Texas Instruments (TXN) Capital Management Update summary

Strategic Growth and Market Positioning

• Investments are focused on expanding 300mm wafer fab capacity to support long-term growth in industrial and automotive markets, which now represent 75% of revenue and have shown double-digit growth through recent cycles.

• The product portfolio has been strengthened, with over 80,000 analog and embedded processing products, targeting increased semiconductor content in factory automation, robotics, and advanced driver assistance systems.

• Embedded business has been repositioned for growth, aiming for both analog and embedded to be equal contributors.

• Market share recovery is a priority, with expectations to regain previous analog share levels as capacity and inventory constraints are resolved.

• China remains a key market, with strong design momentum and revenue growth, despite increased local competition and pricing pressures.

Capital Investment and Capacity Planning

• Over 60% of a six-year elevated CapEx cycle is complete, with $5B annual CapEx planned through 2025, supporting phased investments in modular, scalable 300mm wafer fabs at Richardson, Lehi, and Sherman.

• For 2026, CapEx is expected to be flexible, ranging from $2B to $5B depending on revenue scenarios, with a floor of $2B-$3B to complete long lead-time investments.

• By 2026, over 90% of wafers are expected to be sourced internally, with more than 70% on 300mm, and over 85% of assembly internalized.

• Modular capacity expansion allows for rapid adjustment to market demand, with CapEx beyond 2026 scalable and potentially dropping to maintenance levels if demand is weak.

• Investment Tax Credit (ITC) benefits of $6-$8B are incorporated into planning, with additional potential upside from $1.6B in proposed CHIPS Act direct funding not yet included.

Financial Outlook and Scenario Analysis

• Four revenue scenarios for 2026 are provided, ranging from $20B (0% CAGR) to $26B (7% CAGR), with associated CapEx and free cash flow per share outcomes ($8-$12 per share).

• Free cash flow per share is expected to approach the long-term trend line by 2026 as CapEx moderates and growth returns, with CapEx aligned to revenue scenarios.

• Gross capital intensity has been revised down from 1.5x to 1.2x revenue growth due to improved equipment throughput and operational efficiencies.

• Depreciation is projected at $2.3-$2.7B in 2026, with future increases tied to revenue-driven CapEx.

• Free cash flow margin is expected to return to or exceed the historical 25%-35% range as CapEx normalizes.