⚠ A Metric That Rewards Not InvestingModerate threat

Texas Instruments (TXN) — threat to the moat

A yardstick that rewards not investing, and rewards buying back stock at any price.

Free cash flow per share is a good objective and a fragile one, because it can be improved by not investing.

What the metric rewardsInvesting less this yearImproves itBuying back stock at any priceImproves itBuybacks in 2025$1,477M near 32x earningsBuilding a fabReduces it for yearsWhich is how an activist could argue about capacity entirely in the company's own vocabulary.
A good objective, with the distortions every per-share objective has.

TI states the growth of free cash flow per share as its objective and structures its strategy around it.1 The discipline is real: every dollar of capital expenditure is a dollar of free cash flow forgone this year, which forces the trade-off into the open.

The distortion is that the metric rewards underinvestment in exactly the years when investing is cheapest, and rewards buybacks — the per-share denominator — regardless of price. TI repurchased $1.48 billion of stock in 2025 at a multiple near 32 times earnings.2

It also produced the current argument. An activist could contest the capacity plan entirely in the company's own vocabulary, calculating that free cash flow per share had fallen from $6.40 in 2022 to $1.47 in 2023.3

The counter is that TI kept building through the criticism, which is the behaviour of a company that means the "long term" part of the objective.

Watch free cash flow per share across a full cycle, not in any year — which is the same caveat the metric's own definition contains.

References
  1. ReportedTI states the growth of free cash flow per share as its objective and structures its strategy around it.
    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. ReportedTI repurchased $1.48 billion of stock in 2025 at a multiple near 32 times earnings.
    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 ↗
  3. ReportedAn activist could contest the capacity plan entirely in the company's own vocabulary, calculating that free cash flow per share had fallen from $6.40 in 2022 to $1.47 in 2023.
    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