TEXAS INSTRUMENTS INC (TXN) Q2 2025 Earnings Summary

Executive Summary

Q2 revenue $4.45B and EPS $1.41, both above consensus; revenue +9% q/q and +16% y/y, driven by a broad industrial recovery, while auto declined slightly q/q but grew y/y .
Gross margin expanded 110 bps q/q to ~58% and operating margin reached ~35%; management guided Q3 revenue to $4.45–$4.80B and EPS $1.36–$1.60, implying flattish GM% given higher depreciation .
Tone turned more cautious vs Q1 as management flagged tariff/geopolitical noise and potential Q2 “pull-ins,” especially in China; still sees cyclical recovery progressing with four of five end markets improving .
Cash generation remained strong: TTM CFO $6.44B and FCF $1.76B; TI returned $6.71B to owners over TTM; Q3 dividend maintained at $1.36 per share .
Strategic U.S. manufacturing build-out continues (Sherman, Richardson, Lehi), positioning TI for geopolitically dependable, low-cost 300mm capacity; management expects cash tax rates to be significantly lower for several years due to new U.S. tax law .

What Went Well and What Went Wrong

What Went Well

Industrial revenue “upper teens” y/y and “mid-teens” q/q with broad-based recovery across sectors; China industrial led growth, contributing to overall sequential strength .
Enterprise systems grew ~40% y/y (about 10% q/q), with data center demand strong; management highlighted >50% growth and new SiGe-based capabilities ramping in Sherman .
Gross margin increased 110 bps q/q to ~58%, aided by higher revenue and mix, despite rising depreciation; operating margin reached ~35% .

What Went Wrong

Automotive was down low single digits q/q and only mid-single digits y/y growth, with recovery described as “shallow,” consistent across U.S., Europe, and China .
Management described Q2 as “noisy,” attributing part of strength to tariff-related inventory “pull-ins” in early quarter, normalizing later; hence more conservative Q3 guide relative to Q2 beat .
Net of OI&E and interest expected to be ~$20M unfavorable in Q3 as cash levels declined and interest expense rose, tempering EPS fall-through despite revenue growth .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Billions)	$4.01	$4.07	$4.45
Diluted EPS ($USD)	$1.30	$1.28	$1.41
Gross Profit ($USD Billions)	$2.31	$2.31	$2.58
Gross Margin (%)	58%	57%	58%
Operating Profit ($USD Billions)	$1.38	$1.32	$1.56
Operating Margin (%)	34%	33%	35%

Q2 2025 vs Estimates	Consensus*	Actual	Beat/Miss
Revenue ($USD Billions)	$4.315*	$4.448	Beat
EPS ($USD)	$1.366*	$1.41	Beat

Values with asterisk (*) retrieved from S&P Global.

Segment performance

Segment	Q1 2025 Revenue ($USD Millions)	Q2 2025 Revenue ($USD Millions)	Q1 2025 Op Profit ($USD Millions)	Q2 2025 Op Profit ($USD Millions)
Analog	$3,210	$3,452	$1,206	$1,325
Embedded Processing	$647	$679	$40	$85
Other	$212	$317	$78	$153

Key performance indicators

KPI	Q1 2025	Q2 2025
Cash from Operations ($USD Millions)	$849	$1,860
Capital Expenditures ($USD Millions)	$1,123	$1,305
Free Cash Flow ($USD Millions)	($14)	$555
Inventory ($USD Billions)	$4.69	$4.81
Inventory Days	240	231
Dividends Paid (Quarter) ($USD Millions)	$1,238	$1,235
Stock Repurchases (Quarter) ($USD Millions)	$653	$302
Total Debt Outstanding ($USD Billions)	$12.95	$14.15
Cash & ST Investments ($USD Billions)	~$5.0	$5.36 (cash $3.04 + ST investments $2.32)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Billions)	Q2 2025	$4.17–$4.53	N/A	N/A
EPS ($USD)	Q2 2025	$1.21–$1.47	N/A	N/A
Revenue ($USD Billions)	Q3 2025	N/A	$4.45–$4.80	New range
EPS ($USD)	Q3 2025	N/A	$1.36–$1.60	New range
Gross Margin (%)	Q3 2025	N/A	About flat vs Q2	Maintained
OpEx ($USD)	Q3 2025	N/A	About flat vs Q2	Maintained
Net OI&E vs Interest	Q3 2025	N/A	Unfavorable by ~$20M	New headwind
Effective Tax Rate	Q2/Q3 2025	12–13% (Q2)	~12–13% (Q3 guide); GAAP tax rate to rise in Q3 due to new law, then decrease in 2026; cash tax significantly lower for several years	Updated framework
Dividend per Share	Q3 2025	N/A	$1.36 declared payable Aug 12, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
Industrial recovery	Down low-single digits q/q; bottoming in some sectors; energy infra/automation still weak	“Upper single digits” q/q; broad recovery; low customer inventories	“Upper teens” y/y and “mid-teens” q/q; broad across sectors; China led	Accelerating
Automotive	Mid-single digit q/q decline; China stronger offsetting weakness elsewhere	Low single-digit q/q growth; shallow cycle	Down low single digits q/q; shallow recovery y/y; consignment/real-time ordering	Lagging
Tariffs/geopolitics	Competitive dynamics stable; China important; no investigation notification	Preparing for evolving tariffs; dual flows/logistics flexibility	Q2 “pull-ins” in early quarter; tariffs paused; cautious Q3 guide	Noise moderating, still influential
AI/data center	Enterprise mixed; no specific AI detail	Enterprise up mid-single digits; turns strengthening	Data center growth >50% y/y; expanding app-specific positions; new SiGe tech in Sherman	Structural tailwind
Inventory/turns	Turns drove Q4 beat; inventory 241 days	Lead times short; turns high; inventory up to $4.69B	Inventory $4.81B, days down to 231; turns continued acceleration	Healthy replenishment
Capex/depreciation	Elevated Capex (~$4.8B ’24); GM pressured; LFAB underutilization impacts embedded	Capex $5B ’25 target; Q2 loadings to increase slightly; GM up vs Q1	Capex $1.3B in Q2; GM about flat in Q3; depreciation rising; $20M OI&E headwind	Investment phase persisting
Regional trends (China)	China business grew mid-teens y/y; PE and auto strength	China ~20% of rev; dual flow flexibility	China up ~19% q/q, ~32% y/y; auto not a standout; industrial led	Strong but “hot” normalization
Tax and policy	2025 ETR ~12%	Q2 ETR 12–13%	New U.S. law: GAAP tax up in Q3, down in 2026; cash taxes significantly lower for several years	Favorable cash tax outlook

Management Commentary

“Revenue increased 9% sequentially, led by continued broad recovery in industrial, and 16% from the same quarter a year ago.” – Haviv Ilan .
“Gross profit in the quarter was $2.6 billion, or 58% of revenue… Operating profit was $1.6 billion… Net income… $1.41 per share.” – Rafael Lizardi .
“Our customers are increasingly valuing our geopolitically dependable capacity… TI has a unique answer [with U.S. manufacturing footprint].” – Haviv Ilan .
“Data center… is behaving very well this year… growing nicely at a very high level, above that 50%… ramping new technology in Sherman, Texas.” – Haviv Ilan .
“We continue to invest in our competitive advantages… manufacturing and technology, broad product portfolio, reach of our channels, and diverse and long‑lived positions.” – Rafael Lizardi .

Q&A Highlights

Tone and guidance: Management acknowledged Q2 benefited from early-quarter tariff-related “pull-ins,” normalizing later; hence a prudent Q3 outlook despite cycle strength in four of five markets .
Gross margin mechanics: Q3 GM% guided about flat despite higher revenue due to rising depreciation; OpEx about flat; net OI&E/interest ~$20M unfavorable .
Utilization/inventory: Q3 loadings to run “about the same” as Q2; inventory expected to grow but at a slower rate; day levels down to 231 in Q2 .
Automotive: Recovery remains shallow; orders largely real-time (consignment) with low inventories across tiers; regionally consistent sequential performance .
Tax law: GAAP tax rate to rise in Q3; decline in 2026; materially lower cash taxes for several years; Capex plans unchanged ($5B in ’25; $2–$5B in ’26) .

Estimates Context

Q2 2025: TI delivered a clean beat versus consensus, with revenue $4.45B vs $4.32B* and EPS $1.41 vs $1.366*; beats driven by industrial strength and robust turns activity, with early-quarter tariff-related orders contributing . Values retrieved from S&P Global.
Q3 2025: Guidance revenue range $4.45–$4.80B brackets consensus ~$4.64B*; EPS range $1.36–$1.60 brackets consensus ~$1.486*; given net OI&E headwind and depreciation, Street may trim GM/EBIT fall-through assumptions while maintaining cautious auto trajectory . Values retrieved from S&P Global.

Key Takeaways for Investors

Industrial momentum is real and broad; Q3 guide prudently accounts for Q2 “pull-ins,” but the cycle is progressing across most end markets; auto remains the laggard .
Expect near-term gross margin plateauing as depreciation steps up; model lower net OI&E given rising interest expense and lower cash levels in Q3 .
China ran “hot” in Q2 (industrial-led); normalization likely in Q3, reducing risk of double-ordering while maintaining cycle improvement .
U.S. manufacturing build-out is a structural competitive advantage for geopolitically dependable capacity and cost, with data center and SiGe pipelines ramping for 2026+ .
New U.S. tax law is a medium-term FCF catalyst: GAAP tax up in Q3 ’25, down in ’26; cash taxes significantly lower for several years—supportive of dividend durability and opportunistic buybacks .
Embedded margins remain pressured by LFAB underutilization but should inflect as internal manufacturing ramps and mix improves; maintain longer-term embedded contribution in models .
Near-term trading: Stock likely reacts to beats vs Q2 consensus and cautious Q3 tone; watch for data center updates and industrial momentum vs tariff noise; medium-term thesis hinges on cycle normalization, U.S. fab ramp, and FCF leverage from tax law changes .

Notes: 
- Values marked with * are retrieved from S&P Global consensus data via GetEstimates.

Citations: Q2 press release and tables ; Q2 call ; 8‑K 2.02 ; Q1 press release/call ; Q4 press release/call ; Dividend PR ; Manufacturing PR .