TXN's Data Center Sales Double: Will This Growth Rate Continue in 2026?

Texas Instruments' Q2 2026 data-center revenue doubled year over year and rose roughly 20% sequentially, fueled by AI infrastructure spending; management expects to outgrow the data-center market in 2026. The company sees 800-volt power architectures increasing analog and embedded chip content, while available clean-room capacity supports demand expansion. TXN shares are up 51.9% year to date, and consensus expects 2026 and 2027 EPS growth of 55.1% and 16.8%, respectively, though its 27.84x forward P/E exceeds the industry's 17.68x average.

Analysis

TXN’s rerating leaves little room for a data-center narrative that is not yet proven to be material at the consolidated level. Its 27.84x forward P/E carries a roughly 57% premium to the industry average, while the earnings growth profile decelerates sharply after 2026; therefore, investors need sustained estimate revisions rather than simply high percentage growth off a small base. The near-term risk is that incremental AI revenue is offset by weaker industrial or automotive demand, producing less operating leverage than the market is underwriting.

The 800V transition is more favorable to suppliers with differentiated high-voltage power devices and validated hyperscaler platform positions than to broad analog vendors alone. ON has the clearest torque to this architecture through SiC and power-supply design wins, but it also bears the greatest execution risk if 800V adoption is delayed, silicon substitutes take share, or its auto recovery fails to materialize. ADI offers a more balanced exposure: communications/data-center growth can absorb some cyclicality while its free-cash-flow generation supports continued design-win investment.

Over the next 1-3 months, the relevant catalyst is not another headline growth statistic but management disclosure on data-center mix, incremental gross margin, backlog conversion, and fab-equipment spending. TXN’s available clean-room capacity is only an advantage if utilization rises without requiring a capex step-up that dilutes free cash flow. Over 6-18 months, hyperscaler qualification cycles and the eventual architecture standardization will determine whether the opportunity becomes recurring content growth or merely a temporary AI-infrastructure buildout.

Consensus appears to be extrapolating AI power demand across all analog suppliers. The more contrarian read is that supply availability will normalize before demand visibility does, shifting competition from allocation to pricing and favoring vendors with application-specific design wins rather than generic capacity.

Key Decisions for Investors

• Do not add to TXN on momentum alone; maintain a valuation-risk alert around the next earnings print. Reduce or hedge exposure if data-center growth fails to translate into higher 2027 EPS estimates or if management signals a meaningful increase in fab-equipment spending.
• Initiate a 1-3 month beta-adjusted pair trade: long ON / short TXN. The trade expresses greater 800V and AI-power torque at ON against TXN’s richer multiple; target a 10-15% relative move, with a stop if ON’s AI revenue guidance or SiC growth outlook is cut, or if TXN raises full-year earnings guidance materially.
• For a lower-volatility AI-power allocation, favor ADI over TXN on a 6-12 month horizon. Add only after confirming that communications/data-center growth is sustaining consolidated margin expansion; reassess if communications growth normalizes abruptly or trailing free cash flow weakens.
• Monitor NVDA platform and hyperscaler power-architecture disclosures as the leading indicator for ON, TXN, and ADI. A slower transition to 800V or a shift toward alternative power-device technologies would invalidate the high-voltage-content thesis before reported revenue reflects it.