TEXAS INSTRUMENTS INC (TXN) Q3 2025 Earnings Summary

Executive Summary

Q3 revenue $4.74B (+7% q/q, +14% y/y) with growth across all end markets; GAAP EPS $1.48 included a $0.10 reduction not in original guidance . Segment strength: Analog +16% y/y, Embedded +9%, Other +11% .
Q4 guide: revenue $4.22–$4.58B and EPS $1.13–$1.39; management cited lower wafer loadings, higher depreciation, and a ~13% effective tax rate from new U.S. tax law as drivers .
Versus S&P Global consensus: revenue beat ($4.74B vs $4.64B); on an S&P “Primary EPS” basis, TXN delivered a beat ($1.57 vs $1.49), while reported GAAP EPS was $1.48 due to a discrete $0.10 reduction . Values retrieved from S&P Global.
Capital returns and cash generation underpin the narrative: trailing-12M FCF rose 65% to $2.4B; dividend lifted 4% to $1.42 per share (22nd consecutive year) .

What Went Well and What Went Wrong

What Went Well

Broad-based recovery: “Revenue increased 7% sequentially and 14% year over year with growth across all end markets.”
Data center momentum and planned disclosure: fastest-growing market, >50% ytd growth; TI plans to break out “data center” as a distinct market and estimates ~$1.2B 2025 run rate .
Cash generation and returns: trailing-12M CFO $6.9B, FCF $2.4B; $6.6B returned to owners over 12 months .

What Went Wrong

Margin pressure ahead: sequential gross margin down ~50bps in Q3; management guiding further pressure in Q4 from lower loadings and higher depreciation .
EPS headwind: GAAP EPS $1.48 included a $0.10 reduction not in guidance; ~$0.08 tied to restructuring related to closing last 150mm fabs .
Moderate cycle and macro uncertainty: recovery “continuing at a slower pace,” customer inventories low but hesitancy persists, especially in industrial; tariffs/geopolitics remain a swing factor .

Financial Results

Summary vs prior periods and prior year

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($B)	$4.07	$4.45	$4.74
GAAP Diluted EPS ($)	$1.28	$1.41	$1.48 (incl. $0.10 reduction)
Gross Profit ($B)	$2.31	$2.58	$2.72
Operating Profit ($B)	$1.32	$1.56	$1.66
Net Income ($B)	$1.18	$1.30	$1.36
Gross Margin (%)	56.8% (calc; $2.31B/$4.07B)	57.9% (disclosed)	57.0% (disclosed)
Operating Margin (%)	32.5% (calc)	35.1% (calc)	35.1% (calc)

YoY/ QoQ	Q3 2024	Q2→Q3 Seq.	YoY
Revenue ($B)	$4.15	+7%	+14%
GAAP Diluted EPS ($)	$1.47	+$0.07	+$0.01

Segment breakdown

Segment	Q1 2025 Revenue ($MM)	Q2 2025 Revenue ($MM)	Q3 2025 Revenue ($MM)
Analog	$3,210	$3,452	$3,729
Embedded Processing	$647	$679	$709
Other	$212	$317	$304

Segment	Q1 2025 Op Profit ($MM)	Q2 2025 Op Profit ($MM)	Q3 2025 Op Profit ($MM)
Analog	$1,206	$1,325	$1,486
Embedded Processing	$40	$85	$108
Other	$78*	$153	$69*
Note	*Includes restructuring/other		*Includes restructuring/other

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
Cash from Operations ($MM)	$849	$1,860	$2,190
Capital Expenditures ($MM)	$(1,123)	$(1,305)	$(1,197)
FCF (TTM, non-GAAP) ($MM)	$1,715	$1,763	$2,415
Inventory ($MM)	$4,687	$4,812	$4,829
Inventory Days	240	231	215
Dividends Paid (TTM, $MM)	$4,850	$4,900	$4,949
Stock Repurchases (TTM, $MM)	$1,579	$1,810	$1,611
Cash + ST Investments ($MM)	Cash $2,763; ST $2,242	Cash $3,044; ST $2,315	Cash $3,311; ST $1,875

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($B)	Q4 2025	n/a	$4.22–$4.58	New
GAAP EPS ($)	Q4 2025	n/a	$1.13–$1.39	New
Effective Tax Rate	Q4 2025	~12–13% (Q2 outlook)	~13% (reflect new law)	Raised
Effective Tax Rate	FY 2026	13–14% (initial view)	13–14% (reiterated)	Maintained
Depreciation ($B)	FY 2025	$1.8–$2.0	$1.8–$2.0 (no change)	Maintained
Depreciation ($B)	FY 2026	$2.3–$2.7 (likely lower end)	$2.3–$2.7 (lower end)	Maintained
Capex ($B)	FY 2025	~$5	~$5 (no change)	Maintained
Capex ($B)	FY 2026	$2–$5 (to refine later)	$2–$5 (probability skew lower)	Maintained/Skew Lower
OpEx	Q4 2025	n/a	~flat q/q (excl. restructuring)	New color
Dividend per share	Q4 2025	$1.36 (prior declared)	$1.42 (declared Oct 16, payable Nov 12)	Raised 4%

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
AI/Data Center	Framing capacity/inventory; recovery breadth forming	Data center leading enterprise; >50% growth ytd; 2026 tailwinds from Sherman tech	Fastest-growing market; plan to break out “data center”; ~$1.2B 2025 run rate	Strengthening
Supply Chain/Tariffs	Emphasized geopolitically dependable capacity; dual-flow, logistics flexibility	Tariffs noise vs cyclical signal; China up 19% seq.; managing shifts	“Moderate recovery,” lower loadings to avoid inventory build; prepared for scenarios	Normalizing with caution
Pricing	Volume-driven recovery; no price pass-through commentary	Guidance: GPM ~flat despite higher depreciation	Pricing decline low-single digits for 2025, consistent with learning-curve norms	Slight pressure
Inventory/Loadings	Inventory building from trough to support service	Loadings steady; inventory days 231; plan to moderate depending demand	Lower loadings into Q4; inventory days down to 215; maintain strong customer service	Moderating loadings
Regional Trends (China)	Working closely; flexibility across flows	China +19% seq.; industrial led; auto lagging	China “back to normal”; industrial up ~40% y/y; Q3 didn’t repeat pull-forward	Stabilizing
Regulatory/Tax	Expected 12–13% ETR Q2; evaluating legislation changes	New U.S. tax law expected to lower cash taxes in 2026+	Q4 ETR ~13%; 2026 ~13–14%	Implementing
R&D/Restructuring	Continued disciplined allocation	Capex/Depreciation framework reiterated	$85M restructuring; closing last 150mm fabs; R&D site consolidations	Transition actions

Management Commentary

“Revenue increased 7% sequentially and 14% year over year with growth across all end markets.”
“Our cash flow from operations of $6.9 billion for the trailing 12 months again underscored the strength of our business model… Free cash flow for the same period was $2.4 billion.”
“We are moderating wafer starts… into fourth quarter. As we do that… you have lower revenue, higher depreciation… that’s how you get to the EPS range.”
“We are planning to break out the data center as a market… TI is running more or less at a $1.2 billion run rate in 2025… fastest growing market.”
“Our fourth quarter outlook includes changes related to the new U.S. tax legislation and now assumes an effective tax rate of about 13%.”

Q&A Highlights

Loadings and gross margin trajectory: Lower loadings in Q4 to keep inventory flat-to-down; higher depreciation drives Q4 margin compression; GPM guided down vs Q3 ranges .
Restructuring specifics: Closure of last 150mm fabs; R&D site consolidation to improve long-term returns; OpEx ~flat q/q in Q4 excluding one-time charges .
Regional normalization: China demand returned to normal; Q3 did not repeat Q2 pull-forward pattern; industrial China up ~40% y/y .
Seasonality and cycle: Q4 guide described as roughly seasonal down; recovery pace “moderate” vs prior cycles; customers keeping low inventories .
Pricing/lead times: Pricing down low single digits for 2025; lead times competitive and stable given inventory position .

Estimates Context

Metric	Q1 2025	Q2 2025	Q3 2025
Primary EPS Consensus Mean ($)*	1.096	1.366	1.486
Primary EPS Actual ($)*	1.280	1.410	1.572 (S&P “Primary”) vs GAAP $1.48
EPS # of Estimates*	13	20	21
Revenue Consensus Mean ($MM)*	3,911	4,315	4,640
Revenue Actual ($MM)	4,069	4,448	4,742
Revenue # of Estimates*	25	33	32

Values retrieved from S&P Global.
Note: TXN reported GAAP EPS $1.48 in Q3; S&P “Primary EPS” actual $1.57 reflects normalized methodology. GAAP EPS included a $0.10 reduction not anticipated in original guidance .

Key Takeaways for Investors

Broad-based top-line strength with sequential/YoY growth and segment breadth; revenue beat consensus, while GAAP EPS was impacted by a discrete $0.10 reduction—on S&P Primary EPS basis, EPS beat . Values retrieved from S&P Global.
Near-term margin headwind: Q4 EPS guide below Q3 on lower loadings and higher depreciation; expect gross margin down from Q3 and ETR ~13% reflecting new tax law .
Structural cash flow improving: Trailing-12M FCF +65% to $2.4B and dividend increased 4%; management remains committed to returning all FCF to owners .
Capacity strategy: Inventory days down to 215 with loadings moderated to avoid stock build; strong service levels maintained through dual-flow/geopolitical flexibility .
Data center disclosure ahead: TI intends to break out data center; 2025 run-rate ~$1.2B and >50% ytd growth—possible 2026 tailwinds as Sherman/Lehi investments ramp .
Watch industrial trajectory: Q3 industrial up ~25% y/y and low-single-digit seq; management notes customer hesitancy and moderate cycle—monitor for sustained breadth vs pull-forward risk .
Trading implications: Near-term caution on margins/Q4 seasonality; medium-term thesis supported by capacity, portfolio breadth, growing data center exposure, and improving FCF conversion .

Appendix: Additional Data

End-market color (management)

Industrial: ~+25% y/y; low-single-digit q/q .
Automotive: upper single digits y/y; ~10% q/q; growth across all regions .
Personal Electronics: low single digits y/y; upper single-digit q/q .
Enterprise Systems: ~+35% y/y; ~+20% q/q .
Communications Equipment: ~+45% y/y; ~+10% q/q .