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    TXN
    Earnings call· Sep 2025(Q3 FY25)

    TEXAS INSTRUMENTS INC TXN

    Oct 21, 2025 Source

    Executive summary

    Texas Instruments Q3 FY25 — Moderate Recovery Continues, Data Center Strong

    Texas Instruments reported Q3 FY25 results largely as expected, with revenue up 14% year-over-year, driven by strong growth in Analog and Embedded segments. While the overall semiconductor market recovery is proceeding at a moderate pace, the company highlighted robust growth in the data center market. Management is adjusting wafer loadings in Q4 to optimize inventory levels, which will impact gross margins, but remains focused on long-term free cash flow per share growth and disciplined capital allocation.

    Highlights

    5

    • Revenue reached $4.7 billion, marking a 14% year-over-year increase and 7% sequentially.

    • Analog revenue grew 16% year-over-year, and Embedded Processing grew 9% year-over-year.

    • The data center market, a key growth area, is running at a $1.2 billion run rate in 2025 and grew over 50% year-to-date.

    • The company increased its dividend by 4%, marking the 22nd consecutive year of increases.

    • Customer inventories are at low levels, indicating the inventory depletion phase is largely complete.

    Concerns

    6

    • Gross profit margin decreased 50 basis points sequentially to 57%.

    • Earnings per share included a $0.10 reduction due to restructuring charges, with $0.08 specifically for fab closures.

    • Fourth-quarter revenue guidance is $4.22 billion to $4.58 billion, representing a sequential decline.

    • Fourth-quarter EPS guidance is $1.13 to $1.39, also indicating a sequential decrease.

    • The overall semiconductor market recovery is continuing at a slower pace than prior upturns, influenced by macroeconomic uncertainty.

    • Wafer loadings are being adjusted down in Q4 to manage inventory, which will impact gross margins.

    Guidance & targets

    7
    CategoryTargetConfidence
    Revenue
    $4.22 billion to $4.58 billion
    high materiality
    High
    Earnings per share
    $1.13 to $1.39
    high materiality
    High
    Effective tax rate
    about 13%
    medium materiality
    High
    Effective tax rate
    about 13% to 14%
    medium materiality
    High
    Depreciation
    lower end of $2.3 billion to $2.7 billion
    medium materiality
    Medium
    Pricing decline
    low single-digit decline
    low materiality
    High
    Capital expenditure framework
    lower end of $20 billion to $26 billion
    high materiality
    Medium

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Analog
    Grew year-on-year and sequentially.
    		—16%——
    Embedded Processing
    Grew year-on-year and sequentially.
    		—9%——
    Other segment
    Grew from the year-ago quarter.
    		—11%——
    Industrial
    Followed a strong result in the second quarter.
    		—25%low single digits—
    Automotive
    Growth across all regions.
    		—upper single digitsaround 10%—
    Personal electronics
    		—low single digitsupper single digits—
    Enterprise systems
    		—35%about 20%—
    Communications equipment
    		—45%about 10%—

    Operational metrics

    15
    Operating expenses
    $975 millionup 6% from a year ago
    Q3 FY25

    About as expected.

    Operating expenses
    $3.9 billion
    TTM Q3 FY25

    Trailing 12-month operating expenses.

    Operating profit
    $1.7 billionup 7% from the year-ago quarter
    Q3 FY25
    Net income
    $1.4 billion
    Q3 FY25
    EPS reduction from restructuring
    $0.08
    Q3 FY25

    Related to efforts to drive operational efficiencies, including planned closures of 250-millimeter fabs.

    CHIPS Act incentives
    $637 million
    TTM Q3 FY25

    Includes a $75 million payment received in Q3 related to direct funding agreement.

    Dividends paid
    $1.2 billion
    Q3 FY25
    Stock repurchases
    $119 million
    Q3 FY25
    Total capital returned to owners
    $6.6 billion
    TTM Q3 FY25

    Includes buybacks and dividends.

    Cash and short-term investments balance
    $5.2 billion
    Q3 FY25

    At the end of the third quarter.

    Total debt outstanding
    $14 billion
    Q3 FY25
    Dividend increase
    4%
    September 2025

    Marking the 22nd consecutive year of dividend increases.

    Pricing decline
    low single-digit
    FY25

    Expected for the full year 2025.

    Data Center market run rate
    $1.2 billion
    2025

    Current run rate for the data center market.

    Data Center market growth
    >50%
    YTD

    Fastest-growing market for TI.

    Industry KPIs

    6
    MetricValueDetails
    Lead times—
    Ai data center revenue$1.2 billionUSD
    Fab capacity utilization—
    Bookings net order intake—
    Inventory channel inventory$4.8 billionUSD
    End market segment revenue mixIndustrial: up 25% YoY, low single digits sequentially; Automotive: up upper single digits YoY, ~10% sequentially; Personal electronics: up low single digits YoY, upper single digits sequentially; Enterprise systems: up 35% YoY, ~20% sequentially; Communications equipment: up 45% YoY, ~10% sequentially%

    Capital programs

    2
    250-millimeter fab closuresunderway

    Benefit: Operational efficiency, cost reduction

    Planned closures of the last two 250-millimeter fabs in Sherman and Dallas. Last wafers started in Q3 FY25. Expected gradual cost reduction through H1 FY26.

    Lehi 2 expansionunderway

    Investments in Utah in Lehi 2 are continuing as planned.

    Risks & headwinds

    3
    Slower pace of semiconductor market recovery

    Slower pace than prior upturns

    Mitigation: Well-positioned with capacity and inventory; flexibility to support a range of scenarios.

    Hesitancy in customer CapEx

    Customers in 'wait-and-see' mode

    Mitigation: TI is ready for any scenario, capable of serving quick growth or continued moderate recovery.

    Lower loadings impacting gross marginsQ4 FY25

    Impact on gross margins

    Mitigation: Disciplined inventory management to maintain customer service while optimizing capital allocation.

    What to watch in Q4 FY25

    5

    Data Center market breakout

    Q1 FY26
    CurrentCurrently embedded in other segments, $1.2B run rate in 2025, >50% YTD growth
    TargetFormal breakout as a market segment

    Why it matters

    Provides clearer visibility into a key growth driver for TI and its contribution to overall performance.

    I think we indicated before and we'll provide more color in Q1, we are planning to break out data center as a market for the company.

    Q&A highlights

    7

    How did bookings linearity in Q3 compare to Q2, where it softened through the quarter?

    Q3 bookings linearity was 'as expected' and more stable than Q2, which saw fluctuations due to trade and tariff tensions. The turns business followed a typical cyclical recovery pattern.

    “Yes, this quarter was -- kind of came in as expected and not similar to what we saw in Q2. It was a little bit hectic with the tensions related to trade and tariffs, we saw a lot of change through the quarter. This was more of as expected quarters -- through the quarter in July, August and September.”

    asked by Timothy Arcuri · answered by Haviv Ilan

    2 min read6 chapters

    Detailed Narrative

    01

    Market Environment and Recovery Pace

    The overall semiconductor market recovery is continuing but at a slower pace than previous upturns, attributed to broader macroeconomic dynamics and uncertainty. Customer inventories are reported to be at low levels, and the inventory depletion phase appears to be complete. Management noted a 'wait-and-see' mode among industrial customers due to regulatory uncertainties, contributing to the moderate recovery.

    02

    Q3 Revenue Performance by End Market

    The industrial market increased 25% year-over-year and low single digits sequentially. Automotive grew upper single digits year-over-year and about 10% sequentially, with growth across all regions. Personal electronics saw low single-digit year-over-year growth and upper single-digit sequential growth. Enterprise systems were up 35% year-over-year and 20% sequentially, while communications equipment grew 45% year-over-year and 10% sequentially.

    03

    Data Center Market Focus

    Texas Instruments plans to break out data center as a market segment in Q1, noting it currently sits across enterprise, communications, and industrial segments. The data center market is running at a $1.2 billion run rate in 2025 and is the fastest-growing market, up over 50% year-to-date. This segment is characterized by strong customer investment and no foreseeable slowdown.

    04

    Restructuring and Operational Efficiency

    The company is undergoing restructuring efforts to drive operational efficiencies. This includes the planned closure of its last two 250-millimeter fabs (6-inch fabs) in Sherman and Dallas, with the last wafers started in Q3. This is expected to lead to a gradual reduction in costs related to these factories through the first half of 2026. Additionally, TI is consolidating some R&D sites.

    05

    Inventory Management and Loadings

    Texas Instruments is pleased with its current inventory position of $4.8 billion, representing 215 days of inventory, which supports short lead times and high customer service. To maintain these levels given lower Q4 revenue guidance, wafer loadings will be adjusted down in Q4, following a similar adjustment in Q3. This strategic move is expected to impact gross margins but is viewed as a disciplined approach to capital allocation.

    06

    Capital Management and Shareholder Returns

    Cash flow from operations was $2.2 billion in Q3, and free cash flow on a trailing 12-month basis was $2.4 billion, including $637 million from CHIPS Act incentives. The company paid $1.2 billion in dividends and repurchased $119 million of stock in Q3. The dividend was increased by 4%, marking the 22nd consecutive year of increases, reflecting a commitment to return free cash flow to owners.

    AI-generated summary of the company’s earnings call. Not investment advice.