VALUATION HIGHLIGHTS

1. Analog Semiconductors constitute 83% of the Trefis price estimate for Texas Instruments's stock.
2. Embedded Processors constitute 11% of the Trefis price estimate for Texas Instruments's stock.

WHAT HAS CHANGED?

Q4 FY 2025 Earnings

Texas Instruments slightly missed Q4 2025 earnings estimates amid ongoing semiconductor market recovery and data center strength. Earnings came in at $1.27 per share, missing forecasts, while revenue reached $4.42 billion, up 10% year-over-year. Analog revenue grew 14%, and embedded processing rose 8% year-over-year.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Texas Instruments' value that present opportunities for upside or downside to the current Trefis price estimate for Texas Instruments:

Analog semiconductors Revenues

• Analog semiconductors revenues :
  TI’s Analog revenues grew from $10.9 billion in 2020 to approximately $15.4 billion in 2022, driven by strong demand across consumer electronics, automotive, and industrial end markets. The cycle then turned, with revenues declining to $13.0 billion in 2023 and further to $12.2 billion in 2024 amid prolonged weakness in industrial and automotive spending. In 2025, however, Analog revenues rebounded to roughly $14 billion, signaling early signs of a cyclical recovery.
  Looking ahead, we now expect Analog revenues to rise to around $24 billion by 2032, supported by a normalization in industrial demand, increasing semiconductor content in vehicles, and long-duration growth in automation and electrification.
  That said, the analog industry remains highly competitive and R&D-intensive. If TI’s Analog revenues only reach about $17 billion by 2032, this would imply roughly a 10% downside to our price estimate. Conversely, if revenues scale faster and reach closer to $27 billion, our valuation could see approximately 10% upside.
  


• Analog gross profit margin: We forecast the gross margin on analog products to increase from 61% in 2025 to 72% by the end of our review period, as the company increases its production on 300 mm wafer fabrication facilities going ahead. However, it should be noted that there is higher pricing pressure in the semiconductor industry due to fierce competition. Because TI owns much of its manufacturing capacity, a significant portion of its cost is fixed and does not decline with reductions in customer demand or utilization of manufacturing capacity, which can adversely affect profit margins. There could be a downside of more than 10% to our current price estimate if gross margins come in at 65% by the end of our review period.

Embedded Revenues

• Embedded semiconductors revenues: We forecast TI's revenues from embedded semiconductors to increase to over $4.5 billion over our forecast period. However, there could be a 10% upside in our price estimate if TI's revenues from semiconductors were to improve to almost $8 billion by the end of our forecast period.

BUSINESS SUMMARY

Texas Instruments (TI) designs and manufactures semiconductors to sell to electronics designers and manufacturers all over the world. TI has two main reporting segments, which are mainly established along its major product categories:

1. Analog

Analog consists of high-volume analog & logic, high-performance analog, and power management products.

2. Embedded Processing

Embedded Processing consists of processors, microcontrollers, and connectivity products.

3. Others

Other businesses include smaller semiconductor segments such as DLP (Digital Light Processing) products, primarily used in projectors, application-specific integrated circuits (ASICs), and TI's handheld graphing and scientific calculators.

Others also include royalties received for patented technology that is licensed to other electronics companies and revenue from transitional supply agreements entered into in connection with acquisitions and divestitures.

SOURCES OF VALUE

Analog

The Analog segment continues to be the most valuable segment for TI, accounting for almost 78% of its revenues in 2024. TI is the market leader in the analog semiconductor space.

KEY TRENDS

Analog Business benefits from emerging trends

TI's analog business could benefit from technology trends such as 5G and connected automobiles. The ongoing commercial deployment of 5G networks in Western markets could drive demand for TI's Power ICs and related products. The company could also benefit from increasing semiconductor content in automobiles.

Lower dependence on foundry service vendors

In-house wafer fabrication is becoming increasingly necessary to maintain control over process variables and control production at will, which is not always available from foundry service vendors with generic process technology. Having in-house facilities helps to cut down operating costs as well as production costs when there is increased demand. However, the operating costs might increase in periods of lower demand.

The proportion of TI's revenues from 300 mm production is expected to go up

Texas Instruments has continued to scale its 300 mm wafer production for analog chips through 2025. A 300 mm wafer can accommodate roughly 2.3x more chips than a 200 mm wafer, and TI estimates that output from a 300 mm fab is approximately 40% less expensive than chips produced on 200 mm lines.