Analytical review · Quarter ended 30.6.2026 (Q2 2026)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. Texas Instruments' Form 10-Q for the quarter ended 30 June 2026, filed 24 July 2026; the Q1 2026 10-Q; the Form 10-K for 2025; the April and July 2026 earnings releases; and Form 8-K filings on the dividend increase and the CFO transition. Market data: closing price on 9.10.2026 and the Bank of Israel representative USD rate for the same day. The company's next quarterly report is scheduled for 21.10.2026 and is not included here.
Texas Instruments designs, manufactures and sells analog and embedded processing chips. Analog chips convert real-world signals — sound, temperature, pressure, light — and manage power in every electronic device. Embedded processors are the "brains" of machines, vehicles and industrial equipment. The company is headquartered in Dallas, Texas, and has about 33,000 employees. Unlike most chipmakers, it owns and operates most of its own fabs.
Revenue for the 12 months ended June 2026 was $19.5 billion. Analog was 80% of revenue in the latest quarter. According to the annual report, industrial and automotive were each about one third of 2025 revenue, data center 9% and personal electronics 21%. More than 80% of sales are made directly to customers rather than through distributors. One end customer, not named, accounted for 12% of 2025 revenue.
In February 2026 the company signed an agreement to acquire Silicon Labs, a wireless connectivity chipmaker, for $231 per share in cash, an enterprise value of about $7.5 billion. According to management, closing is planned for the first half of 2027, subject to regulatory approvals. The company has no controlling shareholder. Haviv Ilan is CEO and Chairman. A new CFO from inside the company took office in August 2026.
In the April–June 2026 quarter revenue rose 23% to $5.46 billion. According to the earnings release, growth was led by industrial, data center and automotive. Gross profit rose by $777 million, while R&D and SG&A rose by only $13 million. Operating margin therefore rose from 35.1% to 42.3%, and net income rose 53% to $1.98 billion.
What to read carefully: the company notes that a significant portion of its costs is fixed, and that margins rise as factory loadings rise. Under its accounting policy, the cost of underutilized capacity is expensed as incurred. Part of the margin improvement therefore reflects a return to higher utilization, a mechanism that works in both directions. In addition, in each of the two 2026 quarters EPS included a benefit of about 5 cents that was not in the original guidance, mainly from discrete tax items. The effective tax rate was 12%.
| $ millions | Q2-25 | Q3-25 | Q4-25 | Q1-26 | Q2-26 |
|---|---|---|---|---|---|
| Revenue | 4,448 | 4,742 | 4,423 | 4,825 | 5,463 |
| Gross margin | 57.9% | 57.4% | 55.9% | 58.0% | 61.4% |
| Operating margin | 35.1% | 35.1% | 33.3% | 37.5% | 42.3% |
| Net income | 1,295 | 1,364 | 1,163 | 1,545 | 1,980 |
| Diluted EPS ($) | 1.41 | 1.48 | 1.28* | 1.68 | 2.14 |
| Operating cash flow | 1,860 | 2,190 | 2,254 | 1,520 | 2,703 |
| Capital expenditures | 1,305 | 1,197 | 925 | 676 | 514 |
* Q4 2025 is derived as the annual figure less the sum of the first three quarters.
2022 was the peak year: revenue of $20.0 billion and a 50.6% operating margin. In 2023–2024 revenue fell to $15.6 billion, while the company raised capital spending to about $5 billion a year to build new fabs in Texas and Utah. As a result, depreciation rose from $0.9 billion in 2022 to about $2.1 billion over the last 12 months, and free cash flow fell to $1.3–1.5 billion in 2023–2024. Trailing 12-month revenue is still slightly below 2022.
| $ billions | 2021 | 2022 | 2023 | 2024 | 2025 | 12 months to 6.2026 |
|---|---|---|---|---|---|---|
| Revenue | 18.3 | 20.0 | 17.5 | 15.6 | 17.7 | 19.5 |
| Operating margin | 48.8% | 50.6% | 41.8% | 34.9% | 34.1% | 37.3% |
| Net income | 7.8 | 8.7 | 6.5 | 4.8 | 5.0 | 6.1 |
| EPS ($) | 8.26 | 9.41 | 7.07 | 5.20 | 5.45 | 6.58 |
| Capital expenditures | 2.5 | 2.8 | 5.1 | 4.8 | 4.6 | 3.3 |
| Depreciation | 0.8 | 0.9 | 1.2 | 1.5 | 1.9 | 2.1 |
| Free cash flow, company definition | 6.3 | 5.9 | 1.3 | 1.5 | 2.9 | 6.5 |
At 30.6.2026 the company held $7.0 billion in cash and short-term investments, against $14.15 billion of debt in twenty note series with coupons of 1.1%–5.2% and maturities to 2063. Net debt is $7.1 billion, and operating profit covers interest expense about 13 times. Shareholders' equity rose to $18.0 billion. Inventory fell to $4.6 billion, and days of inventory fell from 222 at the end of 2025 to 196.
US CHIPS Act incentives: the company receives a 35% investment tax credit on qualifying manufacturing investments, plus direct funding of up to $1.6 billion for its fabs in Sherman, Texas and Lehi, Utah. So far $630 million of the direct funding has been received. CHIPS receivables on the balance sheet fell from $3.35 billion at the end of 2025 to $2.16 billion. The incentives appear in two places: in cash flow ($1.18 billion of proceeds and $0.43 billion of tax credit over 12 months), and in earnings — according to the annual report, they reduced depreciation expense by $353 million in 2025. According to the filing, direct funding is based on milestones, and the agreement includes clawback rights.
Capital return: over the last 12 months the company paid $5.1 billion in dividends and repurchased $0.7 billion of stock. In September 2026 it announced a 7% increase in the quarterly dividend to $1.52, the 23rd consecutive annual increase. Q2 buybacks totalled $27 million, all in April. In the first half of 2026 the company received $754 million from employee option exercises, versus $185 million of buybacks, and shares outstanding rose 0.4% over the year.
Financing the Silicon Labs deal: in June 2026 the company signed a 364-day delayed-draw term loan of up to $5 billion, available only if the deal closes. According to management, the deal is to be funded with cash and debt.
The company reports two main segments — Analog and Embedded Processing — and an "Other" segment that includes DLP products, calculators and custom chips. Manufacturing costs, including depreciation, are charged to segments on a per-unit basis.
| Q2, $ millions | Revenue 2025 | Revenue 2026 | Change | Op. margin 2025 | Op. margin 2026 |
|---|---|---|---|---|---|
| Analog | 3,452 | 4,365 | +26% | 38.4% | 45.6% |
| Embedded Processing | 679 | 788 | +16% | 12.5% | 21.3% |
| Other | 317 | 310 | −2% | 48.3% | 48.4% |
Analog: both product lines grew, led by Signal Chain. Embedded Processing: margin nearly doubled. According to the filing, the Utah fab, bought as an operating fab, continues to ramp, and its costs fall mainly on this segment. As loadings rise, the segment's margin improves more than Analog's.
Geography (by customer headquarters, Q2): United States 39%, China 22%, Europe, Middle East and Africa 20%, rest of Asia 11%, Japan 6%.
The company describes four advantages: owned manufacturing and technology, a broad product portfolio (more than 80,000 products per the annual report), market channels that are mostly direct, and diversity and longevity of products, markets and customer positions. According to the filing, a chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer. The company also presents its US capacity as "geopolitically dependable" for customers.
Where the filings show pressure: the company describes the analog and embedded market as "highly fragmented", with dozens of large and small competitors, including "emerging companies, particularly in Asia". China is 22% of revenue. The filings contain no quantitative data on selling prices or market share. This review does not include primary-source competitor data.
At Texas Instruments, the central question is what the company's "normal" earnings are after six years of building. The trailing 12 months include two weak quarters from late 2025; the latest quarter includes a sharp rise in factory loadings. Measuring on the trailing 12 months, or multiplying the latest quarter by four, gives two very different pictures of the same company. Both are partial.
The investment cycle is ending. In 2023–2025 the company invested $4.6–5.1 billion a year in fabs. According to management, 2026 capital spending will be $2–3 billion, and beyond that it depends on revenue and growth. Q2 capex was $514 million. That difference flows straight into free cash flow.
The depreciation stays. Depreciation rose from 4.6% of revenue in 2022 to about 10.9% over the last 12 months. This is a main reason why gross margin (61.4% in the quarter) is below 2022 (68.8%) even at similar revenue. Reported depreciation is already net of a reduction from CHIPS Act incentives.
Operating leverage in both directions. In Q2 each additional dollar of revenue brought about 77 cents of gross profit, and operating expenses barely moved. According to the filing, part of this relates to factory loadings: the cost of unused capacity is expensed as incurred. When loadings rise, that cost falls. When loadings fall, it returns.
Two definitions of free cash flow. The company defines free cash flow as operating cash flow less capex plus CHIPS Act incentive proceeds. On that definition: $6.5 billion over 12 months. Without any CHIPS benefit: $4.9 billion. The incentives are calculated on manufacturing investment, so their size depends on the level of investment.
"Free cash flow per share" — and the denominator. Management defines long-term growth of free cash flow per share as the key measure for owners. Over the last year shares outstanding rose 0.4%: employee option exercises exceeded buybacks. Buybacks fell from $1.5 billion in 2025 to $185 million in the first half of 2026, and none have been made since May.
The dividend relative to cash flow. At the new rate the dividend totals about $5.55 billion a year. In 2025 the company paid $5.0 billion of dividends against $2.9 billion of free cash flow, funding the gap from cash and debt. Over the last 12 months, free cash flow excluding CHIPS benefits covered about 89% of the dividend at the new rate. If capex lands at the midpoint of management's range, coverage reaches about 100%.
Silicon Labs. According to Silicon Labs' own filings, its revenue for the 12 months to June 2026 was about $856 million, with an operating loss. The deal value of about $7.5 billion is about 8.8 times that revenue, and about 2.9% of Texas Instruments' market cap. If the deal closes with the funding management described, net debt rises. Closing is subject to regulatory approvals.
The multiple relative to history. The year-end P/E in 2021–2025 ranged from 17 to 36, with a median of 23.9. On 9.10.2026 it stood at about 43 on trailing 12-month earnings. On 2022 EPS ($9.41) the multiple is about 30. Market cap has risen about 64% since the end of 2025. These figures describe the starting point; they do not set the direction.
This framework is intended to structure analysis, not to produce an investment conclusion. It does not participate in the decision — the decision is the reader's.
| # | Item | Latest reading |
|---|---|---|
| 1 | Revenue vs the range presented by management | $5.65–6.15 billion for Q3 |
| 2 | Gross margin and gross profit added per extra dollar of revenue | 61.4%; about 77 cents |
| 3 | EPS excluding discrete tax benefits | About $2.09 in Q2 |
| 4 | Capital expenditures and incentive proceeds | $514 million; $549 million |
| 5 | Days of inventory | 196 |
| 6 | Diluted share count | 920 million |
| 7 | Embedded Processing margin | 21.3% |
| 8 | Status of approvals for the Silicon Labs deal | Open |
The scenarios below are descriptive, not predictive. They contain no prices, no probabilities, and no ranking of outcomes. Their only purpose is to organize the conditions that would need to hold for each state to materialize, so they can be checked against future reports.
Scenarios are descriptive, not predictive.
The six questions below are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company on the same six dimensions as every other company.
1. In the April–June 2026 quarter Texas Instruments reported revenue of $5.46 billion (+23%) and EPS of $2.14 (+52%). Operating margin rose from 35.1% to 42.3% while operating expenses rose 1%. According to management, Q3 revenue will be in a range of $5.65–6.15 billion.
2. Capital expenditures fell from $1.31 billion in Q2 2025 to $0.51 billion in Q2 2026. Trailing 12-month free cash flow was $6.5 billion on the company's definition, and $4.9 billion excluding CHIPS Act incentives.
3. Depreciation rose from $0.9 billion in 2022 to about $2.1 billion over the last 12 months. Gross margin in the quarter (61.4%) is below the 2022 level (68.8%).
4. In February 2026 the company agreed to acquire Silicon Labs for about $7.5 billion in cash. In September 2026 the dividend was raised 7%, the 23rd consecutive year. Shares outstanding rose 0.4% over the last year.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held a licensed investment adviser license in 2008–2023. As of the date of publication, the company does not hold an investment advice, investment marketing or portfolio management license.
This document is for research and professional learning purposes only. Nothing herein constitutes a recommendation to buy, sell, hold or take any action in securities. It is not a substitute for advice that takes into account each person's data and needs. Any decision is the investor's sole responsibility.
Past performance does not indicate future performance. Data was drawn from official sources: the Form 10-Q for the quarter ended 30.6.2026 (24.7.2026), the Q1 2026 10-Q, the Form 10-K for 2025 (6.2.2026), the company's quarterly earnings releases and Form 8-K filings with the US Securities and Exchange Commission, and Silicon Labs' reporting data. Historical multiples and price: stockanalysis.com. Reporting updates published after this date are not included.
The full analytical review of Texas Instruments (TXN) for the quarter ended June 2026 is available to Bakshi Finance premium clients.
It includes a 10-section analysis, "How to Think About This Company", a structured scenario framework and a 6-dimension Analytical Lens.