worth noting that despite the strong rebound in revenue, the company's single-quarter revenue is still short of the historical peak of about $5.2 billion in 2022. The trend of demand in the industrial and automotive markets and potential changes in trade policy remain the core variables affecting the recovery of medium-term performance.