TXN Q1 2026 Earnings Transcript

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Date

Wednesday, April 22, 2026 at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Haviv Ilan
• Chief Financial Officer — Rafael R. Lizardi
• Vice President, Investor Relations — Mike Beckman

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Takeaways

• Revenue -- $4.8 billion, up 9% sequentially and 19% year over year.
• Analog revenue -- Increased 22% year over year, with broad-based growth across sectors and regions.
• Embedded processing revenue -- Rose 12% year over year, contributing to sequential expansion.
• Other segment revenue -- Declined 16% year over year, offsetting gains in core segments.
• Industrial end market -- Grew over 30% year over year and over 20% sequentially, with all geographies contributing.
• Data center end market -- Expanded about 90% year over year and more than 25% sequentially.
• Automotive end market -- Increased mid-single digits year over year and remained flat sequentially; China region declined, other regions rose.
• Communications equipment segment -- Advanced roughly 25% year over year and over 30% sequentially.
• Personal electronics -- Flat year over year and grew low single digits sequentially.
• Gross profit -- $2.8 billion, or 58% of revenue; margin up 210 basis points sequentially.
• Operating expenses -- $974 million, in line with expectations; $3.9 billion on trailing 12-month basis representing 21% of revenue.
• Operating profit -- $1.8 billion, or 37% of revenue, representing 37% year-over-year growth.
• Net income and EPS -- $1.5 billion net income, or $1.68 per share; EPS included a $0.05 benefit primarily from discrete tax items.
• Free cash flow -- Trailing twelve-month free cash flow was $4.4 billion, up from $1.7 billion in 2025.
• CHIPS Act incentives -- $965 million included in trailing-twelve-month free cash flow; $555 million received in the quarter tied to Sherman, Texas fab production.
• Capital expenditures -- $676 million in the quarter; $4.1 billion over twelve months; guided 2026 CapEx remains $2 billion-$3 billion.
• Inventory -- $4.7 billion at quarter end, down $109 million sequentially and inventory days decreased to 209 from 222 previously.
• Balance sheet -- $5.1 billion in cash and short-term investments; $14 billion in total debt at a 4% weighted average coupon.
• Shareholder returns -- $1.3 billion paid in dividends and $158 million in share repurchases in the quarter; $6 billion returned over twelve months.
• Fiscal Q2 outlook (period ending June 30, 2026) -- Revenue expected between $5.0 billion and $5.4 billion; EPS projected at $1.77-$2.05; 13% effective tax rate guided.
• Acquisition announcement -- Entered agreement to acquire Silicon Labs, targeting enhanced embedded wireless connectivity leadership; anticipated close in 2027, subject to regulatory approval.
• Pricing dynamics -- "Pricing was stable, flat if you will, like-for-like, both sequentially, Q4 to Q1, and also year over year, Q1 2026 versus Q1 2025."
• Gross margin guidance -- CFO Rafael R. Lizardi said, "The fall-through that you should expect is in the 75% to 85% that we have guided," referencing incremental margins excluding depreciation.
• Free cash flow per share outlook -- "Assuming we do not have another false start, I think it is very likely we will easily be at $8 free cash flow per share for 2026."

Risks

• CEO Haviv Ilan stated, "That is the biggest question I have for myself for the second half. But at least the fact that Industrial is still trending below previous peaks and the secular growth in Data Center," signaling uncertainty regarding demand sustainability.
• Management reiterated caution about second-half performance, referencing prior "false start" patterns and macroeconomic/geopolitical risks that could affect growth trajectories.
• Exposure to inventory risk remains as CFO Rafael R. Lizardi said, "Right now, we are at 209. It should drift towards the lower end. And then during the downturn, that is when we build inventory and it moves upward. So high level, in an ideal scenario, that is what you would see in terms of days of inventory."
• Acquisition-related expenses will be recurring, with the CFO stating, "You should expect to continue to have charges there every quarter at the tune of what we just reported in first quarter. We will continue having those there every quarter until we close."

Summary

Texas Instruments (NASDAQ:TXN) delivered sequential and annual revenue growth in its Analog and Embedded Processing segments, highlighted by Industrial and Data Center end markets. Pricing remained stable across analog products, with management flagging the potential for positive resets in the second half pending demand strength. Operating margin expansion was supported by higher gross profit and controlled operating expenses. Management detailed a pending acquisition of Silicon Labs to augment embedded wireless connectivity offerings and provided fiscal Q2 guidance reflecting above-seasonal expectations. The call emphasized continued capital discipline, prepared manufacturing and inventory positions, and provided a framework for rising free cash flow per share as revenue grows.

• The company received $555 million in direct CHIPS Act funding in the quarter, related to new Sherman, Texas fab production milestones.
• Incremental gross margin fall-through guidance remains at 75%-85%, with acquisitional expenses anticipated as recurring through and after the Silicon Labs transaction closes.
• End market growth was broad-based in Industrial, exceeding 30% year over year, while Data Center posted roughly 90% year-over-year growth.
• CapEx for 2026 remains targeted at $2 billion-$3 billion, with a growing focus on internalizing back-end assembly and test given identified capacity bottlenecks in the market.
• Management stressed ongoing monitoring of inventory levels, aiming to support customer service and accommodate variable demand scenarios, with explicit statements that inventory days are expected to drift lower during the upcycle.
• The move to acquire Silicon Labs is intended to expand product portfolio breadth and leverage internally owned technology, with integration strategies focused on maintaining GAAP reporting and transparent disclosure of all acquisition-related impacts.

Industry glossary

• CHIPS Act: U.S. government legislation providing incentives, including direct funding and tax credits, to support semiconductor manufacturing and research.
• AT (Assembly and Test): Back-end semiconductor manufacturing stage involving package assembly and functionality testing before products ship to customers.
• Wafer fab: Facility where semiconductor wafers are fabricated; such as the referenced 300-millimeter fab in Sherman, Texas.
• Fall-through: The percentage of incremental sales that convert to profit or margin after accounting for variable costs, here cited as 75%-85% in gross margin guidance.
• VRM (Voltage Regulator Module): Power management circuit supplying stable voltage to processors, with specific reference to Data Center applications.
• ITC (Investment Tax Credit): Tax credit received by companies for investments in qualified manufacturing capital expenditures as referenced by management for long-term incentive benefits.
• ASSP (Application-Specific Standard Product): Standardized semiconductor products designed for a particular application, cited as part of the general-purpose product portfolio for Data Center sockets.
• BCD (Bipolar-CMOS-DMOS): A semiconductor process technology combining bipolar, CMOS, and DMOS transistors, enabling advanced power management circuits as referenced in Data Center segment remarks.

Full Conference Call Transcript

Haviv Ilan: Thanks, Mike. Before I go into the results, I want to highlight that in the first quarter, we announced an agreement for Texas Instruments Incorporated to acquire Silicon Labs. This transaction enhances our global leadership in embedded wireless connectivity, expands Texas Instruments Incorporated's portfolio, and leverages Texas Instruments Incorporated's internally owned technology and manufacturing and reach of market channels. We expect the transaction to close in 2027 subject to necessary approval. Now let me provide a quick overview of the first quarter. Revenue was $4.8 billion, an increase of 9% sequentially and an increase of 19% year over year. Analog and Embedded both grew sequentially and year over year.

Analog revenue grew 22% year over year and Embedded Processing grew 12%. Our Other segment declined 16% from the year-ago quarter. Let me provide a few comments about the current market environment. In the first quarter, revenue came in above the top of the range as we saw continued acceleration in Industrial and Data Center. The overall semiconductor market recovery is continuing, and we remain well positioned with inventory and capacity that allows us to support our customers with competitive lead times through the cycle. Now I will share some additional insights into first quarter revenue by end market.

First, Industrial increased more than 30% year over year and was up more than 20% sequentially, growing broadly across all sectors and regions. Automotive increased mid-single digits year over year and was about flat sequentially. Data Center grew about 90% year over year and grew more than 25% sequentially. Personal Electronics was flat year over year and grew low single digits sequentially. And lastly, Communications Equipment grew about 25% year over year and grew more than 30% sequentially. With that, let me turn it over to Rafael to review profitability and capital management.

Rafael R. Lizardi: Thanks, Haviv, and good afternoon, everyone. As Haviv mentioned, first quarter revenue was $4.8 billion. Gross profit in the quarter was $2.8 billion, or 58% of revenue. Sequentially, gross profit margin increased 210 basis points. Operating expenses in the quarter were $974 million, about as expected. On a trailing twelve-month basis, operating expenses were $3.9 billion, or 21% of revenue. Operating profit was $1.8 billion in the quarter, or 37% of revenue, and was up 37% from the year-ago quarter. Net income in the quarter was $1.5 billion, or $1.68 per share. Earnings per share included a $0.05 benefit for items not in our original guidance, primarily due to discrete tax benefits.

Let me now comment on our capital management results. Starting with our cash generation, cash flow from operations was $1.5 billion in the quarter, and $7.8 billion on a trailing twelve-month basis. Capital expenditures were $676 million in the quarter and $4.1 billion over the last twelve months. Free cash flow on a trailing twelve-month basis was $4.4 billion, up from $1.7 billion in 2025, trending up as growth returns and CapEx begins to moderate. Free cash flow in the trailing twelve months includes $965 million of CHIPS Act incentives.

This includes a $555 million payment received in the first quarter as part of our direct funding agreement related to the start of production at our newest 300-millimeter wafer fab in Sherman, Texas. In the quarter, we paid $1.3 billion in dividends and repurchased $158 million of our stock. In total, we returned $6 billion to our owners in the past twelve months. Our balance sheet remains strong with $5.1 billion of cash and short-term investments at the end of the first quarter. Total debt outstanding is $14 billion with a weighted average coupon of 4%.

Inventory at the end of the quarter was $4.7 billion, down $109 million from the prior quarter, and days were 209, down thirteen days sequentially. Turning to our outlook for the second quarter, we expect Texas Instruments Incorporated's revenue in the range of $5.0 billion to $5.4 billion and earnings per share to be in the range of $1.77 to $2.05. We expect our effective tax rate to be about 13% in the second quarter. In closing, we will stay focused in the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long-lived positions.

We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities, which we believe will enable us to continue to deliver free cash flow per share growth over the long term. With that, let me turn it back to Mike.

Mike Beckman: Operator, you can now open the line for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we will provide you an opportunity for an additional follow-up. Operator?

Operator: Thank you. We will now be conducting a question-and-answer session. You may press 2 to remove your question from the queue. For participants using speaker equipment, please pick up your handset before pressing the keys. Please hold for a moment while we poll for questions. Our first question is from Timothy Arcuri with UBS.

Timothy Arcuri: Thanks a lot. Haviv, I wonder if you can comment on the behavior of customers. I know you are guiding up a little better than seasonal off of a number in March that was very strong. So it sounds like it is mostly Industrial, but can you comment on whether there are rush orders? We are seeing signs of price increases and things like that. So is this impacting the customers' behavior? Thanks.

Haviv Ilan: Yeah, thanks, Tim. In general, I think Q1 was a continuation of what we saw in Q4, similar behavior, meaning growth coming from two main areas, led by Industrial, as you mentioned, and also supported by the Data Center market that we have seen secular growth in for the last couple of years. This was the eighth quarter of sequential growth, just off of a higher number, so that also helps the overall growth of the company. I will say that the Industrial signal was a little bit broader this time, so I would say all sectors, all geographies grew sequentially, and it continued to accelerate through the quarter.

If you think about January, February, and then you always want to see how the exit from the Lunar or the Chinese New Year break is going to look, but it continued in March. So just a continuation. I would say it is our five or six months of continued growth in Industrial. We want to keep watching it, but I would say that is what guides our forecast into the second quarter. Mike, anything to add on that?

Mike Beckman: I think on behavior, just want to be mindful of the overall macro backdrop and want to see how sustainable the growth is, and that was factored into the guide. Tim, do you have a follow-up?

Timothy Arcuri: I do. Mike, maybe you can comment on, I know typically you do not break the guidance down by segment, but just given how different it was in March, and given that we are hearing some choppiness in Autos, particularly in China, I would think that most of the sequential growth will be Industrial, but can you give any comments for what is being thought of in the June guidance for those two?

Mike Beckman: Thanks.

Haviv Ilan: Let me take that, Tim. I think I can help you a little bit on the Automotive side. First, I think as you said, we are not seeing a change from the previous quarter, so I expect growth to be led by Industrial and Data Center. I will not break it out between the two, but we see strength in both. Regarding Automotive, you are right that Q1 was, you know, it is always the same in Q1 in China. The overall quarter was flat sequentially, but China was down. The rest of the world was up. I want to see Automotive and see how it develops in Q2. It is too soon to call it.

I will remind that during the COVID cycle, even Automotive was the last to join in, also the last to peak. So I am not surprised by the behavior of this market. I will say that secular growth in Automotive continues for the foreseeable future, and that is what gives me encouragement. We are seeing cars adding features. We are seeing more content added to vehicles across the powertrain, whether it is BEV, ICE, or hybrid. Anything to add on that, Mike, in terms of the guide?

Mike Beckman: No, I think you have characterized it well. And as you know, Auto has been steady at an elevated level for some time. It did not really have that steep correction that we saw in the other end market. So as we have called out, these markets in the past have been transitioning out of phase. I do not think it is unrealistic to assume that could happen again. So we will have to see how it plays out.

Haviv Ilan: I think it is an important point. As Mike said, Q1 was a flat quarter, but very close to peak levels, maybe a point or two below its peak. So it is holding very nicely at a high level.

Mike Beckman: Alright. We will move on to our next caller.

Operator: Thank you. Our next question is from Vivek Arya with Bank of America.

Vivek Arya: Thanks for taking my question. On this Industrial growth, up 30% year over year, this is obviously well above the long-term trend line. Could you help us dissect which applications, which end markets are driving this? Is this still inventory replenishment? Is this pricing? Is it share gains? What checks and balances do you have in place that this is not any kind of double ordering or hoarding of your product?

Haviv Ilan: No, I do not see it that way, at least I do not have the evidence to show that, Vivek. But remember, for one quarter, that is a lot of growth. If you look at the long-term trend line, we are still below the trend line. I just did the math in Q1: our Industrial had a very good quarter growing at the rate that you mentioned, but still 15% lower than the peak that was back in 2022. And as I say many times, there is secular growth continuing in Industrial, so we deserve a higher peak four years later. I think there is a lot of room to grow.

The encouragement I would have this time is that I see it at a broader application level. Not only the data-center-related energy infrastructure or power delivery, not only Aerospace and Defense—given the geopolitical tensions the market is establishing new peaks every quarter—I saw it across all sectors in Industrial and also across all customers in terms of regions, and also the size of customers. It is the first quarter where we saw the broad market, typically the tail, starting to wake up again after a long hibernation period, I would call it. So I am encouraged about the fact that we are seeing growth there, but I think there is room to go.

I would like to see secular growth in Industrial continuing and then higher peaks establishing in 2026 or later versus the 2022 peak. So in that sense, trend lines are suggesting we still have room to go. Hopefully, that helps. Do you have a follow-up with that?

Vivek Arya: Thank you, Mike. So last year, we saw the overall Analog industry do very well in the first half, and then there was some level of deceleration in the second half. I realize every year is different. I know you are not guiding to the second half. But from what you see today, what are the puts and takes as you look at the second half versus the first half? Is there anything that could be different just given all the macro trends, memory price inflation, and whatnot? And as part of that, if Rafael could also help chime in with how you are managing fab loadings as you look towards the rest of the year.

Haviv Ilan: Yeah, let me start and Rafael will follow. So first, Vivek, you are spot on. We had a similar strong beginning of the year last year. Maybe the year-over-year growth last year was a little lower, but it was still in the teens, and it looked like it was getting stronger. But it was, whatever you want to call it, a head fake, a false start, or whatever. We had a good year in Analog, but it did not accelerate in the second half. It actually slowed down a little bit. So I think we need to be, as Mike mentioned, mindful. There is geopolitics. There is the macro that we are watching.

On the other hand, there is secular growth in our markets. So in the long term, I am still very optimistic. We want to play it quarter by quarter. That is part of the way we have guided to $5.2 billion at the midpoint. Let the second quarter play out, and we will call it as we see it. I remind you that the way we support our customers and the way we go to market, we serve our customers direct. We have very friendly customer terms. So we see the build-up of demand as we go almost real time. I want to see the second quarter play out and see if this growth is sustainable.

That is the biggest question I have for myself for the second half. But at least the fact that Industrial is still trending below previous peaks and the secular growth in Data Center and, of course, the content growth in Automotive, makes me feel optimistic about the long term. Rafael, can you comment about loading?

Rafael R. Lizardi: Yeah. I will just add that we have the capacity and the inventory, and we are well positioned on both of those to handle a wide range of scenarios in the upturn.

Mike Beckman: Alright. Vivek, thank you so much for the questions. I will move on to our next caller.

Operator: Our next question is from Joe Moore with Morgan Stanley.

Joe Moore: Great, thank you. Yes, on the topic of fab loading, can you talk about what is going to happen with inventory over the course of Q2? And are you seeing incremental gross margins off of Q1 that are better than normal, worse than normal, or just normal? What are the dynamics around that transition?

Rafael R. Lizardi: Yeah. Again, we are well positioned on inventory. The objective of inventory is to maintain high levels of customer service, keep lead times short and stable, and we are accomplishing that. So we feel very good as to where those are, and we will continue to determine what makes sense from a loadings and inventory standpoint throughout the quarter to handle any scenarios.

Haviv Ilan: And Joe, just to add on that, you and I talked a month ago, we saw rapid growth in Q1 and inventory served us well. We depleted some of it. We filled our customers in real time according to their demand. And we just want to see how sustainable that would be. But as Rafael said, if indeed the market wants to have very rapid growth and maybe catch up to the trend line even quicker, we are well positioned. Of course, we are in this phase three on the fab, and we can modulate wafer starts there. We have the capacity.

We may make some incremental investments on the ATs because we are seeing, on the assembly and test side, a little bit of a tighter environment, at least externally. So as you know, we have brought most of our supply internally, and we have that knob as well. We are very excited about the fact that we are prepared. If the market wants to grow at the same rate as Q1, we mentioned 19% year over year, we are ready. If it wants to accelerate, we are ready as well.

Mike Beckman: Joe, do you have a follow-up? Joe, do you have a follow-up?

Joe Moore: Well, just on my follow-up, on the gross margin aspect of that. Is the incremental gross margin going to look normal, or is there some part of inventory management that makes it lesser or more?

Rafael R. Lizardi: Yeah, no. The fall-through that you should expect is in the 75% to 85% that we have guided. That is excluding depreciation over a long term. But on a year-on-year basis, if you look at our midpoint on EPS and revenue, and make the right assumptions on OpEx and other lines, you should get to a reasonable assumption on gross margins, and it will be in that fall-through that we have guided.

Operator: Okay. Thank you. Thanks for these questions. Moving on to our next caller. Our next question is from Stacy Rasgon with Bernstein Research.

Stacy Rasgon: Hi, guys. Thanks for taking my question. Maybe just to dig into that gross margin point, if I typically think of your OpEx up, what, a couple of points in Q2, I come out with a gross margin implicit in the guidance maybe low to mid 59%, up from 58%. And it is up, I do not know, 100 or 150 bps year over year on a pretty material revenue growth. Part of me would almost expect the incremental gross margin to be higher given the revenue. But maybe it is differential, like the increase in depreciation. How should I be thinking about the different drivers of gross margin into Q2?

Qualitatively, if not quantitatively, if you do not want to give us a quantitative?

Rafael R. Lizardi: Yeah. So, Stacy, to help you out a little bit, your OpEx assumption was not a bad one. So you should expect some growth in OpEx first to second. Maybe what you are missing is the acquisition charges line. You should expect to continue to have charges there every quarter at the tune of what we just reported in first quarter. We will continue having those there every quarter until we close, at which time it will be a lot higher at close, and then they will be steady after that for a number of years. But for now, for second quarter, just assume somewhere in the range of what we just reported on the acquisition line.

When you do that, you will get a gross margin assumption that should make sense.

Operator: Alright. Do you have a follow-up, Stacy?

Stacy Rasgon: Thanks. Maybe to ask about the acquisition itself. Again, not the deal specifics, but I know you have talked about it being accretive. You are one of the few, if not the only company in my coverage that still does pure GAAP earnings. And I even remember when you bought Nat Semi, you did pro forma for a little while and then said this is stupid, we are going back to GAAP, and told us to make whatever adjustments we want to make. What are your intentions for how you are going to report once you do close Silicon Labs? Because I have a hard time getting it accretive on a GAAP basis.

Are you going to be going to a pro forma, or how should we be thinking about that?

Rafael R. Lizardi: Our thinking right now is we will do GAAP, and we will give you all the pieces that you need to do your own non-GAAP in whichever way you want to do that. So we will have the acquisition charges line, for example. You can take that out if you like and not count it. Once we are on a run-rate basis, all those will be noncash. But initially, some of those are cash charges. They are charges to advisors: bankers, lawyers, regulatory fees, etc. There will be other things. For example, the first quarter will have some transition impacts in gross margins and inventory as we write off the inventory that we are buying.

We will give you all those pieces. That way, you can do the non-GAAP analysis yourself.

Operator: Thanks for the question. Thank you. Moving on to our next caller, please. Our next question is from Ross Seymore with Deutsche Bank.

Ross Seymore: Hi, guys. Thanks. Let me ask a couple of questions. I guess the first one is the strength that you saw—what was the biggest surprise versus the midpoint of your guide in the first quarter? And was pricing part of the strength in either the quarter or the guide?

Haviv Ilan: Yeah. Let me start with pricing and then we can chat a little bit more about what happened in the quarter. I think we answered it, but I will repeat the same messages. In terms of pricing, I think we said in the last quarter, we do not expect pricing to help the growth, at least not sequentially or year over year, and that was the case. But it was better than our model. Usually, Q1 pricing is a couple of points down—call it low single-digit down year over year and also sequentially—because price agreements typically kick in at the beginning of the year. So the quarter behaved a little better.

We had pricing that was stable, flat if you will, like-for-like, both sequentially, Q4 to Q1, and also year over year, Q1 2026 versus Q1 2025. So that helped a little bit. And I expect Q2 to be very similar, Ross. Just the way we work with our customers, these are discussions that are not happening immediately.

We serve them direct, and I will mention that as I look at the year, if demand—and right now, the demand signals are strong—continues to be strong, and we are monitoring the market price and there is definitely at least an average price increase in the last several months across the Analog market, I think it is likely that prices may go up in the second half of the year. Again, this is going to be a case-by-case discussion in our case, but that is the pricing environment as I see it right now. And, again, it is always a function of supply and demand, and the unknown for me right now is the sustainability of demand.

So I want to see it play out one more quarter, and then we will figure out for the second half. So high level, not immediate support on growth sequentially and year over year on pricing. Now what we have seen is just breadth of demand—multiple sectors, all sectors, all regions, all types of customers, small and large—and supported by a Data Center market where we do pretty well. I think our portfolio is growing. I believe we are fulfilling customer demands at the highest level. We have no shortages, and it allows us, I believe over time, to take market share there. That is what drove Q1.

I expect a similar behavior in Q2, and the second half of the year is still unknown. We are seeing, as I mentioned before, a higher tension on the Analog side. I think we see strength there. And I think we are unique in the setup in the sense that we have the capacity, we have the inventory, and we are well positioned to support customers at the highest level.

Mike Beckman: Do you have a follow-up, Ross?

Ross Seymore: Yeah, I do. One of the concerns people have, and it does not sound in the strong report and guide that you are seeing it, but one of the concerns people had was more consumer-oriented end markets seeing demand destruction with higher memory costs, memory availability, those sorts of things. Are you seeing any evidence of that? Your Personal Electronics segment seemed like it was well better than normal seasonal in the first quarter. I suspect that is where it would arise if it were to arise. So I just wondered if you have seen any evidence of that across your business.

Haviv Ilan: High level, we have not, although customers are very aware of it, but I think they are doing well preparing themselves. And I will let Mike comment about the Personal Electronics market.

Mike Beckman: Yeah. I think it is also important to remember that fourth quarter last year was a pretty easy compare for the sequential transition for PE. And on a year-on-year basis, it is about flat. So, again, if that was happening, I do not know if you could point to those results as evidence of that. But, again, you cannot rule that out. We will move on to our next caller. Thank you, Ross.

Operator: Our next question is from Tore Svanberg with Stifel.

Tore Svanberg: Yes, thank you and congrats on the strong results. Haviv, I was hoping to zoom in on Data Center and specifically Power. It is a great market and great opportunity. It is also very competitive. I am wondering if you could talk a little more about some of the moats here as we go into the next few years that Texas Instruments Incorporated has. I assume your manufacturing footprint will be an important element of that, but any other color you could add on Texas Instruments Incorporated's positioning in power semis, especially with Data Center over the next few years?

Haviv Ilan: Yeah, Tore. Power in general is very important to Data Centers, and specifically power density. Think about the amount of power or energy you have to drive into these systems—you need a lot of silicon to withstand it. So that implies the importance of power electronics, and Texas Instruments Incorporated is well positioned there. What I like about our position is the combination—true for every market—but in Data Center there is a lot of attention to what I call application-specific sockets. You can call it stage one, stage two, the VRM, the last VCORE that these GPUs need for power delivery at the highest level—very complex parts, multiphase power delivery, etc.

And there is also a lot of general-purpose parts in a rack. I would say tens of thousands of them, lots of different SKUs, and this is where our general-purpose portfolio is amazing. We can fulfill almost every Analog socket on these racks. I think we are very unique in that point, not only because of the breadth of the portfolio, but also because of our ability to supply. We have seen cases where our customers needed help because they had supply shortages from their other suppliers, and we come in and solve the problem. I think that is part of the reason our growth has been so high.

I mentioned 90% year over year, and I am very excited about the future there. So that combination of a broad portfolio and the ability to support customers with capacity and inventory is unique.

The second point, which I have touched upon in many calls or conferences, we are also investing more and more R&D in Data Center, and we are going to be one of the competitors on the application-specific sockets, whether it is VRM stage two, or high-voltage conversion—800 to 12 or 6 at stage one—and we are well positioned there as well, both with the GaN technologies that we have invested in for the past fifteen years and also now very advanced BCD nodes that not only have the capability needed, but are also built in North America, here in Texas, and customers care a lot about it.

So I think that combination of broad portfolio, both on general purpose and ASSPs; ability to support the rack, not only the board; and ability to supply at scale with the volume that this market demands is very unique, not to mention that it comes from a geopolitically dependable location. All of that is a unique combination, and that is part of what we like to talk about as our competitive advantages. Maybe one of them is easy to replicate, but trying to replicate all—in this case, all three—is not easy. This is why I am very encouraged about our opportunity to continue to grow in this market.

I will just add that our application-specific sockets are seeing momentum as well on the design-in phase right now, and I do expect that they will kick in more in the second half of the year and into 2027. So my bar for the team and my expectations are high here.

Mike Beckman: Thanks. Tore, do you have a follow-up?

Tore Svanberg: Yeah, that is great color. Thank you, Haviv, for that. And then as my follow-up, thinking about another new upcycle in Analog and comparing this to the last one. In the last one, capacity got tight pretty quickly. Lead times started extending pretty quickly. I know it is a different cycle, but now that you have made all the CapEx investments and you have the big manufacturing footprint, are you starting to see share gains pop up in your design wins since you are much better positioned with capacity now versus back then?

Haviv Ilan: I believe we are, yes. We gained share in Analog in 2025, but I think we have a lot of room to go. We are still below previous peaks. The question, Tore, is can we do it quickly—meaning, does strong demand continue, or is it going to take more time? From our perspective, we hope demand continues. We have the answer for customers, and in many cases, we are unique. I gave the Data Center example a minute ago, but we are starting to see other areas where our availability is allowing us to win back market share. I mentioned pricing before. Our pricing is very competitive.

I think we have an opportunity there as well for the second half of the year. So it all depends on the sustainability of demand. Vivek mentioned before, we had a very unique 2025 where it started strong and then took a breather. I want to see it play out in 2026. Obviously, if it continues, our opportunity just grows.

Mike Beckman: I will just add that we spent the last several years preparing with capacity and inventory, as you know, and our lead times have been stable over the last several years, especially the last several months. We are really happy with the delivery performance. If we look at what the future holds, we want to make sure we can service our customers' needs, but also their growth as well across a broad customer base. We are really happy with the systems we have in place to allow that. Alright. I will move on to our next caller. Thanks.

Operator: Our next question is from Analyst with Cantor Fitzgerald.

Analyst: Guys, thanks for taking the question. You previously talked about spending about $2 billion to $3 billion CapEx in 2026. First, is that still the right number? And then as we think about the modular buildouts within this ongoing recovery, can you help walk us through when you would need to start to add the incremental equipment and how you are thinking strategically about your capacity today, as we are starting to see some foundry capacity at custom mature nodes and now tier-two foundry pricing increases?

Rafael R. Lizardi: Yes. I will start. First, the answer to your question is yes. We are looking at $2 billion to $3 billion of CapEx for this year. In that number, there is capacity for what we call phase three, which is incremental capacity that you are alluding to. That is both on the fab side and also on the assembly test side. That is where a growing proportion of our CapEx is going, to the assembly test side, to address growth. Beyond that, what I would tell you for CapEx beyond 2026 is to think of the 1.2 times rate that we have talked about before for the long-term CapEx intensity.

So, for example, if you take 5% growth, that would translate into 6% CapEx as a percent of revenue, and that is how you would want to model it.

Haviv Ilan: Matthew, just one more point. I think Rafael touched upon it. So again, $2 billion to $3 billion is very valid. Remember, we gave a framework that is still very valid—I think it was a couple of years back during Capital Management—on revenue scenarios and CapEx. I think those are also very valid. I will say that, as Rafael alluded to, we are seeing right now, even at the midpoint of the second quarter—and again, I want to see how it plays out—we are looking at 17% to 18% growth year over year for the first half of the year. That is stronger than last year. So, of course, we want to be prepared in case it continues.

No one tells us what the future will be; we just have to support a range of scenarios. In that sense, we are taking the opportunity to divert some of the focus because we have enough wafer capacity. I think we are well positioned with our 300-millimeter wafer fabs. We have the brick and mortar. We have the installed equipment. But on the AT side, I think there is an opportunity, and we are very happy that we have internalized our supply because we are seeing more and more bottlenecks in the market that are popping up. The fact that we control our destiny here and we can move more stuff internally is a benefit.

So some of the $2 billion to $3 billion of CapEx that you are seeing this year is going to support a faster internalization of our back end into our own assembly and test, and that allows us to support customers at a higher level.

Mike Beckman: Do you have a follow-up, Matt?

Analyst: Yeah, that is helpful. Thanks. I guess as a follow-up, is there any update to your messaging around depreciation expectations versus three months ago? Then maybe how to think about timing of when Texas Instruments Incorporated will receive the remaining CHIPS Act direct funding? Thanks.

Rafael R. Lizardi: Yes. I will take that. No change to depreciation. The expectation for this year is $2.2 billion to $2.4 billion. And then for 2027, continued upward pressure, but likely at a slower rate. On the CHIPS Act, first, I will tell you the more interesting one is ITC. We have been talking about that one. That is the one that is going to give us more money over the long term, and that is 35% of qualified manufacturing investment. We have been getting that ITC and will continue to get ITC. On the direct funding, we have just received over $500 million.

In total, what we received in fourth quarter and first quarter is $630 million out of the up to $1.6 billion of direct funding. The remaining should come over the coming years as we continue fulfilling the various milestones stipulated in the contract.

Mike Beckman: Thanks, Matt. Move on to our next caller, please.

Operator: Our next question is from Analyst with Wells Fargo.

Analyst: Yes, thanks for taking the question. I was curious if you could help us understand, given the resegmentation of revenue especially on the Industrial side, what is normal seasonality now for June?

Mike Beckman: You could look back and model out what our revenue has done over history. I do not have a by-end-market specific percentage, but overall, what you will typically see is the second and third quarter are stronger quarters, and fourth and first are typically lower compared to second and third. A follow-up?

Haviv Ilan: I will just add on that, just on seasonality. Our guide is, I would describe it as, a little bit above seasonal. I think we have guided at about 8% sequential. That is a little bit above. The combination of the market is changing—Data Center, as we know, is now a bigger part of our revenue. But overall, my view on Q2 is it is a slightly above seasonal guide. Hopefully, that helps.

Mike Beckman: Do you have a follow-up?

Analyst: Yeah. As a follow-up, you had a really strong quarter in the first quarter out of the gate for free cash flow and cash flow from operations. Any update on how to think about free cash flow per share for this year? Any change there?

Haviv Ilan: Yeah. I think I mentioned during the Capital Management call that as long as revenue is growing mid- to high-single digits, that $8 free cash flow per share is very probable, highly probable. Now, as I said before, first half of the year at the midpoint is somewhere between 15% to 20% growth. So there is definitely an upside. I am not going to say what the number is, but go back to our framework that we provided in the Capital Management call. You will see, I think at $20 billion we had $8 to $9, and at $22 billion we had $9 to $10.

So it gives you how every extra billion dollars of revenue helps free cash flow per share. It gives you a very high-level framework. But right now, assuming we do not have another false start, I think it is very likely we will easily be at $8 free cash flow per share for 2026. Again, we need to see how the year continues, but I would say the probability is high.

Mike Beckman: Thank you. Move on to our last caller.

Operator: Our last question is from Chris Caso with Wolfe Research.

Chris Caso: Yes, thank you. First question will be about fab loading. Given what appears to be a strong start to the year, what are your plans for fab loadings, and what do you expect to do with inventory as we go through the year? I know you have been building inventory in order to be responsive to customers. Do you expect to keep inventories at these levels, or let that dip a bit?

Rafael R. Lizardi: Yeah. We feel very comfortable with our position with both capacity and inventory. Inventory is there to support customer satisfaction and keep lead times short and stable. So we will continue to do that, and we will adjust loadings throughout the quarter to handle whatever comes at us in a number of scenarios in this upturn.

Haviv Ilan: I would just add on that, Chris. We talked about all these phases of our investment—phase one, phase two, phase three. Right now, the surge of demand is in Analog, and in Analog we are at phase three. So we are modulating starts. We have the capacity. We are moderating starts in real time. We are looking at daily consumption, and this is where Rafael guides the team on how to start wafers. Of course, we have the opportunity. Now in terms of inventory, it all depends on the rate of consumption. If demand continues to be very strong, we will continue to deplete inventory. Obviously, it takes time to build these parts.

Some of the parts get built in three months, but some can take six to nine months. That is why we have inventory. Inventory allows us a quick surge of customer support if they have strong demand. That is what happened in Q1. We have a strong guide for Q2; at the midpoint it is 8% sequentially, above seasonal, as I mentioned. So I think inventory will play a role there. Then the machine catches up. To me, all these questions are related to what the second half of the year of demand will do. Based on the macro environment and based on what happened last year, when the market was jittery, I want to see it play out.

The good news is that we are prepared for every scenario that will be presented to us.

Rafael R. Lizardi: Taking a longer view than just the next quarter, when you think of our range of inventory days—150 to 250—during an upturn, we should be draining that number. Right now, we are at 209. It should drift towards the lower end. And then during the downturn, that is when we build inventory and it moves upward. So high level, in an ideal scenario, that is what you would see in terms of days of inventory. Chris, do you have a follow-up?

Chris Caso: I do. For my follow-up, I want to return to some of your comments about pricing. We have heard from others in the space who were a little more explicit on what they were doing with pricing. Is Texas Instruments Incorporated simply following the market right now with your comments of potentially some better pricing in the second half? And then as a follow-on to that, to what extent are your customers—what percentage of your customers—on annual price contracts such that if there was a reset in pricing, that would more likely happen toward the end of the year into next year?

Haviv Ilan: I think it is a good question, and I think we touched most of it. Just to clarify, Texas Instruments Incorporated follows because we want to see sustainability. We do not want to be changing prices every quarter. Of course, prices go up and down every quarter. It depends on the portfolio and where customers need more demand and what supply is. But let us look at 2025. In 2025, our pricing behaved as we expected. It was down, this low single-digit number. That was the actual number in 2025. In 2026, it was stable. It was a good start of the year.

If demand continues to behave like that and we see stronger and stronger requests from our customers, that opens up a discussion, and that is what we are going through right now. We are definitely seeing that the price agreements we did last year—agreed upon in Q4 when the demand environment was very different—are being revisited. We are seeing higher numbers in terms of demand. We will have to invest in our capacity. I mentioned back-end capacity investment to support all of that. There is a tightness on the outsourced world. So, of course, there is a discussion. I think customers are very thoughtful, and most important for them is not to have a $0.30 part stopping their production.

They need to have a high level of customer support, and that is what we are offering. Not only in supporting the parts we promised them, but also sometimes solving problems they have with other suppliers. That is the opportunity we have in 2026. But it all depends on the sustainability of the demand signal. So we will continue to watch it. We are discussing with our customers as we speak. And we will report back during the July call.

Mike Beckman: Thanks, Chris. Haviv, do you want to close us out?

Haviv Ilan: Yes. Let me wrap up what we have said previously. At our core, we are engineers, and technology is the foundation of our company. But ultimately, our objective and the best metric to measure progress and generate value to owners is the long-term growth of free cash flow per share. Thank you all, and have a good evening.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

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