Texas Instruments Incorporated
Analysis
Three calls of "moderate" recovery turned into a broad one: industrial, data centre and now automotive are growing together, capex is falling and free cash flow has roughly doubled. What management keeps re-asking is how much of the demand is real. How much of data centre revenue is catalogue versus custom parts?
- Demand broadened from two markets to all of them.
Industrial and data centre carried Q1; by Q2 automotive accelerated and management called the setup "a stronger demand, and it's broader". Growth no longer rests on data centre alone, so one market stalling cannot stop the cycle. How much of industrial growth is AI-adjacent demand?
- The build-out is ending and the cash is arriving.
Capex is guided down to a fraction of last year's $4.6bn, with a 35% US tax credit handing part back. Free cash flow over twelve months reached $6.5bn, so cash once tied up in fabs and inventory is starting to reach owners. What is net capex after the CHIPS tax credits?
- Pricing stopped falling before demand proved itself.
Prices were falling, then held flat in the first half, and TI has started "executing price increases" for Q3. Management calls demand's durability "the biggest question I have", so the extra margin rests on orders it will not yet vouch for.
- Industrial keeps climbing back toward its 2022 peak. TI still sells less industrial product than it did four years ago, so the recovery has room even without new demand.
- Data centre keeps doubling. Its chips sit at every stage of power conversion in a rack, so a single lost socket cannot undo the growth.
- Higher prices stick into the fourth quarter. After two years of falling prices, holding them raises profit on every chip TI already sells, without shipping more.
- The second half fades the way 2025 did. Last year started strong and faded by mid-year, and this quarter's forecast only holds if orders keep arriving.
- Automotive is already back near its record. Auto recovered last and is already near its record, so more growth has to come from industrial or data centre.
- Inventory is draining just as demand surges. TI wins orders by shipping instantly when rivals cannot; the buffer that makes that possible is running out.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$250K | Jul 31 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$1K | Jul 17 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Jun 15 | Aug 22 |
Donald Trump Republican · Executive | Purchase | ≥$15K | May 15 | Jul 1 |
Donald Trump Republican · Executive | Sale | ≥$500K | May 14 | Jul 1 |
Congressional trading data provided by QuiverQuant
How Texas Instruments Incorporated turned $17.7B of revenue into $6.0B of operating income.
| Revenue | ||
|---|---|---|
| Analog | $14.0B | ▲ 15.17% YoY |
| Embedded Processing | $2.7B | ▲ 6.47% YoY |
| All Other Segments | $979.0M | |
| Total revenue | $17.7B | |
| Gross profit | $10.1B | 57.0% |
| Operating income | $6.0B | 34.1% |