Company DCF analysis file
Texas Instruments DCF Analysis
Texas Instruments’ DCF needs a funded manufacturing case. Revenue recovery and reported operating margin can move differently from the cash used to build fabrication capacity, while investment incentives have a specific cash classification. The annual cost, segment and cash bridges below show which part of the investment program is funded before a long-term margin or growth assumption is adopted.
Retain fabrication cost, engineering and corporate support
Years ended December 31, 2024 and 2025; consolidated company. Amounts use the monetary scale stated in each table caption. Source: annual financial statements. Reported lines retain the issuer’s scope; derived ratios use the displayed denominators.
| Measure | FY2024 | FY2025 |
|---|---|---|
| Revenue | 15,641 | 17,682 |
| Cost of revenue | 6,547 | 7,599 |
| Gross profit | 9,094 | 10,083 |
| R&D | 1,959 | 2,083 |
| Sales / general / administrative | 1,794 | 1,860 |
| Restructuring expense / (benefit) | -124 | 117 |
| Operating profit | 5,465 | 6,023 |
| Net income | 4,799 | 5,001 |
| Gross margin: derived | 58.1% | 57.0% |
| Operating margin: derived | 34.9% | 34.1% |
The FY2024 restructuring line is a benefit, so subtracting it increases the operating subtotal. Preserve that sign when comparing periods. A forward margin case must retain engineering, support and fabrication economics consistent with the assumed volume and product mix.
New manufacturing capacity first requires cash, then incurs operating and depreciation costs as it is commissioned and used. A higher sales forecast should therefore explain capacity availability, demand and investment timing together. Avoid inferring an undisclosed utilization rate from a consolidated gross margin.
Connect segment earnings to the same consolidated population
The annual segment note gives the following revenue and operating profit. These are reported operating measures, not segment cash available after fabrication investment.
| Business | Revenue | Operating profit |
|---|---|---|
| Analog | 14,006 | 5,412 |
| Embedded Processing | 2,697 | 304 |
| Other | 979 | 307 |
| Consolidated | 17,682 | 6,023 |
Analog supplies most of the displayed operating profit, but a group cash forecast still needs the manufacturing and corporate investment supporting the whole portfolio. Do not allocate new fabrication cash merely in proportion to current segment revenue and then present the result as disclosed segment free cash flow.
Trace earnings into cash and reinvestment
Reconciliation source: annual earnings and cash-flow statements. Subtotals below are checkpoints, not extra amounts to add. Grouped adjustments are calculated from the disclosed cash-flow lines.
| Step | FY2025 |
|---|---|
| Operating profit | 6,023 |
| Other income | 230 |
| Interest / debt expense | -543 |
| Income tax | -709 |
| Net income: subtotal | 5,001 |
| Depreciation + software amortization | 1,999 |
| Other reconciliation adjustments | 402 |
| Operating asset / liability changes | -249 |
| Operating cash: subtotal | 7,153 |
| Capital expenditures | -4,550 |
| CFO less capex: derived subtotal | 2,603 |
| CHIPS investing incentive cash | 335 |
| Issuer free cash flow | 2,938 |
Other reconciliation combines share compensation, asset-sale loss and deferred tax. Operating-balance changes combine receivables, inventory, prepayments, payables, compensation, tax, pension funding and other items. The bridge uses $1,918 million of depreciation plus $81 million of software amortization; a forecast should avoid adding those costs twice.
The $335 million CHIPS incentive is an investing inflow in this definition. The issuer’s $2,938 million free cash flow is therefore different from the $2,603 million CFO-less-capex subtotal. Do not add tax-credit cash a second time if it is already reflected in operating cash. Future incentive timing must be explicit rather than assumed to recur perpetually.
Stress fabrication cash without assuming an immediate earnings benefit
Illustration: raise capex by 10% while keeping operating cash and the displayed incentive inflow fixed. This isolates a funding sensitivity; it assumes no change in commissioned capacity, sales, depreciation or incentive eligibility.
| Measure | Historical basis | Illustrative case |
|---|---|---|
| Operating cash | 7,153 | 7,153 |
| Capital expenditures | 4,550 | 5,005 |
| CFO less capex | 2,603 | 2,148 |
| Including fixed incentive cash | 2,938 | 2,483 |
The funding reduction is $455 million. A multi-year forecast must also schedule commissioning, the resulting expense base and any later incentive cash. A payment deferral may lift one period’s cash while preserving a later obligation; it is not a permanent margin improvement.
Keep interim reporting separate from the annual basis
Q3 2026 covers 2026-07-01 through 2026-09-30 and was released 2026-10-21. Revenue was $6,055 million in this quarter. Source: official Q3 2026 results.
The later Q3 result is a separate demand and earnings observation, not a replacement for the full-year fabrication-cash basis. Roll forward the construction, commissioning and funding schedules before inferring how much cash a revenue recovery can support.
Turn the financial basis into a DCF case
| Decision | Treatment |
|---|---|
| Demand | Separate Analog, Embedded Processing and Other demand assumptions with their product economics. |
| Cost | Retain fabrication, engineering and support costs consistent with commissioning and volume. |
| Investment | Schedule cash capex, commissioning and maintenance separately from depreciation expense. |
| Incentives | Keep operating tax credits and investing incentive receipts in their disclosed cash classifications. |
| Valuation | Match operating tax and financing conventions; reconcile dated debt, cash and diluted common shares. |
A conventional enterprise case uses operating profit after an explicit operating tax assumption, appropriate non-cash adjustments, reinvestment and operating funding. The reported cash bridge requires a financing and tax reconciliation before it can serve that purpose. A terminal case must sustain manufacturing capability without relying on temporary incentive receipts as a recurring operating margin.
The Texas Instruments company analysis explains the wider operating context. Use the company forecast tool and DCF calculator with explicit assumptions. Use the historical financials to define an explicit operating and reinvestment case, then supply valuation-date capital costs, claims and diluted shares. Check that each cash claim is counted once before deriving a per-share value.
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