TEXAS INSTRUMENTS INC (TXN) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $4.01B and EPS $1.30; revenue was slightly above TI’s prior Q4 guidance range high-end ($3.70–$4.00B) and EPS was at the top-end ($1.07–$1.29) with a $0.02 benefit not in guidance; revenue declined 2% YoY and 3% QoQ. Bold: slight top-line beat vs guidance; EPS at high end with discrete benefit .
• Gross margin was 58% and fell ~190 bps QoQ on lower revenue, rising depreciation, and reduced factory loadings; operating margin was ~34% of revenue .
• Analog returned to growth (+2% YoY) after eight quarters of decline; Embedded Processing declined (-18% YoY) with margins pressured by underutilization at LFAB; China grew mid-teens YoY with strength in auto and personal electronics, while Europe/Japan were down low double digits .
• Q1 2025 guidance: revenue $3.74–$4.06B, EPS $0.94–$1.16; 2025 effective tax rate now ~12%; OpEx +3–5% QoQ; OI&E expected to decrease ~$50M QoQ as rates/cash decline .
• Capital and manufacturing update: depreciation guide lowered to $1.8–$2.0B for 2025 (2026 expected at the low end of $2.3–$2.7B) reflecting CHIPS Act awards ($1.6B direct funding booked as receivable) and ITC benefits; TI reiterated $5B capex for 2025 .

What Went Well and What Went Wrong

What Went Well

• Analog revenue grew 2% YoY after eight quarters of decline, signaling stabilization in TI’s largest segment .
• Management continued to return capital: TTM dividends $4.795B and buybacks $929M; Q4 dividend per share was increased 5% YoY to $1.36, marking 21 consecutive years of increases .
• Strategic manufacturing and CHIPS funding support: booked $1.6B direct CHIPS award, reducing expected depreciation and underpinning long-term dependable 300mm capacity; 2025 depreciation lowered to $1.8–$2.0B .
  • Quote: “We’re nearly 70% through a 6-year elevated CapEx cycle… to deliver dependable low-cost 300mm capacity at scale” .

What Went Wrong

• Gross margin compressed ~190 bps QoQ due to lower revenue, higher depreciation, and reduced factory loadings; Q1 GPM expected to decline “a few hundred basis points” further QoQ .
• Embedded Processing revenue fell 18% YoY and margins were disproportionately pressured by underutilization at LFAB (Lehi, Utah) .
• Industrial and automotive end markets experienced modest sequential declines; Europe/Japan down low double digits; inventory increased to $4.5B (241 days), and TI plans to further increase inventory by ~$100M+ in Q1, highlighting ongoing cycle weakness and factory underutilization .

Financial Results

Segment revenue and operating profit

KPIs and capital returns

Notes: EPS included discrete benefits of $0.05 in Q2, $0.03 in Q3, and $0.02 in Q4 not in original guidance .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Revenue decreased 3% sequentially and 2% from the same quarter a year ago… TI’s first quarter outlook is for revenue in the range of $3.74 billion to $4.06 billion and earnings per share between $0.94 and $1.16. We now expect our 2025 effective tax rate to be about 12%.” .
• CFO: “Gross profit in the quarter was $2.3 billion or 58% of revenue… GPM percent [to] decrease probably a few hundred basis points [Q4 to Q1]… OpEx will increase 3% to 5% [QoQ]… interest income is decreasing by about $50 million.” .
• Strategy: “We’re nearly 70% through a 6-year elevated CapEx cycle… to deliver dependable low-cost 300-millimeter capacity at scale… Free cash flow for 2024 was $1.5 billion” .
• Manufacturing transition: Embedded margins pressured due to LFAB underutilization now; expected improvement as LFAB ramps and mix shifts to internal manufacturing .

Q&A Highlights

• Q1 guide dynamics: Seasonal revenue decline; GPM to decrease a few hundred bps QoQ on lower revenue, rising depreciation, reduced loadings; OpEx +3–5% QoQ; OI&E down ~$50M QoQ on lower rates and cash .
• Segment divergence: Embedded margins under pressure due to LFAB underutilization; analog ~1 year ahead in cycle and returned to YoY growth in Q4 .
• China & competition: China mid-teens YoY growth; auto strength; PE recovering; competitive backdrop stable; Europe/Japan down low double digits .
• Inventory strategy: Inventory days 241; target to modestly increase inventory ~$100M+ in Q1 to maintain high service levels; not aiming to drain inventories .
• CHIPS impact & depreciation: $1.6B direct funding booked; 2025 depreciation guided down to $1.8–$2.0B; 2026 expected at low end of $2.3–$2.7B range .

Estimates Context

• Wall Street consensus EPS/Revenue estimates for Q4 2024 from S&P Global were unavailable due to request limits. As a result, we cannot quantify beats/misses vs Street for Q4 in this report. Values retrieved from S&P Global were unavailable.
• Relative to TI’s own Q4 guidance (issued at Q3): revenue slightly exceeded the high end ($4.01B vs $4.00B) and EPS was at/above the top end ($1.30 vs $1.29) aided by a $0.02 discrete benefit .

Key Takeaways for Investors

• Analog stabilization is a constructive inflection: Q4 YoY growth (+2%) after eight quarters of decline suggests mix normalization and potential for margin recovery as factory loadings improve; watch industrial/auto cycle bottoming .
• Near-term margin pressure likely persists into Q1: expect “few hundred bps” GPM decline QoQ, higher OpEx, and lower OI&E; traders should anticipate headline margin compression in Q1 prints .
• Embedded is in transition: LFAB underutilization weighs now, but margins/free cash flow should improve as internal capacity ramps and foundry-to-internal shift progresses through 2025 .
• CHIPS and ITC are meaningful tailwinds: $1.6B direct funding booked and total program benefits of $7.5–$9.5B reduce depreciation and support capex—improving medium-term FCF per share trajectory; 2025 depreciation lowered to $1.8–$2.0B .
• Inventory strategy signals service-level prioritization: inventory days at 241 with expected modest build in Q1; implies continued underloading in Q1 and focus on ready-to-ship availability to capture turn orders .
• Regional dynamics favor China and U.S.: mid-teens China growth and U.S. strength vs Europe/Japan weakness; auto and PE are key demand drivers to monitor .
• Capital returns intact: dividend increased to $1.36 and strong TTM returns ($5.724B total cash returned); supports defensive investor profile despite cycle softness .

Appendix: Additional Data

TTM cash generation and returns (Q4 2024)

End market revenue shares (FY 2024): Industrial 34%; Automotive 35%; Personal Electronics 20%; Enterprise Systems 5%; Communication Equipment 4%; Other 2% .