Free Cash Flow Per ShareNarrow moat

Texas Instruments (TXN) — moat facet

The objective is stated in the first paragraph of the annual report, and it has gone the wrong way for four years.

Texas Instruments states its objective in the first paragraph of its annual report, and it is not revenue, market share or margin. It is the growth of free cash flow per share over the long term.1

Cash, 2025 ($M)$7,153M 40.5%Operating cash flow$4,550MCapital expenditure$2,938M 16.6%Free cash flow$6,480MReturned to shareholders$335M of CHIPS proceeds sits between capex and free cash flow. The gap was bridged with debt.
The metric TI steers by, and the one that has gone the wrong way for four years.

That is an unusually specific thing for a company to commit to in public, and it has consequences that show up everywhere in the accounts. It is why the capital-allocation record is disclosed as a ten-year total — $109 billion allocated from 2016 to 2025, with about $24 billion into capital expenditure. It is why the dividend has risen for 23 consecutive years and reached $1.42 a quarter.2 And it is why an activist arguing about capacity planning could frame the argument entirely in the company's own metric.3

The trouble is that the metric has been going the wrong way for four years, and the reason is the capital cycle. Free cash flow was $2.94 billion in 2025 — 16.6% of revenue — against operating cash flow of $7.15 billion at 40.5%.4 Elliott's calculation was that free cash flow per share fell from $6.40 in 2022 to $1.47 in 2023.

Meanwhile the payout did not adjust. TI returned $6.48 billion in 2025 — $5.00 billion of dividends and $1.48 billion of buybacks — against $2.94 billion of free cash flow, funding the gap partly with $1.20 billion of new long-term debt. The dividend alone was roughly 1.7 times free cash flow. That is a deliberate choice to protect a 23-year record through a capital cycle, and it is only sound if the cycle ends.

It is ending. Capital spending is guided to $2–3 billion for 2026 from $4.55 billion, and management has spoken of free cash flow per share of $8 or more.5

Rated narrow, because this is a capital-allocation philosophy rather than a competitive advantage — a good one, tested, and currently mid-test. The number is free cash flow per share, which is both the company's own yardstick and the entire subject of the argument about it.

Moat trajectory: Widening

Free cash flow per share fell from the 2022 peak to a trough in 2023 and is now recovering: capital spending guided down to $2-3bn, revenue up 23% year over year in the June quarter, and management talking about $8 a share or more. The direction has reversed.

The number that tests this moat
Moat Explorer calc
Free cash flow
$2,938M — 16.6% of revenue

Against operating cash flow of $7,153M at 40.5% of revenue, with capital expenditure of $4,550M and $335M of CHIPS proceeds in between. Free cash flow per share works out near $3.22 on 913 million diluted shares, against management talk of $8 or more in 2026. This is the number TI states as its objective and the number the argument about the company is conducted in.

How it's calculated: Free cash flow per the company’s own non-GAAP reconciliation: operating cash flow less capital expenditure plus CHIPS Act proceeds. The per-share figure divides by FY2025 diluted shares.
Source: Texas Instruments Form 10-K, FY2025 ↗
Aspects of the moat
DIG DEEPER 01
The Metric, and What It Did
From $6.40 a share in 2022 to $1.47 in 2023 — a metric named in public and then missed in public.
DIG DEEPER 02
Twenty-Three Years of Dividend Increases
Twenty-three consecutive years of increases, currently costing about 1.7 times the free cash flow that funds them.
DIG DEEPER 03
A Hundred and Nine Billion, Disclosed
Publishing a ten-year capital-allocation total makes the argument about proportion rather than principle.
DIG DEEPER 04
Raising Prices Again
Held flat through the first half of 2026, then raised customer by customer — the lever that needs no additional wafer.
⚠ Threats to the moat
⚠ THREAT 01
The Payout Runs at 1.7 Times Free Cash Flow
Four consecutive years of returning more than the business generated, bridged with debt issuance.
⚠ THREAT 02
Everything Depends on Capex Actually Falling
One quarter of capital spending above $750 million would say the cliff has moved, and the thesis with it.
References
  1. ReportedIt is the growth of free cash flow per share over the long term.
    Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗
  2. ReportedIt is why the dividend has risen for 23 consecutive years and reached $1.42 a quarter.
    Texas Instruments Incorporated, Form 10-K for the year ended 31 December 2025 (SEC, CIK 97476) — Item 1, Business. TI's two reportable segments are Analog and Embedded Processing, with remaining activities in Other; operations began in 1930 and it has design, manufacturing or sales operations in more than 30 countries. The product portfolio includes more than 80,000 products. TI states four sustainable competitive advantages: a strong foundation of manufacturing and technology, a broad portfolio of analog and embedded processing products, the reach of its market channels, and the diversity and longevity of its products, markets and customer positions, which in combination it describes as difficult to replicate. An unpackaged chip built on a 300mm wafer costs about 40% less than one built on a 200mm wafer; TI continued qualifying and ramping production at its newest 300mm fabs in Richardson and Sherman, Texas, and Lehi, Utah, supporting external foundry transfers and internal transfers from its legacy 150mm facilities, and expects to maintain sufficient internal capacity to meet the majority of its production needs, offering customers geopolitically dependable capacity. TI sells to over 100,000 customers, with about half of revenue derived from customers outside its largest 50; more than 80% of revenue was direct in 2025, including TI.com. End markets as a percentage of 2025 revenue: industrial 33%, automotive 33%, personal electronics 21%, data centre 9%, communications equipment 3%, and calculators about 1%. About 60% of revenue comes from customers headquartered outside the United States; revenue from end customers headquartered in China represented about 20% of revenue in 2025, while revenue from products shipped into China represented about 50%. The analog and embedded processing markets remain highly fragmented, with significant global competition from dozens of large and small companies including emerging companies, particularly in Asia. The company's stated objective is the growth of free cash flow per share over the long term. — FY2025 · publ. 2026-02-06 · source ↗
  3. ReportedIt is why the dividend has risen for 23 consecutive years and reached $1.42 a quarter. And it is why an activist arguing about capacity planning could frame the argument entirely in the company's own metric.
    Coverage of Elliott Investment Management's stake in Texas Instruments, May 2024. Elliott took a stake of more than $2.5 billion and sent a 13-page letter to the board proposing a dynamic capacity-management strategy that would allow TI to achieve free cash flow of as much as $9 a share by 2026. Elliott's letter focused on the 2022 capital expenditure plan, which called for capital spending to ramp to as much as $5 billion a year from 2023 to 2026 — as much as 23% of revenues, against roughly 5% over the preceding decade — and argued that a reversal in demand since the plan was set would leave capacity levels around 50% above consensus revenue expectations in 2026 and 2030. By Elliott's analysis, free cash flow per share fell from $6.40 in 2022 to $1.47 in 2023. Texas Instruments' chief executive subsequently signalled alignment with the proposals rather than contesting them, and suggested the company could reach $12 per share in 2026. — 2024 · publ. 2024-05-28 · source ↗
  4. Moat Explorer calcFree cash flow was $2.94 billion in 2025 — 16.6% of revenue — against operating cash flow of $7.15 billion at 40.5%.
    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 ↗
  5. ReportedCapital spending is guided to $2–3 billion for 2026 from $4.55 billion, and management has spoken of free cash flow per share of $8 or more.
    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 ↗
Sources
Generated September 23, 2026