TEXAS INSTRUMENTS INC

Texas Instruments Incorporated designs and manufactures semiconductors that are sold to electronics designers and manufacturers globally. The company operates in the highly fragmented analog and embedded processing semiconductor markets, facing significant global competition from dozens of large and small companies, including both broad-based suppliers and niche suppliers, as well as emerging companies particularly in Asia. The semiconductor cycle is characterized by periods of tight supply and surplus inventory, affected by the significant time and money required to build and maintain semiconductor manufacturing facilities. The company's revenue is subject to some seasonal variation, with sequential revenue growth rates historically weaker in the first and fourth quarters compared with the second and third quarters.

Texas Instruments' competitive positioning is built around four sustainable competitive advantages: a strong foundation of manufacturing and technology providing lower costs and greater control of the supply chain; a broad portfolio of analog and embedded processing products offering more opportunity per customer; the reach of market channels giving access to more customers and design projects; and diversity and longevity of products, markets, and customer positions providing less single point dependency and longer returns on investments. The company believes these competitive advantages, in combination, separate it from its best peers and position it in a unique class of companies capable of generating and returning significant amounts of cash. The company's strategy to maximize long-term free cash flow per share growth has three elements: a business model focused on analog and embedded processing products built around the four competitive advantages, disciplined allocation of capital, and efficiency.

Texas Instruments generates revenue by designing and manufacturing semiconductors that it sells to over 100,000 customers worldwide. The company's customer base is diverse, with about half of its revenue derived from customers outside of its largest 50. In 2025, more than 80% of revenue was direct, which includes TI.com. The company markets and sells its products through direct sales channels, including its website and broad sales and marketing team, and to a lesser extent through distributors. The company's two reportable segments are Analog and Embedded Processing, with remaining business activities reported in Other.

The Analog segment generated $14.01 billion ¹ of revenue in 2025, representing about 79% of total revenue. Analog semiconductors change real-world signals such as sound, temperature, pressure, or light by conditioning, amplifying, and often converting them to digital data, and are also used to manage power in all electronic equipment. The Analog segment includes two major product lines: Power, which includes battery-management solutions, DC/DC switching regulators, AC/DC and isolated DC/DC switching regulators, power switches, linear and low-dropout regulators, voltage references, multiphase controllers and power stages, and lighting products; and Signal Chain, which includes amplifiers, data converters, interface products, motor drives, clocks, logic, and sensing products. Analog products are used in many markets, including industrial, automotive, data center, personal electronics, and communications equipment.

The Embedded Processing segment generated $2.70 billion ² of revenue in 2025, representing about 15% of total revenue. Embedded Processing products are the digital 'brains' of many types of electronic equipment, designed to handle specific tasks and optimized for various combinations of performance, power, and cost. The segment includes microcontrollers, processors, wireless connectivity, and radar products. An important characteristic is that customers often invest their own R&D to develop software that operates on these products, which tends to increase the length of customer relationships. The Other segment generated $979 million ³ of revenue in 2025 and includes revenue from DLP products, calculators, and certain custom semiconductors known as application-specific integrated circuits (ASICs).

In 2025, the company continued qualifying and ramping production at its newest 300mm wafer fabs in Richardson and Sherman, Texas, and Lehi, Utah. The company recognized restructuring charges of $85 million ⁴ due to efforts to drive operational efficiencies, including the planned closures of its two remaining factories with 150mm production, and a non-cash goodwill impairment of $32 million ⁵ related to its custom ASIC products. During 2025, the company invested $4.55 billion ⁶ in capital expenditures, returned $6.48 billion ⁷ to shareholders, and received proceeds of $335 million ⁸ from CHIPS Act incentives, including $75 million ⁹ in direct funding. The company also issued two series of senior unsecured notes for an aggregate principal amount of $1.20 billion ¹⁰ in May 2025 and retired $750 million ¹¹ of maturing debt in March 2025. As of December 31, 2025, $18.79 billion ¹² of stock repurchase authorizations remain.

Revenue for 2025 was $17.68 billion ¹³, an increase of $2.04 billion ¹⁴, or 13.0% ¹⁵, compared to 2024. Gross profit was $10.08 billion ¹⁶, up $989 million ¹⁷, or 10.9% ¹⁸, with gross profit as a percentage of revenue decreasing to 57.0% ¹⁹ from 58.1% ²⁰. Operating expenses (R&D and SG&A) were $3.94 billion ²¹ compared with $3.75 billion ²². Operating profit was $6.02 billion ²³, or 34.1% ²⁴ of revenue, compared with $5.47 billion ²⁵, or 34.9% ²⁶ of revenue. Net income was $5.00 billion ²⁷ compared with $4.80 billion ²⁸, and diluted EPS was $5.45 ²⁹ compared with $5.20 ³⁰. Cash flow from operations was $7.15 billion ³¹, and free cash flow was $2.94 billion ³², representing 16.6% ³³ of revenue.

The company states that it is expecting to spend about $2 billion to $3 billion ³⁴ in 2026 on capital expenditures, and beyond 2026, capital expenditures will be dependent on revenue and growth expectations.

The company places additional strategic emphasis on designing and selling its products into the industrial, automotive, and data center markets, which it believes represent the best long-term growth opportunities. The company expects semiconductor growth in electronics, particularly in industrial, automotive, and data center markets, to continue well into the future. The company is nearing the end of its six-year elevated capital expenditures cycle, and its long-term capacity plan is designed to meet demand over time.

The company has entered into a definitive agreement to acquire Silicon Labs for $231.00 ³⁵ per share in an all-cash transaction, representing a total enterprise value of approximately $7.5 billion ³⁶. The acquisition is currently expected to close in the first half of 2027, subject to receipt of regulatory approvals and other customary closing conditions, including approval by Silicon Labs stockholders. The company expects to fund the transaction with a combination of cash on hand and debt financing to be arranged prior to closing.

The company's profit margins vary due to a number of factors, including customer demand and shipment volume, capital expenditures and resulting depreciation, manufacturing processes, product mix, inventory levels, tariffs, freight costs, and new accounting pronouncements. Because the company owns much of its manufacturing capacity, a significant portion of its operating costs is fixed, and with capacity expansions, capital expenditures and depreciation have increased. These fixed costs do not decline with reductions in customer demand or factory loadings and can adversely affect profit margins as a result. The company's LFAB facility, which primarily supports its Embedded Processing business, is in the early stages of ramping, so the company expects factory loadings to increase over time, and until LFAB ramps, the company expects Embedded to carry manufacturing costs that disproportionately affect Embedded Processing operating profit as compared to Analog.

The company expects to maintain sufficient internal manufacturing capacity to meet the majority of its production needs and to obtain manufacturing equipment to support new technology developments and revenue growth. The company continues to strengthen its competitive advantage in manufacturing and technology as part of its long-term capacity plan. The company's strategy is to build ahead of demand its broad-based products that are used across a diverse set of applications and customers and have low risk of obsolescence. Inventory levels will vary based on market conditions and seasonality, and the company adjusts factory loadings as needed to execute on this inventory strategy.

In 2025, the company invested $3.94 billion ³⁷ in R&D and SG&A. Capital expenditures were $4.55 billion ³⁸ in 2025, and the company is expecting to spend about $2 billion to $3 billion ³⁹ in 2026. The company used $1.48 billion ⁴⁰ to repurchase 8.5 million ⁴¹ shares of its common stock in 2025. Dividends paid in 2025 were $5.00 billion ⁴², reflecting an increased dividend rate. As of December 31, 2025, $18.79 billion ⁴³ of stock repurchase authorizations remain, and no expiration date has been specified. The company expects to continue benefiting from the CHIPS Act, including the 35% ⁴⁴ ITC on qualifying manufacturing investments for assets placed in service after December 31, 2025, and direct funding of up to $1.6 billion ⁴⁵ for its three large-scale 300mm wafer fabs located in Sherman, Texas, and Lehi, Utah.

In 2025, the overall analog and embedded semiconductor market recovery continued, though at a slower pace than prior upturns, likely related to broader macroeconomic dynamics and overall uncertainty. Global semiconductor shipments remain at levels below the prior peak. The company faces intense technological and pricing competition, which it expects will continue to increase from large competitors, small competitors serving niche markets, and emerging companies, particularly in Asia. The company may face increased competition as a result of China actively promoting and reshaping its domestic semiconductor industry through policy changes and investment.

The company's global operations subject it to risks associated with domestic or international political, social, economic, or other conditions. About 60% ⁴⁶ of the company's revenue comes from customers with headquarter locations outside the United States. Revenue from end customers headquartered in China represented about 20% ⁴⁷ of revenue in 2025, while revenue from products shipped into China represented about 50% ⁴⁸ of revenue in 2025. The semiconductor industry has recently been the focus of increased regulatory activity and scrutiny, which has contributed to variability in global trade conditions and supply chains. Certain countries where the company operates, particularly the United States and China, have experienced geopolitical tensions and administrative measures that affect global trade and macroeconomic conditions through the imposition of tariffs, import or export restrictions, trade embargoes and sanctions, and other trade barriers.

The company faces substantial competition that requires rapid response to product development and pricing pressures, and it expects competition to increase from large competitors, niche suppliers, and emerging companies in Asia, particularly as China promotes its domestic semiconductor industry through policy changes and investment. The cyclical nature of the semiconductor market occasionally leads to significant and rapid increases and decreases in product demand, and changes in expected demand could have a material adverse effect on results of operations. The company's global operations subject it to risks from geopolitical tensions and administrative measures, including tariffs, export restrictions, and trade barriers, which could limit access to markets or impact the ability to deliver products; about 60% ⁴⁹ of revenue comes from customers outside the United States, and revenue from products shipped into China represented about 50% ⁵⁰ of revenue in 2025. The company's results of operations could be affected by changes in tax-related matters, including the complex laws determining how much profit is earned and taxed in various jurisdictions, and the company's effective tax rate was 12.4% ⁵¹ in 2025. The company's ability to match inventory and production with the product mix needed to fill orders may affect its ability to meet revenue forecasts, and if manufacturing forecasts are inaccurate, it could cause the company to hold inadequate, excess, or obsolete inventory that would reduce profit margins.

Management's message emphasizes that the company's objective and the best metric for owners to measure progress is through the growth of free cash flow per share over the long term. The three strategic priorities emphasized for the period ahead are: a great business model focused on analog and embedded processing products built around four sustainable competitive advantages; discipline in allocating capital to the best opportunities; and efficiency, meaning constantly striving for more output for every dollar spent. Management states that the company will invest to strengthen its competitive advantages, be disciplined in capital allocation, and stay diligent in its pursuit of efficiencies, remaining focused on the belief that long-term growth of free cash flow per share is the ultimate measure to generate value. The filing notes that the company is expecting to spend about $2 billion to $3 billion ⁵² in 2026 on capital expenditures, consistent with its capital management strategy.