Silicon Labs Swings to Profit on Record Medical Sales Ahead of TI Takeover

Silicon Labs pulled in $250.9 million of third-quarter revenue, up 22% from $206.0 million a year earlier, and swung from a $9.9 million loss to $8.9 million of GAAP net income — its strongest quarter since Texas Instruments agreed to buy the company for roughly $7.5 billion.

The quarter ended Oct. 3. GAAP earnings came to $0.26 a diluted share, against a loss of $0.30 in the year-ago period; non-GAAP EPS was $1.05. Revenue also climbed 10% sequentially from the second quarter's $228.2 million, extending a steady climb through fiscal 2026: $214 million in Q1, $228 million in Q2, $251 million now.

The Austin-based maker of low-power wireless chips for smart-home, industrial and medical devices issued no outlook. "Due to the announced pending acquisition of Silicon Labs by Texas Instruments, Silicon Labs has suspended providing forward-looking guidance," the company said in its release.

What's driving the growth?

Both segments grew at a double-digit clip. Industrial & Commercial revenue rose 20% year over year to $141.3 million, and Home & Life rose 24% to $109.6 million.

Medical was the standout. Revenue in the end market set a quarterly record, up 48% from the second quarter and more than 300% from a year earlier, as "known customer ramps continued," CEO Matt Johnson said. That tripling points to specific design wins moving into volume production rather than a broad market recovery.

Channel conditions look tight. Distributor inventory fell to a multi-year low during the quarter, and end-customer inventory sat near record lows, according to the company — a setup that historically supports pricing when end demand firms.

Margins held near recent highs. GAAP gross margin was 60.8%, down slightly from 61.6% in Q2 but well above the 57.8% posted in the year-ago quarter. GAAP operating income was $8.0 million, a figure that absorbs $23.0 million of stock compensation and $6.9 million of merger-related costs; on a non-GAAP basis, operating margin was 16.0%. Cash and short-term investments stood at $439.8 million at quarter-end.

"Our current backlog and design-win ramps position us for continued revenue growth and meaningful earnings expansion," Johnson said.

Where does the TI deal stand?

Texas Instruments agreed on Feb. 4 to acquire Silicon Labs for $231.00 a share in cash, valuing the company at about $7.5 billion including debt and cash. Stockholders approved the deal on April 30, and the U.S. Hart-Scott-Rodino antitrust waiting period expired on May 22.

The closing still needs regulatory approvals elsewhere, and the quarterly filing pegs completion in the first half of 2027. The deal isn't cheap to run toward the finish line: merger costs totaled $27.7 million for the first nine months of the year, on top of the $6.9 million booked this quarter.

Why TI wants this portfolio?

For Texas Instruments, the acquisition adds an established low-power wireless connectivity franchise — the chips that link smart-home, industrial and medical devices — to TI's broad analog and embedded processing catalog. Silicon Labs' medical ramps, tripling year over year, show exactly the kind of high-growth end market TI is paying a premium for.

The trajectory into the close matters for both sides. Three straight quarters of sequential growth, a return to GAAP profitability, and inventories scraped to multi-year lows suggest Silicon Labs hands over an accelerating business rather than one propped up by channel stuffing — and if backlog and design-win ramps keep converting, the standalone growth story could still strengthen before the deal seals in 2027.