Texas Instruments Just Guided Above Wall Street as AI Demand Spills Into Analog
Texas Instruments just guided above what Wall Street expected, and the reason involves a corner of AI spending most investors overlook entirely. Whether the stock can hold its premium valuation depends on one market that took four years to recover.
The low end of Texas Instruments’ (NASDAQ:TXN | TXN Price Prediction) fourth-quarter earnings guidance is above what analysts expected. The company reported third-quarter results after the close on October 21, 2026. Texas Instruments forecast fourth-quarter revenue of $5.80 billion to $6.30 billion and EPS of $2.45 to $2.79. For the fourth quarter, analysts expected revenue of $5.75 billion and EPS of $2.27.
The shares closed at $284.65, up 2.47% in the regular session. At 7:59 PM ET, they traded at $288.10 after hours, up 1.21%. That is a modest move for a stock already up 66.84% in 2026.
Valuation is now the central issue for TI. Its analog chips now benefit from AI data center spending, but data centers are still a small part of the business. Most of the growth is coming from the cyclical recovery in industrial and automotive, and the stock may already price that in.
A Guide Above Consensus Matters More Than the Beat
Revenue was $6.055 billion, up 28% from a year ago and 11% from the second quarter. Operating profit rose 73% to $2.874 billion, and net income rose 78% to $2.425 billion.
EPS rose 77% to $2.62. That figure included a 1-cent reduction not in TI’s original guidance. For the third quarter, analysts had expected EPS of $2.42 and revenue of $5.92 billion.
The guide carries more weight than the beat because it shows the recovery keeps going into year-end, but the ranges are wide, so the midpoints matter less than the low ends.
How AI Spending Reaches an Analog Chipmaker
Haviv Ilan, TI’s CEO, said data center revenue rose about 95% from a year ago and about 20% from the prior quarter. It still makes up only about 13% of revenue.
Analog and embedded chips handle power conversion, monitoring, and cooling control around servers and racks. When AI racks draw more power and pack it more tightly, each one needs more of these parts. Ilan described “continuing demand, actually growing demand.” TI did not name any customers, but the power, cooling and networking suppliers riding the same data center expansion are the subject of a free report we put together on seven AI infrastructure names that aren’t chipmakers.
Industrial and Automotive Drive Most of the Growth
Texas Instruments said industrial revenue, its largest market, rose more than 40% year over year and about 10% sequentially. Haviv Ilan said, “This is the first time we created a new peak in industrial after four years.”
Texas Instruments said automotive grew in the mid-teens. On automotive customers specifically, Ilan said, “I don’t see any inventory build-up. On the contrary, I wish they had a little bit more.” Personal electronics was about flat. Analog revenue rose 32% to $4.91 billion, and Embedded Processing rose 21% to $858 million.
Inventory Cushion Meets a Premium Price
CFO Julie Knecht reported inventory of $4.7 billion, up $67 million in the quarter, or 194 days of supply. That chip inventory lets TI ship quickly while customers run low. It would tie up cash if demand stalls.
At a $259.96 billion market value, the stock trades at 37 times trailing earnings and 28 times forward earnings. That is a premium to a typical cyclical chipmaker, even with the shares about 15% below their 52-week high of $334.03.
What Could Break the TXN Recovery Story
The guide is above consensus and growth is spread across TI’s three main markets, which supports earnings that could justify the forward multiple. Industrial demand is cyclical, and after its second-quarter beat, the stock fell 9.14% over the following 30 days.
Data center is too small to carry the stock if industrial demand turns down. If reported fourth-quarter revenue comes in below the $5.80 billion low end of Texas Instruments’ forecast, or the January outlook shows 2027 pricing slipping, the recovery story would weaken considerably.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
