⚠ Everything Depends on Capex Actually FallingHigh threat

Texas Instruments (TXN) — threat to the moat

One quarter of capital spending above $750 million would say the cliff has moved, and the thesis with it.

The capex guidance is a plan, and TI has revised this plan before.

The one number to check$4,550Mcapitalexpenditure, 2025$2-3bnguided for 2026$750Ma quarter, at theguided run rateAbove itthe cliff has movedManagement declined to bias the range toward the lower end.
Everything downstream of this line depends on it arriving.

Capital spending is guided to $2–3 billion for 2026 against $4.55 billion in 2025 and $4.82 billion in 2024, and management declined to bias the range toward the lower end.12 Everything in the bull case — the free-cash-flow inflection, the return on capital recovering toward the forties, the dividend becoming covered again — depends on that number arriving where it is guided.

The history is not reassuring on this specific point. The 2022 capacity plan called for spending to rise toward $5 billion a year through 2026, which is roughly 23% of revenue against about 5% for the preceding decade, and Elliott's argument was that TI would end up with capacity around 50% above consensus revenue expectations.3 A company that has just spent six years above plan is being asked to spend three years below it.

The counter-argument is that the fabs are largely built: Richardson, Sherman and Lehi are qualifying and ramping rather than being poured.4

Watch quarterly capital expenditure against the $2-3 billion annual guide. One quarter above $750 million would say the cliff is being deferred.

References
  1. ReportedCapital spending is guided to $2–3 billion for 2026 against $4.55 billion in 2025 and $4.82 billion in 2024, and management declined to bias the range toward the lower end.
    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 spending is guided to $2–3 billion for 2026 against $4.55 billion in 2025 and $4.82 billion in 2024, and management declined to bias the range toward the lower end.
    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. ReportedThe 2022 capacity plan called for spending to rise toward $5 billion a year through 2026, which is roughly 23% of revenue against about 5% for the preceding decade, and Elliott's argument was that TI would end up with capacity around 50% above consensus revenue expectations.
    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 ↗
  4. ReportedThe counter-argument is that the fabs are largely built: Richardson, Sherman and Lehi are qualifying and ramping rather than being poured.
    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