Amid the AI hype on the stock markets, the semiconductor sector has performed particularly well for investors. However, manufacturers of analog circuit solutions receive significantly less attention than manufacturers of AI chips.
This market is expected to continue growing by 5 to 6 percent annually, driven by factors such as self-driving cars, Industry 4.0, IoT, smart homes, and medical technology.
The biggest beneficiary could be the largest supplier of analog microchips, Texas Instruments (ISIN US8825081040).
Source: StocksGuide Charts
We first highlighted this stock about five years ago, in the midst of the COVID-19 tech boom (Texas Instruments Stock: A Winner of the Chip Shortage).
Since that analysis, the stock has gained only a few percentage points and has, from a technical perspective, been trapped in a narrow trading range ever since. Its performance has thus lagged significantly behind the indices and is far from satisfactory for investors.
We’ll take a look at the latest developments at the semiconductor giant and venture a forecast.
Can Texas Instruments accelerate its growth again?
How has capital been deployed in recent years?
What challenges must the company overcome?
Let’s dive into the Texas Instruments stock analysis.
Who doesn’t remember Texas Instruments calculators from their school days? The American company’s calculators, used in nearly every classroom, are still being produced. However, at 2 percent, they account for only a small portion of the business. Yet they are symbolic of the Texan company’s product range and business model.
For many decades, Texas Instruments has been the market leader in so-called analog semiconductors. These are integrated circuits (ICs) that perform simpler tasks compared to their highly complex counterparts in the AI sector. This can include powering a calculator, lighting in a car, turning an electric toothbrush on and off, volume control in a smartphone, and much more.
Source: Texas Instruments 2024 Annual Report
In short: Analog chips are used in applications where the size and performance of the semiconductor play a somewhat secondary role.
That is why Texas Instruments does not develop its chips for the nanometer range, as do AMD (Advanced Micro Devices) or industry leader Nvidia, but rather in the range between 300 and 400 micrometers.
While AI chips are built for high-performance data centers and leading companies can command very high prices for their semiconductors, analog chips, on the other hand, are intended to be developed, produced, and delivered as cost-effectively as possible.
For this reason, Texas Instruments has switched its production from 200mm wafers (silicon discs required as raw material for semiconductor manufacturing) to 300mm wafers. This switch reduced manufacturing costs by 40 percent.
The company could then pass these cost savings on to its approximately 100,000 end customers in the form of lower prices, thereby increasing sales volume.
In a fragmented sector, this could give Texas Instruments a competitive advantage through economies of scale. The company currently holds a market share of around 18 percent.
The Texas-based company offers over 80,000 different products. With a combined share of approximately 70 percent of total revenue, the focus is on the automotive and industrial sectors.
Here, the product range extends from switching solutions for infotainment systems to driver assistance systems, vehicle lighting, and safety warning systems. In the industrial sector, Texas Instruments is active in automated production and also offers chips for energy infrastructure and robotics. Semiconductors for consumer electronics—such as computers, TVs, cell phones, game consoles, printers, and many others—account for 20 percent of the market. Here, the focus is on wireless switching solutions such as Wi-Fi or Bluetooth.
To further diversify, the company recently acquired Silicon Labs for $7.5 billion. This company manufactures ICs for wireless devices.
The product portfolio is thus broadly diversified, and Texas Instruments is not particularly dependent on any single sector.
However, the automotive and personal electronics sectors are considered particularly sensitive to economic cycles.
Source: StocksGuide Ai
TI manufactures its chips not only in the United States, but all over the world. Texas Instruments has facilities in Germany (near Munich), Japan, Taiwan, Mexico, India, Singapore, Malaysia, and the Philippines.
This allows the company to keep shipping costs as low as possible, since logistics routes are short across all relevant continents.
Texas Instruments' revenue is derived from its Analog, Embedded, and Other divisions. In 2025, total revenue amounted to $17.68 billion. Analog semiconductors dominate the mix, accounting for approximately 80 percent. This segment also posted revenue growth of 15 percent, reaching $14 billion.
Operating income rose by 17 percent to $5.4 billion.
Source: Q4 2025 Texas Instruments
The picture is quite different in the other two segments, however. The embedded circuits segment generated approximately $2.7 billion in revenue, representing a 6 percent increase. However, EBIT in this segment, at $304 million, was 14 percent below the previous year’s figure.Embedded chips can be intelligent circuit solutions that, for example, perform a task in a car’s engine control system or function as an inverter in an electric vehicle to convert battery power into motor power.The Other segment generated $970 million. This includes semiconductors for applications such as screen backlighting, the famous TI calculators, or chips for the aerospace and defense industries. This segment achieved 3 percent revenue growth.However, operating income was only $307 million. This represented a 39 percent decline.Geographically, we do not see any significant concentration risk.
Source: Texas Instruments 10-K Filing 2025
At 38 percent, the focus is clearly on the U.S. This is followed by EMEA (Europe, the Middle East, and Africa) and China, each accounting for 21 percent, and the rest of Asia (excluding Japan) at 11 percent. Japan alone accounts for 7 percent, and all other countries combined account for 2 percent.
Upon examining the revenue distribution, we observe that Texas Instruments’ success is heavily dependent on analog semiconductors. Geographically, the 21 percent exposure to China is within a healthy range. The U.S. and EMEA regions together account for approximately 60 percent of revenue.
Texas Instruments is known for its CEOs having long tenures. Since the company’s founding, the average tenure has been nearly a decade.
The current CEO, Haviv Ilan, has been in office since 2023 and succeeded the legendary CEO Rich Templeton, who held the position almost continuously since 2004.
Under Templeton, Texas Instruments evolved into the global powerhouse for analog and embedded semiconductors that it is today. In recent years, over $30 billion has been invested in expanding production capacity to meet higher demand following the transition to 300mm wafers.
The most important metric for management is the long-term growth of free cash flow per share.
Let’s take a look at the development of this metric, which is so important to management, over the past few years.
Source: StocksGuide Charts
Due to heavy investments in recent years, free cash flow per share has declined significantly and currently stands at just $2.57.
Operating cash flow—that is, cash flow before capital expenditures—stands at $7.15 billion, still well below the levels seen during the COVID-19 years and at the same level as in 2019.
Thus, the high expenditures are not yet reflected in the cash flows.
This should be a key focus for interested investors in the quarterly reports over the coming months and years.
A few weeks ago, Texas Instruments announced its quarterly results for the December quarter.
Revenue rose by 10 percent to $4.42 billion. Product costs, however, rose by 15 percent, leaving a gross profit of $2.47 billion. This represented a 7 percent increase compared to the same quarter last year. Due to higher depreciation and an increase in research and development costs, EBIT rose by 9 percent to $1.5 billion.
Source: Financial data
Net income fell by 4 percent compared to the same quarter last year. Revenue was $1.1 billion.
Profitability falls short of investors’ and management’s expectations, but this can be explained as follows: Heavy investment in new factories is driving up production costs and thereby squeezing the gross margin.
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After exceeding 70 percent in 2021, the gross profit margin has fallen below 60 percent. The increased fixed costs cannot be offset by savings in operating expenses. In addition, the Texas-based company has financed its high capital expenditures by taking out new loans, resulting in higher interest expenses and principal payments.
Source: Texas Instruments
In addition, Texas Instruments paid higher corporate income taxes (provision for income taxes), which ultimately resulted in lower net income.
For the coming quarters, higher utilization of the new factories is crucial to reduce production costs per unit and thus report higher operating income and net income.
Analysts are optimistic about Texas Instruments for the coming years. Double-digit revenue growth is expected for 2026 through 2028.
Source: Revenue estimates
On average, revenue of approximately $29 billion is expected for 2030. This would represent an annual increase of around 8.5 percent. Analysts are anticipating a recovery in the cyclical automotive and industrial sectors, as well as full utilization of the increased capacity in the U.S.
Analysts are even more optimistic about earnings per share (EPS (TTM) explained simply) for the coming years. Annual growth rates of between 19 and 21 percent are expected.
Source: EPS
After many years of stagnation, these growth rates are likely to give investors hope that the company is back on a growth trajectory following the very strong pandemic years and the subsequent consolidation.
However, Texas Instruments is also heavily dependent on cyclical sectors. If demand remains subdued, these forecasts may not be met.
Texas Instruments recently made it into the top scorers according to the Levermann strategy. It achieved the minimum required 4 points exactly. Meanwhile, the score has dropped to just 3 points, as the stock’s performance over the last 6 months has not generated any additional points.
Nevertheless, the composition of the score is encouraging, as the company earns its points through key balance sheet metrics rather than solely through short-term technical factors.
Source: Levermann analysis
The stock earns one point each for its 30 percent return on equity, its 47 percent equity ratio, and its EBIT margin of approximately 35 percent.
Taken individually, all these figures are impressive. The EBIT margin, in particular, stands out for a low-cost semiconductor manufacturer.
Source: EBIT margin
For every dollar of revenue, the company generates 35 cents in operating profit. This indicates very good cost control at all levels of the company. The decline in the EBIT margin is not yet a cause for concern. The high margins seen during the chip shortage of 2021–2022 are not a sustainable benchmark. Investors should nevertheless watch for stabilization.
The stock can also earn points for technical factors. Another point is added to the credit side for its price performance over the past 12 months.
Points are deducted, however, for valuation metrics. Both the current price-to-earnings ratio (P/E ratio) and the average over the last five years are in the range of 30, placing them well outside the positive corridor. A value of 12 or less would have been required here.
Texas Instruments stock earns additional points for its most recently reported earnings growth and the price reaction on the day of the latest earnings release.
To summarize the score, the points earned in the first three categories are particularly encouraging, as these are more sustainable and more important for the company’s overall valuation than short-term technical factors. However, the stock’s valuation does not speak well for the company. But we’ll get into that in more detail later.
In my opinion, despite a 14 percent price correction over the past month, the valuation of Texas Instruments stock has not yet reached an attractive level.
Source: key metrics
Let’s go over the key metrics. The price-to-earnings ratio (P/E ratio) currently stands at 35 (based on the last 12 months) and at 29 based on expected annual earnings for 2026. However, these figures do not yet reflect the impact of the geopolitical developments of the past few weeks. The enterprise value-to-sales (EV/Sales) ratio, at a factor of 10, is significantly elevated for a capital-intensive and cyclical semiconductor company. The average ratio over the past few years has been between 6 and 7. As a reminder, Texas Instruments owns its own manufacturing facilities and has expanded them significantly in recent years. We saw in the latest quarterly results how these increased unit costs impact profitability when capacity utilization is too low. AMD and Nvidia rely on contract manufacturing through companies like TSMC and have a correspondingly less capital-intensive business model.
The impact of the Iran conflict on the global economy is not yet foreseeable, and the stock’s valuation is currently unattractive in light of this. Texas Instruments’ next quarterly results should give investors insight into whether the expected annual targets can be met. I consider a decline in the stock to a level of $130 to $120 to be realistic. This would correspond to an expected P/E ratio of 18 to 20 and would be a significantly more attractive entry level.
Source: StocksGuide AI
Management has made significant investments in recent years to prepare for a sharp rise in demand. If this does not materialize, the operating costs of the new factories could squeeze margins and lead to a decline in profits.
Cash flow conversion would also deteriorate in this scenario, resulting in smaller dividend increases and reduced share buyback programs.
A great company isn’t always an attractive investment right away. That’s the conclusion we can draw about Texas Instruments.
The company operates globally, has a broad product and customer portfolio, and is indispensable to the automotive, industrial, and electronics sectors.
The transition from 200mm to 300mm wafers could improve the gross margin in the long term and ensure that the EBIT margin rises back toward 40 percent.
This could deliver the profit growth of around 20 percent forecast by analysts over the next few years, though the company will still need time to get there.
The stock price could therefore remain in its 5-year sideways phase, and investors would have to settle for steady dividend payments.
These have been consistently increased for many years, placing the company in the select circle of dividend aristocrats, with over 25 consecutive annual increases.
Source: Dividend history
The current ratings from analysts are similarly cautious.
The author and/or persons or companies associated with StocksGuide own or may own shares of Texas Instrument. This article represents an expression of opinion and does not constitute investment advice. Please note the legal information.