On Tuesday night, Texas Instruments (NASDAQ:TXN) reported results for the third quarter of 2017. A tight focus on high-growth end markets powered a large revenue surprise and torrential cash profits. Here's a closer look at TI's report.

TI's third-quarter results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Change


$4.12 billion

$3.68 billion


Free cash flows

$1.54 billion

$1.33 billion


Net income

$1.29 billion

$1.02 billion


GAAP earnings per share (diluted)




Data source: Texas Instruments.

For the record, Wall Street analysts would have settled for earnings of $1.12 per share on sales in the neighborhood of $3.9 billion. TI crushed both of these consensus estimates.

What happened with TI this quarter?

  • Customer demand from the automotive and industrial markets provided fuel for TI's revenue growth.
  • Breaking the revenues down by product category, TI's analog division reported 16% year-over-year sales growth thanks to healthy orders in the power and signal chain portfolios. Embedded processor sales rose 17%, evenly spread across microcontrollers and core processors.
  • As always, TI returned plenty of cash directly to shareholders during this quarter. The company spent a net of $574 million on share buybacks in the third quarter along with $495 million of dividend checks. That's 70% of TI's free cash flows, up from 55% in the year-ago period.

Management provided the following guidance targets for the fourth quarter of 2017:

  • Top-line revenues should stop near $3.72 billion, a 9% boost from $3.41 billion in the fourth quarter of 2016.
  • On the bottom line, GAAP earnings were guided to approximately $1.10 per share, down from $1.14 per share a year earlier.

What management had to say

The focus on automotive and industrial computing is quite intentional, and that's not expected to change for the foreseeable future.

"We continue to focus our strategy on the industrial and automotive markets where we've been allocating our capital and driving initiatives to strengthen our position," said Dave Pahl, head of TI's investor relations organization. "This is based on a belief that industrial and automotive will be the fastest-growing semiconductor markets due to their increasing semiconductor content and that they provide diversity and longevity of products, which translates to a high terminal value of the portfolio."

Texas Instruments' logo in red and black on a white background.

Image source: Texas Instruments.

Looking ahead

TI's long-term strategy rests on cash flow growth, unlocked by chasing down high-growth market opportunities within the company's analog and embedded processor wheelhouse. At the moment, that means leaning into the exploding automotive computing market while building on many years of industrial processor leadership.

Meanwhile, TI shares trade at a discount to rivals in the semiconductor industry, and that cash-backed 2.6% dividend yield looks as tasty as ever. Don't forget about TI the next time you're looking for an investment idea in the semiconductor sector.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.