TXN Q2 2026: Revenue and EPS Beat, Pricing Hikes Begin, Guidance Reaffirmed

Transcript intelligence

What changed

Revenue growth accelerated from 19% YoY in Q1 to 23% YoY in Q2. Gross margin expanded from 58% to 61%, with the rate of improvement widening from 210 bps to 340 bps sequentially. Automotive demand accelerated to mid-teens YoY growth, supported by low customer inventory levels and EV/hybrid adoption. Data-center growth roughly doubled YoY, building on the 90% growth seen in Q1. Management introduced a new element not present last quarter: pricing increases beginning in Q3 and continuing into Q4, a shift from the prior quarter's emphasis on pricing stability. The Silicon Labs acquisition timeline was refined from a broad 2027 close to the first half of next year. CHIPS Act and ITC incentive contributions to free cash flow grew, with $1.6 billion in cumulative contributions and $549 million in ITC payments received this quarter. Free cash flow reached $6.5 billion on a trailing 12-month basis, enabling $5.8 billion in shareholder returns.

Guidance delta

Q3 guidance was reaffirmed at $5.65-$6.15 billion in revenue and $2.23-$2.57 in EPS. Q2 actuals exceeded the company's prior guidance range of $5.0-$5.4 billion revenue and $1.77-$2.05 EPS, with revenue of $5.46 billion and EPS of $2.14 both coming in above the high end of the guided range. The most notable new guidance element is the pricing increase initiative starting in Q3 and continuing into Q4, which was not part of the prior quarter's outlook. Capex outlook remains increasing. Guidance sentiment is maintained.

Key takeaways

• Revenue grew 23% YoY to $5.46 billion, beating consensus estimates by 3.9%.
• EPS of $2.14 exceeded the consensus estimate of $1.91 by 12%, and topped the high end of prior guidance.
• Gross margin expanded 340 bps to 61% of revenue, accelerating from 210 bps of improvement in Q1.
• Q3 guidance reaffirmed at $5.65-$6.15 billion revenue and $2.23-$2.57 EPS.
• Pricing increases are being rolled out in Q3, with further hikes expected into Q4 and beyond.
• Free cash flow reached $6.5 billion trailing 12 months, supporting $5.8 billion in shareholder returns.

Management priorities

• Implement pricing actions across Analog and Embedded segments starting in Q3 and continuing into Q4.
• Leverage increased 300-mm fab loadings and available clean-room space to meet rising demand.
• Complete the Silicon Labs acquisition in the first half of next year to broaden embedded wireless connectivity.
• Develop and launch 800-volt data-center solutions as the market matures.
• Maintain disciplined capital allocation while targeting free-cash-flow-per-share growth.