TXN · Q4 2025 Earnings

Cautious

Texas Instruments

Reported January 27, 2026

30-second summary

Q4 revenue of $4.423B (+10.4% YoY, -7% QoQ) landed mid-range against the prior $4.22–4.58B guide and GAAP EPS of $1.27 cleared the midpoint, but the real signal is the Q1 FY2026 guide: revenue $4.32–4.68B (mid $4.50B, ~+1.7% QoQ) and EPS $1.22–1.48 (mid $1.35, +6% QoQ) — the first sequential up-guide in years and well above the "historically down slightly" framing management used three months ago. Industrial grew 18% YoY in Q4 with data center at a ~$450M quarterly run rate (seven straight quarters of growth), and management explicitly disclaimed pricing as a Q1 driver. The cautious cycle posture from Q2–Q3 has been replaced by "recovery is continuing," but with the qualifier that 75% of revenue now sits in industrial/auto/data center and the rest is shrinking.

Headline numbers

EPS

Q4 FY2025

$1.27

Revenue

Q4 FY2025

$4.42B

+10.4% YoY

Gross margin

Q4 FY2025

55.9%

Free cash flow

Q4 FY2025

$1.33B

Operating margin

Q4 FY2025

33.3%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$4.42B	+10.4%	$4.74B	-6.7%
EPS	$1.27	—	$1.48	-14.2%
Gross margin	55.9%	—	57.4%	-150bps
Operating margin	33.3%	—	35.1%	-180bps
Free cash flow	$1.33B	—	$1.07B	+24.4%

Guidance

TI reaffirmed full-year FY2026 tax guidance at 13–14% while raising Q1 FY2026 revenue and EPS outlook to $4.32–4.68B and $1.22–1.48, reflecting continued semiconductor market recovery and strong positioning in analog, embedded, and data-center segments.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q4 FY2025	$4.22B to $4.58B	$4.423B	within guide range, at lower-middle of band	Beat
EPS (GAAP)	Q4 FY2025	$1.13 to $1.39	$1.27	within guide range, upper-middle of band	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q1 FY2026	$4.32B to $4.68B	—
EPS (GAAP)	Q1 FY2026	$1.22 to $1.48	—

Reaffirmed unchanged this quarter: Effective Tax Rate (13% to 14%)

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Analog	$3.615B	+14.0%
Embedded Processing	$0.662B	+8.0%
Other	$0.146B	-34.0%

Capacity & utilization

Q4 FY2025

Segment	Q4 FY2025
R&D + SG&A (TTM)	$3.943B
Capital Expenditures (TTM)	$4.550B

Profitability

Q4 FY2025

Segment	Q4 FY2025
Operating Margin	33.3%
Free Cash Flow Margin	16.6%
Trailing 12-Month Operating Cash Flow	$7.153B

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Cash Returned to Shareholders (TTM)	$6.476B

Management tone

Cycle confidence (Q1) → tariff caution (Q2) → explicit deceleration (Q3) → "recovery is continuing" with portfolio repositioning (Q4).

The recovery framing was upgraded for the first time in three quarters. Last quarter management said the upturn was running "at a slower pace than prior upturns"; this quarter the line is "the overall semiconductor market recovery is continuing, and we are well positioned with inventory and capacity to meet immediate customer demand." The "slower than prior upturns" qualifier is gone. The Q1 up-guide is the financial expression of that — three months ago management telegraphed Q1 "historically down slightly"; what they actually issued is flat-to-up sequentially. The Deutsche Bank exchange flagged this as the first sequential up-guidance since the financial crisis.

The capex narrative completed its multi-quarter transition from build to harvest. In Q2 capex was framed as ongoing structural investment ($5B for 2025, $2–5B for 2026). In Q3 management told Goldman the low end of the $20–26B multi-year envelope was "probably more probable." This quarter the framing is finalized: "we're nearing the end of a six-year elevated capex cycle that uniquely positions TI to deliver dependable, low-cost, 300-millimeter capacity at scale" and the 2026 number landed at $2–3B — the low end materialized. That is a meaningful FCF inflection point.

Portfolio framing pivoted from end-market diversification to strategic concentration. Across 2025 management described "all five end markets" as the lens; this quarter the framing narrowed: "industrial automotive and data center combined made up about 75% of TI's revenue in 2025, up from about 43% in 2013… we place additional strategic emphasis on industrial automotive and data center." The other 25% (personal electronics down upper-teens YoY, comms equipment down) is being deprioritized rather than defended. Combined with the Other segment's goodwill impairment, this reads as structural acceptance that consumer-adjacent end markets are no longer part of the growth story.

The order-driver question was the one place management refused to commit. Pressed by JPMorgan on what drove Q4/Q1 order improvement, management acknowledged "I can't tell you why" and cited possible supplier noise and memory shortages as factors they could not isolate. Combined with the Bank of America exchange — Q1 is "only slightly above seasonal," not pricing-driven, expects -2% to -3% pricing in 2026 — the inflection looks demand-led but management is unwilling to attribute it to any specific durable mechanism.

Recurring themes management leaned on this quarter:

Data center acceleration driving portfolio repositioningSecular content growth in analog/embedded applicationsManufacturing capacity positioning after elevated capex cycleSequential market softness despite year-over-year growthFree cash flow expansion and capital returns disciplineChannel diversification and product breadth as competitive advantages

Risks management surfaced:

Personal electronics market declining upper teens year-over-yearCommunications equipment declining low single digits year-over-yearGoodwill impairment in other segment reducing Q4 EPS by 6 centsSequential revenue decline of 7% quarter-over-quarterForward-looking statements involving risks and uncertainties

Q&A highlights

Ross Seymour · Deutsche Bank

Why is Q1 guidance significantly stronger than seasonal, and is this the first sequential up-guidance since the financial crisis? What unique factors in end markets or geography are driving this optimistic view?

Management attributed the strong guidance to continued industrial recovery (18% YoY growth with room to go), sustained data center strength (7 consecutive quarters of growth, now ~$450M quarterly run rate), and improving orders/bookings throughout Q4. Industrial still 25% below 2022 peaks. Data center becoming more substantial portion of revenue. Revenue linearity and backlog building occurred through the quarter.

Industrial revenue grew 18% YoY in Q4Industrial still ~25% below 2022 peak levelsData center revenue run rate ~$450M per quarterData center has grown for 7 consecutive quarters

Jim Snyder · Goldman Sachs

Are inventory levels now optimized, or does management expect to reduce them further? What is the inventory position across technologies?

Management stated they are very pleased with current inventory levels across all technologies, reached through deliberate reduction in loadings. Inventory is viewed as an asset enabling support for real-time/just-in-time demand and turns business. They will adjust loadings as needed based on demand but are not planning further inventory reductions.

Inventory levels optimized across all technologiesLoadings were reduced in prior quarter to optimize inventoryInventory supports real-time/just-in-time demand and turns businessTurns business running at high levels

Harlan Sur · JPMorgan

Is customer hesitation in industrial/factory automation persisting, or are order trends improving? What is driving the industrial business pickup?

Management indicated industrial still 25% below 2022 peak with room for recovery. Saw some hesitation earlier but now seeing order improvements in Q4/Q1, though cannot fully explain causation. Noted potential supplier-related noise and memory shortage issues that may be driving orders. First half of 2025 saw pickup, then calmed down; awaiting visibility on sustainability.

Industrial revenue still ~25% below 2022 peakSecular growth continues with more content per generationOrders showing pickup in Q4/Q1Cannot identify specific drivers of order improvement

Vivek Arora · Bank of America Securities

How much above seasonal is Q1 guidance and what is driving it—pricing or end-market trends? Is TI raising prices in Q1?

Management stated Q1 is only slightly above seasonal (low single-digit to flat range, now guided up). Explicitly stated pricing is NOT driving the beat. Attributed to growing orders (especially industrial) and data center becoming larger portion of mix. Confirmed no pricing action planned for Q1 and expects low single-digit pricing declines overall (similar to 2025 experience of ~2-3% down).

Q1 slightly above typical low single-digit to flat seasonalityNo pricing increases driving Q1 guidanceCompany expects low single-digit (2-3%) pricing declines in 2026No step-function price increases planned

Timothy Akuri · UBS

How quickly will CapEx fall off after 2026? Can it go below $1B? What is the maintenance CapEx floor and ITC/grant capture timing?

Management guided 2026 CapEx at $2-3B (consistent with prior guidance). Characterized maintenance CapEx as mid-single-digit revenue percentage (IBM-like level, always non-zero). Long-term CapEx intensity target is 1.2x revenue growth rate gross, but nets to ~1:1 after 35% ITC benefits. Depreciation expected $2.2-2.4B in 2026, growing at slower pace in 2027. Direct funding remains up to $1.6B based on milestone achievement.

2026 CapEx guidance: $2-3 billionMaintenance CapEx characterized as mid-single-digit % of revenueLong-term CapEx intensity: 1.2x revenue growth (gross), ~1:1 after ITC2026 depreciation: $2.2-2.4 billion

Answers to last quarter's watch list

Whether Q4 actual gross margin holds ~55% or breaks lower — Q4 gross margin printed 55.9%, above the ~55% guide management gave Bernstein on the Q3 call. Not high enough to call it sandbagging, but the conservative guide proved conservative. Status: Resolved positively.

Q1 2026 sequential framing on the February call — Management telegraphed Q1 "historically down slightly" three months ago; the actual guide is +1.7% QoQ at midpoint with a high end up nearly 6%. This is materially better than the prior framing and the first sequential up-guide in years per analyst commentary. Status: Resolved positively.

2026 capex hard number at February Capital Management Day — Disclosed at $2–3B for 2026, the low end of the prior $20–26B multi-year envelope. Combined with the "nearing the end of a six-year elevated capex cycle" language, this is the FCF-positive read. Status: Resolved positively.

Embedded Processing op margin progression — Embedded segment-level op margin not disclosed in the inputs at this granularity for Q4. Segment revenue grew 8% YoY to $662M but down meaningfully from Q3's $709M, suggesting operating leverage may have given back ground. Status: Continue monitoring.

TTM FCF margin breaking above 15% — FY FCF margin reached 16.6%, with Q4 standalone FCF of $1.329B (30.0% margin). The threshold was cleared with room. Status: Resolved positively.

China industrial sequential direction in Q4 — Specific China industrial sequential direction was not called out in the disclosed Q&A. Industrial overall was down mid-single digits sequentially but +18% YoY, with no geographic split disclosed in the inputs. Status: Continue monitoring.

What to watch into next quarter

Whether the Q1 sequential up-guide is followed by Q2 acceleration or reversion — management could not explain Q4/Q1 order improvement; if Q2 guidance lands above typical seasonality (Q2 historically up mid-single digits QoQ), the cycle inflection is real; if Q2 guides flat or reverts, the Q1 strength was pull-in.

Gross margin trajectory back toward 57%+ on Q1's higher revenue base — Q4 printed 55.9% on lower revenue and depreciation drag; Q1 at $4.50B midpoint should mechanically lift gross margin. If it doesn't crack 57%, the loadings cuts from Q3 are still weighing on the cost structure into 2026.

2026 FCF margin trajectory with capex at $2–3B and depreciation $2.2–2.4B — capex/depreciation crossover is approaching; FY FCF margin should accelerate beyond the 16.6% 2025 print. If 2026 FCF margin doesn't reach 20%+, the capex-harvest thesis under-delivers.

Personal electronics and communications equipment trajectory — both down upper-teens / mid-teens sequentially in Q4; if these continue compressing in Q1, the strategic deprioritization is accelerating and the "75% industrial/auto/data center" mix is shifting structurally faster than the headline number suggests.

Data center run rate sustaining $450M+ for an eighth consecutive quarter — seven straight quarters of growth makes this the cleanest secular story in the print; a flat-to-down sequential print here would reframe data center as a 2024–2025 boom rather than a structural revenue line.

Whether full-year revenue/EPS guidance is reinstated — TI has now gone three quarters without a FY revenue/EPS guide, holding only to FY tax-rate disclosure. Reinstating FY guidance would signal management views the cycle as readable again; continuing to withhold it preserves the "range of scenarios" posture even as Q1 was guided up.

Sources

TXN Q4 2025 press release (8-K exhibit 99-ER), filed with SEC: https://www.sec.gov/Archives/edgar/data/97476/000009747626000003/q42025txnex99-eredgar.htm
TXN Q4 2025 earnings call Q&A (as provided in extraction inputs; no full transcript URL on file).

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