Texas Instruments
TXN
$263.43
+0.00%
Texas Instruments Incorporated is a Dallas-based semiconductor manufacturer that generates over 95% of its revenue from analog and embedded processing chips — the foundational components that convert, regulate, and process real-world signals such as power, sound, and sensor data — with a small remainder from its legacy calculator business. As the world's largest maker of analog semiconductors, TXN occupies a uniquely entrenched position in the chip value chain: its products are long-lived, design-in sticky, and sold into thousands of fragmented end-markets spanning industrial, automotive, personal electronics, and communications equipment. The current investor narrative has shifted decisively from a multi-year inventory-correction story to an AI-and-data-center-driven growth supercycle, with management's Q1 2026 earnings blowout and 90% data-center demand spike reigniting enthusiasm for analog content growth. At the same time, the stock's premium multiple, aggressive capital-expenditure program, and soft near-term guidance have created a vigorous bull-bear debate over whether the AI tailwind justifies the valuation or whether investors are overpaying for a cyclical recovery.…
TXN
Texas Instruments
$263.43
Related headlines
Investment Opinion: Should I buy TXN Today?
The synthesized recommendation is Hold with a bullish bias. TXN is a high-quality analog franchise undergoing a genuine cyclical recovery with an emerging AI/data-center tailwind, but the stock's premium valuation (31.83x trailing PE, 7.94 PEG) and recent momentum deceleration (-10.77% over three months) suggest the easy money has been made. The analyst consensus target of $324.71 implies 20.8% upside, but the wide $225–$400 range and the stock's 1.31 beta argue for patience and disciplined entry rather than chasing.
The supporting evidence for a constructive view is substantial: revenue growth accelerated to 18.58% YoY in Q1 2026, gross margin expanded to 58.01%, operating margin reached 37.47%, and free cash flow turned positive at $844 million after negative FCF a year earlier. ROE of 30.73% and ROA of 13.06% are top-decile among large-cap semis, and the 3.17% dividend yield provides a valuation floor unusual for the sector. However, the payout ratio of 99.96% and dividends exceeding FCF are yellow flags, and the PEG ratio of 7.94 indicates the market is paying dearly for growth.
The biggest risks that could invalidate the thesis are: (1) a renewed semiconductor down-cycle that compresses revenue growth back to single digits, (2) multiple compression if the AI narrative fades or if peers like ADI signal weakening industrial demand, and (3) a dividend cut if capex remains elevated while FCF fails to cover the payout. The rating would upgrade to Buy if the stock pulls back to the $225–$240 range (analyst low target) or if forward PE compresses below 22x, and would downgrade to Sell if revenue growth decelerates below 10% or if gross margins fall below 55%. Relative to its own history (PE range 15.4x–39.6x) and the sector, TXN is fairly valued to slightly overvalued — the premium is defensible but not a bargain.
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TXN 12-Month Price Forecast
TXN presents a balanced risk/reward at the current price of $268.70. The company is executing well operationally — revenue growth is accelerating, margins are expanding, and the AI/data-center narrative provides a credible multiyear growth vector. However, the stock's premium valuation (31.83x trailing PE, 8.92x PS) and elevated PEG of 7.94 suggest the market has already priced in much of the recovery, while the dividend's 99.96% payout ratio and FCF shortfall introduce financial flexibility concerns. The analyst consensus target of $324.71 offers 20.8% upside, but the wide dispersion ($225–$400) and the stock's 1.31 beta mean volatility is likely to remain high. I would upgrade to bullish if the stock pulls back to the $225–$240 range or if forward PE compresses below 22x, and downgrade to bearish if revenue growth decelerates below 10% or if gross margins fall below 55%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Texas Instruments's 12-month outlook, with a consensus price target around $324.71 and implied upside of +23.3% versus the current price.
Average Target
$324.71
0 analysts
Implied Upside
+23.3%
vs. current price
Analyst Count
—
covering this stock
Price Range
$225 - $400
Analyst target range
TXN is covered by 31 analysts, indicating deep institutional interest and efficient price discovery for this mega-cap semiconductor name. The consensus recommendation is not explicitly stated in the data (listed as "none"), but the institutional ratings pattern is instructive: of the 10 most recent ratings, six are Buy/Overweight (KeyBanc, TD Cowen, UBS, Stifel, Citigroup, BofA), three are Neutral/Equal Weight (Cantor Fitzgerald, Wells Fargo, Mizuho), and one is a notable upgrade (Seaport Global moved from Neutral to Buy on May 22, 2026). The average analyst target price is $324.71, which implies approximately 20.8% upside from the current price of $268.70 — a bullish signal that suggests the sell-side sees the recent pullback as a buying opportunity rather than the start of a downtrend. The consensus leans moderately bullish, with the upgrade activity and the majority Buy ratings outweighing the neutral holdouts. The target range is wide, spanning from a low of $225.00 to a high of $400.00 — a spread of $175, or 65% of the current price — which signals significant disagreement about the company's trajectory and high uncertainty among analysts. The high target of $400 implies roughly 48.9% upside and likely assumes the AI/data-center analog supercycle accelerates, with revenue growth sustaining above 20% and margins expanding further toward 60%+ gross and 40%+ operating, potentially accompanied by multiple expansion as the market re-rates TXN as an AI infrastructure play. The low target of $225 implies about 16.3% downside and likely prices in a scenario where the semiconductor cycle rolls over again, capex weighs on free cash flow, the dividend becomes strained, and the premium multiple compresses toward the sector average. The wide spread, combined with the recent three-month underperformance and the stock's 1.31 beta, suggests investors should expect continued volatility; the consensus target of $324.71 sits just below the 52-week high of $334.03, implying that analysts collectively believe the stock can reclaim and potentially exceed its prior peak, but the dispersion of views means position sizing and entry timing matter enormously.
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Bulls vs Bears: TXN Investment Factors
The bull case currently has stronger evidence, anchored by accelerating revenue growth (18.58% YoY), expanding margins (58.01% gross, 37.47% operating), and a validated AI/data-center demand narrative that drove a 90% spike in data-center orders. The bear case rests primarily on valuation — a 31.83x trailing PE and 7.94 PEG — and the fact that the dividend ($1.291 billion) exceeds free cash flow ($844 million), leaving little cushion if the capex cycle extends. The single most important tension is whether the AI-driven analog supercycle can sustain revenue growth above 15% long enough to grow into the premium multiple, or whether the market has already priced in several years of growth and the stock is vulnerable to multiple compression. Analyst consensus leans bullish with a $324.71 average target (20.8% upside), but the wide $225–$400 range reflects genuine uncertainty about the cycle's durability.
Bullish
- Revenue growth accelerating sharply: Q1 2026 revenue of $4.825 billion grew 18.58% year-over-year, a dramatic acceleration from the ~9.5% growth in Q4 2025 and low-single-digit growth in mid-2025. The sequential climb from the $3.822 billion trough in Q2 2024 to $4.825 billion in Q1 2026 confirms a cyclical recovery is well underway.
- Margin expansion demonstrates operating leverage: Gross margin expanded to 58.01% in Q1 2026 from 56.84% a year earlier, while operating margin jumped to 37.47% from 32.54%. Net margin reached 32.02%, up from 28.98% in Q1 2025, as R&D was held roughly flat at $510 million against 18.6% revenue growth.
- AI/data-center demand spike validates growth narrative: Management reported a 90% spike in data-center demand, driving an 18% single-day stock surge on April 23, 2026. This positions TXN's analog chips as critical infrastructure for AI power delivery and signal processing, opening a multiyear growth vector beyond traditional industrial and automotive markets.
- Fortress balance sheet and strong cash generation: Current ratio of 4.35 and quick ratio of 2.94 provide exceptional liquidity, while debt-to-equity of 0.946 is manageable. Q1 2026 generated $844 million in free cash flow on $1.52 billion operating cash flow, a sharp reversal from negative FCF of -$274 million in Q1 2025.
Bearish
- Premium valuation leaves little margin of safety: Trailing PE of 31.83x sits above the semiconductor sector's typical mid-20s range, while the PEG ratio of 7.94 signals the growth rate does not justify the multiple on a growth-adjusted basis. PS of 8.92x and EV/EBITDA of 20.59x are also rich relative to peers.
- Dividend exceeds free cash flow: Q1 2026 dividends paid of $1.291 billion exceeded free cash flow of $844 million, and the payout ratio stands at 99.96%. With heavy capex of $676 million in the quarter, the dividend is currently funded partly by balance sheet strength rather than organic cash generation.
- Recent momentum has decelerated sharply: Despite 45.76% one-year gains, the stock is down 2.85% over the past month and 10.77% over the past three months, underperforming SPY by 13.81 points over three months. This divergence suggests a momentum unwind following the April earnings spike.
- Wide analyst target dispersion signals uncertainty: The target range spans $225 to $400 — a $175 spread equal to 65% of the current price — indicating significant disagreement about TXN's trajectory. The low target of $225 implies 16.3% downside if the semiconductor cycle rolls over.
TXN Technical Analysis
TXN is in a powerful primary uptrend that has carried the stock 45.76% higher over the trailing twelve months, dramatically outpacing the S&P 500's 16.22% gain and producing 29.54 percentage points of relative strength versus the index. At the current price of $268.70, the stock sits roughly 63.4% of the way up its 52-week range of $152.73 to $334.03, having pulled back from the upper reaches of that band but remaining far above its lows. This positioning — well above the midpoint but below the highs — suggests a stock in a healthy consolidation phase within a broader bull trend rather than either an overextended momentum name or a broken falling knife. The 25.59% maximum drawdown from peak confirms that the stock has already endured a meaningful correction, which historically has marked accumulation zones for high-quality compounders. Recent momentum, however, has decelerated sharply: the stock is down 2.85% over the past month and 10.77% over the past three months, directly contradicting the 45.76% one-year and 51.36% year-to-date gains. This divergence is notable — TXN has underperformed SPY by 1.79 points over one month and by a striking 13.81 points over three months, even as it leads by 39.28 points year-to-date. The pattern suggests a classic momentum unwind following an April earnings-driven spike (the stock gapped from $236 to $282 on April 23), with the subsequent months representing profit-taking and multiple compression rather than fundamental deterioration. The most recent session, however, showed a sharp 3.82% single-day rebound on elevated volume of 5.26 million shares, hinting that buyers are stepping back in near the $255–$260 zone. Key technical levels are clearly defined: support rests at the $253–$255 area (the September 1–3 lows of $253.34–$254.80), with deeper support at the 52-week low of $152.73, while resistance sits at the 52-week high of $334.03 and intermediate resistance near the $300–$310 zone where the stock repeatedly stalled in June and July. A breakout above $300 would signal renewed institutional conviction and likely target the highs, whereas a breakdown below $253 would open the door to a retest of the $230–$240 region and potentially invalidate the uptrend. With a beta of 1.314, TXN is roughly 31% more volatile than the broad market, meaning position sizing should account for amplified drawdowns — a 10% market decline could translate to a 13%+ move in TXN, making stop-loss discipline essential.
Beta
1.31
1.31x market volatility
Max Drawdown
-25.6%
Largest decline past year
52-Week Range
$153-$334
Price range past year
Annual Return
+47.8%
Cumulative gain past year
| Period | TXN Return | S&P 500 |
|---|---|---|
| 1m | -5.8% | -2.4% |
| 3m | -12.7% | +2.2% |
| 6m | +39.9% | +14.8% |
| 1y | +47.8% | +14.6% |
| ytd | +48.4% | +11.1% |
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TXN Fundamental Analysis
TXN's revenue trajectory has inflected decisively upward, with Q1 2026 revenue of $4.825 billion representing 18.58% year-over-year growth versus Q1 2025's $4.069 billion — a sharp acceleration from the roughly 9.5% YoY growth seen in Q4 2025 ($4.423B vs. $4.007B) and the low-single-digit growth of mid-2025. The sequential progression tells the story of a cyclical trough and recovery: revenue bottomed at $3.822 billion in Q2 2024, climbed steadily through $4.151B (Q3 2024), $4.007B (Q4 2024), $4.069B (Q1 2025), $4.448B (Q2 2025), $4.742B (Q3 2025), $4.423B (Q4 2025), and finally surged to $4.825 billion in Q1 2026. Segment data shows Analog — the core franchise — generating $3.174 billion, dwarfing Embedded Processing at $613 million, confirming that the analog recovery, particularly in industrial and data-center applications, is the primary growth engine. This accelerating top-line momentum, if sustained, supports the bull case that TXN is in the early innings of a multiyear analog upcycle driven by AI infrastructure buildout. Profitability remains elite: Q1 2026 net income of $1.545 billion on $4.825 billion in revenue produced a 32.02% net margin, up from 28.98% in Q1 2025 and 26.29% in Q4 2025, while gross margin expanded to 58.01% from 56.84% a year earlier. Operating margin reached 37.47% in Q1 2026, a substantial improvement from 32.54% in Q1 2025, and EBITDA surged to $2.417 billion (50.09% EBITDA margin) from $1.848 billion a year prior. The margin expansion is being driven by operating leverage on higher revenue — R&D held roughly flat at $510 million while revenue grew 18.6% — and the company's trailing gross margin of 57.02% and operating margin of 34.06% remain among the best in the semiconductor industry, reflecting the pricing power and manufacturing efficiency of its 300mm analog fabs. The balance sheet is fortress-like: a current ratio of 4.35 and quick ratio of 2.94 provide enormous liquidity, while debt-to-equity of 0.946 is manageable given the company's cash generation. Free cash flow on a trailing basis stands at $3.721 billion, and Q1 2026 alone generated $844 million in FCF on $1.52 billion in operating cash flow against $676 million in capex — a notable improvement from the negative FCF of Q1 2025 (-$274 million). ROE of 30.73% and ROA of 13.06% demonstrate exceptional capital efficiency, though the payout ratio of 99.96% and dividend yield of 3.17% signal that TXN is returning essentially all earnings to shareholders, leaving little retained capital and making the company dependent on its strong cash flow to fund both the dividend and its heavy capex program. The $1.291 billion in Q1 2026 dividends paid versus $844 million in FCF highlights that the dividend currently exceeds free cash flow, a dynamic worth monitoring if the capex cycle extends.
Quarterly Revenue
$4.8B
2026-03
Revenue YoY Growth
+18.6%
YoY Comparison
Gross Margin
58.0%
Latest Quarter
Free Cash Flow
$3.7B
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 of $1.545 billion in the most recent quarter and positive EPS of $0.03 on a trailing basis (with quarterly diluted EPS of $1.69), the PE ratio is the appropriate primary valuation metric. The stock trades at a trailing PE of 31.83x and a forward PE of 25.24x, and the 6.6-point gap between these figures implies the market expects meaningful earnings growth — consistent with the analyst consensus EPS estimate of $12.16 for the forward period versus the trailing run-rate. The forward PE of 25.24x on estimated EPS of $12.16 suggests investors are paying a moderate premium for a company expected to grow earnings at a healthy clip, though the PEG ratio of 7.94 is elevated and signals that the growth rate may not fully justify the multiple on a growth-adjusted basis. Relative to the broader semiconductor sector, TXN's trailing PE of 31.83x sits above the industry's typical mid-20s range, representing a premium of roughly 20–30%, while its PS ratio of 8.92x and EV/EBITDA of 20.59x are also rich. The premium is partially justified by TXN's best-in-class 57.02% gross margin, 34.06% operating margin, and 30.73% ROE — all top-decile among large-cap semis — as well as its 3.17% dividend yield, which is unusually high for the sector and provides a valuation floor. However, the PB ratio of 9.69x and price-to-cash-flow of 22.05x indicate the market is pricing in sustained high returns on capital, and any disappointment in the AI-driven demand narrative could compress these multiples. Historically, TXN's PE has ranged from a low of roughly 15.4x (Q3 2022) to a high of 39.6x (Q2 2024), with the current 31.83x sitting in the upper-middle portion of that band — above the 10-year median but below the 2024 peak. The PS ratio of 8.92x is more striking: it compares to historical readings of 26–46x in 2021–2024 (though those figures appear to reflect different share-count or data conventions) and a more recent 35–42x range in 2025, suggesting the current reading may be at the low end of its recent band if measured consistently. On balance, TXN is not cheap — it trades at a premium to the sector on most metrics — but the premium is defensible given its margin profile, dividend, and the early-stage AI/analog recovery narrative; the risk is that the market has already priced in several years of growth, leaving limited margin of safety.
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
TXN's financial risks center on its capital allocation priorities. The payout ratio of 99.96% and Q1 2026 dividends of $1.291 billion exceeding free cash flow of $844 million mean the dividend is not fully covered by organic cash generation, while capex of $676 million in the quarter remains elevated. Debt-to-equity of 0.946 is manageable but not trivial for a cyclical semiconductor company, and interest expense of $141 million per quarter consumes a meaningful portion of operating income. Revenue concentration in analog ($3.174 billion of $4.825 billion in Q1 2026) ties the company's fate to industrial and automotive end-markets, which are historically cyclical and currently in recovery — any renewed inventory correction would hit the core franchise directly.
Market and competitive risks are amplified by TXN's premium valuation and high beta. At 31.83x trailing PE and 8.92x PS, the stock trades at a 20–30% premium to the semiconductor sector, leaving it vulnerable to multiple compression if growth disappoints. Beta of 1.314 means the stock is 31% more volatile than the market, and the 25.59% maximum drawdown from peak demonstrates the downside potential. Competitive threats include larger analog rivals like ADI (which recently declined 5.6% in a month on similar cyclical concerns) and the risk that AI-driven demand shifts toward digital solutions where TXN has less presence. Recent news highlights that chip stocks broadly have become stretched on forward valuations, raising near-term sector rotation risk.
The worst-case scenario would involve a renewed semiconductor down-cycle coinciding with TXN's capex program straining free cash flow, forcing a dividend cut or suspension. In this scenario, the stock could retest its 52-week low of $152.73, representing a 43.2% decline from the current $268.70, or fall to the analyst low target of $225 (16.3% downside). A more moderate bear case would see the stock trade down to the $225–$240 range as the premium multiple compresses toward the sector average and the AI narrative loses momentum. From the current price, investors could lose 16% to 43% in an adverse scenario, with the 52-week low serving as the absolute floor unless fundamentals deteriorate beyond the prior cycle trough.
FAQ
The most severe risk is a renewed semiconductor down-cycle that would hit TXN's core analog franchise ($3.174 billion of $4.825 billion in Q1 2026 revenue) and compress revenue growth back to single digits, potentially sending the stock to the analyst low target of $225 or the 52-week low of $152.73. Second, valuation compression risk is significant given the 31.83x trailing PE and 8.92x PS, which are at a 20–30% premium to the sector — any slowdown in AI/data-center demand could trigger a sharp de-rating. Third, dividend sustainability is a concern with a 99.96% payout ratio and Q1 2026 dividends of $1.291 billion exceeding free cash flow of $844 million, especially if capex remains elevated. Fourth, macro sensitivity is amplified by the 1.314 beta, meaning a 10% market decline could translate to a 13%+ drop in TXN, and sector rotation out of high-multiple semis would disproportionately impact the stock.
The 12-month forecast is balanced with a neutral stance. The base case (50% probability) targets $290–$325, assuming revenue growth of 15–18% YoY and stable margins, aligning with the analyst average target of $324.71. The bull case (30% probability) targets $334–$400 if the AI/data-center supercycle accelerates and margins expand toward 60% gross, while the bear case (20% probability) targets $225–$253 if a renewed down-cycle compresses growth and multiples. The most likely scenario is the base case, which assumes the analog recovery continues but at a moderating pace, with the stock grinding higher as earnings grow into the valuation. Key assumptions include sustained data-center demand, no Fed rate cuts, and gross margins holding above 57%.
TXN is fairly valued to slightly overvalued relative to both its history and the semiconductor sector. The trailing PE of 31.83x sits above the sector's typical mid-20s range and in the upper-middle portion of TXN's own historical band (15.4x–39.6x), while the forward PE of 25.24x on estimated EPS of $12.16 implies the market expects meaningful earnings growth. The PEG ratio of 7.94 is elevated and signals that the growth rate does not fully justify the multiple on a growth-adjusted basis. However, the premium is partially defensible given TXN's best-in-class 57.02% gross margin, 34.06% operating margin, 30.73% ROE, and 3.17% dividend yield. The market is pricing in several years of AI-driven analog growth; if that narrative holds, the stock is reasonably valued, but any disappointment could trigger multiple compression toward the sector average.
TXN is a good buy for long-term investors with a 3–5 year horizon who can tolerate volatility, but it is not an obvious bargain at $268.70. The analyst average target of $324.71 implies 20.8% upside, supported by accelerating revenue growth (18.58% YoY), expanding margins (58.01% gross), and a 3.17% dividend yield. However, the premium valuation (31.83x trailing PE, 7.94 PEG) and the fact that dividends ($1.291 billion) exceeded free cash flow ($844 million) in Q1 2026 introduce risk. The biggest downside risk is a renewed semiconductor down-cycle that could send the stock to the analyst low target of $225 (16.3% downside) or the 52-week low of $152.73 (43.2% downside). For risk-averse investors, waiting for a pullback to the $225–$240 range would improve the risk/reward profile.
TXN is best suited for long-term investment with a minimum holding period of 3–5 years. The company is in the early-to-mid stages of a cyclical recovery, and its analog franchise benefits from long product lifecycles and sticky design wins that compound over time. The 3.17% dividend yield and 30.73% ROE make it an attractive income-and-growth holding for patient investors. However, the 1.314 beta and 25.59% maximum drawdown mean short-term trading carries significant risk, and the recent 10.77% three-month decline shows the stock can correct sharply. Short-term traders should note key technical levels: support at $253–$255 and resistance at $300–$310. For long-term investors, dollar-cost averaging on pullbacks toward $225–$240 would improve entry points and reduce volatility risk.
