Texas Instruments Reports Q3 This Week: Gross Margin Tests the Chip Recovery
Texas Instruments reports third-quarter results on Wednesday, October 21, after the close. Consensus calls for EPS of $2.43 on revenue of $5.94 billion, up 64% and 25% from a year ago. Whether gross margin holds above 60% as a larger manufacturing base carries more volume will decide whether the recovery looks durable.
Maz Vantage Research ·
Texas Instruments reports third-quarter 2026 results on Wednesday, October 21, after the market closes. The analog chipmaker comes into the print with two strong quarters behind it and a consensus that assumes the recovery keeps accelerating. Revenue growth is largely expected at this point. The more informative number is gross margin, because it shows whether the company's expanded manufacturing base is now earning its keep.
What the street expects
Analysts expect earnings per share of $2.43 on revenue of $5.94 billion. In the third quarter of 2025, TI earned $1.48 per share on revenue of $4.74 billion.
| Q3 | Consensus 2026 | Actual 2025 | Change |
|---|---|---|---|
| EPS | $2.43 | $1.48 | +64.2% |
| Revenue | $5.94B | $4.74B | +25.2% |
Change columns are simple arithmetic on the consensus and last year's actuals.
The consensus also implies sequential growth: $5.94 billion would be about 8.7% above the $5.46 billion reported for the second quarter. EPS rising more than twice as fast as revenue year on year is the consensus view of operating leverage, and that view rests on margins.
The track record
The last four reported quarters split neatly into two phases:
- July 2026 (Q2 2026): EPS $2.14 vs $1.94 expected (beat); revenue $5.46B vs $5.26B expected (beat).
- April 2026 (Q1 2026): EPS $1.68 vs $1.36 (beat); revenue $4.83B vs $4.53B (beat).
- January 2026 (Q4 2025): EPS $1.27 vs $1.29 (miss); revenue $4.42B vs $4.44B (miss).
- October 2025 (Q3 2025): EPS $1.48 vs $1.49 (miss); revenue $4.74B vs $4.65B (beat).
Late 2025 brought small EPS misses. The first half of 2026 brought large beats on both lines, with EPS 20 cents and 32 cents above consensus. Second-quarter revenue grew about 22.8% year on year and about 13.2% from the first quarter. The bar has risen accordingly: the $2.43 consensus for the third quarter sits 29 cents above what the company actually earned in the second.
The line that decides the quarter
The line that decides the quarter is gross margin. TI's depreciation charge has climbed as its manufacturing base has grown, from $481 million in the June 2025 quarter to $568 million in the June 2026 quarter. That cost is largely fixed. When factories run below capacity, it weighs on margins; when demand returns and utilisation rises, each additional dollar of revenue falls through at a high rate.
The filed accounts show that shift under way (gross profit divided by revenue):
- Q2 2025: 57.9%
- Q3 2025: 57.4%
- Q4 2025: 55.9%
- Q1 2026: 58.0%
- Q2 2026: 61.4%
Operating margin followed, from 35.1% in the third quarter of 2025 to 42.3% in the second quarter of 2026. The jump of more than three percentage points in gross margin between the first and second quarters is the clearest sign yet that higher volumes are being absorbed by the expanded cost base.
If third-quarter revenue lands near $5.94 billion and gross margin holds at or above the second-quarter level, the 64% EPS growth in the consensus is well supported. If revenue arrives but gross margin slips back toward 58%, that would suggest the second quarter was flattered by one-off factors, and the operating-leverage story would need rethinking. Any management commentary on the fourth quarter will also shape how this result is read.
News flow before the report has been quiet. On October 15 the board declared a quarterly dividend of $1.52 per share, payable November 10. Preview pieces, including a Zacks note asking whether TI will "beat estimates again", have focused on the run of recent beats.
Valuation and the Maz Rating
At $276.15, Texas Instruments has a market value of about $252 billion and trades at 41.8 times trailing earnings. The trailing dividend yield is about 2.1%, with a payout ratio of roughly 84% of trailing earnings. The $1.52 quarterly dividend annualises to $6.08 (simple arithmetic). The shares are well above the 52-week low of $152.73 and about 17% below the 52-week high of $334.03, close to their 50-day average of $272.11. The analyst price-target consensus is $323.89 (median $322.50, range $225 to $405), about 17% above the current price by simple arithmetic.
TI holds a Maz Rating of 4.42 out of 5 (Strong Buy). Profitability scores 4.85 and Momentum 4.22, Financial Health is 3.66 and Growth 3.19. Valuation, at 1.6, is the clear weak point: the multiple already reflects a strong recovery in earnings. That makes the quality of the earnings beat, and the margin behind it, more important than the size of the revenue number.
Bottom line
The consensus already expects TI to grow revenue by a quarter and EPS by almost two thirds from a year ago. A revenue figure in line with that is largely priced into the estimates. The open question is whether gross margin holds above 60% now that a larger manufacturing base is carrying more volume. That figure will show whether the first half of 2026 was the start of sustained operating leverage or a peak.
This is a preview based on published consensus and filed accounts, not investment advice.