Texas Instruments (TXN) Q3 2026 Earnings Call: Q&A Summary

Q: Joe Moore with Morgan Stanley asked about the sustainability of the 90% incremental gross margins.

A: Julie Knecht explained that margins were driven by higher revenue, pricing, loadings, and product mix, noting that the long-term model remains 75% to 85% ex-depreciation fall-through.

Q: Joe Moore with Morgan Stanley asked if these margin levels are embedded in the guidance.

A: Julie Knecht reiterated the long-term modeling approach and noted that fourth-quarter operating expenses are expected to be flat to slightly up.

Q: Harlan Sur with JPMorgan asked if the company drove positive book-to-bill and if order activity was broad-based.

A: Haviv Ilan and Mike Beckman stated that demand is strong across all markets and regions, and while lead times have ticked higher, the company remains competitive.

Q: Harlan Sur with JPMorgan asked for an update on annual pricing negotiations.

A: Haviv Ilan noted some price movement in the second half of 2026, mainly in Analog, and confirmed the company is currently engaged in 2027 pricing discussions.

Q: Stacy Rasgon with Bernstein Research asked what is driving the stronger-than-seasonal fourth-quarter guidance.

A: Haviv Ilan attributed the strength to secular growth in data centers and momentum in industrial sectors like aerospace, defense, and energy infrastructure.

Q: Stacy Rasgon with Bernstein Research asked for the outlook on capital expenditures for 2026 and 2027.

A: Haviv Ilan stated the company is aiming for $2 billion to $3 billion in 2026, while 2027 expenditures will depend on demand and growth aspirations.

Q: Chris Caso with Wolfe Research asked how much of the 40% year-on-year industrial growth is cyclical versus secular.

A: Haviv Ilan and Mike Beckman noted that industrial reached a new peak after four years, driven by higher content per system and secular trends in aerospace, defense, and energy infrastructure.

Q: Chris Caso with Wolfe Research asked about the deployment of the Lehi 2 shell and its impact on Embedded.

A: Haviv Ilan stated that Lehi 1 and 2 are beneficial for growth, and the Embedded business has room for both top-line and gross margin expansion.

Q: Joe Quatrochi with Wells Fargo asked for color on automotive demand and whether it is broad-based.

A: Haviv Ilan and Mike Beckman reported strong demand, particularly in hybrid electric and powertrain systems, noting that customers are not holding significant inventory.

Q: Joe Quatrochi with Wells Fargo asked if back-end tool tightness changes capacity plans.

A: Haviv Ilan stated the company is ramping a new site in Malaysia and is pleased with its front and back-end situation as they control their own destiny.

Q: Tore Svanberg with Stifel asked how to think about data center growth given the building block nature of the business.

A: Haviv Ilan highlighted the breadth of opportunity with 10,000 different generic part numbers and a focus on power density and efficiency.

Q: Tore Svanberg with Stifel asked how much of industrial revenue is impacted by data center build-outs.

A: Haviv Ilan explained that while energy infrastructure and test and measurement are data center specific, industrial robustness is broad and driven by multiple secular trends.

Q: William Stein with Truist Securities asked if customers are struggling to complete kits.

A: Haviv Ilan and Mike Beckman noted the situation is not comparable to previous cycles, as the company is better prepared with inventory and capacity.

Q: William Stein with Truist Securities asked about lead time changes and backlog duration.

A: Mike Beckman stated that the backlog is consistent with demand and while lead times have ticked up, the company remains competitive.

Q: Nabeel Aziz with Rothschild & Company asked about incremental market share gains.

A: Haviv Ilan stated that market share cannot be measured yet and the company must wait through the cycle to assess results.

Q: Nabeel Aziz with Rothschild & Company asked if back-end tools are a bottleneck.

A: Haviv Ilan confirmed there are no gating items, describing the situation as a matter of execution and managing complex supply chains.

Q: Vijay Rakesh with Mizuho Securities asked if data center growth will continue in 2027.

A: Haviv Ilan and Mike Beckman noted no signs of a slowdown and emphasized the company's focus on power density and efficiency opportunities.

Q: Vijay Rakesh with Mizuho Securities asked about EV exposure in China.

A: Haviv Ilan noted that China is leading in EV and the company is well-positioned there with high content per system.