Txn (TXN) Q3 2026 earnings call transcript

Txn (TXN) held its earnings call for the third quarter of fiscal 2026 on 21 October 2026. What follows is my machine transcription of the company's public webcast, made on 21 October 2026, and not the company's official text.

A machine mis-hears names and numbers, so where one reads oddly, the webcast is the record. This recording is not split by speaker.

Transcript

Welcome to the Texas Instruments third quarter 2026 earnings conference call. I'm Mike Beckman, head of investor relations, and I'm joined by our chief executive officer, Hevi Velan, and our chief financial officer, Julie Kannett. 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 for you.

Play on our website. In addition, today's call is being recorded and will be available for your replay on our website. 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 TI's most recent SEC filings for a more complete description. Today, we'll provide the following updates.

First, Hevi will start with a quick overview of the quarter. Next, he will provide insight into third quarter revenue results with some details on what we are seeing with respect to our end markets. And lastly, Julie will cover the financial results and give an update on capital management, as well as share the guidance for fourth quarter 2026. With that, let me turn it over to Hevi. 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. Second or 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'll 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-tins 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. Thanks, Saviv, and good afternoon, everyone. As Saviv 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-go quarter. Net income in the quarter was $2.4 billion, or $2.62 per share. Earnings per share included a one-cent 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 CHIP's ACT incentives, which 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 two 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 the technology, a broad product portfolio, reach of our channels, and a diverse and long-lived positions.

We will continue to strengthen these advantages through disciplined capital allocation 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. 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'll provide you with an opportunity for an additional follow-up.

Operator? Thank you. Again, we will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, we ask all those in the queue to limit themselves to one question and one follow-up question to allow everyone a chance to ask.

And our first question, come from the line of Joe Moore with Morgan Stanley, please proceed with your question. 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. You're sure thanks, Joe. Yes, our margin in third quarter were really driven by higher revenue.

That's 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'm good. So that looks like about comparable gross margins embedded in the guidance. Is that kind of the right way to think of it? I think over the long-term, the way to model continues to be looking at 75 to 85% extra appreciation fall through. It's easier to look at that more of our longer time horizon, so year over year.

But of course, there's puts and takes in this. For modeling, I would also share that off X for the fourth quarter of our expecting to be flat, just slightly up. Acquisition charges should look as that similar to what we saw in third quarter thing with net OINE. Thanks, Joe. Moving on to our next caller, please. Our next question comes from the line of Harlan, sir, with JP Morgan. Please proceed. Yeah, good afternoon. Thank you for taking my question and a great job on the quarter of the execution.

Both short time, both short lead time orders and 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're getting a bit more orders placed further out in time as well. Did the TI team drive another quarter of positive book to billing Q3 and was the order activity pretty broad-based? Hey, late Harlan. This is Harvey. Let me say a few words and let Mike offer some more comments.

So, look, we are seeing, as I said, the broadening of the demand coming across the three main markets that we focus on for the long term. That's a lot of the data center. But in general, the demand was growing across the board, across the market, sectors, and regions. That's put pressure on lead times, but I think they may be ticked a little bit higher, I'll let Mike comment. But I still believe that TI is the best position to support that growing demand.

I think we are still the most competitive supplier in terms of lead time, Mike, if you can offer anything else here. I think he characterized it right, and I just also add the investments that we've made in inventory and capacity to position us to support growing demand. And we'll continue to ramp our factories to support revenue growth moving forward. You have a follow-up? I appreciate the answer. Last quarter, have you talked about the potential for broader positive pricing initiatives?

Does 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're 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're 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.

Yes, first, a high-level picture, Holland, 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 hasn't been a lot of addition into capacity in the last four years since the previous peak of the market during the COVID days. So especially if you do care about geopolitically dependable capacity, meaning usually factories outside of China and Taiwan. So in this case, TI has a good position.

We are seeing our customers' value, our investment, and also capacity to continue to grow them, not only in the next quarters, but also in the foreseeable future. So that's a good characterization of the situation we are in. Regarding pricing specifically, look, most of our pricing discussions are done once here 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.

And 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 the second half of 2026 after a flat pricing environment year over year in the first half of 2026. So we are seeing a little bit of an uptick, not very significant for this year. And for 27 years, we are now engaged in the discussions we just mentioned, we are looking at customers in the end of what type of supply they want to guarantee if you will get support 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. All right. Thank you, Harlan. We'll move on to our next caller, please. Our next question comes from Stacey Raskin with Bernstein research. You may proceed with your question. Hi, guys. Thanks for taking my questions. I wanted to ask about the end mark about what that's embedded in guidance. Usually too far, just seasonally is down, I don't know, mid-single, high-single, maybe even more sometimes.

And I get it's calculators and personal electronics, typically. You're driving flattish, which is well above would be one of your stronger two-fours in quite a while, probably since the COVID cycle. What is embedded there, the puts and takes on end mark that's given those sort of typical seasonal patterns. And what do you see across the markets now that the striving thing's stronger? Yes, Stacey, I'll take a stab at it. I'm not going to guide by market, as you know, we don't.

But I will just give a little bit of color. The data center market, it's a market that we feel is strong secular growth. I don't think it's influenced by seasonality. The demand continues to be strong and growing. And it's just a bigger part of our business now. I think it was about 13% of revenue in Q3 or 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'm very excited about what we're seeing on the industrial market. We are seeing a very strong momentum in industrial growth across sectors, but specifically in areas like aerospace and defense, energy infrastructure, testing measurement, the robotics sector. So this is where we see a combination of secular growth, but also sequential or cyclical recovery, I would say. So this is why we're seeing an above seasonal forecast on P.I. We also saw the automotive customers waking up, if you will, with higher demand in Q3.

And I think that may continue into Q4. So again, the top three markets, industrial automotive and data center are the ones that are driving our guide into Q4. I do think so. I wanted to ask about CapEx. So you've been talking about you'll be near the higher end of the two to three billion range of the year. Are you still going to be tracking there in the one quarter that we have left? In addition to that, you talked about continuing to invest in manufacturing to support demand.

So how do we think about CapEx and 27 relative to 26, given that statement? Yeah, let me start with 26 right now, Stacey. And of course, we'll give some more color during our February call for capital management about what we're seeing. But high level, you're right, we are aiming to continue to invest right now in 26, somewhere between two and three. And yes, we want to 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 20s. So you do want to make sure you continue to feel that that clean room with tools both on the back end, but also later on on the front end side. So we are leaning in. And again, now when you talk about CapEx, it's when tools are, you know, coming in delivered by our suppliers and that's what influences more or less the result.

But you should expect somewhere between two to three billion this year and maybe on the higher end if we get that execution as planned. Now, regarding 27, I won't say anything right now about the numbers, but I do think it's a function of demand and what our aspiration of growth stays here. I think we've given a framework at the time of what CapEx will do as a function of, you know, the expected longer term revenue growth.

Of course, you're investing ahead of demand, right? So there are certain CapEx level to support 10% growth versus, you know, a higher CapEx plan to support mid teens growth, for example. And this is where we want to provide some more color in our February call. I will say that we have the, we are in a position to control our destiny. We have taken care of the long lead time investments on clean rooms, including all the sub-fab and all the, to be fair, the equipment that takes right now is very long time to get and build and get qualified.

So I'm very excited about that. We do have the slot reserved for 27 and beyond, and we are going to modulate the incoming rate based on the revenue growth we would like to support. Okay. All right. Thank you for the question. Stacy, moving on to our next caller, please. Our next question comes from the line of Chris Casa with Wolf Research. Please proceed with your question. Yes, thanks. Good evening. A first question was the digging a little more on the industrial market.

And, you know, that market has been in recovery for some time now using an up above 40% year on year and a quarter. I guess the question is, you know, what's your level of conviction that one this recovers, you know, how much of that recovery do you think has been driven by, you know, cyclical factors as opposed to the secular factors such as, you know, the growth in some of those individual segments. Yes, so let me start and then, Mike, maybe you can offer some more color on the sectors 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 2022. So this is the first time we created a new peak in industrial after, you know, four years. I do believe that systems that are being designed by our customers four years later than the COVID peak are much more rich with content. We are seeing end equipment by end equipment, a 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 is done very well in terms of, you know, we've built more and more parts in the last several years invested in R&D, and I think we won a larger share per system based on our portfolio, so I'm excited about that as well. Now, there is also some, you know, secular areas of growth, like aerospace and defense, and also, you know, data center-induced sectors. I'll let Mike comment there about the different sectors.

Some of them, by the way, have not reached our previous peak yet, so 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, are the ones that are more closely adjacent to data center, like energy infrastructure. Test and measurement, you know, make all new highs over time. But even areas like industrial automation that are, you know, going through recovery and also had, as you described, four years of content increase, you know, gen to gen secular content growth.

So, as we look at the industrial and market, we see opportunity ahead there. And as you mentioned, it's just now reached a little bit above its previous peak, but again, that's four years of content expansion. So, we look forward to serving that market well in the quarters ahead. So, do you have a follow-up? I do, thanks. The follow-up question is on embedded. And now that I guess the second Lehigh Shell will be ready by the end of the year, maybe you can talk about how you intend to deploy that as you're going in 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? Yes. So, on the embedded side, we are seeing that our investment in Lehigh, 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 Lehigh 1, but we still have plenty of clean room in Lehigh 1.

So, we are going to grow into that. That will carry us, at least in the coming quarters. But we do have Lehigh 2, as you mentioned, there to continue to grow embedded, the rate which demand will indicate. So, we are right now looking at the numbers. I think that the embedded business in general, I think this is not only a TI comment, but in terms of the cyclical recovery, I would call it maybe a year later than analog.

We saw that the embedded business picked in 2023, while analog 40, while analog picked in 2022. I also believe that the supply 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, as some of the foundries are transitioning their supply base to support non-analog portfolio parts. So, with that sense, I think the pressure is now higher, and this is why you are seeing higher growth on analog.

Having said that embedded is well-positioned, our portfolio is growing. We have a clean room in Lehigh 1. We have the shell in Lehigh 2 that is the last stages of completion. So, we can module right now with two installations according to what the demand says. Last but not least, I want to mention our plan with the Silicon Labs acquisition. That's another clean room that will serve the transitioning of the portfolio that right now is running in foundries into, again, in Lehigh.

From a growth margin perspective, we are seeing a strong progress. I think we've seen it in the last several quarters. Julie Wright, is it a couple of points for the portfolio that we are seeing lately? Yes. And I think about 10.0 over here or something. So, I do see that the embedded has room to grow in the sense of not only top-line growth, but also growth margins as well. All right. Moving on to our next caller, please.

Our next question comes from the line of Joe Aquatrochi, which was for our company. Please proceed with your question. Yeah, thanks for taking the question. I wanted to ask about the auto demand commentary that you're talking about. You're seeing customers kind of wake up a little bit. Can you give a little bit more color? Is that broad base that you're a demand that you're seeing and you're seeing customers add more inventory? And is that across analog and embedded or more concentrated?

Yeah, I will start. But automotive, I think I will describe the demand we're seeing in automotive is such that keeping demand is coming in pretty strong in Q3. We did see a nice sequential growth. We are seeing meetings year-to-year growth, but I think customers have not kept a lot of inventory on their side. So when they saw maybe demand growing, maybe a little bit of more EV as field prices went up, they were not well positioned compared to customers we've seen in other markets.

So we are now supporting these customers as they're trying to ramp their production. I don't see any inventory build up on the contrary. I wish they had a little bit more. But we are positioned to grow. Of course, the father cannot flip a switch already to get the output the right mix immediately. And this is where we help some customers with the existing inventory build ahead, but some of the parts are more unique and we need to react to customer demand.

So that's what I'm seeing right now in terms of region. Can you add a little bit, Mike? 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 the common around EV mix, you can see it clearly on our sectors as well. So the hybrid electric and powertrain system sector grew about twice as fast as the overall did.

So that just gives you a sense of the mix that has shifted toward EV inside of that. So with that, you have a follow up. Yeah, thanks. And then just as you think about it, if you talked about, you know, back end tools, we times kind of starting to extend and things capacity, obviously tight. Does that change any of your plans of how you're thinking about just moving more of your capacity on the back inside internal?

Are you trying to flex some of your external capacity a bit more just given that the pretty significant increase in demand or change? Yeah, I think I commented before earlier this year. We've done it throughout the year, so we are not getting as much as we wanted from our OSAT partners. And I think it's also just tightness of supplies you mentioned. So we do have a new site in Malaysia that we are ramping very quickly. We have the largest 80 site, newly built, and I'm 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, you know, how quickly we add tools. And that's also a function of the demand, I would say. But in general, I'm very pleased with our situation, both front and back end because we control our destiny here. We've done the work during the dance 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 now is a very strong demand scenario. All right, thanks Joe. Moving on to our next caller, please. Thank you. Our next question comes from the line of tours of amber with Steve will please proceed with your question. Yes, thank you and congratulations on the results. I'm just zooming in a little bit on data center. I think it almost doubled year to year. I think in the past you talked about your exposure to the data center still kind of being more building 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, you know, almost double your growth.

Yeah, look, I'm very excited about the market in the sense of you guys know exactly what's going on though, but what I would like to share is that we see a very high breadth of opportunity and we can we are continuing to invest. I mean, customers 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 many, you know, coming from the 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 10,000 different GPNs or generic part numbers that we are selling into this market and it's growing every quarter. So that's a very exciting opportunity.

Now, our focus is again, we are, we are, we are a company that is trying to abreast of our portfolio is one of our competitive 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've mentioned it. It's now early ramping chairman. I think the execution is going well. So I'm excited about continuing to expand our portfolio and data center. Assuming the investment in data center continues saying the US and by the way, it's not only in the US, we are seeing it worldwide, but the US is leading your follow up story.

Yes, thank you Mike. So an industrial, which is a little more than a 30 or over your revenue. I know you talked about the cyclical growth and the cyclical growth. So serious, you know, if you look at all, you know, all the sub segments there, how, you know, how much of that, you know, let's say 35% of revenue is potentially being impacted by the data center built up as well. So I think we, we have about nine or 10 sectors over there in industrial, the last one is kind of what we call other all other end equipment, but of the nine, I think to very much data center specific energy infrastructure and also tests and measurement.

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. That has been a very fast growing sector for us and we're doing well over there. And then the energy infrastructure. I think that, you know, the world is rebuilding its grid and it's a very, the content is very rich with semiconductors. So that has been a very good sector growth for us.

I think data center influences, but the world needs more energy. I think in general, if you think about automation and later on physical and robotics and aerospace and defense, everything needs more energy. And I think that's going to continue. So I'm being very excited about the progress over there. Now, we are seeing as Mike mentioned before, we just see other secular friends that are not. I don't think they may be related to data center because they have helped accelerate them.

But, you know, what's going on in the aerospace and defense with autonomous and equipment, if you will, that are very content rich in the type of parts we make very early on the robotic side. But I think 27 is going to be a great deal of ramps of content over there is actually per for example, for per humanoid is very high. I would say somewhere between $500 to $1,000 per content for TI one on this type of system.

So, you know, I don't know how many deals build their next field, 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'm excited about because it also helps you. There was a question before one margin. This is our best market in terms of diversity and longevity, but also in terms of margin. So a very lucrative market. Thanks for the question, Story.

Moving on to our next call, please. Our next question comes from the line of William Stein with true securities. Please proceed with your question. Great. Thanks for taking my question. I'm hoping you can comment on customer inventory levels and their ability to complete kits. We've heard some feedback from industry contacts that this is becoming a challenge the way it was, you know, a few years ago in the so-called Golden Screw era. I wonder to what degree you're seeing this and what is your ability to perhaps help customers deal with those challenges?

Yes, first, you know, we all live through the previous up cycle during the COVID-8. I would not compare the situation. I think also we are earlier right now in terms of the cycle is so we left to go to see, but again, from a T.I. perspective, we are much better prepared in terms of we can grow our capacity every quarter. And we've built inventory during the down cycle. Now, if you have a very rapid fast growth in some of the customers or markets and especially with customers 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's the one place I would say that I see it right now versus in capital 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 for help many times. We have been the solution many times, indeed, right now in other markets, so some of our industrial customers, some of our data center customers have asked for us.

And many times we had the inventory and could also commit capacity or growth into 27 and beyond. So we are seeing early anecdotal feedback that 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 outside of China, mainly on the analog side, it's not we don't see a lot of clean room and a lot of new capacity added in the last four years.

And as I mentioned the cycle time to build, you know, from moving dirt to getting output from a farm, it's about four years. Not to mention about full rent of a farm. So I think the idea is in an advantage position here versus the rest of the market. I do think that customers, you know, in the context of the question on kidding and maybe should I 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 as I get what I need in maybe another area where they're having a challenge getting it.

So, you know, this is all part of, you know, what we're seeing in our markets 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 grow. So we'll give a follow up. Yeah, appreciate that helpful answer. And the next one, 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 and ability to place backlog with you has been as has the has the backlog duration extended materially in the last quarter.

Thank you. So I characterize the backlog is consistent with the overall demand environment that we're seeing. And we have seen an uptick in lead times. And there are areas where you'll 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're competitive right now. And again, we're in a position where we can make investments into the clean room and the assembly and test facilities that we have to be a little support group for our customers and we'll continue to ramp those as we move into the, you know, this quarter and beyond.

With that, move on to our next caller. All right. Next question comes from the line of the meal Aziz with Rothschild and company. You may proceed. Hey, thanks. Take the question. I just thought a question on supply demand tightness through the quarter and what you're seeing in terms of socket wins and your engagements with customers there. But you've started seeing incremental market share gains through the quarter. Thank you. Yeah, I mean, I think we, when it goes to market share, we don't like to measure it.

Of course, we look at the results internally, but I think we should look at it through the cycle. And again, if we are indeed a better position than some of the competition to support the demand and if demand continues, we should be able to translate it to market share gains, but that we cannot measure it yet. So I think we have to wait through the cycle. Let's see when the next pick is it will arrive one day and then see where we are.

But I'm pleased with the momentum we are building. I'm pleased with the ability to continue to ramp our supply and let's see how we do over the long term. Yeah, just to follow up on the backend tool comments. Could you just confirm, is there a potential that backend tool availability could at all bottom at your growth and whether that is a gating factor for you over the next couple of quarters. Thanks. I don't want to talk about the gating items because the gate is when you don't have the clean room right the gate when you now are stuck for a couple of years to build your shell and to build the clean room and all the infrastructure behind it we don't have a gating item like that.

I think this is just simple blocking and tackling is we say your execution of getting the equipment on time, our suppliers also need the supply chain is complex and they have to get through it it's just a period of high demand all over. Everybody is going through their challenges but there is a very large opportunity to expand capacity and we are. I would say that I don't see a between front end and and back end, we are going to 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 whether the CapEx is more expensive and also the lead times are always longer with the supply chain over there. And this is why we are not playing only 27 and 28 we are actually thinking through the rest of the decade. And what is our plan and how are we going to slot our future tools and even you know new clean rooms. So we can continue to support a range of scenarios that the market when market may present to us.

All right, thanks to we'll move on to our final caller. Can you come from the line of Vijay Rakesh with Mizuho securities, please proceed with your question. Yeah, hi, just a quick question. I see your data center side is going pretty strong. It's almost like a 2.5 billion run rate this year annualized. Just wondering as you look at 27, do you expect that that go through to continue another double from here and a quick follow up.

Thanks. Yeah, I mean, we are watching like everyone, you know, the CapEx investment into the data center market. It doesn't have, it doesn't 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's my, that's where I'm excited about our investment. We are not sitting still. We are creating new parts. We all continue to attack new subsystems. So we want to continue not only to grow with the market, but also playing more sockets and ultimately gain market share.

So, so far, so good. We'll see how the demand continues to develop into the next year. And Vijay is zooming out, you know, when there's more power, there's more opportunity for T.I. and there's more power density, there's more opportunity for T.I. and when there's higher voltages, there's more opportunity for T.I. 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.

Agreed, thanks. And just a quick one. On the commentary on the Eevee side, is this more of a, does T.I. have more exposure on China, China export Eevee market as well? Like how would you characterize the Eevee strength just globally across regions? Thanks. Now, as we talked many times over the last several years, China industry for, you know, the automotive industry and especially Eevee is, you know, leading in many ways. And they are not only building for their domestic market.

This is why a supplier like T.I. was always something that was very, very important to them. We are a global company, very diverse supply chain across the globe. And we've continued to design part into their systems. I think I am excited about the fact that China is growing faster their export business because these are usually just in terms of content, just higher content and also higher shelf for us there. So that also is driving the growth.

Mike has mentioned before that, you know, automotive business for T.I. and Q3 was driven by China in the U.S. and we are excited about our position there. All right. With that, I'm going to have to leave closes out for the call. Okay. So let me wrap up with what we've said previously at our core. We are engineers and technology is the foundation of our company. But ultimately our objective and the best metric to measure progress and generate value to our owners is the long term growth of free cash lower share.

Thank you and have a good evening. Thank you. This concludes today's conference. Are you made this connection lines at this time? We thank you for your participation.

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