TXN's Automotive Recovery Gains Pace: Can It Lift 2026 Growth Further?

Texas Instruments Incorporated TXN is seeing a meaningful improvement in automotive demand, adding another growth driver as the semiconductor industry enters a broader recovery. In the second quarter of 2026, automotive revenues increased in the mid-teens year over year and rose at a high-single-digit rate sequentially. This was a clear acceleration from earlier quarters and came alongside strong growth in industrial and data center markets.

Texas Instruments attributed the automotive improvement partly to stronger demand for electric vehicles (EVs) and hybrids, particularly in China. Lower customer inventories also appear to be supporting orders as automakers replenish supplies. The company believes the recovery is still in its early stages, suggesting automotive could contribute more meaningfully to growth during the second half of 2026.

The opportunity is significant because automotive electronics require increasing amounts of analog and embedded chips as vehicles become more electrified and connected. The broader recovery is already showing up in Texas Instruments’ quarterly performance. Second-quarter revenues climbed 23% to $5.46 billion, while operating profit jumped 48%. The company’s third-quarter revenue guidance of $5.65-$6.15 billion indicates a year-over-year increase in the 19-29% range, suggesting continued growth momentum.

The automotive rebound strengthens Texas Instruments’ growth outlook. If EV, hybrid and broader auto demand continue improving, the market could become an increasingly important contributor to TXN’s 2026 growth. The Zacks Consensus Estimate for the company’s 2026 revenues is currently pegged at $21.7 billion, indicating year-over-year growth of 22.7%.

How Do Competitors Fare Against TXN in Auto Chips?

Analog Devices, Inc. ADI remains a strong rival to Texas Instruments in analog semiconductors. In the second quarter of fiscal 2026, Analog Devices generated $3.62 billion in revenues, up 37% year over year. Automotive represented 24% of second-quarter revenues and increased 2% year over year and 8% sequentially to $871.6 million, reflecting better demand and content gains.

During the last earnings call, management stated that Analog Devices is capturing share in next-generation ADAS and infotainment systems, supported by higher demand for its GMSL, functionally safe power and A2B technologies. The company also noted that its battery management system solutions for EVs returned to year-over-year growth for the first time in two years, while the same platform supports energy storage systems. For the third quarter, Analog Devices expects Automotive to grow mid- to high-single digits sequentially at the midpoint of guidance, suggesting continued growth momentum for the segment.

ON Semiconductor ON has a more direct automotive focus, particularly in power semiconductors. In the second quarter of 2026, automotive revenues rose 7% year over year to $781 million, while total revenues climbed 9% to $1.6 billion.

China remained a key growth area for ON Semiconductor. Automotive revenues in the country rose 13% during the first half of 2026 despite a 4% decline in total vehicle sales. The company expects China automotive silicon carbide revenues to increase 60-70% in 2026 as market-share gains and new vehicle programs ramp up. ON Semiconductor expects automotive revenues to increase by a low-single-digit percentage sequentially in the third quarter.

TXN’s Price Performance, Valuation and Estimates

Shares of Texas Instruments have surged 63.1% year to date compared with the Zacks Semiconductor - General industry’s 28.2% growth.

Texas Instruments YTD Price Return Performance

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From a valuation standpoint, TXN trades at a forward price-to-earnings ratio of 30.31, significantly higher than the industry’s average of 22.98.

Texas Instruments Forward 12-Month P/E Ratio

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The Zacks Consensus Estimate for Texas Instruments’ 2026 and 2027 earnings implies a year-over-year increase of 54.5% and 17.3%, respectively. Estimates for 2026 and 2027 have been revised upward over the past 30 days.

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Texas Instruments currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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