Last Update 14 Dec 25

Fair value Decreased 0.34%

TXN: Inventory Discipline And Shifting Tariff Landscape Will Shape Cyclical Recovery Path

Analysts have trimmed their blended price target on Texas Instruments by less than $1 to approximately $189. This reflects slightly lower margin expectations and a slower than typical early-cycle recovery, even as revenue growth assumptions edge modestly higher.

Analyst Commentary

Analyst opinions on Texas Instruments remain divided, with recent target cuts clustering around the high $100s to low $200s range and one notable downgrade into the $150 area. The debate centers on how quickly margins can normalize and whether the current valuation adequately reflects a slower, more inventory constrained upcycle.

Bullish Takeaways

Bullish analysts view the stock as attractive on a medium term basis. They argue that current levels already discount near term margin pressure while still reflecting potential upside to a $200 to $210 valuation range as utilization and free cash flow recover.
Solid recent revenue performance and in line earnings are seen as evidence that Texas Instruments is executing well operationally. This is viewed as providing a base for earnings power to rebound once demand broadens and factory loading improves.
Supportive U.S. manufacturing policy and potential tariff shifts are expected to favor domestically concentrated chipmakers over time. Bullish analysts see this as an incremental tailwind to long term growth and multiple support.
Conservative management guidance is interpreted by some as risk management rather than structural weakness. This leaves room for positive estimate revisions if the macro backdrop stabilizes or improves faster than embedded in current models.

Bearish Takeaways

Bearish analysts argue that a premium valuation is difficult to justify while margins are being pressured by reduced fab utilization and while the company deliberately keeps inventory flat to slightly down quarter over quarter.
They highlight that the fundamental cycle appears to be stabilizing rather than recovering, with limited restocking by both direct and channel customers. This is seen as constraining near term revenue acceleration and earnings leverage.
Some see a lack of near term catalysts and relatively limited exposure to faster growing segments such as artificial intelligence data center and silicon carbide. This raises concerns that Texas Instruments could undergrow the broader semiconductor space.
Macro and geopolitical risks, including slowing auto demand, China competition and potential tariff headwinds, are cited as reasons to trim estimates below consensus and assign lower target prices. Downside scenarios in these cases tend to gravitate toward the mid $100s.

What's in the News

U.S. officials are signaling that long promised tariffs of about 100% on imported semiconductors may be delayed, which would benefit chipmakers with U.S. manufacturing footprints such as Texas Instruments if the shift away from aggressive tariff implementation persists (Reuters).
China has launched an anti discrimination and anti dumping investigation into U.S. chip trade policy and imports of some U.S. analog chips, potentially heightening regulatory and pricing scrutiny for companies like Texas Instruments that sell analog devices into the Chinese market (Reuters).
America's expanded chip export restrictions are contributing to advanced semiconductor shortages in China, reinforcing a supply demand imbalance that could affect global pricing, customer ordering patterns, and competitive dynamics for diversified chipmakers including Texas Instruments (Wall Street Journal).
China has suspended for one year certain export controls on key semiconductor minerals such as gallium and germanium. This move may modestly ease upstream supply risk for analog and power chip producers like Texas Instruments while geopolitical tensions remain elevated (New York Times).
The Trump administration is weighing new rules to curb software exports to China in response to rare earth restrictions. This could broaden the technology trade conflict in ways that may indirectly affect Texas Instruments and its customers through tighter controls on design and manufacturing tools (Reuters).

Valuation Changes

Fair Value: Trimmed slightly from approximately $189.56 to $188.92, reflecting a modestly lower intrinsic value estimate.
Discount Rate: Reduced marginally from about 10.81% to 10.76%, implying a slightly lower required return on equity.
Revenue Growth: Raised slightly from roughly 9.43% to 9.45%, signaling a modestly stronger long term top line outlook.
Net Profit Margin: Eased fractionally from around 33.86% to 33.82%, indicating a minor downgrade to long term profitability assumptions.
Future P/E: Lowered slightly from about 30.40x to 30.28x, pointing to a marginally less aggressive valuation multiple on forward earnings.

Growth in industrial automation and automotive semiconductor demand, alongside stable high-margin product focus, positions the company for resilient revenue and margin expansion.
Investments in domestic manufacturing and efficient tax incentives enhance supply chain strength, cash flow, and potential for increased shareholder returns.
Texas Instruments faces increasing competition, shifting technology trends, and geopolitical uncertainties, raising risks of margin pressure, capacity underutilization, and volatile revenue in key end markets.

Catalysts

About Texas Instruments

Designs, manufactures, and sells semiconductors to electronics designers and manufacturers in the United States, China, rest of Asia, Europe, Middle East, Africa, Japan, and internationally.What are the underlying business or industry changes driving this perspective?

The ongoing acceleration of industrial automation and digital transformation across diverse industrial sectors is driving sustained recovery and above-average growth in TI's core industrial end market, which increased by double-digits year-over-year. As automation and digitalization continue to proliferate globally, demand for robust analog and embedded chips is expected to boost revenue and support stable, high-margin sales.
Expansion in automotive semiconductor content, especially for electric vehicles and ADAS, is poised to drive future growth as automotive recovery lags the broader cyclical upturn. With content per vehicle rising and automotive representing a key longer-term demand vector, an eventual rebound could provide incremental revenue tailwinds and enhance gross margins as higher-complexity products ship.
Strategic investment in U.S.-based 300mm wafer fabs and a diversified global manufacturing footprint uniquely position TI to benefit from evolving supply chain localization and customer preferences for geopolitically resilient suppliers. This advantage is likely to help win incremental business, strengthen preferred supplier status, and improve long-term gross margins and pricing power.
Management is signaling that the benefits of recent U.S. tax incentives and R&D/capex expensing will materially lower future cash tax rates, bolstering free cash flow and enabling increased capital returns (dividends/buybacks), contributing to long-term earnings per share expansion even in periods of muted sales growth.
TI continues to focus on long-life, high-margin product portfolios targeting industrial and automotive applications, which typically feature lower product obsolescence and longer revenue cycles. This strategy supports stable, recurring revenues and net margins, and positions the company to capture outsized share of ongoing semiconductor content growth per end product.

Texas Instruments Earnings and Revenue Growth

Texas Instruments Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Texas Instruments's revenue will grow by 10.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 30.1% today to 35.7% in 3 years time.
Analysts expect earnings to reach $7.9 billion (and earnings per share of $8.48) by about September 2028, up from $5.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $10.8 billion in earnings, and the most bearish expecting $5.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.2x on those 2028 earnings, down from 33.5x today. This future PE is lower than the current PE for the US Semiconductor industry at 33.5x.
Analysts expect the number of shares outstanding to decline by 0.34% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.31%, as per the Simply Wall St company report.

Texas Instruments Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The analog and embedded chip segments, which are TI's core business, may face commoditization pressures as more competitors-including Chinese firms-enter the market, potentially leading to price wars, slower revenue growth, and margin compression over time.
Heavy ongoing investments in expanded in-house manufacturing and 300mm wafer fabs raise the risk of underutilized capacity if demand falls short of expectations, which could result in lower return on assets, higher depreciation charges, and negative impacts on earnings and free cash flow.
Ongoing geopolitical instability and shifting tariff regimes (especially between the U.S. and China) continue to create supply chain uncertainty and volatile customer demand patterns, exposing TI to sales swings, inventory risks, and potential margin pressure on global revenues.
Accelerating technological shifts, such as increased focus on advanced logic and AI-specific processors, may reallocate industry value away from analog and discrete segments, threatening Texas Instruments' long-term competitive position and future revenue growth in rapidly evolving markets.
TI's substantial exposure to industrial and automotive end markets, which remain sensitive to global trade policy and economic cycles, introduces risk of revenue volatility and prolonged margin pressure during cyclical downturns or sector-specific slowdowns.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $205.423 for Texas Instruments based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $260.0, and the most bearish reporting a price target of just $125.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.3 billion, earnings will come to $7.9 billion, and it would be trading on a PE ratio of 31.2x, assuming you use a discount rate of 10.3%.
Given the current share price of $185.03, the analyst price target of $205.42 is 9.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

TXN: Gross Margins And Low Inventories Will Drive Recovery If Demand Normalizes