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DATE

Wednesday, Oct. 21, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Mike Beckman
• Chief Executive Officer - Haviv Ilan
• chief financial officer - Julie C. Knecht

TAKEAWAYS

• Revenue -- $6.06 billion, growing 28% year over year driven by broad demand across industrial, automotive, and data center markets.
• Analog Segment Revenue -- $4,911 million, increasing 32% year over year reflecting secular content growth and a strong cyclical recovery.
• Embedded Processing Revenue -- $858 million, up 21% year over year as the segment continues its cyclical recovery.
• Net Income -- $2,425 million, an increase of 78% from $1,364 million in the prior-year quarter.
• Earnings Per Share -- $2.62, rising 77% year over year and including a $0.01 reduction due to discrete tax items.
• Gross Profit Margin -- 64%, increasing 280 basis points sequentially due to higher revenue, pricing benefits, and favorable product mix.
• Industrial Market Revenue -- growing more than 40% year over year to reach a new record peak after four years.
• Automotive Market Revenue -- increasing in the mid-teens year over year, supported by demand in the U.S. and China.
• Data Center Revenue -- growing approximately 95% year over year and representing 13% of total company revenue.
• Operating Profit -- $2,874 million, or 47% of revenue, representing a 73% increase compared to the prior-year quarter.
• Cash Flow from Operations -- $9,896 million on a trailing 12-month basis, equivalent to 48% of total revenue.
• Free Cash Flow -- $8,422 million for the trailing 12 months, including $1.6 billion in incentives from the CHIPS Act.
• Capital Expenditures -- $2,578 million over the last 12 months, with $463 million invested during the third quarter.
• Dividends -- $1,298 million paid in the quarter, with a recently announced 7% increase to $1.52 per share.
• Total Cash and Short-term Investments -- $8.1 billion at quarter end, maintaining a strong liquidity position.
• Total Debt -- $13.65 billion, carrying a weighted average coupon of 4.11%.
• Inventory -- $4,672 million, representing 194 days, which is a decrease of two days from the prior quarter.
• Q4 Revenue Guidance -- $5.80 billion to $6.30 billion, reflecting above-seasonal demand expectations.
• Q4 EPS Guidance -- $2.45 to $2.79, based on projected operational performance and a 13% effective tax rate.
• Full-Year CapEx Guidance -- $2 billion to $3 billion for 2026, with management aiming for the higher end of the range.
• 2027 Tax Guidance -- 13% to 14% effective tax rate expected for the full fiscal year.

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RISKS

• Ilan noted that broad demand "does put pressure on lead times," which increased slightly during the third quarter.
• Ilan stated, "we are seeing lead times extending on tools and everything, especially on the back end side," which may impact the timing of manufacturing capacity expansion.

SUMMARY

Texas Instruments Incorporated (TXN +2.47%) reported third-quarter results characterized by a 28% increase in revenue and 77% growth in earnings per share, driven by a combination of secular content expansion and a broad cyclical recovery. Management reported record revenue in the industrial end market and a near-doubling of data center revenue, which now accounts for 13% of the total revenue mix. The company is executing a long-term manufacturing plan to expand internal capacity, including the ramping of back-end facilities in Malaysia and the completion of Lehigh fab shells. The company returned $5.8 billion to shareholders over the past 12 months and achieved its 23rd consecutive year of dividend increases.

• Ilan stated, "We do have the slot reserved for 2027 and beyond, and we are going to modulate the incoming rate based on the revenue growth we would like to support."
• Ilan indicated that the data center market is less influenced by seasonal patterns compared to the personal electronics and calculator segments.
• The company is internally sourcing more back-end capacity through its new facility in Malaysia to reduce reliance on external assembly and test partners.
• Knecht noted that incremental gross margins reached approximately 90% in the third quarter, significantly above long-term targets of 75% to 85%.
• Ilan indicated that analog pricing saw an uptick in the second half of 2026 following a flat pricing environment in the first half of the year.
• Management indicated that humanoid robotics could represent a content opportunity of $500 to $1,000 per unit for the company starting in 2027.
• The company is transitioning foundry-based business to its internal Lehi 1 facility to improve structural gross margins in the embedded processing segment.

INDUSTRY GLOSSARY

• 300mm: A semiconductor manufacturing standard using 300-millimeter diameter silicon wafers, which allows for more chips per wafer and lower costs compared to smaller sizes.
• Analog: Semiconductors that process real-world physical signals such as sound, temperature, and power into digital data.
• Embedded Processing: Semiconductors designed to perform specific processing functions within an electronic system, such as microcontrollers or digital signal processors.
• CHIPS Act: U.S. federal legislation providing financial incentives and tax credits to support domestic semiconductor manufacturing and research.
• Foundry: A specialized factory that manufactures semiconductor chips for third-party companies.
• Back-end: The final stage of semiconductor production involving assembly, packaging, and testing of individual chips after wafer fabrication.
• GPN: Generic Part Number, a designation for specific semiconductor components within a broader product family.

Full Conference Call Transcript

Operator: Welcome to the Texas Instruments Third Quarter 26 Earnings Conference Call.

Mike Beckman: I am Mike Beckman, Head of Investor Relations, and I am joined by our Chief Executive Officer, Haviv Ilan, and our chief financial officer, Julie C. Knecht. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations.

We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today as well as most recent SEC filings for a more complete description. Today, will provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he will provide insight into third quarter revenue results, some details on what we are seeing with respect to our end markets, And lastly, Julie will cover the financial results, give an update on capital management as well as share the guidance for fourth quarter 26. With that, let me turn it over to Haviv.

Haviv Ilan: Thanks, Mike. Let me start with a quick overview of the third quarter. Revenue was $6.1 billion an increase of 11% sequentially and an increase of 28% year over year. Analog and embedded processing both grew sequentially and year-on-year. Analog revenue grew 32% year-on-year, and Embedded Processing grew 21%. Our other segment declined 6% from the year-ago quarter. During the quarter, we saw broad demand with revenue growth across all end markets and regions. Secular growth of semiconductor content is continuing alongside a strong cyclical recovery. We are working closely with our customers to support them during this time of increased demand.

We are executing to our long term manufacturing plan and our investments have positioned us to ramp our factories to support revenue growth. Now I will share some additional insights into third quarter revenue by end market. First, industrial increased more than 40% year-on-year and was up about 10% sequentially. Automotive increased mid-teens year-on-year and increased about 10% sequentially. Data center was up about 95% year-on-year and grew about 20% sequentially. Personal electronics was about flat year-on-year and grew upper-single-digits sequentially. And lastly, Communications Equipment grew both year-on-year and sequentially. With that, let me turn it over to Julie to review profitability and capital management.

Julie C. Knecht: Thanks, Haviv, and good afternoon, everyone. As Haviv mentioned, third quarter revenue was $6.1 billion Gross profit in the quarter was $3.9 billion or 64% of revenue. Sequentially, gross profit margin increased 280 basis points. Operating expenses in the quarter were $1 billion on a trailing 12 month basis, operating expenses were $4 billion or 19% of revenue. Operating profit was $2.9 billion in the quarter, or 47% of revenue, and it was up 73% from the year ago quarter. Net income in the quarter was $2.4 billion or $2.62 per share. Earnings per share included a $0.01 reduction not in our original guidance, due to discrete tax items.

Let me now comment on our capital management results starting with our cash generation. Cash flow from operations was $3.4 billion in the quarter, and $9.9 billion on a trailing 12 month basis. Capital expenditures were $463 million in the quarter and $2.6 billion over the last 12 months. Free cash flow on a trailing 12 month basis was $8.4 billion up from $2.4 billion in the third quarter of 2025. Free cash flow in the trailing 12 months includes $1.6 billion of CHIPS Act incentives includes both the investment tax credit and direct funding. In the quarter, we paid $1.3 billion in dividends.

In September, we announced we would increase our dividend by 7% to $1.52 per share, marking our 23rd consecutive year of dividend increases. This reflects our continued commitment to return all free cash flow to owners over time. In total, we returned $5.8 billion to our owners in the past 12 months. Our balance sheet remains strong with $8.1 billion of cash and short term investments at the end of the third quarter. In the quarter, we repaid $500 million of debt. Total debt outstanding is $13.65 billion with a weighted average coupon of 4.11%. Inventory at the end of the quarter was $4.7 billion up $67 million from the prior quarter and days were 194. down 2 days sequentially.

Turning to our outlook for the fourth quarter, we expect TI's revenue in the range of $5.8 billion to $6.3 billion and earnings per share to be in the range of $2.45 to $2.79. We expect our effective tax rate to be about 13% in the fourth quarter and for 2027, we expect it to be about 13% to 14%. In closing, we will stay focused in the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing technology, a broad product portfolio, reach of our channels, and diverse, and long lived positions.

We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities which we believe will enable us to continue to deliver free cash flow per share growth over the long term. With that, let me turn it back to Mike.

Mike Beckman: Thanks, Julie. Operator, you can now open the line for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we will provide you with an opportunity for an additional follow-up. Operator?

Operator: Thank you. Again, we will now be conducting a question and answer session. If you would like to ask a question, Again, we ask all of those in the queue to limit themselves to 1 question and 1 follow-up question to allow everyone a chance to ask. And our first question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Joe Moore: Yes. Hi, thank you. I was a little surprised that the gross margins, kind of incremental gross margins of about 90% on incremental revenue. I know the long term targets lower than that. Can you just give us a sense for what went right there and how sustainable that may be? Thank you.

Julie C. Knecht: Sure. Thanks, Joe. Yes, our margin in third quarter was really driven by higher revenue. that is the largest reason for that increase. But we also did have some benefit from pricing loadings, and some product and end market mix. You have a follow-up, Joe? No, I am good. So that is it looks like about comparable gross margins embedded in the guidance. Is that kind of the right way to think of I think over the long term, the way to model continues to be looking at 75 to 85% x depreciation fall through. it is better. it is easier to look at that more over a longer time horizon, so year-over-year.

But, of course, there is puts and takes in this. For modeling, I would also share that OpEx for the fourth quarter, we are expecting to be flat to slightly up. Acquisition charges should look at that as similar to what we saw in third quarter, same with net OI and E.

Mike Beckman: Thanks, Joe.

Operator: Moving on to our next caller, please. Our next question comes from the line of Harlan Sur with JPMorgan. Please proceed.

Harlan Sur: Yes, good afternoon. Thank you for taking my question and great job on the quarterly execution. Both short-term and short lead time orders longer term duration orders have been positive for the TI team over the past few quarters. Lead times, I assume, are probably expanding a bit. So you are getting a bit more orders placed further out in time as well. Did the TI team drive another quarter of positive book to bill in Q3, and was the order activity pretty broad based?

Haviv Ilan: Hey, Harlan. This is Haviv. Let me say a few words and I will let Mike offer some more comments. So look, we are seeing, as I said, the broadening of the demand. Coming across the 3 main markets that we focus on for the long term industrial, automotive and data center, in general, the demand was growing across the board, across the market, sectors and regions. That does put pressure on lead times, but I think they maybe ticked a little bit higher. I will let my comment.

Mike Beckman: But say, I still believe that TI is best positioned to support that growing demand. I think we are still the most competitive supplier in terms of lead time, Mike. If you can-- Yeah. Offer anything else here. I think you characterized it right, and I just also add, the investments that we have made in inventory and do position us to support growing demand and we will continue to ramp our factories to support revenue growth moving forward. Haviv, a follow-up?

Harlan Sur: Yeah. No. I appreciate the answer. Last quarter, Haviv, you talked about the potential for a broader positive pricing initiatives. Did you hold your annual pricing negotiations for next year, That would overlay not just on your analog and power products, but also on your embedded products as well. Can you give us an update here I mean, industry supply dynamics feel like they are getting worse, not better. TI is in a great position to support customers' supply requirements. And I think they do value the team's supply capability.

And I assume they are willing to pay a premium for the assurance and predictability you offer, but I wanted to get an update from you there on annual pricing negotiations.

Haviv Ilan: Yes. First, a high level picture on pricing as you mentioned, there is a stronger demand environment right now. And if you look at the area of foundational chips, as I call it, but specifically analog, there has not been a lot of addition into capacity in the last 4 years since the previous peak of the market during the COVID days. So especially if you do care about the geopolitically dependable capacity, meaning usually factories outside of China and Taiwan. So in this case, TI has a good position. We are seeing our value our investment and also capacity to continue to grow them, only in the next quarter, but also in the foreseeable future.

So that is that is a good characterization of the situation we are in. Regarding pricing, specifically, look, most of our pricing, this discussions are done once a year with our customers, but we did see some areas in the middle of the year where we had the opportunity to talk to customers that wanted more supply more urgently in this case, and Julie indicated in her answer, we did see some price movement, I would say, mainly on the analog side, in the second half. I would just characterize it as the second half of 26. After a flat pricing environment, year over year in the first half of 26.

So we are seeing a little bit of an uptick, not very significant for this year. For 2027, yes, we are now engaged in, as you mentioned. We are looking at the customer's demand and what type of supply they want to guarantee, if you will, or to get supported from TI, and that has a pricing element to it. So I think we will report more of it when we provide our results, mainly our guidance during the January call.

Mike Beckman: Alright. Thank you, Harlan.

Operator: We will move on to our next caller, please. Our next question comes from Stacy Rasgon with Bernstein Research. You may proceed with your question.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. I wanted to ask about the end market outlook that is embedded in guidance. Usually Q4 just seasonally is down, I do not know, mid single to high single, maybe even more sometimes. And I get it calculators and personal electronics. Typically. You are you are guiding flattish, which is well above. It would be 1 of your stronger Q4 in quite a while probably since the COVID cycle. What is embedded there the puts and takes on end markets given those sort of typical seasonal patterns. What are you seeing across the markets now that is driving things stronger? Yes.

Haviv Ilan: Stacy, I will take a stab at it. I am not going to guide by guide by market. As you know, we do not. But I will just give a little bit of color. You know, the data center market, it is a market that we see is strong secular growth. I do not think it is it is influenced by seasonality. The demand continues to be as strong and growing. So. And it is just a bigger part of our business now. I think it was about 13% of revenue in Q3 or so. So I think just you see that coming in and just helping, if you will, the transition from Q3 to Q4.

But on top of it, I am very excited about what we are seeing on the industrial market. We are seeing a very strong momentum in industrial across sectors, but specifically in areas like aerospace and defense, energy, infrastructure, test and measurement, the robotics sectors. So this is where we see a combination of secular growth that also sequential or cyclical recovery, I would say. So this is why we are seeing an above seasonal forecast on PI. We also saw the automotive customers waking up, if you will, with a higher demand in Q3, and I think that may continue into Q4.

So again, top 3 markets, industrial, automotive and data center, are the ones that are driving our guide into Q4.

Mike Beckman: Do you have a follow-up, Stacy?

Stacy Rasgon: I do. Thanks. I wanted to ask about CapEx. So you have been talking about you will be near the higher end of the 2 billion to $3 billion range for the year. And are you still going to be tracking there in the 1 quarter that we have left? And I guess, in addition to that, you talked about continuing to invest in manufacturing support demand. So like, do we think about CapEx in 2027 relative to 2026 given that statement?

Haviv Ilan: Yes, let me start with 2020 Right now, Stacy, and of course, we will give some more color during our February call capital management about what we are seeing. But high level, you are right. We are aiming to continue to invest right now in 2026, somewhere between 2 and 3. And we wanna aim higher, but also we are seeing lead times extending on tools and everything, especially on the back end side. So that is very, very tactical situation, but we do want to expand capacity As you know, we have plenty of clean room. And we are seeing strong demand leaving the. You know, this quarter, we grew in the high twenties.

So you do wanna make sure they continue to fill that clean room with tools both on the on the back end, but also later on the front end. So I So we are leaning in. And, again, the now when you talk about CapEx, it is when tools are, you know, coming in delivered by our suppliers, and that is what influences more or less the result you should expect somewhere between $2 billion to $3 billion this year and maybe on the higher end if we get that execution as planned.

Now regarding 2027, I will not say anything right now about the numbers, but I do think it is a function of demand and what our aspiration of growth I think we have given a framework at the time of what CapEx will do as a function of the expected longer term revenue growth. Of course, you are investing ahead of demand. Right? So there is a certain CapEx level to support a 10% growth versus, you know, a higher plan to support mid teens growth, for example. And this is where we wanna provide some more color in our February call. I will say that we have the are in a position control our destiny.

We have taken care of the long lead time investments on clean rooms, including all the subfab and all the, to be fair, the equipment that takes right now a very long time to get and build and get qualified. So I am very excited about that. We do have the slot reserved for 2027 and beyond, and we are going to modulate the incoming rate based on the revenue growth we would like to support. Okay?

Mike Beckman: Alright. Thank you for the question, Stacy. Moving on to our next caller, please.

Operator: Our next question comes from the line of Christopher Caso with Wolfe Research. Please proceed with your question.

Chris Caso: Yes. Thanks. Good evening. First question was to dig in a little more the industrial market. And that market has been in recovery some time now. You are seeing it up 40% year-on-year in the quarter. I guess the question is, what is your level of conviction that when this recovers, how much of that recovery do you think was has been driven by cyclical factors as opposed to secular factors such as, you know, the growth and some of those segments.

Haviv Ilan: Yes. So let me start and Mike, maybe you can offer some more color on the inside the industrial. But high level, the excitement I have about industrial is growing very fast, but only now in Q3 2026, it reached the same level of revenue we had in Q3 22. So this is a first time we created a new peak in industrial after, you know, 4 years. I do believe that systems that are being designed by our customers 4 years later than the COVID peak are much more rich with content.

We are seeing equipment by end equipment, sector by sector, that there is just more content per system as customers want to achieve higher precision, higher speed, higher quality, more throughput, whatever they want to drive, right? So that is there. I also believe our portfolio has done very well in terms of we have built more and more parts in the last several years, invested in R&D, I think we won a larger share of our system based on our portfolio. So I am excited about that as well. Now there was also some, you know, secular areas growth, like aerospace and defense and also you know, data center induced sectors.

I will let Mike comment there about the different sectors.

Mike Beckman: Some of them, by the way, have not reached their previous peak yet. But we are in early innings. Right. So some of the sectors, as you probably know, that have had industry level unit demand like aerospace and defense, or the ones that are more closely adjacent data center, like energy infrastructure, test and measurement. You know, make all new highs over time. But even areas like industrial automation that are going through recovery, and also had, as have you described, 4 years of content increase, you know, gen to gen secular content growth. So as we look at the industrial end market, we see opportunity ahead there.

And as we have mentioned, it is just now reached a little bit above its previous peak, but again, that is 4 years of content expansion. So, we look forward to serving that market well in the quarters ahead.

Chris Caso: So do have a I do. Thanks. The follow-up question is on embedded and now that I guess the second Lehi shell will be ready by the end of the year, Maybe you can talk about how you intend to deploy that as you go into next year. And as you said, it does seem like industry capacity is getting tighter. What benefit does that bring to you? What are your plans for next year? And does that have any margin impact?

Haviv Ilan: Yes. So on the embedded side, I am we are seeing that our Lehigh 1 and Lehigh 2 is extremely beneficial. On Lehigh 1, as you remember, we have transferred a lot of our foundry based business into Lehi I, but we still have plenty of clean room in Lehi I. So we are gonna grow into that. That will carry us in the. You know? At least in the following. In the in the coming quarters. But we do have Lehi II, as you mentioned there. To continue to grow embedded at the rate which demand will indicate. So we are right now looking at the numbers.

I think that the embedded business general, I think this is not only a TI comment, but in terms of the cyclical recovery I would call it maybe a year beyond. You know, later than analog. We saw that the embedded business picked in 2023 while analog for TI, while analog picked in 2022. I also believe that the supply you know, demand mismatch is higher in analog because some of the analog supply to be fair went offline in the last few years, and more is coming out. And some of the foundries are transitioning their supply base to support non analog you know, portfolio part.

So with that sense, I think the pressure is now higher and this is why you are seeing higher growth on analog. Haviv said that, Embedded is well positioned. Our portfolio is growing. We have clean room in Lehi I. We have the shelf in Lehi fab 2 that is the last stages of completion. So can modulate now tool installations according to what demand says. Last but not least, I wanna mention the outline with the Silicon Labs acquisition that is another clean room that we serve the transitioning of the portfolio that right now is running in foundries into, again, into Lehigh. From a gross margin perspective, we are seeing strong progress.

I think we have seen it in the last several quarters.

Julie C. Knecht: Julie, right? Is it a couple of points per quarter that we are seeing lately? Yes. And I think about 10 points year-over-year or something.

Haviv Ilan: So I do see that the embedded has room to grow in the in of not only top line growth, but also gross margins as well.

Mike Beckman: All right.

Operator: Moving on to our next caller, please. Our next question comes from the line of Joseph Quatrochi with Wells Fargo and Company. Please proceed with your question.

Joseph Quatrochi: Yeah. Thanks for taking the question. I wanted to ask about the auto demand. Commentary you provided talking about you are seeing customers kind of wake up a little bit. Can you give a little bit more color? Is that broad based that your the demand that you are seeing and are you seeing customers you know, add more inventory? And is that across analog and embedded or more concentrated?

Haviv Ilan: Yeah. Yeah. I will I will start. But automotive, I think I will describe the demand we are seeing in automotive as such that keeping demand is coming in pretty strong in Q3. Did see a nice sequential growth. We are seeing mid teens year over year growth. But I think customers have not had not kept a lot of inventory on their side. So when they saw maybe demand growing maybe a little bit of more EV as, you know, fuel prices went up, They were not well positioned compared to customers we have seen in other markets. So we are now, you know, supporting these customers as they are trying to ramp their production.

I do not see any inventory buildup. On the contrary, I wish they a little bit more. But we are we are positioned to grow. Of course, the faster you cannot switch a flip a switch, sorry, to get the output, the right mix immediately. And this is where we help some customers with the existing, you know, inventory we have built ahead, but some of the parts are more unique, and we need to react to customer demand. So that is some. What I am seeing right now in terms of reach and can you add a little bit, Mike?

Mike Beckman: Yeah. So similar to last quarter, you may recall that we saw China and the US averaging up the overall growth. We continue to see that. In third quarter as well. And, you know, the comment around EV mix you can see it clearly in our sectors as well. So the hybrid electric and powertrain systems sector grew about 2x as fast as the overall. So that just gives you a sense of the mix that has shifted toward EV inside of that. So with that, I will give a follow-up.

Joseph Quatrochi: Yes, thanks. And then just as you think about it. I think you talked about back end tools, lead times kinda starting to extend and things. You know, capacity, obviously, tight, Does that change any of your plans and how you are thinking about of just moving more of your capacity on the back end side to internal? Are you trying to flex some of your external capacity a bit more just given the pretty significant increase in demand you are seeing?

Haviv Ilan: Yeah. I think I commented before earlier this year. We are. We have done it a lot, you know, throughout the year. So we are we are not getting as much as we wanted from our OSAT partners. And, like, I think it is also just tightness of supply as you mentioned. So we do have a new site in Malaysia that we are ramping very quickly. it is our largest IT site, newly built and I am very glad we have it. You know, the parts are being qualified and ramped. So we can continue and increase capacity every quarter, thanks to the clean room we have.

The rate of which we go is a function of how quickly we add tools and that is also a function of the demand, I would say. But in general, I am very pleased with our situation, both front end and back end because we control our destiny here. And we have done the work during the down cycle, Again, when lead times are very short on this type of equipment, to get ahead and to be ready for a range of scenarios. This scenario right is a very strong demand scenario.

Mike Beckman: All right. Thanks, Joe. Moving on to our next caller, please.

Operator: Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Please proceed with your question.

Tore Svanberg: Yes. Thank you, and congratulations on the results. Just zooming in a little bit on data center, I think it almost doubled year-over-year. I think in the past, you have talked about your exposure to data centers still kind of being more building block components, but I do know you have some newer products that are starting to get designed in. So how should we think about that in the context of the almost double year-over-year growth rate?

Haviv Ilan: Yes. Look, I am very excited about the market in the sense of you guys know exactly what is going on there. But what I would like to share is we see a very high breadth of opportunity and we are continuing to invest. I mean, we want new solutions, to get more I mean, these are very expensive assets if you think about the compute rack or networking rack, and it needs a lot of telemetry. And cooling, and efficiency is critical. Power density is critical. So we are seeing customers being very, very innovative on how they add part that are mainly, you know, coming from the. Our portfolio of foundational chips of analog and embedded chips.

To do all of that. So just a growing opportunity in terms of diversity of part numbers. We reviewed it earlier this week, and we have about 10 thousand different GPNs or generic part numbers that we are selling into this market, and it is growing every quarter. So that is a very exciting opportunity. Now our focus is, again, we are we are we are a company that we is trying to breadth of our advantages. But, of course, we also pay attention to the, you know, the more application specific sockets We have developed the technology for that. I think I have mentioned it. it is now early ramping chairman. I think the execution is going well.

I am excited about continuing to expand our portfolio in data center. Assuming the investments in data center continues in the US. And by the way, it is not only in the US. We are seeing it worldwide, but the US is leading.

Mike Beckman: Your follow-up, Tore?

Tore Svanberg: Yes. Thank you, Mike. So in industrial, which is a little more than a third of your revenue, I know you talked about the cyclical growth and the cyclical growth. I am just also curious, if you look at all the sub segments there, how much of that, let's say, 35% of revenue is potentially being impacted by the data center build out as well?

Mike Beckman: So I think we have about 9 or 10 sectors over there in industrial. The last 1 is kind of what we call other, all other end equipments. But of the 9, I think 2 are very much data center specific, energy infrastructure and also test and measurement.

Haviv Ilan: But I think I see a lot of robustness there. I mean, people are building you know, memories and GPUs for the foreseeable future. They need to test them. This has been a very fast growing sector for us, and we are doing well over there. And then the energy infrastructure, I think the world is rebuilding its grid, and it is a very. it is the content is very rich with semiconductors. So that has been a very good sector growth for us. I think data center influences it, but they will need more energy, I think, in general, I think about automation and later on physical AI and robotics and aerospace and defense.

Everything needs more energy, and I think that is going to continue. So I am very excited about the progress over there. Now we are seeing, as Mike mentioned before, we just see other secular trends that are not I do not think may be related to data center because they have helped accelerate them, but know, what is going on in the aerospace and defense with autonomous end equipment, if you will, that are very content rich in the type of parts we make. Very early on the robotic side, but I 2027 is gonna be a great deal of ramps. Our content over there is actually per for example, per humanoid is very high.

I would say somewhere between $500 to $1 thousand per content for TI. 1 on this type of system. So know, I do not know how many they will build there next year, but definitely the demand is they want to grow. So all of that is putting a lot of providing a lot of tailwind on our industrial business, which I am excited about because it also helps there was a question before on margins. This is our best market in terms of diversity and longevity, but also in terms of margins. So a very lucrative market.

Mike Beckman: For the question, Tore. Moving on to our next caller, please.

Operator: Our next question comes from the line of William Stein with Truist Securities. Please proceed with your question.

William Stein: Great. Thanks for taking my question. I am hoping you can comment on customer inventory levels and their ability to complete kits. We have heard some feedback from industry contacts that this is becoming a challenge. The way it was a few years ago in the so called Golden screw era. I wonder to what degree you are seeing this? And what is your ability to perhaps help customers deal with those challenges?

Haviv Ilan: Yes. First, we all live here I lived through the previous up cycle in during the COVID days. I would not compare the situations. I think also we are earlier right now in terms of where the cycle is. So we. We will have to wait and see. But, again, from a TI perspective, we are much better prepared in terms of. We have. We can grow our capacity every quarter we have built inventory during the down cycle. Now, if you have a very rapid, fast growth of the customers or markets, and especially with customers who have not prepared and did not have enough inventory on their side, you can run into situations like that.

I think I gave an example before on the automotive market that is the 1 place I would say that I see it right now. Versus--in the COVID cycle, we did see a much broader situation across almost every customer over every end market. So I would not compare them yet I will say that, yes, we have come to us for help many times. We have been the solution many times right now in other markets. Some of our industrial customers, some of our data center customers have asked for help. And many times, we had the inventory and could also commit capacity or growth into 2027 and beyond.

So we are seeing early anecdotal feedback that we can we can help our customers. But we need to see how the situation develops. I will say, as I said before, in terms of capacity addition, out. Out. Outside of China, mainly on the analog side, it is not that we do not see a lot of clean room and a lot of new capacity added in the last 4 years. And as I mentioned, the cycle time to build you know, from moving dirt to getting output from a fab. it is about 4 years, not to mention about full ramp of a fab.

So I think TI is in an advantage position here versus the rest of the market.

Mike Beckman: I do think that customers, you know, in the context of the question on kitting and making sure they have all the products they need, you know, they will come to us and say, I need to make sure I have what I need from your portion to meet my demand as I get what I need in. I think maybe it is another area where they are having a challenge getting it. So you know, this is all part of, you know, what we are seeing in our market overall, but, you know, I think we are in a good position to be able to help work with our customers to help them as they as they grow.

So, Will, do you have a follow-up?

William Stein: Yeah. Appreciate the, that helpful answer and the next 1 you might have discussed already but can you talk about where lead times might have changed in the last quarter? And what your customers' willingness or ability to place backlog with you has been? Has the backlog duration extended materially in the last quarter?

Mike Beckman: So I would characterize the backlog as consistent with the overall demand environment that we are seeing. And we have seen an uptick in lead times. Yeah. And there are areas where you will see just as you would expect in an environment like this where there may be more or less tightness in certain areas. But in terms of where we are from a lead time perspective, we are competitive right now.

And, again, we are in a position where we can make investments into clean room and the assembly and test facilities that we have. to be able to support growth for our customers, and we will continue to ramp those as we move into the you know, this quarter and beyond. With that, we will move on to our next caller.

Operator: Our next question comes from the line of Nabil Aziz with Rothschild and Company. You may proceed.

Analyst: Hey, thanks for taking the question. Just had a question on supply demand tightness through the quarter and what you are seeing in terms socket wins and your engagements with customers there and whether you have started to see incremental market share gains Through the quarter? Thank you.

Haviv Ilan: Yes, Nabil, I think when it goes to market share, we do not like to measure it, and we look at the results internally, but I think we should look at it through the cycle as again, if we are indeed better positioned than some of the competition to support demand, and if demand continues, we should be able to translate it to market share gains. But that is cannot measure it yet. So I think we have to wait through the cycle and see when the next peak is. if it will arrive 1 day and then see where we are.

But I am I am pleased with the momentum we are building I am pleased with the ability to continue to ramp our supply, and let's see how we do over the long term. You have a follow-up, Nabil? Yeah. Just to follow up on the back end tool comments. Could you just confirm is there a potential that back end tool availability could at all bottleneck your growth and whether that is a gating factor for you? Over the next couple of quarters? Thanks. I do not want to talk about gating items because the gate is when you do not have the clean room. Right?

The gate is when you now are stuck for a couple of years to build your shell and to build a cleanroom and all the infrastructure behind it. We do not have a gating item like that. I think this is just people, you know, blocking it tackling, as we say, or execution of getting the, you know, the equipment on time. Our suppliers also need the, you know, their supply chain. is complex and they have to get through it. it is just a period of high demand all over. And everybody is going through their challenges, but there is a very large opportunity to expand capacity, and we are.

I would say that I do not see a gap between front end and the. And back end, we are gonna be balanced Of course, the higher investment we need to make when you think about CapEx for the longer term is always on the front end. This is where the CapEx is more expensive. And, also, the lead times are always longer. With the supply chain over there. This is why we are not planning only 2027, 2028.

We are actually thinking through the rest of the decade what is our plan and how are we gonna slot our future tools and even you know, new clean rooms so we can continue to support a range of scenarios that the market may present to us.

Mike Beckman: Right. Thanks, Nabil. We will move on to our final caller.

Operator: And our last question comes from the line of Vijay Rakesh with Mizuho Securities.

Analyst: Yeah. Hi. Just a quick question. I see your data center side is growing pretty strong. it is almost like a $2.5 billion run rate this year annualized. Just wondering, as you look at 2027, do you expect that the growth rate to continue and double from here? And a quick follow-up. Thanks.

Haviv Ilan: Yeah. I mean, we are watching like everyone the, you know, the CapEx investment into the data center market. It does not have it does not signal right now any. We are not seeing any slowdown. We are seeing continuing demand, actually growing demand. As I mentioned before, our portfolio is growing. that is my. that is why I am excited about our investment We are not sitting still. We are creating new parts. We are continuing to attack new subsystems. So we wanna continue not only to grow with the market, but also play in more sockets and ultimately gain market share. So far, so good. We will see how the demand continues to develop into the next year.

Mike Beckman: And Vijay, just zooming out, you know, when there is more power there is more opportunity for TI. When there is more power density, there is more opportunity for TI. When there is higher voltages, more opportunity for TI. And, obviously, these are things that are all being worked on very heavily in this end market. And, again, we look forward to supporting. So you have a follow-up?

Analyst: Agreed. Thanks. And just a quick 1. On the commentary on the EV side, is this more of a does TI have more exposure on China export EV market as well? Mike, how would you characterize the EV strength just globally across regions? Thanks.

Haviv Ilan: No. I. As we. I talked many times over in the last several years, the China industry for, you know, the automotive industry in especially EVs, you know, is leading the way in many ways, and they are not only building for their domestic market. This is why a supplier like TI was always something that was very, very important to them. We are a global company, very diverse supply chain across the globe. And we have continued to design in our part into their systems.

I think I am excited about the fact that the China business is growing faster for business because these are usually just in terms of content, just higher content and also higher share for us there. So that also is driving the growth. Mike has mentioned before that you know, automotive business for TI in Q3 was driven by China and The US, and we are excited about our position. There.

Mike Beckman: Alright. With that, I am going to have Haviv close this out for the call.

Haviv Ilan: Okay. So let me wrap up with what we have said previously at our call. We are engineers and technology is the foundation of our company. But, ultimately, our objective and the best metric to measure progress and to generate value to our owners is the long term growth of free cash flow per share. Thank you, and have a good evening.

Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.