✦ The Capex CliffWide moat

Texas Instruments (TXN) — the future bets

The same operating cash flow meeting a capital call two billion dollars smaller is the entire justification for forty times earnings.

Everything about Texas Instruments over the next three years reduces to one line falling.

Capital expenditures ($m)$531m2016$1,131m2018$649m2020$2,462m2021$2,797m2022$5,071m2023$4,820m2024$4,550m2025$1,190mH1 2026Texas Instruments Forms 10-K (SEC XBRL) and Q2 2026 10-Q
Capex rose almost eightfold from 2020 to 2023; the first half of 2026 ran at about half 2025's pace.

Capital expenditure was $4.55 billion in 2025 and $4.82 billion in 2024, against roughly 5% of revenue for the decade before the programme began. It is guided to $2–3 billion for 2026.12 The fabs at Richardson, Sherman and Lehi are qualifying and ramping rather than being built.3

The arithmetic that follows is mechanical. Operating cash flow was $7.15 billion in 2025 — 40.5% of revenue — and free cash flow $2.94 billion at 16.6%. Spend $2.5 billion instead of $4.55 billion on the same operating cash flow and free cash flow is roughly $4.6 billion. Add the 23% revenue growth of the June 2026 quarter and it is a great deal more.4

That is the entire justification for 40 times trailing earnings on a company earning less than it did in 2022.

The risk is that guidance is a plan. TI has revised this plan upward before, and management explicitly declined to bias the 2026 range toward the lower end.

Watch quarterly capital expenditure. One quarter above $750 million would say the cliff has been deferred, and the whole sequence with it.

Moat trajectory: Widening

$4.55bn to a guided $2-3bn, on operating cash flow of $7.15bn. The arithmetic improves mechanically each quarter the guidance holds.

The number that tests this moat
Reported
Operating cash flow
$7,153M — 40.5% of revenue

Against capital expenditure of $4,550M. Holding operating cash flow constant and spending $2.5bn instead adds roughly $2bn to free cash flow before any growth, and the June 2026 quarter grew revenue 23%. That arithmetic is the entire justification for 40 times trailing earnings on a company earning less than it did in 2022.

Source: Texas Instruments Form 10-K, FY2025 ↗
References
  1. ReportedIt is guided to $2–3 billion for 2026.
    Coverage of Texas Instruments' second-quarter 2026 results, July 2026 — revenue of $5.46 billion, up 23% year over year and 13% sequentially against consensus near $5.24 billion; net income of $1.98 billion, up 53%, and EPS of $2.14, up 52% and above the high end of guidance. By segment, Analog revenue was $4.37 billion (up 26%), Embedded Processing $788 million (up 16%) and Other $310 million (down 2%). Industrial revenue grew more than 30% year over year across all sectors and regions, automotive re-accelerated, and data centre revenue roughly doubled. Management guided third-quarter revenue to $5.65-6.15 billion and confirmed 2026 capital expenditure of $2-3 billion, declining to bias the range toward the lower end. After holding pricing flat through the first half, TI began executing customer-by-customer price increases from the third quarter, extending into the fourth quarter and into 2027, concentrated in Analog. Management has framed free cash flow per share of $8 or more as probable for 2026, having earlier suggested $12. The shares fell after hours. — Q2 2026 · publ. 2026-07-24 · source ↗
  2. ReportedIt is guided to $2–3 billion for 2026.
    Coverage of Texas Instruments' second-quarter 2026 results, July 2026 — revenue of $5.46 billion, up 23% year over year and 13% sequentially against consensus near $5.24 billion; net income of $1.98 billion, up 53%, and EPS of $2.14, up 52% and above the high end of guidance. By segment, Analog revenue was $4.37 billion (up 26%), Embedded Processing $788 million (up 16%) and Other $310 million (down 2%). Industrial revenue grew more than 30% year over year across all sectors and regions, automotive re-accelerated, and data centre revenue roughly doubled. Management guided third-quarter revenue to $5.65-6.15 billion and confirmed 2026 capital expenditure of $2-3 billion, declining to bias the range toward the lower end. After holding pricing flat through the first half, TI began executing customer-by-customer price increases from the third quarter, extending into the fourth quarter and into 2027, concentrated in Analog. Management has framed free cash flow per share of $8 or more as probable for 2026, having earlier suggested $12. The shares fell after hours. — Q2 2026 · publ. 2026-07-24 · source ↗
  3. ReportedIt is guided to $2–3 billion for 2026. The fabs at Richardson, Sherman and Lehi are qualifying and ramping rather than being built.
    Coverage of Texas Instruments' second-quarter 2026 results, July 2026 — revenue of $5.46 billion, up 23% year over year and 13% sequentially against consensus near $5.24 billion; net income of $1.98 billion, up 53%, and EPS of $2.14, up 52% and above the high end of guidance. By segment, Analog revenue was $4.37 billion (up 26%), Embedded Processing $788 million (up 16%) and Other $310 million (down 2%). Industrial revenue grew more than 30% year over year across all sectors and regions, automotive re-accelerated, and data centre revenue roughly doubled. Management guided third-quarter revenue to $5.65-6.15 billion and confirmed 2026 capital expenditure of $2-3 billion, declining to bias the range toward the lower end. After holding pricing flat through the first half, TI began executing customer-by-customer price increases from the third quarter, extending into the fourth quarter and into 2027, concentrated in Analog. Management has framed free cash flow per share of $8 or more as probable for 2026, having earlier suggested $12. The shares fell after hours. — Q2 2026 · publ. 2026-07-24 · source ↗
  4. ReportedAdd the 23% revenue growth of the June 2026 quarter and it is a great deal more.
    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 ↗
Sources
Generated September 23, 2026