Texas Instruments (NASDAQ:TXN) used its 2026 Capital Management Call to reiterate that it manages the business for long-term owners with an emphasis on growing free cash flow per share, while outlining a lower capital spending outlook for 2026, an updated inventory framework, and details on its manufacturing roadmap and cash return priorities.
Long-term objective and strategy
CEO Haviv Ilan said the company’s objective is to “maximize long-term growth of free cash flow per share,” which management described as the primary driver of long-term shareholder value. Ilan said TI’s strategy centers on three elements: a business model focused on analog and embedded processing; disciplined capital allocation across R&D, manufacturing capacity, acquisitions, and cash returns; and a focus on efficiency to generate more output per dollar of input.
2025 scorecard results and 2026 targets
CFO Rafael Lizardi said TI met its 2025 capital management objectives. He reported capital expenditures of about $4.6 billion in 2025 and cash return of about $6.5 billion, which he said reflects TI’s commitment to returning all free cash flow over time through dividends and share repurchases.
For 2026, TI updated its capital spending target range and inventory framework:
- 2026 CapEx: expected to be $2 billion to $3 billion, down as TI nears completion of major capacity expansions.
- Inventory days target: updated to 150–250 days, which management said is intended to support high customer service levels and stable lead times across market conditions while minimizing obsolescence.
On the question-and-answer portion of the call, Ilan said CapEx in 2026 could trend toward the lower end of the range (closer to $2 billion) if growth is similar to last year, while stronger growth could push spending toward $3 billion as the company equips capacity in phase three of its modular expansion plan.
Growth focus: industrial, automotive, and data center
Ilan said the semiconductor unit recovery is continuing but remains more modest than prior upturns, with units still below a long-term trend line referenced from WSTS data. He said TI has been reshaping its portfolio over the past decade toward analog and embedded products in “large, growing markets,” and noted that TI recently reorganized its end markets to include data center.
He said industrial, automotive, and data center represented around 75% of TI’s revenue in 2025, up from about 43% in 2013. Ilan described continued content expansion in automotive across battery electric, hybrid, and internal combustion vehicles, while characterizing industrial as diverse and long-lived with growth tied to automation, sensing, and energy efficiency. For data center, Ilan outlined a broad opportunity spanning compute, networking, and rack power and thermal management, and cited products such as DC-to-DC voltage regulators, clocks, hot-swap controllers, sensors, interface products, and point-of-load controllers.
Ilan also pointed to a long-term transition toward 800V DC architectures and said TI’s gallium nitride (GaN) technology is expected to enable higher power density per rack.
Manufacturing roadmap, CHIPS Act benefits, and modular CapEx
Management emphasized the benefits of owning and controlling the supply chain, including capacity to support growth, geopolitical dependability, and structural cost advantages as TI expands its 300mm wafer footprint. Ilan said TI expects to increase both the percentage of wafers produced internally and the share produced on 300mm over the next several years.
Ilan said TI has executed its 300mm roadmap “on time” and “on budget” and is transitioning into phase three—equipping and ramping fabs according to demand without requalifications—across most sites. He provided updates across the company’s key 300mm locations:
- RFAB2 (Richardson): transfers from 150mm fabs completed; facility ramping toward full build-out and expected to more than double RFAB1 capacity.
- LFAB1 (Lehi): continuing to ramp, adding new products on 45nm to 65nm processes; transferring products from external foundries; 28nm qualification underway.
- Sherman (SM1/SM2): SM1 clean room complete with production underway and ramping according to demand; SM2 shell complete to reduce future construction lead time.
By 2030, Ilan said TI expects more than 95% of wafers to be sourced internally, with more than 80% on 300mm, and expects to assemble more than 90% internally.
On U.S. CHIPS Act incentives, Ilan noted that the company’s 2026 CapEx outlook does not include CHIPS Act benefits. Lizardi later said TI received about $670 million of cash benefits in 2025, primarily tied to the investment tax credit (ITC), and said the ITC is now 35% versus 25% previously. Lizardi also referenced direct funding activity, including $75 million in direct funding in 2025 and a $555 million receipt in the first quarter tied to milestone completion, while noting that future amounts depend on U.S. CapEx levels.
Free cash flow outlook, capital returns, and Silicon Labs acquisition
Lizardi said operating cash flow in 2025 was $7.2 billion, up about 13% year over year, as recovery began across end markets. He said free cash flow in 2025 was $3.23 per share, up 97% from 2024, and stated TI is “on track” to deliver more than $8 per share of free cash flow in 2026 as growth returns and CapEx moderates. In Q&A, management said free cash flow per share outcomes depend on revenue, and Lizardi suggested modeling changes using a 75%–85% revenue fall-through assumption.
On dividends, Lizardi said TI has increased its dividend for 22 consecutive years, including a 4% increase in the fourth quarter of 2025. He cited a dividend yield of 2.58% as of February 20, 2026. On repurchases, he said TI has reduced shares outstanding 47% since 2004 and ended 2025 with about $20 billion in open authorizations, having repurchased about $1.5 billion of stock in 2025.
Regarding M&A, Lizardi said TI plans to fund its “recently announced acquisition of Silicon Labs” with a combination of cash on hand and debt arranged prior to closing, and said the company expects the transaction to close in the first half of 2027. Ilan described Silicon Labs as a strategic match that enhances embedded wireless connectivity offerings, and management said TI applies financial criteria focused on achieving returns above its cost of capital within three to five years. Lizardi said TI’s weighted average cost of capital is about 10% and described the goal as generating at least that level of free cash flow return on the purchase price by years three to five.
About Texas Instruments (NASDAQ:TXN)
Texas Instruments Inc (NASDAQ: TXN) is a global semiconductor company headquartered in Dallas, Texas, that designs and manufactures analog and embedded processing chips. The company’s products are used across a wide range of end markets, including industrial, automotive, personal electronics, communications and enterprise equipment. TI’s business emphasizes components that condition, convert, manage and move electrical signals—capabilities that are foundational to modern electronic systems.
TI’s product portfolio includes a broad array of analog integrated circuits—such as power management, amplifiers, data converters and interface devices—as well as embedded processors and microcontrollers used to control systems and run real-time applications.
