Texas Instruments Incorporated (TXN): A Bull Case Theory

Core Thesis - Texas Instruments Incorporated (TXN) is experiencing a bullish outlook due to strong Q4 results and robust guidance, leading to a notable increase in stock price post-earnings [3][8] Financial Performance - TXN's share price was $225.01 as of February 2nd, with trailing and forward P/E ratios of 41.29 and 33.56 respectively [1] - Free cash flow (FCF) surged 94% in 2025, achieving a 17% margin, with projections for 2026 FCF to reach approximately $6.4–7.0 billion, or $7 per share [7] Market Growth - TXN highlighted growth across all end markets for 2025: industrial ($5.8 billion, +12%), automotive ($5.8 billion, +6%), personal electronics ($3.7 billion, +7%), communications ($0.5 billion, +20%), and data center ($1.5 billion, +64%), with data center emerging as a key growth driver [4][5] - Core segments—industrial, automotive, and data center—now comprise 75% of revenue, indicating a shift towards higher-margin, growth-oriented markets [5] Strategic Positioning - Management began reporting data center as an independent segment earlier than expected, reflecting its strategic importance and increasing exposure to AI-related investments [5] - Despite strong guidance, management noted that pricing assumptions remain largely unchanged, and orders could fluctuate due to short lead times and customer-friendly policies [6] Investment Case - TXN's performance indicates a gradual recovery supported by secular growth in semiconductors, accelerating data center adoption, and strong FCF generation, creating a compelling investment case with substantial upside potential [8] - Previous coverage indicated early signs of analog revenue stabilization and strategic manufacturing investments, with TXN's stock appreciating approximately 21.44% since then [9]