Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $6.1 billion | up 28% year-over-year |
| Gross Profit Margin | 64% | up 280 basis points sequentially |
| Operating Profit | $2.9 billion | up 73% year-over-year |
| Earnings Per Share | $2.62 | Not stated |
| Free Cash Flow (TTM) | $8.4 billion | up from $2.4 billion in the third quarter of 2025 |
Guidance and outlook
- Q4 revenue is expected in the range of $5.8 billion to $6.3 billion.
- Q4 earnings per share are expected in the range of $2.45 to $2.79.
- Effective tax rate is expected to be about 13% in the fourth quarter.
- Effective tax rate for 2027 is expected to be about 13% to 14%.
How management sounded
Positive (+7 on our -10 to +10 scale). Management reported strong growth across all major end markets and provided an above-seasonal outlook for the fourth quarter. Management sounded more upbeat than on 48% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
Gross Margin Sustainability
Asked: Joe Moore with Morgan Stanley asked about the sustainability of high incremental gross margins.
Answer: Management attributed the margin performance to higher revenue, pricing, and product mix, noting that long-term modeling should focus on 75% to 85% fall-through excluding depreciation.
Industrial Market Drivers
Asked: Chris Caso with Wolfe Research asked about the balance of cyclical versus secular drivers in the industrial market.
Answer: Management noted that industrial revenue reached a new peak for the first time in four years, driven by increased semiconductor content per system and secular growth in areas like aerospace and energy infrastructure.
Automotive Demand
Asked: Joseph Quatrochi with Wells Fargo asked about the nature of automotive demand and inventory levels.
Answer: Management stated that automotive demand is strong, particularly in EV and powertrain systems, and noted that customers are not holding excess inventory, which limits their ability to buffer against supply constraints.
Data Center Growth
Asked: Vijay Rakesh with Mizuho Securities asked about the sustainability of data center growth into 2027.
Answer: Management indicated they see no slowdown in data center demand and continue to invest in new products and sockets to capture further market share.
What to watch before the next call
- Execution of capital expenditures and the timing of tool installations for capacity expansion.
- The evolution of lead times and potential supply constraints in the automotive and industrial sectors.
- The outcome of annual pricing negotiations for 2027.
