Texas Instruments designs and manufactures semiconductors, the tiny chips that sit inside almost every electronic device on the planet. The company earns money by selling more than 80,000 different chip products to over 100,000 customers worldwide. Its two main businesses are Analog chips, which handle real-world signals like temperature, sound, and power, and Embedded Processing chips, which act as the digital brains inside industrial machines, cars, and other equipment. In 2025, Analog alone brought in $14.01 billion of revenue, about 79% of the company's total. The diagram below traces where the money goes.
Five years of financial data tell a story of a cycle playing out in slow motion. Revenue peaked at $20.0 billion in 2022, then fell sharply to $15.6 billion in 2024 before recovering to $17.7 billion in 2025. Gross margin followed the same arc, dropping from nearly 69% in 2022 to 57% in 2025. That shrinking margin is not a mystery. Texas Instruments owns most of its own factories, which means a large share of its costs stay fixed whether orders are high or low. When demand fell, those fixed costs hit margins hard.
The biggest financial pressure over this period has not been falling revenue. It has been capital spending. Texas Instruments has been in the middle of a six-year plan to build new, larger factories using 300mm wafers. A chip built on a 300mm wafer costs about 40% less to make than one built on a smaller 200mm wafer, according to the company. That efficiency payoff is real, but getting there required spending $4.55 billion on factories in 2025 alone. That heavy spending crushed free cash flow, which is the money left after operating expenses and factory investment.
The company says it is nearing the end of this heavy spending period. Capital expenditures are expected to drop to roughly $2 billion to $3 billion in 2026, compared with $4.55 billion in 2025. If that holds, free cash flow should climb, because the factories will already be built and paid for. In 2025, free cash flow recovered to $2.6 billion from a low of $1.3 billion in 2023, which the company partly attributes to rising factory use and some benefit from US government chip incentives.
While the factory plan plays out, several real threats sit on the horizon. About 20% of Texas Instruments revenue comes from customers in China, and about half of all products shipped end up there. US and Chinese governments have both imposed tariffs, trade restrictions, and sanctions on semiconductors. Those restrictions could block sales, cut off materials, or prevent the company from supporting existing customers in the region. This is not a hypothetical. The rules have already changed multiple times in recent years.
Supply chain risk sits alongside the trade risk. Key materials used to make semiconductors come from only a few places in the world. The company uses outside contractors for some production without long-term contracts, and there are few backup suppliers available. On top of that, Texas Instruments operates factories in specific geographic locations, and the company's own filings note that a major natural disaster at any key site could severely disrupt operations. Fixed costs make this especially painful. When output falls for any reason, margins fall with it, because the factories keep running whether or not the orders are there.
The company returned $6.48 billion to shareholders in 2025 through dividends and share repurchases, even as free cash flow was only $2.6 billion. That means the company paid out more than it generated in free cash flow, covering the gap with debt and cash reserves. Net debt rose from $3.6 billion in 2021 to $11.3 billion by the end of 2025. The pending Silicon Labs acquisition adds roughly $7.5 billion more to that load. Whether the new factories generate enough cash to absorb all of this is the central financial question facing the business.