Texas Instruments (TXN) Stock Price Ignores Strong Q3 Earnings

Texas Instruments just reported Q3 2026 and the numbers landed well ahead of where many investors had mentally parked the story. Revenue reached US$6.1b and basic earnings per share came in at about US$2.65, both aligned with a brisk recovery in its core chip lines. Yet the stock slipped about 1.8% today and barely moved over the past three months, a muted reaction that suggests traders are more cautious than the results alone would imply.

Impressed by the clean Texas Instruments earnings beat but unsure how to approach a stock that barely reacts to it? Compare this quarter with a wider field of resilient chip and hardware names in our 30 resilient stocks with low risk scores.

Q3 2026 Earnings Summary

• Revenue (Q3 2026 vs Q3 2025): US$6,055m vs. US$4,742m (up about 28%)
• Net Income (Excl. Extra Items, Q3 2026 vs Q3 2025): US$2,425m vs. US$1,356m (up about 79%)
• Basic EPS (Q3 2026 vs Q3 2025): US$2.65 vs. US$1.49 (up about 78%)
• Gross Margin (Q3 2026 vs Q2 2026): 64% of revenue vs. about 61% of revenue (up roughly 280 basis points)

Texas Instruments recently reported strong accounting profits, but many valuation-focused investors pay closer attention to cash flow when assessing what they are really paying for the business. Based on Texas Instruments' cash flows alone, the stock could be a hefty 31% overvalued.

Texas Instruments Edges Closer To Its Capacity Upside Story

The bullish pitch centers on Texas Instruments proving that its expanded footprint really converts into richer, steadier profitability.

"The main thing that has to go right is that Texas Instruments continues to fill its expanded data center and industrial capacity at attractive pricing, so that internalized production and CHIPS-backed investments are reflected in sustainable free cash flow and gross margin quality."

Q3 offers early proof points. Industrial revenue sits modestly above the 2022 peak, data center nearly doubled year on year, and gross margin reached 64% with pricing and mix helping. Trailing 12 month free cash flow of US$8.4b, including CHIPS support, shows the buildout already feeding cash generation rather than just lifting depreciation.

Not everyone reads the same price the same way. → See the higher figure this Narrative lands on, and how it gets there.

Texas Instruments Margins Clear A Low Bar, But Questions Linger

Bears worry that Texas Instruments loads up on fabs only to see that fixed cost base squeeze profitability if demand cools.

"Although Texas Instruments highlights long term cost and supply benefits from its more than US$20b 300mm U.S. fab buildout and higher internal production, the July 2026 concerns about rising depreciation and the potential for weaker industrial and automotive demand suggest the expanded footprint could compress gross margins and limit the uplift to net earnings if utilization falls short of expectations."

Q3 margins move in the opposite direction of that fear. Gross margin reached 64% and operating margin hit 47%, with industrial and automotive both posting double digit growth. The miss for the bearish script is timing. Depreciation is already flowing, yet utilization looks healthy and free cash flow of US$8.4b over twelve months, including CHIPS support, covers current capital returns.

Hunt For Quiet Capacity Stories

Texas Instruments showed that reporting solid earnings does not always translate into an immediate share price reaction. The real opportunity could be in identifying stocks that appear undervalued before the market reassesses them.

• Company 1 - 35% below our estimate - uses new high horsepower engine buildouts and data center contracts to stretch power capacity for long term projects.
• Company 2 - 41% below our estimate - leans into AI data center and defense programs as fresh acquisitions and capacity upgrades reshape its manufacturing footprint.
• Company 3 - 23% below our estimate - rides AI driven data center optics demand as expanded high value photonics capacity absorbs new programs in multiple hardware niches.

That is three of the list. See the full list of 30 companies trading below our fair value estimates →

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