Texas InstrumentsWide moat

TXN — overall economic moat

Investment snapshot
Wide moat→ Holding steadyConfidenceHighValuationExpensive
Strongest advantage80,000 parts, 100,000 customers
Greatest threatChina is investigating it for dumping
Key metricFree cash flow per share
Verdict: The broadest catalogue and the lowest customer concentration in this collection, sold direct to a hundred thousand buyers at a 40% structural cost advantage per chip. Six years of building that advantage halved the return on capital, and at 40x earnings the market has already paid for the recovery.
📈 TXN valuation, revenue & earnings — P/E, P/S, revenue, EPS →

Texas Instruments makes more than 80,000 different chips and sells them to more than 100,000 customers, and roughly half of its revenue comes from customers outside its largest fifty.1

Texas Instruments revenue by segment, 2025Analog $14.01bn — 79%Embedded Processing $2.70bn — 15%Other $0.98bn — 6%$17.68bn in total. Analog also carries the margin, at a 38.6% operating margin.
One segment is four-fifths of the company and all of the premium.

That sentence is the whole company. Analog and embedded processing chips are the unglamorous parts inside almost everything with a circuit board — the things that convert and amplify signals, manage power, interface with sensors and run small dedicated tasks. They are cheap individually, they stay in production for decades, and no single one of them is important. What matters is having all of them, making them at the lowest cost, and being reachable by anyone who needs one.

The financial shape follows. Revenue was $17.68 billion in 2025, up 13.0%, with gross profit of $10.08 billion — a 57% gross margin — and operating profit of $6.02 billion.2 Net income was $5.00 billion and diluted earnings per share $5.45 on 913 million shares.3 Analog is 79% of it: $14.01 billion of revenue at a 38.6% operating margin, against $2.70 billion for Embedded Processing and about $1.0 billion of Other. By end market, industrial and automotive are 33% each, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%.

Two things make TI different from most semiconductor companies. The first is that it owns its factories and has been building more of them: capital expenditure was $4.55 billion in 2025 against operating cash flow of $7.15 billion, leaving free cash flow of $2.94 billion — 16.6% of revenue.4 The second is the yardstick management uses, which it states in the first paragraph of its own annual report: the growth of free cash flow per share over the long term.

Those two facts are currently in tension, and it is the most interesting thing about the company. Six years of fab building have taken return on invested capital from 49.8% in 2021 to 18.6% in 2025 — not because anything went wrong, but because putting $24 billion into factories is what deploying capital looks like.5 Meanwhile TI returned $6.48 billion to shareholders in 2025 — more than twice its free cash flow — through a dividend of $5.00 billion and $1.48 billion of buybacks, funded partly by issuing debt. An activist investor has been on the register since 2024 arguing that the capacity plan is too large.6

The market is paying for the other side of it. At about $267 a share and $243 billion, TI trades at roughly 40 times earnings and 12.5 times sales — worth 38% more than Qualcomm on a third of the revenue, while earning less than it did in 2022, when EPS was $9.41 against $6.58 today.7 Capital spending is guided down to $2–3 billion for 2026, and the bull case is entirely that the fabs fill up, the depreciation gets absorbed, and free cash flow per share inflects.8

The customer base deserves its own sentence, because it is the opposite of almost everything else in this collection. TI sells to more than 100,000 customers and discloses no concentration at all — there is no 10% customer, no named three, no distributor at 37%.9 More than 80% of revenue is now direct, including through TI.com, after a decade of deliberately moving business away from distributors and building the relationship itself. A company whose largest single risk is a government investigation rather than a customer is a rare thing in semiconductors.

The company has been doing this a long time. Operations began in 1930, it has design, manufacturing or sales in more than 30 countries, and it has raised its dividend for 23 consecutive years. What is different now is only the shape of the capital: over the ten years to 2025 TI allocated $109 billion, of which about $24 billion went into capital expenditure for the six-year build that is now ending. Everything interesting about the next three years is whether that $24 billion earns its keep. Each of its three segments is taken in turn in The Revenue Lines.

The number that tests this moat
Reported
Revenue, and where it comes from
$17.68bn in 2025 — Analog 79%

Analog was $14,006M at a 38.6% operating margin, Embedded Processing $2,700M and Other about $976M. By end market, industrial and automotive were 33% each, personal electronics 21%, data centre 9%, communications equipment 3% and calculators about 1%. More than 100,000 customers, with about half of revenue from outside the largest 50 and no customer above the 10% disclosure threshold. Watch the Analog line: it is four-fifths of the company and the whole of the margin premium.

Source: Texas Instruments Form 10-K, FY2025 ↗
Moat scorecardHow ratings work →
Switching costs8/10
Network effects3/10
Pricing power7/10
Hard to replicate9/10
Disruption resistance7/10
Overall durability8/10

Eighty thousand products no rival can assemble quickly, a hundred thousand customers none of whom can argue about price, and a manufacturing cost advantage bought with six years of depressed returns.

Dig deeper
DIG DEEPER 01
The Revenue Lines
Analog is four-fifths of the revenue and nine-tenths of the profit; the other two segments are smaller than in 2018.
DIG DEEPER 02
The Moat
TI publishes its own four competitive advantages. Three of them survive inspection, and building the first one halved the return on capital.
DIG DEEPER 03
Competitors
Highly fragmented, in TI's own words — dozens of suppliers, and not one front where it is uncontested.
DIG DEEPER 04
Major Clients
A hundred thousand customers, no concentration table, and the lowest revenue concentration in this collection.
✦ Future bets — beyond today's moat
✦ FUTURE BET 01
The Future Bets
No new markets and no acquisitions. The whole future is a capital cycle ending and the arithmetic that follows.
⚠ Threats to the moat
⚠ THREAT 01
The Capital Cycle Ate the Returns
Six years of building the moat cut the return on capital by two-thirds, and it has taken an activist to make that a conversation.
⚠ THREAT 02
China Is Investigating TI for Dumping
A company shipping half its output into the jurisdiction investigating it for dumping, with a ruling due within the year.
◆ What the market may be missing
◆ THE VARIANT VIEW
What the Market Isn't Pricing In
A dividend running at 1.7 times free cash flow, a return on capital that should mechanically reverse, and pricing that has just restarted.
◆ THE VARIANT VIEW
Inside the Latest Quarter (Q2 2026)
Revenue up 23%, operating profit up 48%, and the capital spending guided down to $2-3 billion — the sequence arriving on schedule.
References
  1. ReportedTexas Instruments makes more than 80,000 different chips and sells them to more than 100,000 customers, and roughly half of its revenue comes from customers outside its largest fifty.
    Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗
  2. ReportedRevenue was $17.68 billion in 2025, up 13.0%, with gross profit of $10.08 billion — a 57% gross margin — and operating profit of $6.02 billion.
    Texas Instruments Incorporated, Form 10-K FY2025 — consolidated statements of income and segment results. Revenue $17,682M, up $2.04bn or 13.0%; gross profit $10,081M; operating profit $6,023M; other income net $230M; interest and debt expense $543M; income before income taxes $5,710M; provision for income taxes $709M at an effective rate of 12.4% (12.0% in 2024); net income $5,001M against $4,799M in 2024 and $6,510M in 2023. Basic EPS $5.47 and diluted EPS $5.45, against $5.20 and $7.07 in the two prior years, on 913 million diluted shares. By segment, Analog revenue $14,006M (2024 $12,161M, +15%) with operating profit $5,412M (2024 $4,608M, +17%) at 38.6% of revenue (37.9%); Embedded Processing $2,700M; Other the remainder. Revenue peaked at $20,028M in 2022 with operating profit of $10,140M, and troughed at $15,641M in 2024 with operating profit of $5,465M. — FY2025 · publ. 2026-02-06 · source ↗
  3. ReportedRevenue was $17.68 billion in 2025, up 13.0%, with gross profit of $10.08 billion — a 57% gross margin — and operating profit of $6.02 billion. Net income was $5.00 billion and diluted earnings per share $5.45 on 913 million shares.
    Texas Instruments Incorporated, Form 10-K FY2025 — consolidated statements of income and segment results. Revenue $17,682M, up $2.04bn or 13.0%; gross profit $10,081M; operating profit $6,023M; other income net $230M; interest and debt expense $543M; income before income taxes $5,710M; provision for income taxes $709M at an effective rate of 12.4% (12.0% in 2024); net income $5,001M against $4,799M in 2024 and $6,510M in 2023. Basic EPS $5.47 and diluted EPS $5.45, against $5.20 and $7.07 in the two prior years, on 913 million diluted shares. By segment, Analog revenue $14,006M (2024 $12,161M, +15%) with operating profit $5,412M (2024 $4,608M, +17%) at 38.6% of revenue (37.9%); Embedded Processing $2,700M; Other the remainder. Revenue peaked at $20,028M in 2022 with operating profit of $10,140M, and troughed at $15,641M in 2024 with operating profit of $5,465M. — FY2025 · publ. 2026-02-06 · source ↗
  4. Moat Explorer calcThe first is that it owns its factories and has been building more of them: capital expenditure was $4.55 billion in 2025 against operating cash flow of $7.15 billion, leaving free cash flow of $2.94 billion — 16.6% of revenue.
    Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗
  5. Moat Explorer calcSix years of fab building have taken return on invested capital from 49.8% in 2021 to 18.6% in 2025 — not because anything went wrong, but because putting $24 billion into factories is what deploying capital looks like.
    Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗
  6. ReportedAn activist investor has been on the register since 2024 arguing that the capacity plan is too large.
    Coverage of Elliott Investment Management's stake in Texas Instruments, May 2024. Elliott took a stake of more than $2.5 billion and sent a 13-page letter to the board proposing a dynamic capacity-management strategy that would allow TI to achieve free cash flow of as much as $9 a share by 2026. Elliott's letter focused on the 2022 capital expenditure plan, which called for capital spending to ramp to as much as $5 billion a year from 2023 to 2026 — as much as 23% of revenues, against roughly 5% over the preceding decade — and argued that a reversal in demand since the plan was set would leave capacity levels around 50% above consensus revenue expectations in 2026 and 2030. By Elliott's analysis, free cash flow per share fell from $6.40 in 2022 to $1.47 in 2023. Texas Instruments' chief executive subsequently signalled alignment with the proposals rather than contesting them, and suggested the company could reach $12 per share in 2026. — 2024 · publ. 2024-05-28 · source ↗
  7. ReportedAt about $267 a share and $243 billion, TI trades at roughly 40 times earnings and 12.5 times sales — worth 38% more than Qualcomm on a third of the revenue, while earning less than it did in 2022, when EPS was $9.41 against $6.58 today.
    Texas Instruments (NASDAQ: TXN) market data — share price about $267, market capitalisation about $243.4 billion on 913.25 million shares outstanding, trailing price/earnings about 40.5 and forward price/earnings about 27.5, on trailing revenue of $19.45 billion and trailing net income of $6.02 billion; trailing EPS $6.58 against $9.41 earned in 2022; dividend yield about 2.13%; 52-week range $152.73 to $334.03. — August 2026 · publ. 2026-08-28 · source ↗
  8. ReportedAt about $267 a share and $243 billion, TI trades at roughly 40 times earnings and 12.5 times sales — worth 38% more than Qualcomm on a third of the revenue, while earning less than it did in 2022, when EPS was $9.41 against $6.58 today. Capital spending is guided down to $2–3 billion for 2026, and the bull case is entirely that the fabs fill up, the depreciation gets absorbed, and free cash flow per share inflects.
    Coverage of Texas Instruments' second-quarter 2026 results, July 2026 — revenue of $5.46 billion, up 23% year over year and 13% sequentially against consensus near $5.24 billion; net income of $1.98 billion, up 53%, and EPS of $2.14, up 52% and above the high end of guidance. By segment, Analog revenue was $4.37 billion (up 26%), Embedded Processing $788 million (up 16%) and Other $310 million (down 2%). Industrial revenue grew more than 30% year over year across all sectors and regions, automotive re-accelerated, and data centre revenue roughly doubled. Management guided third-quarter revenue to $5.65-6.15 billion and confirmed 2026 capital expenditure of $2-3 billion, declining to bias the range toward the lower end. After holding pricing flat through the first half, TI began executing customer-by-customer price increases from the third quarter, extending into the fourth quarter and into 2027, concentrated in Analog. Management has framed free cash flow per share of $8 or more as probable for 2026, having earlier suggested $12. The shares fell after hours. — Q2 2026 · publ. 2026-07-24 · source ↗
  9. ReportedTI sells to more than 100,000 customers and discloses no concentration at all — there is no 10% customer, no named three, no distributor at 37%.
    Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗
Sources
Generated September 23, 2026