Texas Instruments gets upgrade at Citi on CapEx plans; Outperform rating kept at Evercore

Update: The story was updated with Evercore’s rating action on Texas Instruments.

Citi Research upgraded Texas Instruments’ (NASDAQ:TXN) rating to Buy, noting that the company is lowering its capital expenditure and pointed to margins bottoming.

On Tuesday, Texas Instruments hosted a capital management call and lowered its 2026 capex to be between $2B and $5B from $5B and intimated gross margins are bottoming, in line with Citi’s expectations, said analyst Christopher Danely.

The analyst added that they were upgrading the rating to Buy from Neutral as they believe margins are bottoming and should rebound back to the previous peak, which would result in 100% EPS growth.

Citi also raised its estimates and the target price on TXN to $235 from $200.

The analyst noted that Texas Instruments stated that unless it achieves 30% revenue growth, capex will be at the low end. The company expects 2026 gross margins to be at least 5% above the 2024 level of 57.8%.

Danely believes Texas Instruments’ margins could rebound back to the previous peak, which would result in peak EPS of over $10 or roughly 100% growth from Citi’s 2024 EPS estimate of $5.13. The company agrees with margins going back to the peak.

In addition, the analyst said the main pushback on Texas Instruments is valuation, as its stock has consistently traded at a 20%-30% premium to peers. Danely noted that the company’s operating margins are the lowest in a decade, which they see as unsustainably low.

Citi raised their 2025 EPS estimate on TXN to $5.98 from $5.81 and their 2026 EPS estimate to $6.59 from $6.41 due to higher gross margins.

The analyst said that despite the higher EPS, he believes there is upside when inventory replenishment happens, as he does not expect seasonal quarter-over-quarter revenue growth.

On Tuesday, prominent activist investor Elliott Investment Management had commended Texas Instruments on its capital allocation update.

Evercore said that following Texas Instruments’ capital management call, it has reiterated its Outperform rating and its view that TXN is its top analog pick.

Analysts led by Mark Lipacis said that think there are four ways investors win with Texas Instruments — The trailing 12 months Free Cash Flow, or FCF/share expands to $11 from $1 between March 2024 and December 2026; the company xits its CapEx cycle and re-enters a capital return cycle; share gains and price premiums that come with being the largest domestic analog supplier that just doubled its capacity, and upside to estimates due to Street missing that the company is shipping 27% below consumption, and that snapbacks to previous peaks usually takes three-to-six quarters.

Evercore has set a $268 price target on Texas Instruments’ stock.

Texas Instruments (TXN) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is also Hold, and so is the average Wall Street analysts’ rating, Hold.