National Instruments Reports Record Quarterly Revenue of $160 million

Revenue for the First Half of 2006 up 16 percent in U.S. Dollars and 20 percent in Local Currency

AUSTIN, Texas - July 27, 2006 - National Instruments (Nasdaq: NATI) today reported record revenue in Q2 2006 of $160 million, a 14 percent USD increase over Q2 2005 and an equivalent 16 percent increase in local currency. Generally Accepted Accounting Principles (GAAP) fully diluted earnings per share (EPS) for Q2 2006 was 21 cents with GAAP net income of $17 million, up 13 percent from Q2 2005. Non-GAAP fully diluted EPS was 25 cents with non-GAAP net income of $20.5 million, up 33 percent from Q2 2005. Non-GAAP results exclude the impact of stock-based compensation and the impact of the amortization of acquisition-related intangibles. A reconciliation of GAAP to non-GAAP results is included as a part of this press release.

For the first half of 2006, the company reported revenue growth of 16 percent in USD terms and 20 percent in local currency. In addition, the company reported GAAP net income of $29.6 million, up 13 percent, and non-GAAP net income of $36.6 million, up 38 percent year-over-year.

"We are pleased with the results for the first half of 2006, as we saw revenue growth of 20 percent in local currency with strong operating leverage," said Dr. James Truchard, NI president and CEO. "At NIWeek, Aug. 8-10, we will highlight how NI LabVIEW, graphical system design and PXI Express will help further our expansion into key application areas."

NI continues to have a very strong balance sheet, with $211 million in net cash and short-term investments as of June 30, 2006. The company also announced today a dividend of 6 cents per share on its common stock payable on Aug. 28, 2006, to shareholders of record on Aug. 7, 2006.

Q2 2006 Highlights

• Record quarterly revenue of $160 million, up 14 percent year-over-year
• Quarterly GAAP net income of $17 million, up 13 percent year-over-year
• Quarterly non-GAAP net income of $20.5 million, up 33 percent year-over-year
• GAAP operating margin of 13 percent and non-GAAP operating margin of 16 percent
• Strong sales of software, PXI, modular instruments and distributed I/O products
• Cash and short-term investments of $211 million

"In Q2 last year, we saw very strong sequential growth in both revenue and earnings. Given these tough compares, we are pleased to have delivered 14 percent year-over-year revenue growth in U.S. dollar terms and 16 percent in local currency," said Alex Davern, NI CFO. "Our goal of driving operating leverage continued to pay off in Q2 with a 33 percent increase in non-GAAP net income, and we are well-positioned for a significant increase in operating margin for the full year."

Geographically, the growth of revenue in U.S. dollar terms for Q2 2006 compared to Q2 2005 was as follows: up 16 percent in the Americas, up 6 percent in Europe and up 19 percent in Asia, equaling overall growth of 14 percent. In local currency terms, revenue was up 15 percent in Europe and up 21 percent in Asia, for an overall local currency growth of 16 percent.

Looking at Q2 revenue growth in U.S. dollars in more detail, sales of NI instrument control products were up 10 percent year-over-year. Management believes this is indicative of continued improvement in the test and measurement market in Q2. The first-year impact of acquisitions added $4.4 million in revenue in Q2. This is lower than Q1 2006, as NI passed the first anniversary of the acquisition of Measurement Computing Corporation, during the first quarter. Sales of the rest of the NI product portfolio, in other words, NI virtual instrumentation products, were up 11 percent year-over-year. NI growth in Q2 was driven by the success of new products, especially in the areas of software, data acquisition, PXI, modular instruments and distributed I/O.

Guidance for Q3 2006
For Q3 2006, NI currently expects revenue to be in the range of $157 million to $164 million and non-GAAP gross margins to be approximately 75 percent. The company currently expects GAAP fully diluted EPS to be in the range of 16 cents to 21 cents per share and expects non-GAAP fully diluted EPS to be in the range of 21 cents to 26 cents per share.

In Q3 2006, the company expects the impact of stock-based compensation to be 4 cents per share and the impact of the amortization of acquisition-related intangibles to be 1 cent per share. A reconciliation of the company's Q3 2006 guidance on a GAAP basis to its guidance on its non-GAAP basis is included as part of this press release.

Accounting for Stock-Based Compensation
In accordance with SFAS123R, the company began expensing all stock-based compensation in its GAAP results for all periods beginning after Jan. 1, 2006. This includes the impact of the company's current restricted stock and employee stock purchase plans, in addition to its unvested options outstanding under its stock option plans.

Non-GAAP Earnings Presentation and Non-GAAP Earnings Guidance
In addition to disclosing results determined in accordance with GAAP, the company also discloses non-GAAP operating results that exclude certain charges. In this press release, the company has presented its results for Q2 2006 and its guidance for Q3 2006 on a GAAP and non-GAAP basis. When presenting non-GAAP results, the company includes a reconciliation of the non-GAAP results to the results under GAAP as part of the press release.

Management believes that including the non-GAAP results assists investors in assessing the company's operational and cash-flow performance. The company presents these non-GAAP results as a complement to results provided in accordance with GAAP, and they should not be regarded as a substitute to GAAP. Management uses non-GAAP measures to plan and forecast future periods, to establish operational goals, to compare with its business plan and individual operating budgets and to allocate resources. Management also considers such non-GAAP results to be an important supplemental measure of its performance.

In line with common industry practice and to help enable comparability with other technology companies, the company's non-GAAP presentation excludes the impact of both stock-based compensation under the new accounting standard SFAS123R and the amortization of acquisition-related intangibles. Other companies may calculate non-GAAP results differently than the company, limiting its usefulness as a comparative measure.

Interested parties can listen to a conference call today, July 27, 2006, beginning at 4:00 p.m. CDT, at www.ni.com/call. Replay information is available by calling (719) 457-0820, confirmation code #1047037, from July 27, 2006, at 7:00 p.m. CDT, through Aug. 3, 2006, at midnight CDT.

This release contains "forward-looking statements," including statements related to expansion in key application areas, expected revenue and gross margin for Q3 2006, estimated Q3 2006 GAAP and non-GAAP EPS and estimated Q3 2006 EPS impact of stock-based compensation and acquisition-related intangibles. These statements are subject to a number of risks and uncertainties, including the risk of adverse changes in the global economy, delays in the release of new products, fluctuations in customer demand for NI products, manufacturing inefficiencies and foreign exchange fluctuations. Actual results may differ materially from the expected results. The company directs readers to documents filed with the SEC for other risks associated with the company's future performance.

About National Instruments
For 30 years, National Instruments (www.ni.com) has been a technology pioneer and leader in virtual instrumentation - a revolutionary concept that has changed the way engineers and scientists in industry, government and academia approach measurement and automation. Leveraging PCs and commercial technologies, virtual instrumentation increases productivity and lowers costs for test, control and design applications through easy-to-integrate software, such as NI LabVIEW, and modular measurement and control hardware for PXI, PCI, PCI Express, USB and Ethernet. Headquartered in Austin, Texas, NI has more than 3,900 employees and direct operations in nearly 40 countries. For the past seven years, FORTUNE magazine has named NI one of the 100 best companies to work for in America. Readers may obtain investment information from the company's investor relations department by calling (512) 683-5090, e-mailing nati@ni.com or visiting www.ni.com/nati.

The condensed consolidated balance sheet and statement of income follow.