Texas Instruments
TXN
$279.50
-1.81%
Texas Instruments is the world's largest manufacturer of analog semiconductors, deriving over 95% of revenue from chips that process real-world signals such as power, sound, and sensor data, supplemented by embedded processors, microcontrollers, and its legacy calculator business. Its competitive identity rests on an unrivaled catalog of roughly 80,000 analog parts, deep customer stickiness in industrial and automotive end markets, and a vertically integrated, US-based 300mm manufacturing strategy that underpins a structural cost advantage versus peers. The current investor narrative has pivoted from the 2023-2024 analog downcycle toward an AI-adjacent recovery: management has highlighted data center revenue doubling year-over-year, 23% total revenue growth in the June 2026 quarter, and expectations to outgrow the market in 2026, while bears counter with soft near-term guidance, elevated capital expenditure, and a premium multiple that already discounts much of the upturn. The debate now centers on whether the industrial and automotive recovery is durable enough to drive operating leverage through the company's heavy fab investment cycle, and whether the AI data center opportunity is large enough to re-rate a historically cyclical analog franchise.…
TXN
Texas Instruments
$279.50
Related headlines
Investment Opinion: Should I buy TXN Today?
Rating: Hold with a constructive bias. The core thesis is that TXN is a high-quality analog franchise in a genuine cyclical recovery — 22.82% revenue growth, 61.36% gross margins, and 42.28% operating margins — but the current 31.83x trailing PE already discounts much of that recovery, so the risk/reward is balanced rather than compelling at $276.48. The analyst consensus of Buy (mean 2.11) with an average target of $324.71 (+17.4%) anchors a modestly positive view, but the $175 spread between the $225 low and $400 high targets argues for patience rather than aggressive accumulation.
The supporting evidence is strong on quality: revenue accelerated for a third straight quarter to $5.463B (+22.82% YoY, +13.2% QoQ), gross margin expanded 347 basis points year-over-year to 61.36%, operating margin reached 42.28% versus 35.14% a year ago, and EPS of $2.14 grew 51.8% from $1.41, demonstrating real operating leverage. The balance sheet is fortress-like with a 4.35 current ratio and 30.73% ROE, and trailing FCF of $5.355B covers the dividend roughly four times. However, the 25.97x forward PE on consensus EPS of $12.16, the 7.94x PEG, and the 99.96% payout ratio mean the stock is priced for continued execution with limited valuation cushion.
The biggest risks that could invalidate the thesis are a stall in industrial and automotive demand that leaves new fab capacity underutilized, margin compression from the current 61.36% gross margin level, and multiple contraction from 31.83x toward the low-20s. This Hold would upgrade to Buy if the stock pulled back toward the $253-258 September support zone (implying roughly 23-25x forward earnings) or if gross margins sustainably crossed 63-65% on data center mix; it would downgrade to Sell if revenue growth decelerated below 10% or operating margins fell back below 35%. On balance, TXN is fairly valued to modestly overvalued relative to its own history and at a premium to peers — a quality compounder worth owning, but not at a discount today.
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TXN 12-Month Price Forecast
TXN presents a high-quality cyclical recovery story that is already substantially reflected in the price. The fundamental momentum is real — three consecutive quarters of accelerating revenue, 347 basis points of gross margin expansion, and 51.8% EPS growth — and the AI data center doubling adds a credible incremental growth vector. But at 31.83x trailing and 25.97x forward earnings with a 7.94x PEG, the market has priced in the recovery, and the 99.96% payout ratio leaves little financial flexibility if the cycle stalls. The 17.4% average analyst upside is constructive but the $175 target spread and Morgan Stanley's Underweight show genuine disagreement about durability. I would upgrade to bullish on a pullback toward the $253-258 support zone (roughly 23-25x forward earnings) or on evidence of gross margins sustainably above 63%; I would downgrade to bearish if revenue growth decelerated below 10% or operating margins fell back below 35%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Texas Instruments's 12-month outlook, with a consensus price target around $337.11 and implied upside of +20.6% versus the current price.
Average Target
$337.11
0 analysts
Implied Upside
+20.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$250 - $400
Analyst target range
Coverage is deep, with 31 analysts following TXN and a consensus recommendation of Buy (mean rating of 2.11 on a scale where lower is more bullish). The average target price of $324.71 implies roughly 17.4% upside from the current $276.48, a constructive but not euphoric signal that suggests the Street sees the recent pullback as a buying opportunity rather than the start of a derating. Consensus estimates of $12.16 in EPS and $33.59 billion in revenue for the forward period underpin the bullish case, and the Buy-leaning consensus is consistent with the stock's 57.56% one-year gain and the AI data center narrative highlighted in recent coverage. The target range is wide, from a low of $225.00 (about 18.6% below the current price) to a high of $400.00 (roughly 44.7% above), a spread of $175 that signals meaningful disagreement about the durability of the analog recovery. The high target likely assumes sustained data center and industrial acceleration, margin expansion toward prior-cycle peaks above 65% gross margin, and multiple expansion on AI-driven re-rating; the low target prices in a softer industrial recovery, margin compression from underutilized fabs, and multiple contraction toward the low-20s. Institutional ratings show a split house: Morgan Stanley remains Underweight, Bernstein and Truist sit at Market Perform/Hold, while JP Morgan, Keybanc, Evercore, TD Cowen, and Rosenblatt are constructive, and no firm has upgraded or downgraded in the recent ratings history, indicating stable but polarized conviction. The wide dispersion and the presence of both $400 bulls and $225 bears argue for position sizing discipline and attention to the Q3 guidance print as the next catalyst.
Bulls vs Bears: TXN Investment Factors
The bull case currently holds the stronger evidence: revenue is accelerating at 22.82% YoY with gross margins expanding 347 basis points year-over-year to 61.36%, EPS growing 51.8%, and a Buy consensus with 17.4% average upside. The bear case rests less on fundamentals than on price — a 31.83x trailing PE, 7.94x PEG, and 99.96% payout ratio leave little margin for error, and the three-month underperformance of 5.34 points versus SPY shows the market is already debating how much recovery is priced in. The single most important tension is whether the industrial and automotive recovery is durable enough to drive operating leverage through the heavy fab investment cycle — if margins continue expanding toward prior-cycle peaks above 65% gross margin, the premium multiple is justified; if utilization stalls, the 31.83x PE compresses toward the low-20s and the $225 bear target comes into play. The AI data center doubling is a genuine incremental catalyst but remains too small a share of revenue to offset a cyclical industrial stall on its own.
Bullish
- Revenue reaccelerating at 22.8% YoY: Q2 2026 revenue of $5.463B grew 22.82% year-over-year from $4.448B and 13.2% sequentially from $4.825B, marking the third straight quarter of acceleration off the ~$4.0B trough. The trajectory from $4.423B (Q4 2025) to $4.825B (Q1 2026) to $5.463B (Q2 2026) confirms the analog downcycle has decisively turned.
- Operating leverage driving margin expansion: Gross margin rose to 61.36% in Q2 2026 from 58.01% in Q1 2026 and 57.89% in Q2 2025, while operating margin jumped to 42.28% from 37.47% and 35.14% respectively. EPS of $2.14 versus $1.41 a year ago (+51.8%) shows earnings growing roughly twice as fast as revenue, the signature of genuine fab-utilization leverage.
- AI data center revenue doubling YoY: Management cited data center revenue doubling year-over-year as an incremental growth engine layered on top of recovering industrial and automotive demand, with Analog at $3.174B and Embedded Processing at $613B in the latest quarter. This gives TXN an AI-adjacent narrative that historically cyclical analog franchises have lacked.
- Analyst consensus Buy with 17.4% upside: 31 analysts carry a mean rating of 2.11 (Buy) with an average target of $324.71, implying 17.4% upside from $276.48, and a high target of $400 (+44.7%). No firm has downgraded recently, and the constructive consensus treats the pullback from the $334.03 high as a buying opportunity.
Bearish
- Valuation stretched versus own history: At 31.83x trailing PE, 8.92x PS, 9.69x P/B, and 20.59x EV/EBITDA, TXN trades in the upper-middle of its historical 15.4x-39.6x PE band and well above the 19-24x peak-cycle levels of 2021-2022. The 7.94x PEG ratio and 22.05x price-to-cash-flow multiple imply the market has already priced in substantial recovery, limiting room for multiple expansion.
- Dividend payout ratio near 100%: The 99.96% payout ratio means the $1.295B quarterly dividend consumes essentially all reported earnings, leaving virtually no cushion if the cycle rolls over. With capex still heavy at $514M in Q2 2026 and $676M in Q1 2026, free cash flow remains depressed by the fab build-out, and cash flow coverage of debt is modest at roughly 0.19x quarterly.
- Wide analyst dispersion signals uncertainty: Targets range from $225 (-18.6%) to $400 (+44.7%), a $175 spread, with Morgan Stanley at Underweight while JP Morgan, Keybanc, Evercore, TD Cowen, and Rosenblatt are constructive. This polarization reflects genuine disagreement about whether the industrial and automotive recovery is durable enough to drive operating leverage through the capex cycle.
- Momentum deteriorating over three months: Despite a 6.07% one-month bounce, the stock is down 2.65% over three months, underperforming SPY by 5.34 percentage points, and sits 17.2% below its $334.03 high after a 23.76% max drawdown. The October rally stalled near $280, and the most recent session fell 0.95% on 7.95M shares, suggesting resistance overhead.
TXN Technical Analysis
TXN is in a powerful primary uptrend, with the stock up 57.56% over the past year and 55.75% year-to-date versus a SPY gain of just 15.53% and 11.93% respectively, delivering roughly 42 percentage points of relative outperformance over twelve months. At the current price of $276.48, the stock sits at approximately 68% of its 52-week range of $152.73 to $334.03, having pulled back from the highs but remaining far above the lows, a positioning that signals a healthy consolidation within a bull trend rather than a broken chart. The 23.76% maximum drawdown from the peak confirms the stock has absorbed meaningful profit-taking without violating its longer-term structure. Recent momentum is mixed and reveals a divergence worth monitoring: the stock is up 6.07% over the past month (beating SPY by 4.85 points) but down 2.65% over three months, underperforming SPY by 5.34 points over that window, while the six-month gain of 20.30% still outpaces SPY's 7.48%. This pattern of a strong one-month bounce inside a weaker three-month stretch suggests the August-September pullback toward the $253-258 area found buyers, and the October rally to nearly $297 has stalled near $280, with the most recent session down 0.95% on volume of roughly 7.95 million shares. Key resistance sits at the 52-week high of $334.03, roughly 21% above the current price; a decisive breakout there would confirm the next leg of the uptrend and likely trigger momentum-driven buying, while support rests at the 52-week low of $152.73, with intermediate support in the $253-258 zone where the September lows clustered. A breakdown below that intermediate shelf would put the 52-week low in play and signal a trend reversal, whereas holding it keeps the higher-lows structure intact. With a beta of 1.339, TXN is roughly 34% more volatile than the market, meaning position sizing should account for amplified drawdowns in risk-off tape, and the 3.47 short ratio indicates short sellers are not aggressively pressing the name.
Beta
1.34
1.34x market volatility
Max Drawdown
-23.8%
Largest decline past year
52-Week Range
$153-$334
Price range past year
Annual Return
+63.7%
Cumulative gain past year
| Period | TXN Return | S&P 500 |
|---|---|---|
| 1m | +3.0% | -1.2% |
| 3m | -0.0% | +3.4% |
| 6m | +0.9% | +7.0% |
| 1y | +63.7% | +14.4% |
| ytd | +57.4% | +12.0% |
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TXN Fundamental Analysis
Revenue is in a clear cyclical upswing: Q2 2026 revenue reached $5.463 billion, up 22.82% year-over-year from $4.448 billion in Q2 2025, and up 13.2% sequentially from Q1 2026's $4.825 billion. The multi-quarter trajectory shows acceleration, with revenue climbing from $4.423 billion in Q4 2025 to $4.825 billion in Q1 2026 to $5.463 billion in Q2 2026, and the segment mix confirms the driver: Analog generated $3.174 billion and Embedded Processing $613 million in the latest quarter, with management citing data center revenue doubling year-over-year as the incremental growth engine on top of recovering industrial and automotive demand. This reacceleration from the 2024-2025 trough, when quarterly revenue bottomed near $4.0 billion, supports the thesis that the analog downcycle has turned and that operating leverage should follow. Profitability is robust and expanding: Q2 2026 net income was $1.98 billion on a 36.24% net margin, gross margin reached 61.36% (up from 58.01% in Q1 2026 and 57.89% in Q2 2025), and operating margin hit 42.28% versus 37.47% in the prior quarter and 35.14% a year ago. The gross margin recovery of roughly 350 basis points year-over-year reflects higher fab utilization and a richer mix, while the 34.06% trailing operating margin and 28.28% net margin remain well above typical semiconductor-industry levels and consistent with TXN's premium analog franchise. EPS of $2.14 in Q2 2026 versus $1.41 in Q2 2025 shows earnings growing faster than revenue, evidence of genuine operating leverage. The balance sheet is fortress-like but capital-intensive: the current ratio stands at 4.35, debt-to-equity at 0.95, and ROE at 30.73% (with ROA of 13.06%), while trailing free cash flow of $5.355 billion covers the $1.295 billion quarterly dividend roughly four times over. However, capex remains heavy at $514 million in Q2 2026 and $676 million in Q1 2026, and the payout ratio of 99.96% signals that dividends currently consume essentially all reported earnings, leaving little cushion if the cycle rolls over. Cash flow coverage of debt is modest at roughly 0.19x on a quarterly basis, and the 22.05 price-to-cash-flow ratio underscores that the market is paying richly for a cash flow stream still depressed by the fab build-out.
Quarterly Revenue
$5.5B
2026-06
Revenue YoY Growth
+22.8%
YoY Comparison
Gross Margin
61.4%
Latest Quarter
Free Cash Flow
$5.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is TXN Overvalued?
Because TXN is solidly profitable with trailing net income positive and EBITDA of $2.379 billion in Q2 2026, the PE ratio is the appropriate primary metric. The stock trades at 31.83x trailing earnings but only 25.97x forward earnings, and the roughly 18.4% compression between the two implies the market expects meaningful EPS growth, consistent with consensus estimated EPS of $12.16 versus the current run-rate. The forward PE of 25.97x on a 31.83x trailing base is a reasonable premium for a company whose earnings are inflecting off a cyclical trough. Against the broader semiconductor industry, TXN's 31.83x trailing PE and 8.92x PS ratio represent a premium, though the exact industry-average multiple is not provided in the data; the 9.69x price-to-book and 20.59x EV/EBITDA (with EV/Sales at 13.47x) place it among the more richly valued large-cap analog names. The premium is defensible on quality grounds, given 61.36% gross margins, 42.28% operating margins, and a 30.73% ROE that few semiconductor peers can match, but the 7.94x PEG ratio and 22.05x price-to-cash-flow multiple suggest the market is already pricing in substantial recovery, leaving limited room for multiple expansion. Historically, TXN's PE has ranged from roughly 15.4x in Q3 2022 to 39.6x in Q2 2024, and the current 31.83x sits in the upper-middle of that band, well above the 19-24x levels seen during the 2021-2022 peak-cycle years but below the 2024 trough-earnings distortion. The PS ratio of 8.92x compares favorably to the 49.76x reading in Q2 2026 historical data (a figure distorted by a different share-count basis) but remains elevated versus the 26-38x range of 2022-2023, reinforcing that valuation is stretched relative to its own history and dependent on continued earnings recovery to justify the multiple.
PE
31.8x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 15x~40x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
20.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the capital intensity of TXN's 300mm fab build-out colliding with a near-100% dividend payout ratio. Capex was $514M in Q2 2026 and $676M in Q1 2026, keeping trailing FCF at $5.355B against a $1.295B quarterly dividend — coverage of roughly four times, but the 99.96% payout ratio means reported earnings are fully committed, leaving no retained cushion if the cycle rolls over. Cash flow coverage of debt is modest at roughly 0.19x quarterly with debt-to-equity at 0.95, and the 22.05x price-to-cash-flow multiple shows the market is paying richly for a cash flow stream still depressed by the fab investment cycle. Revenue concentration in analog ($3.174B of $5.463B) and in cyclical industrial and automotive end markets means a demand stall would hit both the top line and fab utilization simultaneously, compressing the 61.36% gross margin that underpins the entire valuation.
Market and competitive risks are dominated by valuation compression. At 31.83x trailing and 25.97x forward earnings, 8.92x PS, and 20.59x EV/EBITDA, TXN trades at a premium to the broader semiconductor industry and in the upper-middle of its own 15.4x-39.6x historical PE band, well above the 19-24x peak-cycle levels of 2021-2022. The 7.94x PEG ratio implies the market already discounts the recovery, so any deceleration in the 22.82% revenue growth rate would trigger multiple contraction rather than earnings-driven downside. A beta of 1.339 makes the stock roughly 34% more volatile than the market, amplifying sector rotation out of semis, and recent coverage already flags the premium valuation debate — Zacks asked in September whether to buy 'despite its premium valuation,' while Motley Fool noted soft Q3 guidance even as it called the dip a buy. Competitive pressure from analog peers like ADI, which is also expanding industrial margins, plus potential in-sourcing by large customers, adds share-loss risk to the cyclical risk.
The worst-case scenario is a synchronized industrial and automotive demand stall arriving while new fab capacity comes online, driving utilization and gross margins down from 61.36% toward the mid-50s while the premium multiple compresses from 31.83x toward the low-20s. That combination would take the stock toward the analyst low target of $225, roughly 18.6% below the current $276.48, and in a deeper derating toward the 52-week low of $152.73 the loss would be approximately 44.8%. The 23.76% maximum drawdown already experienced from the $334.03 peak shows how quickly the stock can shed value when momentum reverses, and with beta at 1.339 a broad risk-off tape would compound the company-specific damage. Realistically, an investor should underwrite a -19% to -25% downside to the $225-$210 zone in a soft-landing bear case, with tail risk to the $152.73 low if the cycle turns outright negative.
FAQ
The most severe risk is valuation compression: at 31.83x trailing PE with a 7.94x PEG, any deceleration in the 22.82% revenue growth rate could drive the multiple toward the low-20s, implying downside toward the $225 analyst low target (-18.6%). Second is financial inflexibility from the 99.96% payout ratio, which leaves essentially no retained earnings cushion if the cycle rolls over while capex remains heavy at $514M in Q2 2026. Third is cyclical demand risk concentrated in industrial and automotive end markets, where a stall would hit both revenue and the 61.36% gross margin through fab underutilization. Fourth is macro and market risk from the 1.339 beta, which amplifies drawdowns in risk-off tape — the stock has already shown a 23.76% max drawdown from its peak.
The 12-month forecast has three scenarios: a 50% probability base case targeting $300-$335 (aligned with the $324.71 analyst average and $334.03 52-week high), a 25% probability bull case targeting $360-$400 (the analyst high target, assuming margins reach 63-65% and data center growth sustains), and a 25% probability bear case targeting $225-$255 (the analyst low target, assuming industrial demand stalls and the multiple compresses). The base case is most likely, resting on the assumption that revenue growth decelerates modestly to the high-teens while gross margins hold in the 60-62% range and forward EPS tracks near the $12.16 consensus. The key swing factor is whether the industrial and automotive recovery proves durable enough to drive operating leverage through the fab investment cycle.
TXN is modestly overvalued relative to its own history and at a premium to semiconductor peers. At 31.83x trailing and 25.97x forward earnings, 8.92x PS, 9.69x P/B, and 20.59x EV/EBITDA, the stock sits in the upper-middle of its historical 15.4x-39.6x PE band and well above the 19-24x levels of the 2021-2022 peak cycle. The 7.94x PEG ratio and 22.05x price-to-cash-flow multiple confirm the market is paying for growth that has yet to fully materialize. The valuation implies the market expects the 22.82% revenue growth to continue and margins to expand toward prior-cycle peaks above 65% gross margin — if that happens, the premium is justified; if growth decelerates, the multiple has room to compress toward the low-20s, which would imply meaningful downside.
From a risk/reward perspective, TXN is a reasonable but not compelling buy at $276.48. The analyst consensus is Buy with an average target of $324.71, implying 17.4% upside, and the fundamentals support it: 22.82% revenue growth, 61.36% gross margins, and 51.8% EPS growth. However, the 31.83x trailing PE and 7.94x PEG mean much of the recovery is already priced in, and the downside to the $225 analyst low target is 18.6% — a roughly 1:1 risk/reward at current levels. It is a better buy on a pullback toward the $253-258 support zone, which would imply a more attractive 23-25x forward multiple, or for long-term investors comfortable with a 1.339 beta and a 3.17% dividend yield while waiting for the fab investment cycle to pay off.
TXN is better suited to long-term holding than short-term trading. It is a mature, profitable franchise with a 3.17% dividend yield, 30.73% ROE, and a fortress balance sheet (4.35 current ratio), but its 1.339 beta and 23.76% max drawdown mean short-term price action is volatile and driven by cyclical sentiment — the stock swung from a $334.03 high to a $253.34 September low within months. The heavy fab investment cycle means free cash flow and margin benefits accrue over multiple years, not quarters, rewarding patient holders. A suggested minimum holding period is 2-3 years to ride through a full analog cycle and capture the operating leverage from the 300mm capacity, with investors monitoring the Q3 guidance and gross margin trajectory as the key checkpoints along the way.