Texas Instruments Inc. delivered a first-quarter performance that outpaced analyst expectations, prompting consecutive upgrades from major brokerages. The chipmaker reported Q1 revenue of $4.83 billion, a 6.6% beat versus the $4.52 billion consensus and an 18.6% increase year-over-year.
Following the results, BofA Securities moved its recommendation to "buy" from "neutral," lifting its price objective to $320 from $235. The firm applied a 34x multiple to its revised calendar-year 2027 GAAP EPS estimate of $9.35 to reach the new target.
Barclays shifted its stance to "equal weight" from "underweight," raising its target by 43% to $250 from $175. That target reflects a 31x multiple on Barclays' CY27 GAAP EPS estimate of $8.06. Both brokerages pointed to accelerating industrial and data center demand as primary drivers behind their more bullish outlooks.
Segment-level strength in the quarter was notable. Industrial revenue totaled $1.75 billion, expanding more than 20% quarter-over-quarter versus a historical quarterly average of about 2% growth. According to BofA Securities, data center revenue climbed more than 25% quarter-over-quarter, accounted for 11% of total Q1 sales, and was up 90% year-over-year. Communications Equipment rose by more than 30% quarter-over-quarter compared with a historical 1% change, while Automotive revenue was flat sequentially.
On profitability, GAAP EPS for Q1 came in at $1.68, above the Street estimate of $1.38. Gross margin expanded by 210 basis points quarter-over-quarter to 58.0%, topping the consensus margin estimate of 56.1%. GAAP operating expenses were reported at $974 million, below the Street's $996 million estimate.
Looking ahead, management guided Q2 revenue to $5.20 billion, implying 8% sequential growth and standing above the consensus of $4.85 billion. The midpoint of GAAP EPS guidance for Q2 was $1.91, higher than the Street consensus of $1.57. Management also provided a Q2 tax-rate guide of approximately 13% and set capital expenditures for calendar-year 2026 in a range of $2 billion to $3 billion. Depreciation guidance of $2.2 billion to $2.4 billion was reiterated, with the company expecting depreciation growth to slow in 2027.
Analysts adjusted their multi-year profit and cash-flow projections. BofA raised its CY26/27/28 GAAP EPS estimates by 21%/31%/33%, to $7.52, $9.35, and $10.75 respectively, and projected free cash flow per share to rise to about $12 by CY28 from $8 in CY26. Barclays set its CY26 revenue and EPS estimates at $20.82 billion and $7.63, and its CY27 estimates at $22.34 billion and $8.06.
Both brokerages flagged potential near-term challenges alongside their upgraded views. BofA called out the pending $7.5 billion Silicon Labs acquisition, expected to close in the first half of 2027, as likely to pause share buybacks and increase near-term leverage. Barclays highlighted valuation considerations, noting the company currently trades at about 26x its free cash flow estimate versus a historical mid-teens multiple.
Summary of the quarter and outlook:
- Revenue of $4.83 billion in Q1, beating consensus and up 18.6% year-over-year.
- Strong sequential growth in industrial and data center end markets; industrial at $1.75 billion and data center up more than 25% quarter-over-quarter.
- Q2 guidance points to continued sequential revenue and EPS expansion, with management providing tax, capex, and depreciation guidance.
Analyst reactions and model changes:
- BofA upgraded to buy and raised its price target to $320, using a 34x CY27 EPS multiple on an EPS estimate of $9.35.
- Barclays moved to equal weight and boosted its target to $250, applying a 31x multiple to a CY27 EPS estimate of $8.06.
What remains uncertain:
- The impact of the planned Silicon Labs acquisition on buybacks and leverage in the near term.
- Valuation risk given the premium to historical free cash flow multiples noted by Barclays.
- Reliance on sustained industrial and data center momentum to support upgraded estimates and multiples.