Texas Instruments (TXN)

Investment Review After Q1 FY2026 Earnings (stock price as of 2026.04.22)

TL;DR

Texas Instruments is the world’s largest analog semiconductor company — they make the chips that convert real-world signals (heat, pressure, sound) into digital data. Just reported: revenue +19%, OP +37%, industrial up 30% with broad recovery accelerating. Stock up ~137% over 5 years ($100 → $236). At $236 (36x P/E(ttm)), fairly valued if the analog cycle sustains. The risk: last year’s recovery was a false start — sustainability of demand is the key question.

Summary

Finding	Assessment
5-Year Stock Return	$100→$236. TTM OP +24% ($6.0B→$7.4B), non-linear: peaked $10.9B in 2022, troughed $5.2B. P/E(ttm) 36x vs 5-yr avg ~24x.
Business Model	World’s largest analog semi. ~20% share, 80K products, 100K customers. Industrial, Auto, Data Center (+90% YoY).
Competitive Moat	WIDE Only analog co with multiple 300mm fabs (~40% cost edge). 80K SKUs, direct sales (ti.com 60%), 10-15yr product lifecycles.
Past 5-YR Drivers	300mm capacity buildout (Sherman ahead of schedule), data center emergence (+90% YoY, 8th consecutive Q/Q growth), FCF inflection as capex moderates.
Recent Stock Move	$173→$236 (vs Dec 2025). Q1 beat above top of guidance. Industrial broadening, data center +90%. Pricing stable.
Revenue Trend	ACCELERATING Rev YoY: 19% (Q1 2026) → 24% (Q2 2026E).
Margin Trend	EXPANDING OM%: 37.8% (Q1 2026) → 40.8% (Q2 2026E).
TTM OP Trajectory	ACCELERATING TTM OP QoQ: 8.1% (Q1 2026) → 10.1% (Q2 2026E). TTM OP $7,407M.
Key Opportunities	Industrial broadening to all sectors/regions. Data center +90% YoY. Silicon Labs acquisition (H1 2027). Pricing inflection likely H2 2026.
Key Risks	2025 recovery was false start (H1 strong, H2 faded). 36x P/E needs sustained 15%+ growth. Auto near peak. FCF/OP 55% still below target.
Catalysts	Q2 guided $5.0-5.4B (~8% Q/Q). H2 pricing inflection. FCF/share likely >$8 target. 300mm leverage as rev scales to $22-24B.
P/E(ttm) Valuation	36x vs 5-yr avg ~24x. Reasonable if OM normalizes to 40%+ ($8B+ OP, ~25x normalized). Upside 40x; downside 25x if cycle stalls.

Q1 FY2026 Key Data

Revenue $4,825M (+19% YoY, +9% Q/Q), beat top of guidance. EPS $1.68 (+31%).
By end market: Industrial +30% (broad, all sectors/regions), Data Center +90% (8th straight quarter of sequential growth), Auto mid-single-digit, PE flat, Comms +25%.
Q2 guided at $5.0-5.4B revenue ($5.2B midpoint, ~8% Q/Q, slightly above seasonal). EPS $1.77-2.05.

Key Takeaways from Earnings Call

Industrial recovery broadening and accelerating: all sectors, all regions, all customer sizes growing. The “tail” (small/mid customers) starting to wake up after long hibernation. Still 15% below 2022 peak — secular growth means higher peaks ahead. But CEO cautious: “I want to see it playing out one more quarter” after last year’s false start.
Data center strength plus capacity advantage: +90% YoY, 8th consecutive sequential quarter of growth. TI’s broad analog portfolio uniquely serves both application-specific sockets (VRMs, power stages) and tens of thousands of general-purpose parts per rack. Investing more R&D in data center — GaN and advanced BCD nodes built in Texas. No shortages.
Silicon Labs acquisition announced ($5.4B) to expand embedded wireless connectivity. FCF/share likely to “easily beat” $8 target for 2026. CapEx moderating to $2-3B. Assembly & test capacity being internalized as external market tightens. Pricing environment improving — stable now, potential H2 increases if demand sustains.

Key Segments and Revenue Mix (Q1 FY2026)

Segment	Q1 2026 Revenue	% of Total	Key Details
Analog	~$3,950M	~82%	+22% YoY. Power management, signal chain, high-volume analog. Serves all end markets. 300mm wafer fabs in Texas (DMOS6, RFAB2, Sherman) provide structural cost advantage.
Embedded Processing	~$680M	~14%	+12% YoY. Microcontrollers, processors. Industrial and automotive focus. Silicon Labs acquisition ($5.4B) will expand wireless connectivity portfolio.
Other	~$195M	~4%	-16% YoY. DLP products, custom ASICs. Declining but manageable.

End markets: Industrial ~40% (broad recovery, +30% YoY), Automotive ~25% (mid-single-digit growth, near peak), Data Center ~10% (+90% YoY, secular), Personal Electronics ~15% (flat), Comms ~10% (+25%). ~100,000 customers served direct. Key competitors: Analog Devices (ADI), Infineon, STMicroelectronics, NXP, ON Semiconductor. Inventory: 209 days (down 13 days Q/Q).

Business Model

SUPPLIERS

Silicon wafers (200mm & 300mm)
Chemicals & gases
Assembly & test equipment
GaN & BCD process technology

Materials / Wafers →

TEXAS INSTRUMENTS

Analog chips (power, signal chain)
Embedded processors (MCUs)
300mm fabs in Texas (lowest cost)
Direct sales to ~100K customers
~80,000 products in catalog

Chips / Solutions → $ Revenue

CUSTOMERS

Industrial equipment makers
Automotive OEMs & Tier 1s
Data center operators
Consumer electronics OEMs
Telecom infrastructure

Moat Assessment: WIDE

Lowest-cost manufacturing from 300mm analog fabs: TI is the only analog company manufacturing at scale on 300mm wafers. The cost advantage is structural and widens with volume. Competitors (ADI, Infineon, NXP) remain on 200mm and would need $5-10B+ and 3-5 years to replicate. CHIPS Act funding further entrenches this advantage.
Product breadth and longevity create massive switching costs: 80,000 products with typical lifecycles of 10-15+ years. Once designed into an industrial controller or automotive ECU, TI’s chips stay for the life of that product. No single competitor can match the full catalog. Direct customer relationships (no distributors) give TI real-time demand visibility.
Capital discipline and owner-oriented management: TI’s stated objective is maximizing free cash flow per share over the long term. They built capacity during the downturn, maintained inventory, and kept lead times stable — exactly when competitors were cutting. This counter-cyclical investment strategy has delivered share gains in every upturn for the past decade.

Stock vs. Earnings — 5-Year Performance

Stock currently $236, up ~137% from $100 (5 years ago). A steady compounder that nearly tripled through the semiconductor supercycle, then consolidated during the 2023-2024 downturn. The stock peaked at $206 in mid-2024 before pulling back, and has since reached new highs on the recovery.
TTM OP grew from $5,975M to $7,407M (+24%) but the journey was non-linear — TTM OP peaked at $10,886M in Q3 2022 during the supply-constrained supercycle, then contracted 52% to $5,226M as inventory corrections hit. Now recovering strongly with industrial broadening.
P/E(ttm) at 36x is above the 5-year average of ~24x, reflecting the market’s bet that this analog recovery is the beginning of a multi-year upturn, not another false start. TI’s 300mm capacity advantage and inventory positioning should drive operating leverage as revenue scales.

Past 5-Year Key Drivers

300mm wafer manufacturing creates structural cost advantage: TI’s Sherman, Texas fab (DMOS6, RFAB2) produces analog chips at ~40% lower cost per wafer than 200mm competitors. This advantage compounds as revenue scales — incremental gross margins of 75-85% on organic growth. CHIPS Act incentives ($1.6B direct funding + ITC) further subsidize the investment.
Broadest analog portfolio with direct customer relationships: ~80,000 products serving ~100,000 customers through direct channels (no distributor dependency). This breadth means TI wins on total solution, not just individual chip performance. Market share gains accelerate during upturns when competitors face supply constraints — TI’s inventory and capacity allow it to fulfill demand others cannot.
Secular growth in industrial, automotive, and data center: Industrial content per system rising (factory automation, energy infrastructure, grid hardening). Automotive content growing across all powertrains (ICE, hybrid, BEV). Data center power delivery expanding with AI GPU density. These are multi-year structural drivers independent of economic cycles.

Quarterly Key Metrics

USD	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26E
Quarter End	Mar24	Jun24	Sep24	Dec24	Mar25	Jun25	Sep25	Dec25	Mar26	Jun26
Stock	$173	$195	$207	$188	$180	$208	$184	$173	$194	$236
Stock QoQ	-13%	+13%	+6%	-9%	-4%	+15%	-11%	-6%	+12%	+22%
Rev YoY	-16%	-16%	-8%	-2%	+11%	+16%	+14%	+10%	+19%	+24%
OM%	28%	33%	37%	35%	32%	35%	39%	34%	38%	41%
R40	+12%	+17%	+29%	+33%	+44%	+52%	+53%	+44%	+56%	+64%
TTM OP ($M)	$6,420	$5,696	$5,359	$5,226	$5,512	$5,831	$6,114	$6,222	$6,726	$7,407
TTM OP QoQ	-12%	-11%	-6%	-2%	+5%	+6%	+5%	+2%	+8%	+10%
FCF/OP	15%	26%	27%	29%	26%	26%	34%	42%	55%	69%
Debt/EBITDA	1.8x	1.9x	1.9x	1.9x	1.7x	1.8x	1.7x	1.6x	1.5x	1.5x
P/E(ttm)	28x	35x	39x	37x	34x	38x	33x	31x	32x	36x

Recent Stock Performance & Drivers

Stock currently $236, vs $173 (Dec 2025). The +36% rally from the Dec 2025 low reflects the broadening industrial recovery, data center momentum (+90% YoY), and the Q1 beat above the top of guidance. Pricing stability (usually down in Q1) added confidence.
TTM OP bottomed at $5,226M (Q4 2024) and is recovering to $7,407M. Gross margins expanding on 300mm cost leverage as revenue scales. FCF margin recovering from 10.7% trough to 23.6% as CapEx moderates from peak investment phase.
P/E(ttm) at 36x vs 5-year average of ~24x. The premium reflects the market’s bet on sustained analog recovery. If revenue reaches $22-24B (prior peak trajectory), TTM OP could reach $9-10B, bringing P/E closer to 25x on forward earnings.

Opportunities

Industrial recovery broadening to all sectors, regions, and customer sizes. The “tail” of smaller customers is waking up. Industrial is still 15% below 2022 peak despite secular content growth. If the recovery sustains, new peaks are achievable in 2026-2027. CEO: “We deserve a higher peak four years later.”
Data center is a secular growth engine — +90% YoY, 8th consecutive quarter of sequential growth. TI’s unique breadth (general-purpose + application-specific) and ability to supply at scale with no shortages is winning share. GaN technology investments and advanced BCD nodes position TI for next-gen power delivery. Application-specific design wins ramping in H2 2026.
Silicon Labs acquisition expands embedded wireless connectivity TAM. Expected to close H1 2027. Strengthens position in IoT, industrial automation, and smart home. Complements TI’s existing embedded processing portfolio with Bluetooth, Wi-Fi, Zigbee, and Matter protocol capabilities.

Challenges

Last year’s recovery was a false start — H1 2025 was strong but H2 decelerated. CEO acknowledged this explicitly: “We had a very unique 2025 where it started strong and then took a breather.” The sustainability of the current demand signal is the #1 question. Macro uncertainty (tariffs, geopolitics) adds risk.
36x P/E(ttm) prices in a sustained multi-quarter recovery. If demand flattens in H2 like 2025, the stock could pull back 15-20% to the mid-$190s. The 5-year average P/E(ttm) is ~24x. TXN needs to demonstrate several more quarters of 15%+ growth to justify current valuation.
Automotive near peak and not contributing to growth acceleration. Auto revenue is at or near peak levels (mid-single-digit growth, flat Q/Q). If auto weakens while industrial is still recovering, it creates a mixed signal. FCF/OP at 55% is improving but still below the 80%+ long-term target due to elevated CapEx.

Next 12 Months

Q2 guided at $5.0-5.4B revenue ($5.2B midpoint, ~8% Q/Q, slightly above seasonal). EPS $1.77-2.05. If the midpoint holds, first-half revenue growth would be 17-18% YoY. The key is whether H2 sustains or fades like 2025.
Pricing could inflect in H2 2026. CEO indicated that if demand continues at current pace, price increases are likely in H2. This would be the first positive pricing cycle since 2021-2022 and would add to both revenue and margin expansion.
FCF/share likely to exceed $8 target. CFO said probability is “probably high” at current growth rates. At $22B+ revenue, the framework implies $9-10 FCF/share, which would support the stock at 25-30x FCF.

Next 12-24 Months

Silicon Labs integration in 2027 expands wireless connectivity TAM. Adds Bluetooth, Wi-Fi, Zigbee to TI’s embedded portfolio. Cross-selling into TI’s 100,000 direct customer base could accelerate embedded growth beyond the current 12% rate.
300mm capacity advantage widens as CapEx moderates. Phase 1 and 2 investments are largely complete. Phase 3 (incremental equipment) costs far less. As depreciation growth slows, the operating leverage on revenue growth accelerates. This is the “earnings engine” TI has been building for 5 years.
If industrial recovery reaches prior peak + secular growth, revenue could reach $22-24B. At 40%+ OM (achievable at scale on 300mm), that implies $9-10B+ in OP. At 25-30x P/E, the stock has a path to $300+. But this requires 2-3 years of sustained growth without another false start.

Core Metrics Scorecard

	Q3'21	Q4'21	Q1'22	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26E
Quarter End	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24	Dec24	Mar25	Jun25	Sep25	Dec25	Mar26	Jun26
R40 > 40%	✅	✅	✅	✅	✅	✅									✅	✅	✅	✅	✅	✅
R40 accelerate												✅	✅	✅	✅	✅	✅		✅	✅
TTM OP QoQ > 10%																				✅
TTM OP QoQ accelerate	✅		✅							✅		✅	✅	✅	✅	✅			✅	✅
TTM FCF/OP > 60%	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Debt/EBITDA < 3.5	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Total passes	4	3	4	3	3	3	2	2	2	3	2	4	4	4	5	5	4	3	5	6
Stock QoQ	+2%	-2%	-3%	-18%	+1%	+5%	+14%	-3%	-11%	+6%	+2%	+12%	+6%	-9%	-4%	+15%	-11%	-6%	+12%	+22%
P/E(ttm)	24x	22x	20x	16x	16x	17x	20x	21x	21x	24x	28x	35x	39x	37x	34x	38x	33x	31x	32x	36x

TXN is approaching a perfect 6/6 scorecard in Q2 2026E — historically the strongest signal. The last time TXN hit 6 passes was Q2 2021, which preceded the massive supercycle rally. The current 5-pass reading (Q1 2026) already confirms the growth inflection is real. R40 at 56% and accelerating is the strongest reading since 2022.
FCF/OP and Debt/EBITDA always pass — TI’s financial discipline is unwavering. Even during the CapEx-heavy investment phase (2023-2025), both metrics held. FCF/OP is now recovering rapidly (55% and rising) as CapEx moderates. This is the earnings leverage TI has been building toward.

Chart: R40 vs Stock Price (Since 2020)

Chart: Scorecard Total Passes vs Stock Price (Since 2020)

Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.

Disclaimer: This report is for educational purposes only. NO investment advice.