⚠ Guidance Is a Plan, and This Plan Has Moved BeforeHigh threat

Texas Instruments (TXN) — threat to the moat

The bull case for revenue is a threat to the bull case for cash, because a strong upturn is a reason to build more.

Capital expenditure guidance is a plan, and this is a company whose plan has already been revised upward once.

Why guidance is not a commitment$5bn/yrthe 2022 plan,through 202623%of revenueat the peak~5%for the precedingdecade$2-3bnnow guided for 2026Management declined to bias the 2026 range toward the lower end.
A strong upturn is a reason to build more, which is the awkward part.

The 2022 capacity plan called for spending to rise toward $5 billion a year through 2026 — roughly 23% of revenue, against about 5% for the preceding decade.1 It is now guided to $2–3 billion for 2026, and management declined to bias that range toward the lower end.2

Everything in the current valuation depends on the lower number arriving. Free cash flow was $2.94 billion in 2025 at 16.6% of revenue; the entire bull case is that the same operating cash flow meets a much smaller capital call.3

The circumstance that would break it is a strong upturn. If demand runs harder than expected, the rational thing for a company with TI's cost structure is to build more capacity — which is exactly what it did in 2022, and exactly what would defer the free-cash-flow inflection again.

That makes this an unusual risk: the bull case for revenue is a threat to the bull case for cash.

Watch quarterly capital expenditure against a $750 million run rate. One quarter above it says the cliff has moved.

References
  1. ReportedThe 2022 capacity plan called for spending to rise toward $5 billion a year through 2026 — roughly 23% of revenue, against about 5% for the preceding decade.
    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 ↗
  2. ReportedThe 2022 capacity plan called for spending to rise toward $5 billion a year through 2026 — roughly 23% of revenue, against about 5% for the preceding decade. It is now guided to $2–3 billion for 2026, and management declined to bias that range toward the lower end.
    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 ↗
  3. Moat Explorer calcFree cash flow was $2.94 billion in 2025 at 16.6% of revenue; the entire bull case is that the same operating cash flow meets a much smaller capital call.
    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 ↗
Sources
Generated September 23, 2026