Texas Instruments Incorporated

TXN · NASDAQ · USD

Is the demand recovery broad and durable enough to keep TI's expanded 300-millimeter factories full, or will price competition and customer inventory discipline cap the upturn?

Last 4 earnings calls · through Q2 FY2026

Bull case

  • Demand breadth across end markets

    The bull case is that growth now comes from industrial, data center and automotive at the same time, so one weak end market no longer decides the company's result.

  • Capacity built ahead of demand

    Management spent years building inventory and manufacturing capacity before the upturn, so TI can fill orders that rivals turn away and win designs on delivery.

  • Free cash flow inflection

    With the fab build-out largely paid for, capital spending is falling while revenue rises, which is what drives the company's stated goal of free cash flow per share.

Bear case

  • Restocking versus real demand

    The bear case is that customers are refilling empty parts bins rather than buying for new production, so orders could slow once those bins are full again.

  • Price competition in analog

    Analog chips are numerous and interchangeable enough that large rivals and Chinese suppliers can undercut on price, which limits what TI earns on each part.

  • Depreciation from the new fabs

    The plants TI built now run depreciation through the income statement every quarter, so reported profit can lag the cash the business actually generates.

Bull and bear points

Growth & Execution

In short: Revenue is growing in every end market, but management cannot say whether that demand will hold next year.

Bull · 2

  • Data center is now a reported end market and the fastest growing

    A year ago data center sat inside other markets and was called a small part of revenue; management now reports it separately and says it doubled from a year earlier.

    Tone shiftQ3 FY2025 → Q2 FY2026

  • Industrial revenue is still below its 2022 peak

    Management says industrial remains roughly five to six points under the 2022 peak even after strong growth, leaving room for cyclical recovery and content growth to run further.

    Q2 FY2026 call
Bear · 2

  • A strong first half last year faded in the second half

    Management compares this year's fast start with 2025, when analog growth slowed after a strong opening, and says the second half is still unproven.

    Q1 FY2026 call

  • Automotive uptick rests on China EV demand and low customer stock

    The automotive acceleration came from Chinese electric and hybrid vehicle demand plus customers who had let inventories run low, drivers management did not describe as durable.

    Q2 FY2026 call

Profitability & Financial Strength

In short: Free cash flow is rising as capital spending falls, but depreciation from new fabs still weighs on margins.

Bull · 2

  • Gross margin reached 64% as factory loadings rose

    Gross margin expanded by nearly seven points from a year earlier, helped by higher factory loadings and revenue growth that outran depreciation.

    Filed financials

  • Free cash flow is 35% of revenue as capital spending falls

    Free cash flow over the past year reached 35% of revenue, more than triple the prior year, as the heavy fab construction spending of recent years wound down.

    Filed financials
Bear · 2

  • Depreciation keeps rising into 2027 as new fabs start up

    Management expects depreciation of $2.2 billion to $2.4 billion this year with more in 2027, so reported margins absorb costs that do not appear in free cash flow.

    Q1 FY2026 call

  • Dividends absorb most of the cash returned to shareholders

    Dividends account for almost all of the $5.8 billion returned over the past year while buybacks are a small share, so the payout is the main claim on cash.

    Filed financials

Market Position

In short: A broad analog catalog and US capacity support supply, while price competition limits pricing power.

Bull · 2

  • Management has begun raising prices after a year of declines

    Three months ago management assumed another year of low-single-digit price declines; it now says price increases are being negotiated customer by customer.

    Tone shiftQ4 FY2025 → Q2 FY2026

  • US fabs qualify for a 35% investment tax credit

    Management says the investment tax credit is now 35% for qualifying US equipment, which offsets part of the cost of building and equipping domestic factories.

    Q4 FY2025 call
Bear · 1

  • Fixed fab costs turn demand drops into margin losses

    In the FY2000 to FY2001 downturn revenue fell 30.9% and operating margin swung to -7.1%, showing how quickly underused factories hurt profit.

    Filed financials