• EN

    • -+ 0.00%
    -+ 0.00%
    -+ 0.00%

    Does Texas Instruments' Shrinking Free Cash Flow Margin Reshape the Capital Investment Story for TXN?

    Simply Wall St·01/04/2026 22:22:41
    Listen to the news
    • In recent years, Texas Instruments, the world’s largest analog chipmaker, has reported a 2.4% annual sales decline, a 13.5 percentage point drop in operating margin, and a 28.5 percentage point fall in free cash flow margin as it ramps up investment to protect its market position.
    • These weaker profitability trends and heavier capital spending have raised fresh questions about how effectively Texas Instruments can balance growth, efficiency, and competitive intensity through the current semiconductor cycle.
    • We’ll now examine how Texas Instruments’ sharply lower free cash flow margin and rising investment needs affect the existing investment narrative.

    Find companies with promising cash flow potential yet trading below their fair value.

    Texas Instruments Investment Narrative Recap

    To own Texas Instruments, you need to believe its heavy spending on new fabs will ultimately support resilient analog demand and healthy long term returns, despite near term pressure on margins and free cash flow. The recent drop in free cash flow margin highlights the key short term catalyst and risk in one: whether these investments begin to translate into better earnings before concerns about commoditization, overcapacity, or weaker industrial and auto demand grow louder. So far, the news does not appear to change that core debate in a material way.

    Against this backdrop, Texas Instruments’ steady dividend actions in 2024 and 2025, including the increase to US$1.42 per share in September 2025, stand out. While free cash flow has been squeezed by higher capital expenditure, continuing to raise and affirm the dividend underscores management’s current confidence in the company’s cash generation capacity, which matters for investors weighing today’s margin pressure against TI’s long running capital return track record.

    Yet beneath the comfort of ongoing dividends, investors should be aware that rising in house manufacturing capacity and the risk of underutilized fabs could...

    Read the full narrative on Texas Instruments (it's free!)

    Texas Instruments' narrative projects $22.3 billion revenue and $7.9 billion earnings by 2028.

    Uncover how Texas Instruments' forecasts yield a $188.92 fair value, a 6% upside to its current price.

    Exploring Other Perspectives

    TXN 1-Year Stock Price Chart
    TXN 1-Year Stock Price Chart

    Some of the most optimistic analysts previously expected revenue to reach about US$27.9 billion and earnings US$11.7 billion by 2028, which sits in sharp contrast to today’s margin compression and weak free cash flow, reminding you that views on TI’s future can differ widely and may need revisiting as fresh data comes in.

    Explore 10 other fair value estimates on Texas Instruments - why the stock might be worth 23% less than the current price!

    Build Your Own Texas Instruments Narrative

    Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

    Curious About Other Options?

    Opportunities like this don't last. These are today's most promising picks. Check them out now:

    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.