✦ The Future BetsNarrow moat

Texas Instruments (TXN) — the future bets

No new markets and no acquisitions. The whole future is a capital cycle ending and the arithmetic that follows.

Texas Instruments' future is not a set of new markets. It is the arithmetic of a capital cycle ending, and it is unusually easy to check.

The whole forward case, in four linesCapital expenditure$4,550M to a guided $2-3bnPricingIncreases from Q3 2026, into 2027Data centre9% of revenue, roughly doublingFree cash flow per share~$3.22, targeted at $8+No new market, no acquisition, no adjacent business being entered.
A capital cycle ending, and the arithmetic that follows.

The capex cliff is the whole thesis. Capital expenditure was $4.55 billion in 2025 and is guided to $2–3 billion for 2026.12 Operating cash flow was $7.15 billion — 40.5% of revenue — so holding that constant and spending $2.5 billion instead of $4.55 billion adds roughly $2 billion to free cash flow before any growth. Management has spoken of free cash flow per share of $8 or more, against about $3.22 generated in 2025.3

Pricing is the second lever and it has just been pulled. After holding prices flat through the first half of 2026, TI began customer-by-customer increases from the third quarter, concentrated in Analog and extending into 2027. Gross margin had already moved from 57.0% to 61.4% on volume alone.4

The data centre is the one genuinely new end market. It is disclosed at 9% of 2025 revenue — data-centre compute, networking, and rack power and thermal management — and it roughly doubled year over year in the June 2026 quarter.5 TI does not make AI accelerators; it makes the power delivery and signal-chain parts around them, which is a smaller and much more durable position in the same boom.

And the activist is still on the register. Elliott took a stake of more than $2.5 billion in 2024 arguing for a dynamic capacity-management strategy and free cash flow of as much as $9 a share by 2026; the chief executive signalled alignment with the proposals.6 Whatever one thinks of the analysis, it has shaped how the company now talks about itself.

None of this is optionality in the way the word usually gets used here. There is no new product, no acquisition, no adjacent market being entered. The bet is that a company which just spent six years and $24 billion on factories gets to stop, and that the factories fill. The number is free cash flow per share.

Moat trajectory: Widening

Capital spending is guided down by roughly half, price increases have started, the data-centre line roughly doubled, and management has put a free-cash-flow-per-share figure in public. Every element of the forward case moved in the same direction this year.

The number that tests this moat
Moat Explorer calc
Free cash flow, first half
About $3,033M in H1 2026, against about $281M

Capex fell as the build-out ended; free cash flow rising toward the $8-a-share target is the whole bet.

How it's calculated: Cash flows from operating activities less capital expenditures: 4,223 - 1,190 against 2,709 - 2,428 (CHIPS Act proceeds excluded).
Source: Texas Instruments Form 10-Q, quarter ended 30 June 2026 ↗
✦ Future bets — beyond today's moat
✦ FUTURE BET 01
The Capex Cliff
The same operating cash flow meeting a capital call two billion dollars smaller is the entire justification for forty times earnings.
✦ FUTURE BET 02
Price, the Lever That Needs No Wafer
Margin rose 4.4 points on volume alone before a single price increase landed.
✦ FUTURE BET 03
The Data Centre, From the Outside
TI sells the power and signal-chain parts around the accelerators, which is a smaller position in the AI boom and a far more durable one.
✦ FUTURE BET 04
Elliott, and the Number in Public
An activist arguing in the company's own vocabulary, about the company's own published number.
References
  1. ReportedCapital expenditure was $4.55 billion in 2025 and is guided to $2–3 billion for 2026.
    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 ↗
  2. ReportedCapital expenditure was $4.55 billion in 2025 and is guided to $2–3 billion for 2026.
    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 ↗
  3. ReportedManagement has spoken of free cash flow per share of $8 or more, against about $3.22 generated in 2025.
    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 ↗
  4. ReportedGross margin had already moved from 57.0% to 61.4% on volume alone.
    Texas Instruments Incorporated, Form 10-Q for the quarter ended 30 June 2026 (SEC, CIK 97476). Revenue $5,463M against $4,448M a year earlier, and $10,288M for the six months against $8,517M; cost of revenue $2,111M; gross profit $3,352M against $2,575M — a 61.4% gross margin against 57.9%; research and development $535M against $527M; selling, general and administrative $490M against $485M; acquisition charges $17M; operating profit $2,310M against $1,563M. Income before income taxes $2,238M; provision for income taxes $258M; net income $1,980M against $1,295M. Basic EPS $2.16 and diluted EPS $2.14, against $1.42 and $1.41, on 920 million diluted shares. — Q2 2026 · publ. 2026-07-24 · source ↗
  5. ReportedIt is disclosed at 9% of 2025 revenue — data-centre compute, networking, and rack power and thermal management — and it roughly doubled year over year in the June 2026 quarter.
    Texas Instruments Incorporated, Form 10-Q for the quarter ended 30 June 2026 (SEC, CIK 97476). Revenue $5,463M against $4,448M a year earlier, and $10,288M for the six months against $8,517M; cost of revenue $2,111M; gross profit $3,352M against $2,575M — a 61.4% gross margin against 57.9%; research and development $535M against $527M; selling, general and administrative $490M against $485M; acquisition charges $17M; operating profit $2,310M against $1,563M. Income before income taxes $2,238M; provision for income taxes $258M; net income $1,980M against $1,295M. Basic EPS $2.16 and diluted EPS $2.14, against $1.42 and $1.41, on 920 million diluted shares. — Q2 2026 · publ. 2026-07-24 · source ↗
  6. ReportedElliott took a stake of more than $2.5 billion in 2024 arguing for a dynamic capacity-management strategy and free cash flow of as much as $9 a share by 2026; the chief executive signalled alignment with the proposals.
    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 ↗
Sources
Generated September 23, 2026