TXN 10-K & 10-Q changes, risk factors and insider trading

WeThe havesemiconductor facilitiesindustry has recently been the focus of increased regulatory activity and scrutiny, which has contributed to variability in moreglobal thantrade 30 countries. About 60% of our revenue comes from customers with headquarter locations outside the United States; revenue from end customers headquartered in China represents about 20% of our revenue. We also continue to expand our offerings of online transactionsconditions and servicessupply worldwide.chains. Certain countries where we operateoperate, particularly the United States and China, have experienced, and other countries may experience, geopolitical tensions and administrative measures that affect global trade and macroeconomic conditions through the enactmentimposition of tariffs, including tariffs specific to the products that we sell, import or export restrictions, trade embargoes and sanctions, restrictions on cross-border investment and other trade barriers.barriers applicable to the semiconductor industry. Geopolitical tensions mayand administrative measures could limit our access to markets or impact our ability to deliver products, support customers, purchase or receive manufacturing equipment or materials, limit our suppliers’ and customers’ access to our products, or cause customers to seek alternate suppliers, which could adversely affect our operations and financial results.

We face intense technological and pricing competition in the markets in which we operate. We expect this competition will continue to increase from large competitors and from small competitors serving niche markets, and also from emerging companies, particularly in Asia, that sell products into the same markets in which we operate. For example, we may face increased competition as a result of China actively promoting and reshaping its domestic semiconductor industry through policy changes and investment.investment, Thesewhich actions, in conjunction with trade tensions, may restrict us from participating in the China market or maycould prevent us from competing effectively. Certain competitors possess sufficient financial, technical and management resources and utilize available incentives offered by various countries and government entities to develop and market products that may compete favorably against our products, and consolidation among our competitors may allow them to compete more effectively. The price and product development pressures that result from competition may lead to reduced profit margins and lost business opportunities in the event that we are unable to match the price declines or cost efficiencies, or meet the technological, product, support, software or manufacturing advancements of our competitors.

Our customers include companies in a wide range of end markets and sectors within those markets. If demand in one or more sectors within our end markets declines or the rate of growth slows, our results of operations may be adversely affected. The cyclical nature of the semiconductor market occasionally leads to significant and rapid increases and decreases in product demand. Additionally, the loss or significant curtailment of purchases by one or more of our large customers, including curtailments due to a change in the design or manufacturing sourcing policies or practices of these customers, the timing of customer or distributor inventory adjustments, changes in demand for customer products, tariffs, export controls or other trade restrictions,measures, may adversely affect our results of operations and financial condition.

In particular, our manufacturing processes and critical manufacturing equipment, and those of our suppliers, require that certain key materials, services and utilities be available. SuppliersGeopolitical tensions are disrupting and reshaping global supply chains, and suppliers of these items have and might continue to extend lead times, limit supply or increase prices due to factors beyond our control. Further, certain key materials used in semiconductor manufacturing are primarily sourced from limited geographies. Governments have adopted or proposed measures, including export controls on certain minerals, materials and equipment, that could adversely affect equipment and material availability, cost or movement. Limited or delayed access to and high costs of key materials, services and utilities could adversely affect our results of operations.

Our inability to timely implement new manufacturing technologies, install manufacturing equipment or secure necessary personnel for manufacturing operations could adversely affect our results of operations. We have made and will continue to make significant investments in manufacturing capacity,capacity consistent with our capital management strategy, and we might not realize our expected return on those investments. We subcontract a portion of our wafer fabrication and assembly and testing of our products, and we depend on third parties (including contractors and other service providers) to support key portions of our operations (including manufacturing operations and advanced logic manufacturing process technology development) and to construct our facilities. We do not have long-term contracts with all of these suppliers, and the number of alternate suppliers is limited. Reliance on these suppliers involves risks, including possible shortages of capacity in periods of high demand, suppliers’ inability to develop and deliver advanced logic manufacturing process technology or build facilities in a timely, cost-effective, and appropriate manner, the possibility of suppliers’ imposition of increased costs on us and the unauthorized disclosure or use of our intellectual property. In addition, failure by these suppliers to fulfill expectations, commitments and responsibilities in accordance with agreed terms or applicable laws, rules and regulations (including health, safety, forced labor, human trafficking and supply chain standards) could adversely affect our results of operations, financial condition and reputation.

Claims based on warranty, product liability, epidemic or delivery failures, or other grounds relating to our products, software, manufacturing, services, designs, communications or cybersecurity could lead to significant expenses as we defend the claims or pay damage awards or settlements. In the event of a claim, we would also incur costs if we decide to compensate the affected customer or end consumer. Any such claims may also cause us to write off the value of related inventory. We maintain product liability insurance, but there is no guarantee that such insurance will be available or adequate to protect against all such claims. In addition, it is possible for a customer to recall a product containing a TI part, for example,example with respect to products used in automotive applications or handheld electronics, which may cause us to incur costs and expenses relating to the recall. Improper, incorrect, illicit or unauthorized storage, handling, modification, diversion or use of our products, or use of counterfeit products, by third parties could result in reputational harm. Any of these events could adversely affect our results of operations, financial condition and reputation.

Our results of operations could be adversely affected by distributors’ promotion of competing product lines or our distributors’ financial performance.performance and operations.

In 2024,2025, aboutless than 20% of our revenue was generated from sales of our products through distributors. Our distributors carry competing product lines, and our sales could be affected if semiconductor distributors promote competing products over our products. Moreover, our results of operations could be affected if our distributors are subject to administrative measures that materially affect their ability to operate or our ability to supply customers with products or if our distributors suffer financial difficulties that result in their inability to pay amounts owed to us. Disputes with current or former distributors could be disruptive or harmful to our business.

Our profit margins vary due to a number of factors, which may include customer demand and shipment volume; capital expenditures and resulting depreciation; our manufacturing processes; product mix; inventory levels; tariffs; freight costs; and new accounting pronouncements or changes in existing accounting practices or standards. In addition, we operate in a highly competitive market environment that might adversely affect pricing for our products. Because we own much of our manufacturing capacity, a significant portion of our operating costs is fixed. With our planned capacity expansions, capital expenditures and depreciation have increased. In general, these fixed costs do not decline with reductions in customer demand or factory loadings, and can adversely affect profit margins as a result.

We are subject to complex laws, rules and regulations on an international, national and local level that affect our domestic and international operations relating to, for example, the environment and climate change; safety; health; trade, including import and export; bribery and corruption; financial reporting; tax; data privacy and protection; labor and employment; competition; facilities and code compliance; market access; pandemics, epidemics or other public health crises; intellectual property ownership and infringement; and the movement of currency. Compliance with these laws, rules and regulations may be onerous and expensive and could restrict our ability to manufacture or ship our products and operate our business. From time to time, we receive inquiries from government entitiesentities, regarding our compliance with laws and regulations, and wewhich could beresult subjectin enforcement actions or litigation leading to related litigation, investigations or enforcement activity that can be unpredictable and time-consuming, as well aspotential disruptions to our operations, or significant fines, penalties or other legal liability. Furthermore, should these laws, rules and regulations be amended or expanded, or new ones enacted, we could incur materially greater compliance costs or restrictions on our ability to manufacture our products and operate our business.

We have facilities in more than 30 countries and as a result are subject to taxation and audit by a number of taxing authorities. Tax rates vary among the jurisdictions in which we operate. If our tax rate increases, our results of operations could be adversely affected. A number of factors could cause our tax rate to increase, including a changechanges in the jurisdictions in which our profits are earned and taxed; a changechanges in the mix of profits from those jurisdictions; changes in available tax credits or deductions, including for amounts relating to stock compensation; changes in applicable tax rates; changes in tariff regulations or surcharges; changes in accounting principles; or adverse resolution of audits by taxing authorities. We have deferred tax assets on our balance sheet. Changes in applicable tax laws and regulations or in our business performance could affect our ability to realize those deferred tax assets, which could also affect our results of operations.

We are subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction. These laws and regulations can be complex and subject to interpretation. In addition, many countries have enacted or begun the process of enacting laws that align with the Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting recommendations.recommendations; application of these laws to U.S.-based multinational corporations remains uncertain. Changes in these laws and regulations could affect the locationsjurisdictions wherein wewhich our profits are deemedearned toand earn income,taxed, which could in turn affect our results of operations. Each quarter we forecast our tax expense based on our forecast of our performance for the year. If that performance forecast changes, our forecasted tax expense will change.

We have received and may in the future continue to receive government incentives, including but not limited to tax incentives, designed to encourage certain investments in our operations. We may be subject to increased scrutiny from government entities, shareholders and others on how these incentives are usedearned and spent. Such incentives could be subject to reduction, modification, clawback or termination, and such changes to these incentives could adversely affect our results of operations, financial condition and reputation.

We maintain bank accounts, a portfolio of investments, access to one or more revolving credit agreementsfacilities and the ability to issue debt to support the financing needs of the company. Our ability to fund our operations, invest in our business, make strategic acquisitions, service our debt obligations and meet our cash return objectives depends upon continuous access to our bank and investment accounts, and may depend on access to our bank credit lines that support commercial paper borrowings and provide additional liquidity through short-term bank loans. If we are unable to access these accounts and credit lines (for example, due to instability in the financial markets), our results of operations and financial condition could be adversely affected and our ability to access the capital markets or redeem our investments could be restricted.

(a) A strong foundation of manufacturing and technology that provides lower costs and greater control of our supply chain.

(b) A broad portfolio of analog and embedded processing products that offers more opportunity per customer and more value for our investments.

(c) The reach of our market channels that gives access to more customers and more of their design projects, leading to better insight and knowledge of customer needs and the opportunity to sell more of our products into each design and gives us better insight and knowledge of customer needs.design.

(d) Diversity and longevity of our products, markets and customer positions that provide less single point dependency and longer returns on our investments.

Our strategic focus is on analog and embedded processing products. We sell our products into sixthe endfollowing markets: industrial, automotive, data center, personal electronics,electronics enterprise systems,and communications equipment and other.equipment. While all of these end markets represent good opportunities, we place additional strategic emphasis on designing and selling our products into the industrialindustrial, automotive and automotivedata center markets, which we believe represent the best long-term growth opportunities.

Revenue of $15.64$17.68 billion decreasedincreased $1.88$2.04 billion, or 10.7%,13.0%, due to lowerhigher revenue from increased demand in our Analog andsegment and, to a lesser extent, in our Embedded Processing.Processing segment, which were both impacted by the macroeconomic factors discussed above.

Gross profit of $9.09$10.08 billion was downup $1.93$989 billion,million, or 17.5%, primarily10.9%, due to lowerhigher revenuerevenue. and,Our togross aprofit lesserwas extent,also impacted by higher manufacturing costs associated with our planned capacity expansions.expansions, partially offset by reduced costs related to increased factory loadings. As a percentage of revenue, gross profit decreased to 58.1%57.0% from 62.9%.58.1%.

Other income and expense (OI&E) was $496$230 million of income compared with $440$496 million of income,income. This decrease was due to lower interest income. See Note 11 to the financial statements.

Our provision for income taxes was $654$709 million compared with $908$654 million. This decreaseincrease was primarily due to lowerchanges in the effect of U.S. tax benefits, including the effect of OBBBA, and higher income before income taxes.taxes, partially offset by higher discrete tax benefits of $37 million, primarily related to our non-U.S. operations. Our effective tax rate, which includes discrete tax items, was 12.0%12.4% in 20242025 compared with 12.2%12.0% in 2023.2024. See Note 4 to the financial statements for a reconciliation of the U.S. statutory corporate tax rate to our effective tax rate.

Analog revenue decreased due to the mix of products shippedincreased in both product lines,lines ledabout evenly due to higher demand, which was impacted by Signalthe Chain.macroeconomic factors discussed above. Operating profit decreasedincreased primarily due to lowerhigher revenue and associated gross profit, partially offset by higher manufacturingoperating costs.expenses.

Other revenue decreasedincreased $164$32 million, and operating profit increaseddecreased $3$198 million.

At the end of 2024,2025, total cash (cash and cash equivalents plus short-term investments) was $7.58$4.88 billion, a decrease of $995$2.70 millionbillion from the end of 2023.2024.

Accounts receivable were $1.72$1.96 billion, aan decreaseincrease of $68$244 million compared with the end of 2023.2024. Days sales outstanding at the end of 2024 and 20232025 were 39.40 compared with 39 at the end of 2024.

Inventory was $4.53$4.80 billion, an increase of $528$277 million from the end of 2023.2024. Days of inventory at the end of 20242025 were 241222 compared with 219241 at the end of 2023.2024, which reflects the continued execution of our inventory strategy.

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and access to debt markets. We also have a variable-rate, revolving credit facility. As of December 31, 2024,2025, our credit facility was undrawn, and we had no commercial paper outstanding. Cash flows from operating activities for 20242025 were $6.32$7.15 billion, aan decreaseincrease of $102$835 million primarily due to lowerhigher net income,income and non-cash items, partially offset by lowerhigher cash used for working capital. Cash flows from operating activities for 2025 and 2024 include a cash benefitbenefits of $335 million and $588 millionmillion, respectively, from the U.S. CHIPS and Science Act (CHIPS Act) investment tax credit (ITC) used to reduce income taxes payable.

Investing activities for 20242025 used $3.20$1.44 billion compared with $4.36$3.20 billion in 2023.2024. Capital expenditures were $4.82$4.55 billion compared with $5.07$4.82 billion in 20232024 and were primarily for semiconductor manufacturing equipment and facilities in both periods. In 2025, we received proceeds of $335 million from CHIPS Act incentives, including $75 million in direct funding. Short-term investments provided cash proceeds of $2.78 billion in 2025 compared with $1.47 billion in 2024 compared with $682 million in 2023.2024.

Financing activities for 20242025 used $2.88$5.69 billion compared with $2.14$2.88 billion in 2023.2024. In 2025, we received net proceeds of $1.20 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $750 million. In 2024, we received net proceeds of $2.98 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $600 million. In 2023, we received net proceeds of $3.00 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $500 million. Dividends paid in 20242025 were $4.80$5.00 billion compared with $4.56$4.80 billion in 2023,2024, reflecting an increased dividend rate. We used $929$1.48 millionbillion to repurchase 4.78.5 million shares of our common stock compared with $293$929 million used in 20232024 to repurchase 1.84.7 million shares. Employee exercises of stock options provided cash proceeds of $517$400 million compared with $263$517 million in 2023.2024.

This MD&A includes references to free cash flow and ratios based on that measure. These are financial measures that were not prepared in accordance with generally accepted accounting principles in the United States (GAAP). Free cash flow wasis calculated by subtracting capital expenditures from the most directly comparable GAAP measure,as cash flows from operating activities (also referred to as cash flow from operations). less capital expenditures, plus proceeds from CHIPS Act incentives.

* Includes a cash benefitbenefits of $335 million and $588 million from the CHIPS Act ITC used to reduce income taxes payable for 20242025 and 2024, respectively.

We continue to invest to strengthen our competitive advantage in manufacturing and technology as part of our long-term capacity plan. We arehave nearinginvested thein endmanufacturing ofcapacity ato six-yearsupport elevatedcustomer capitaldemand, expendituresenable cycleexternal that,foundry whentransfers completed,and willprepare new factories to have cleanroom space available to support future growth. These investments have uniquely positionpositioned TI to deliver dependable, low-cost 300mm capacity, scalability of capital expenditures, including capacity modularity,with the ability to equip and ramp factories to support customer demand. We believe this approach supports free cash flow per share growth across a range of market conditions.

◦Unless otherwise noted, changes in our revenue are attributable to changes in customer demand, which are evidenced by fluctuations in shipment volumes. Upturns in the semiconductor cycle are often characterized by rising customer demand, which drives higher revenue, while downturns in the semiconductor cycle are characterized by weakening customer demand, which results in lower revenue.

Our firstsecond quarter revenue was $4.83$5.46 billion, net income was $1.55$1.98 billion and earnings per share (EPS) were $1.68.$2.14.

Revenue increased 9%13% sequentially and 19%23% from the same quarter a year ago with broad growth led by industrialindustrial, data center and data center.automotive.

As announced on February 4, 2026, we have entered into a definitive agreement to acquire Silicon Labs for $231.00 per share in an all-cash transaction, representing a total enterprise value of approximately $7.5 billion. Under the terms of the agreement, Silicon Labs stockholders will receive $231.00 in cash for each share of Silicon Labs common stock they hold at the time of closing, which is currently expected in the first half of 2027, subject to receipt of regulatory approvals and other customary closing conditions, including approval by Silicon Labs stockholders.conditions. We expect to fund the transaction with a combination of cash on hand and debt financing to be arranged prior to closing.financing.

Details of financial results – firstsecond quarter 2026 compared with firstsecond quarter 2025

Revenue of $4.83$5.46 billion increased $756$1.02 million,billion, or 19%,23%, due to increased demand in our Analog segment and, to a lesser extent, in our Embedded Processing segment, which were both impacted by the macroeconomic factors discussed above.segment.

Operating expenses (R&D and SG&A) were $974$1.03 millionbillion compared with $989$1.01 million.billion.

OI&E was $47$69 million of income compared with $80$48 million of income. This decreaseincrease was primarily due to lowerhigher interest income.

Our provision for income taxes was $169$258 million compared with $97$183 million. This increase was primarily due to higher income before income taxes.taxes, partially offset by higher discrete tax benefits of $35 million, related to stock-based compensation. Our effective tax rate, which includes discrete tax items, was 10%12% comparedin withboth 8%.periods.

FirstSecond quarter 2026 segment results

Analog revenue increased in both product lines, led by Signal Chain, due to higher demand, which was impacted by the macroeconomic factors discussed above.demand. Operating profit increased primarily due to higher revenue and associated gross profit.

Embedded Processing revenue increased due to higher demand, which was impacted by the macroeconomic factors discussed above.demand. Operating profit increased primarily due to higher revenue and associated gross profit.

At the end of the firstsecond quarter of 2026, total cash (cash and cash equivalents plus short-term investments) was $5.10$7.00 billion, an increase of $222$2.12 millionbillion from the end of 2025.

Accounts receivable were $2.25$2.52 billion, an increase of $282$557 million compared with the end of 2025. Days sales outstanding in the firstsecond quarter of 2026 were 42 compared with 40 at the end of 2025.

Inventory was $4.70$4.61 billion, a decrease of $109$199 million from the end of 2025. Days of inventory for the firstsecond quarter of 2026 were 209196 compared with 222 at the end of 2025, which reflects the continued execution of our inventory strategy.

Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and access to debt markets. We also have a variable-rate, revolving credit facility. As of MarchJune 31,30, 2026, our credit facility was undrawn, and we had no commercial paper outstanding. Cash flows from operating activities for the first threesix months of 2026 were $1.52$4.22 billion, an increase of $671$1.51 millionbillion from the year-ago period due to higher net income and non-cash items, as well as lower cash used for working capital. Cash flows from operating activities for the first six months of 2026 and 2025 include cash benefits of $301 million and $203 million, respectively, from the U.S. CHIPS and Science Act (CHIPS Act) investment tax credit (ITC) used to reduce income taxes payable.

Investing activities for the first threesix months of 2026 used $47$1.75 millionbillion compared with $1.25$82 billion of cash providedmillion in the year-ago period. Capital expenditures were $676$1.19 millionbillion compared with $1.12$2.43 billion in the year-ago period and were primarily for semiconductor manufacturing equipment and facilities in both periods. U.S.In 2026, CHIPS and Science Act (CHIPS Act) incentives provided cash proceeds of $555$1.10 million of direct fundingbillion compared with $260 million related to the investment tax credit (ITC) in the year-ago period. Short-term investments providedused cash of $108$1.66 millionbillion compared with $2.16$2.10 billion of cash provided in the year-ago period.

We are nearing the end of our six-year elevated capital expenditures cycle, and consistentConsistent with our capital management strategy, we areexpect expecting to spend aboutbetween $2 billion to $3 billion of capital expenditures in 2026. Beyond 2026, capital expenditures will be dependent on revenue and growth expectations. We expect to continue benefiting from the CHIPS Act. This includes the 35% ITC on qualifying manufacturing investments as well as direct funding of up to $1.6 billion, of which we have received $630 million, for our three large-scale 300mm wafer fabs located in Sherman, Texas, and Lehi, Utah.

Financing activities for the first threesix months of 2026 used $1.15$2.04 billion compared with $2.54$2.78 billion in the year-ago period. We received net proceeds of $1.20 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $750 million in the year-ago period. Dividends paid were $1.29$2.59 billion compared with $1.24$2.47 billion in the year-ago period, reflecting an increased dividend rate. We used $158$185 million to repurchase 0.80.9 million shares of our common stock compared with $653$955 million to repurchase 3.55.4 million shares in the year-ago period. Employee exercises of stock options provided cash proceeds of $309$754 million compared with $118$233 million in the year-ago period.

We had $3.55$3.66 billion of cash and cash equivalents and $1.55$3.34 billion of short-term investments as of MarchJune 31,30, 2026. We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures, dividend and debt-related payments, and other business requirements for at least the next 12 months.

* Includes cash benefits of $335$433 million and $588$479 million from the CHIPS Act ITC used to reduce income taxes payable for the twelve months ended MarchJune 31,30, 2026 and 2025, respectively.