Texas Instruments Sees Broadest Demand Upturn in Years as Automotive Joins Industrial and Data Center Rebound, Begins First Price Increases Since 2022
Q2 2026 earnings call, July 22, 2026
Texas Instruments delivered second-quarter revenue of $5.5 billion, up 13% sequentially and 23% year-over-year, and guided third-quarter revenue to $5.65 billion to $6.15 billion, well above normal seasonal patterns. The bigger story for investors is not the beat itself but management's characterization of demand breadth: for the first time in this upcycle, automotive has joined industrial and data center as a growth driver, and the company is now actively raising prices for the first time since the 2022 peak.
Automotive Inflects, Led by China EVs
CEO Haviv Ilan told analysts that automotive strength "developed throughout the quarter" and was not visible when TI gave its April guidance. Automotive revenue rose in the mid-teens year-over-year and upper single digits sequentially, a sharp change from the soft trends that have dogged the sector for two years. Ilan attributed the inflection to a mix of factors: "I think we did see an uptick... led by China. And I think it's really led by EVs and hybrids. Cost of fuel drove that, I believe." He also flagged that automotive customers had run inventories down to unsustainable levels, forcing restocking as demand ticked up. Combined with continued strength in industrial (up roughly 30% year-over-year, 10% sequentially) and data center (revenue doubled year-over-year, up about 20% sequentially), Ilan said TI now sees "a stronger demand, and it's broader" heading into the third quarter, with contributions expected from industrial, data center, automotive and, seasonally, personal electronics. "I think we are in the start of a cycle that is very, very broad," he said.
Pricing Turns Positive After Years of Erosion
Perhaps the most consequential disclosure was on pricing. Ilan confirmed that after a first half in which prices were flat — already "an above-average year" relative to TI's historical pattern of annual price declines of a couple of points — the company has now begun executing increases customer by customer. "We have started executing price increases, yes," he said, noting that because TI sells direct rather than through distribution, negotiations are individualized and will roll in unevenly, with some effective in the third quarter and others delayed until annual pricing discussions in the fourth quarter or even into 2027. The pressure is currently concentrated in Analog, particularly automotive, though Ilan said "Embedded is joining the trend." Management was careful to temper near-term expectations, telling Bank of America's Vivek Arya that pricing contributes only "a little" to the above-seasonal third-quarter guide, with the "vast majority" driven by unit growth.
Data Center: Doubling Now, Structural Tailwind From 800-Volt Transition
Data center revenue doubling year-over-year continues to be the standout segment, and Ilan used the call to lay out why the opportunity extends well beyond the current cycle. As the industry transitions to 800-volt power architectures, he described a multi-stage conversion process — AC to DC, DC to 800 volts, then step-downs to 48 volts and 12 volts — that increases the number of conversion stages TI can address with both Analog and Embedded parts. "The higher voltage, the more opportunity we see," he said, though he cautioned that eventual direct 800-volt-to-12-volt conversion is a longer-dated development. On profitability, Investor Relations head Mike Beckman said data center gross margins have tracked in line with the corporate average so far and declined to skew expectations either way as the business scales. On competitive positioning, Ilan pointed to TI's inventory and capacity buffer as a share-gaining tool in real time: "We are seeing examples, real-time examples of, hey, we are line down, please help us. And every time that happens, that's an opportunity."
Capacity: Clean Rooms No Longer the Constraint
Unlike the prior upcycle, when clean-room construction lead times of two to three years left TI scrambling, Ilan said the company now has available clean-room space at Sherman 1 and a second shell at Sherman 2, alongside Richardson's RFAB 2 ramp, giving it flexibility to equip fabs opportunistically rather than build from scratch. Lehi 2 is expected to come online at the end of the year to support growing Embedded demand. "We are good for the next 3 years," Ilan said, though more specific 2027 capital intensity guidance will wait for the February capital management call. CFO Rafael Lizardi reiterated the standing rule of thumb — capital intensity of roughly 1.2 times revenue growth — as the modeling framework, and said gross full-year CapEx of $2 billion to $3 billion is more likely to land at the higher end of that range given current demand, a modest upward revision from earlier expectations of low-end spending.
Margins, Cash Flow and the CHIPS Act ITC
Gross margin expanded 340 basis points sequentially to 61% of revenue, with operating margin at 42%, up sharply from a year ago. Trailing-twelve-month free cash flow reached $6.5 billion, up from just $1.8 billion a year earlier, aided by $1.6 billion in CHIPS Act investment tax credit and direct funding over the period. Lizardi cautioned that the ITC benefit will get "choppy" going forward since a growing share of CapEx is directed toward assembly and test operations outside the U.S., which do not qualify for the 35% U.S. manufacturing credit. Management reaffirmed the free-cash-flow framework given at its Capital Management Day — $8 billion to $9 billion at $20 billion of revenue and $9 billion to $10 billion at $22 billion — as still valid.
Leadership Transition
The call marked Lizardi's final earnings call after nearly a decade as CFO before his end-of-August retirement; Julie Knecht, a 25-year TI veteran and the company's chief accounting officer since 2021, takes over August 1. Knecht fielded several modeling questions on loadings and gross-margin fall-through during the call, suggesting a smooth operational handoff. Separately, management confirmed the pending Silicon Labs acquisition remains on track, with regulatory approvals "moving as planned" and closing still expected in the first half of 2027, to be funded with cash on hand and debt.