TI(TXN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $4.4 billion, a decrease of 7% sequentially but an increase of 10% year-over-year [3] - Gross profit was $2.5 billion, representing a gross profit margin of 56%, which decreased by 150 basis points sequentially [8] - Operating profit was $1.5 billion, or 33% of revenue, up 7% from the previous year [8] - Net income for the quarter was $1.2 billion, translating to $1.27 per share, which included a $0.06 reduction due to non-cash impairment of goodwill [8] - Cash flow from operations was $2.3 billion, with capital expenditures of $925 million [9] - Free cash flow for 2025 was $2.9 billion, or 17% of revenue, representing a 96% increase from 2024 [10] Business Line Data and Key Metrics Changes - Analog revenue grew 14% year-over-year, while Embedded Processing grew 8% [3] - The Other segment declined from the year-ago quarter [3] - Industrial market revenue was $5.8 billion, up 12% year-over-year, accounting for 33% of total revenue [5] - Automotive revenue was also $5.8 billion, up 6% year-over-year, making up 33% of revenue [5] - Data center revenue reached $1.5 billion, up 64% year-over-year, representing 9% of total revenue [5] - Personal electronics revenue was $3.7 billion, up 7% year-over-year, accounting for 21% of revenue [5] - Communications equipment revenue was approximately $500 million, up about 20% year-over-year, making up 3% of revenue [5] Market Data and Key Metrics Changes - The industrial market saw high teens growth year-over-year but was down mid-single digits sequentially [4] - The automotive market increased upper single digits year-over-year but was down low single digits sequentially [4] - Data center market grew around 70% year-over-year and mid-single digits sequentially [4] - Personal electronics declined upper teens year-over-year and mid-teens sequentially [4] - Communications equipment declined low single digits year-over-year and mid-teens sequentially [4] Company Strategy and Development Direction - The company reorganized its end markets to include data center, reflecting growth opportunities in analog and embedded products [3] - Strategic emphasis is placed on industrial, automotive, and data center markets, which combined accounted for about 75% of revenue in 2025 [5] - The company aims to maximize long-term free cash flow per share growth, which is seen as the primary driver of long-term value [10] Management's Comments on Operating Environment and Future Outlook - Management noted a continuing recovery in the semiconductor market and expressed confidence in meeting customer demand with existing inventory and capacity [3] - The company expects Q1 2026 revenue in the range of $4.32-$4.68 billion and earnings per share between $1.22-$1.48 [11] - Management highlighted the importance of disciplined capital allocation and investment in competitive advantages to sustain growth [10] Other Important Information - The company paid $1.3 billion in dividends and repurchased $403 million of its stock in the quarter [9] - The balance sheet remained strong with $4.9 billion in cash and short-term investments at the end of Q4 [9] - The company has returned $6.5 billion to shareholders in the past 12 months [9] Q&A Session Summary Question: What is driving the above-seasonal Q1 guidance? - Management indicated that the guidance is based on stronger bookings and recovery in industrial and data center markets, not pricing [14][15] Question: What are the implications for gross margin in Q1? - Management noted that gross margin was better than expected in Q4 due to improved revenue and operating expenses, with expectations for reasonable gross margin in Q1 [17][18] Question: How are inventory levels expected to change? - Management expressed satisfaction with current inventory levels, indicating they are well-positioned to meet customer demand [21][23] Question: What is the outlook for the automotive market? - Management noted that while automotive was slightly down in Q4, secular growth continues, and they expect it to remain strong in the long term [55][58] Question: How is the data center business expected to grow? - Management highlighted that growth in the data center market is expected to continue as CapEx investments remain strong, with a focus on both power and signal chain products [70][72]