Texas Instruments Incorporated TXN and ON Semiconductor Corporation ON are two leading U.S. semiconductor companies with strong positions in automotive and industrial chips. Both are benefiting from long-term trends such as electric vehicles (EVs), factory automation, AI infrastructure and power management.
However, their business models, growth drivers and valuations differ. While ON Semiconductor is focused on high-growth power and sensing markets, Texas Instruments offers broader diversification, stronger profitability and a more consistent cash-generation profile, making it a better investment choice for long-term investors.
The Investment Case for Texas Instruments
Texas Instruments entered the second half of 2026 with solid momentum. Second-quarter 2026 revenues rose 23% year over year to $5.46 billion, driven by broad-based growth across industrial, automotive and data center markets.
Industrial revenues increased roughly 30%, automotive posted mid-teen growth, and data center revenues doubled from the year-ago quarter as AI infrastructure spending accelerated. Management also expects continued strength in the third quarter, supported by healthy demand across nearly all end markets.
Beyond top-line growth, Texas Instruments continues to deliver robust profitability improvement. Gross margin reached 61.4% from 57.9% in the year-ago quarter, while operating margin expanded to 42.3% from 35.1%. Driven by higher revenues and improved margins, second-quarter earnings per share jumped 52% year over year to $2.14.
Texas Instruments Incorporated Price, Consensus and EPS Surprise
Texas Instruments Incorporated price-consensus-eps-surprise-chart | Texas Instruments Incorporated Quote
Texas Instruments’ investments in 300mm manufacturing continue to provide cost advantages, while its extensive analog portfolio and direct customer relationships support pricing power. Strong cash generation also enables the company to continue investing in capacity while maintaining an attractive dividend and shareholder returns. The company generated $6.5 billion in the trailing 12 months, and it returned $5.8 billion to shareholders through share buybacks and dividend payments.
Guidance for the third quarter indicates continued growth momentum for Texas Instruments. The mid-point of third-quarter revenue and earnings per share (EPS) guidance ranges signify a year-over-year increase of approximately 25% and 62%, respectively.
The Investment Case for ON Semiconductor
ON Semiconductor continues to execute well following a prolonged semiconductor downturn. First-quarter 2026 revenues increased nearly 5% year over year to $1.51 billion, while non-GAAP EPS rose 16% to 64 cents. Automotive revenues returned to year-over-year growth after seven quarters of declines, AI data center revenues more than doubled from the prior year, and management reported improving order trends and stronger backlog visibility.
The company's long-term outlook remains attractive. ON Semiconductor is strengthening its leadership in silicon carbide, intelligent power, EV traction systems and AI data center power solutions. The growing adoption of Treo networking products, expanding 900V EV platforms and partnerships with companies such as Geely and NIO should support future growth.
Management also expects AI data center revenues to double in 2026 while forecasting additional margin expansion as volumes recover. The mid-point of ON Semiconductor’s revenue guidance range indicates a year-over-year increase of 7.8%, while the same for non-GAAP EPS calls for 40% growth. In the trailing 12 months, ON generated free cash flow of approximately $1.2 billion and returned $1.4 billion to shareholders through share repurchases and dividend payments.
ON Semiconductor Corporation Price, Consensus and EPS Surprise
ON Semiconductor Corporation price-consensus-eps-surprise-chart | ON Semiconductor Corporation Quote
However, ON Semiconductor carries greater execution risk. Its profitability remains well below Texas Instruments', restructuring efforts are ongoing, and much of its recovery depends on continued strength in automotive, industrial and silicon carbide demand. The company’s first-quarter non-GAAP gross margin contracted 150 basis points year over year to 38.5%.
The business is, therefore, likely to remain more volatile across semiconductor cycles. ON Semiconductor is also navigating product portfolio changes and exiting non-core businesses, adding execution risk.
TXN vs. ON: Which Stock Has a Better Growth Outlook?
Both companies are benefiting from recovery across the industrial and automotive market. AI data centers have also opened new growth opportunities for the companies. However, analysts appear more optimistic about TXN's growth outlook.
The Zacks Consensus Estimate for Texas Instruments 2026 revenues and EPS indicates year-over-year growth of approximately 20% and 50%, respectively. The consensus mark for 2026 earnings has also been revised upward by 6.66% over the past 60 days. The meaningful upward estimate revision reflects growing confidence in TXN’s earnings growth potential.
TXN Consensus EPS Estimate Revision Trend
Image Source: Zacks Investment Research
On the other hand, the Zacks Consensus Estimate for ON Semiconductor’s 2026 revenues and earnings calls for year-over-year growth of 8% and 31.5%, respectively, significantly less than TXN’s. The consensus mark for ON’s 2026 earnings has also remained unchanged over the past 60 days, suggesting that analysts currently see stronger earnings momentum at Texas Instruments.
ON Consensus EPS Estimate Revision Trend
Image Source: Zacks Investment Research
Valuation: ON Looks Cheaper, But TXN Deserves the Premium
ON Semiconductor appears cheaper based on valuation. The stock trades at a forward 12-month price-to-earnings (P/E) multiple of 23.03 compared with 31.51 for Texas Instruments.
Performance has been nearly identical this year, with TXN shares gaining 61.2% and ON advancing 60.3%. Although investors can buy ON Semiconductor at a lower multiple, Texas Instruments deserves its premium because of its superior margins, stronger free cash flow, broader product portfolio and consistent capital returns. Investors are paying for higher quality and greater earnings stability rather than simply faster growth.
TXN vs. ON: Which Semiconductor Stock Wins?
Both companies should benefit from long-term growth in automotive electronics, industrial automation and AI-driven power management. ON Semiconductor offers stronger upside if EV, silicon carbide and AI infrastructure demand accelerates further.
Texas Instruments combines improving end-market demand with exceptional profitability, industry-leading cash generation, pricing power and a highly diversified business. Although TXN trades at a higher valuation, its robust financial profile and stronger growth outlook make it the better semiconductor investment today.
Currently, Texas Instruments sports a Zacks Rank #1 (Strong Buy), giving it a clear edge over ON Semiconductor, which carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
