Texas Instruments (TXN) investment Quality Rating (AA)

(AA) | Technology | Analog & Embedded Semiconductors
By: Old York Financial
A Private Principal Research Report

the verdict

Old York Financial has assigned Texas Instruments (TXN) an Operational Quality (AA) Rating. TXN is the "Blue-Chip Utility" of the chip world. In FY2025, the machine delivered $17.68 Billion in revenue, a 13% increase as industrial and automotive markets stabilized. It earns a (AA) rather than a (AAA) because, while it is the undisputed king of Analog, it faces cyclical inventory headwinds and lacks the absolute lithography monopoly of an ASML. However, with an Operating Margin of 34.1% and a 22-year streak of dividend increases, TXN remains the premier defensive engine for the Principal.

the old york analysis

owner earnings: the industrial cash generator

We look at the cash produced by TXN’s 80,000+ product catalog. The company is currently in a heavy investment cycle (building 300mm fabs), which temporarily suppresses free cash flow but builds the 2030 moat.

• 2025 Operating Cash Flow: $7.15 Billion

• (-) Capital Expenditures: ($4.55 Billion)

• (+) Depreciation & Amortization: $2.00 Billion

• OLD YORK OWNER EARNINGS: $4.60 Billion

Analyst Note: TXN is a "Shareholder Steward." In 2025, they returned $6.48 Billion to owners ($5.0B in dividends, $1.5B in buybacks). Note that they returned more than their 2025 Owner Earnings dipping into their $4.8B cash pile to maintain the streak. This signals management's absolute conviction in the recovery.

operational efficiency

• 5-Year ROIC (Avg): 40.05%

• 5-Year EPS CAGR: -6.76%

• 5-Year Price CAGR: 1.69%

• Share Change (5Y): -1.76%

Analyst Note (The 300mm Advantage): TXN’s efficiency is rooted in its 300mm wafer manufacturing. Producing analog chips on 300mm wafers yields a 40% cost advantage over competitors using 200mm. While margins dipped slightly from historical 40% levels due to factory under-loading in early 2025, the "Data Center" segment (now a $1.2B run-rate) is high-margin fuel for 2026.

growth & market dominance

• 2025 Consolidated Revenue: $17.68 Billion (+13% YoY).

• Analog Segment: $14.01 Billion (The core engine, up 15%).

• The "Data Center" Pivot: Growing at 50% year-to-date, TI is successfully moving beyond just industrial/auto and into the AI power management space.

• Automotive Moat: Now accounts for ~35% of revenue ($5.8B). As EVs and ADAS systems require more analog content per vehicle, TXN’s "sticky" long-lived parts ensure decades of recurring revenue.

the fortress check

• Total Assets: $34.6 Billion.

• Cash & Short-Term Investments: $4.88 Billion.

• Total Debt: $11.1 Billion (Managed conservatively against a $200B market cap).

• Dividend Status: 22 consecutive years of growth; quarterly dividend raised to $1.42/share in Q4 2025.

• Share Count: Reduced by 47% since 2004 a masterclass in long-term share cannibalization.

final determination

Rating: Old York Operational Quality (AA)

Classification: The Analog Sovereign.

TXN is a (AA) because of its discipline. It is the "freshest fruit" for a Principal seeking stability over speculative growth. Its 30.7% ROE and relentless focus on "Free Cash Flow per Share" make it a permanent fixture in the registry. It is the industrial backbone that ensures every AI server and EV actually has power.

Disclaimer: Old York Financial operates privately as a principal and sells corporate advisory. Old York Financial is not an accountant, a financial advisor, a broker, an agent, a lawyer, or a portfolio manager.