Earnings Call Insights: Texas Instruments (TXN) Q4 2025
Management View
- CEO Haviv Ilan reported, “Revenue came in about as expected at $4.4 billion, a decrease of 7% sequentially and an increase of 10% from the same quarter a year ago.” Ilan highlighted that analog revenue grew 14% year-over-year, embedded processing grew 8%, and the Other segment declined from the year-ago quarter.
- Ilan explained a reorganization of end markets to include data center, now grouping industrial, automotive, data center, personal electronics, and communications equipment as key sectors. He stated, “Our end markets are now industrial, automotive, data center, personal electronics and communications equipment.”
- Ilan disclosed, “Industrial was $5.8 billion, up 12% year-on-year and was 33% of revenue. Automotive was $5.8 billion, up 6% year-on-year and was 33% of revenue. Data center was $1.5 billion, up 64% year-on-year and was 9% of revenue. Personal electronics was $3.7 billion, up 7% year-on-year and was 21% of revenue. Communications equipment was about $500 million, up about 20% year-on-year and was 3% of revenue.”
- Ilan emphasized, “Industrial, automotive and data center combined made up about 75% of TI’s revenue in 2025, up from about 43% in 2013.”
- CFO Rafael Lizardi stated, “Gross profit in the quarter was $2.5 billion or 56% of revenue. Sequentially, gross profit margin decreased 150 basis points. Operating profit was $1.5 billion in the quarter or 33% of revenue and was up 7% from the year-ago quarter.”
- Lizardi added, “Net income in the fourth quarter was $1.2 billion or $1.27 per share. Earnings per share included a $0.06 reduction not in our original guidance related to the noncash impairment of goodwill in our Other segment and other tax-related items.”
Outlook
- Lizardi provided guidance: “We expect TI revenue in the range of $4.32 billion to $4.68 billion and earnings per share to be in the range of $1.22 to $1.48.”
- Lizardi stated, “We continue to expect our effective tax rate for 2026 to be about 13% to 14%.”
- Ilan noted, “I expect this market [data center] to continue to grow in Q1. It’s been growing for now 7 quarters in a row for us.”
Financial Results
- Lizardi reported, “Cash flow from operations was $2.3 billion in the quarter. Capital expenditures were $925 million in the quarter. In the quarter, we paid $1.3 billion in dividends and repurchased $403 million of our stock.”
- Lizardi highlighted, “We also increased our dividend per share by 4% in the fourth quarter to $1.42 per share, marking our 22nd consecutive year of dividend increases.”
- Lizardi stated, “Our balance sheet remains strong with $4.9 billion of cash and short-term investments at the end of the fourth quarter. Total debt outstanding was $14 billion with a weighted average coupon of 4%. Inventory at the end of the quarter was $4.8 billion, down $25 million from the prior quarter and days were 222, up 7 days sequentially.”
- For the full year, Lizardi said, “Cash flow from operations was $7.2 billion and capital expenditures were $4.6 billion. Free cash flow for 2025 was $2.9 billion or 17% of revenue, representing an increase of 96% from 2024.”
Q&A
- Ross Seymore, Deutsche Bank: Asked if anything unique was driving the above-seasonal Q1 guide. Ilan responded, “We did see orders improving throughout the quarter. And what guides our guidance is the stronger bookings.”
- Seymore followed up on gross margin implications. Lizardi answered, “Assume OpEx is up low single digits, and you should get into a reasonable number for gross margin. And the loadings will depend on demand, and we’ll adjust those as needed.”
- James Schneider, Goldman Sachs: Asked about inventory levels and future plans. Ilan responded, “We are very pleased with the inventory position we have built. We are very proud of how we got there.”
- Schneider asked about prospects in personal electronics and communications. Ilan said, “Personal electronics…did grow for the year…We just saw a little bit of a weak Q4, I would say, below typical seasonality.”
- Harlan Sur, JPMorgan: Inquired about customer hesitancy in industrial. Ilan responded, “I do believe that the secular growth continues in industrial. We are looking at end equipment and generation to generation, we see just more content growth per system.”
- Sur also asked about fab build-outs and CapEx. Ilan reported, “We are very pleased about the execution in Sherman. It’s actually ramped ahead of schedule, high yields.”
- Vivek Arya, BofA: Asked if Q1 strength was pricing related. Ilan said, “The answer is no, it’s not pricing related.”
- Timothy Arcuri, UBS: Asked about CapEx trajectory. Lizardi replied, “We continue to expect CapEx for 2026 between $2 billion and $3 billion.”
- Thomas O’Malley, Barclays: Asked about auto market trends. Ilan stated, “We did see strength in the automotive in the second half of this year…I think secular growth continues into the foreseeable future.”
- Joshua Buchalter, TD Cowen: Asked about data center growth. Ilan responded, “Data center has grown nicely…most of our business is based on the analog side…I see the opportunity as an attractive one.”
- William Stein, Truist: Asked about bookings strength and backlog duration. Beckman explained, “We did see throughout the quarter backlog did build…we have seen our turns business also exhibit strength over the last several quarters.”
- Christopher Caso, Wolfe Research: Asked about factory loadings. Lizardi stated, “We are not making any disclosure right now on which way the loadings are going…there’s nothing significant versus where we’ve been running in fourth quarter.”
Sentiment Analysis
- Analysts focused on Q1 guidance strength, gross margin trajectory, inventory management, and end-market recovery. The tone was cautiously optimistic with repeated probing for drivers behind above-seasonal guidance and market-specific recovery, and some skepticism regarding sustainability of demand.
- Management maintained a confident tone in prepared remarks, emphasizing execution and strategic positioning. During Q&A, management was generally open but occasionally deflected specifics, especially regarding future loadings or pricing, using phrases such as “we are very pleased,” “we’ll adjust those as needed,” and “we are in a very good position.”
- Compared to the previous quarter, analyst tone shifted from concern about slow recovery and inventory build-up to cautious optimism about order momentum and data center growth. Management’s confidence increased, reflecting improved bookings and operational progress.
Quarter-over-Quarter Comparison
- Q4 guidance was notably above typical seasonality, with management citing stronger bookings and data center growth, compared to the previous quarter’s moderate recovery outlook and flat-to-down seasonal comments.
- Strategic focus evolved, with Q4 highlighting a new end-market structure and increased reporting transparency around data center, industrial, and automotive segments.
- Analyst focus shifted from concerns about inventory and gross margin headwinds to questions about drivers of revenue upside, sustainability of growth in data center, and CapEx trajectory.
- Management provided more specific forward-looking statements on CapEx, depreciation, and secular content growth, compared to more reserved language in Q3.
- Key metrics such as free cash flow and revenue diversification improved, and management expressed greater confidence in operational readiness and end-market growth drivers.
Risks and Concerns
- Management acknowledged market volatility, with Ilan noting, “The market has been jittery in the last 12 years — 12 months, sorry. And we’ll just have to see how it plays out.”
- Concerns about pricing were addressed, with Ilan stating, “We have 80,000 products. Prices always go up and down. But for the company, the overall price effect like-for-like in ’25, we expected it to be low single digits down.”
- Analyst questions highlighted potential risks from memory pricing and demand sustainability, especially in consumer and automotive sectors, but management reported no immediate negative impact.
- Management reiterated flexibility in adjusting factory loadings and inventory to respond to shifts in demand.
Final Takeaway
Texas Instruments management emphasized that industrial, automotive, and data center now account for three-quarters of revenue, with data center growing 70% year-on-year and contributing significantly to above-seasonal Q1 guidance. Robust operational execution, disciplined capital allocation, and a strong inventory and capacity position support confidence in meeting customer demand and further capitalizing on long-term secular growth trends across key end markets.