Texas Instruments Incorporated

Welcome to the Texas Instruments Second Quarter 2025 Earnings Conference Call. I'm Mike Beckman, Head of Investor Relations, and I'm joined by our Chief Executive Officer, Haviv Ilan, and our Chief Financial Officer, Rafael Lizardi. For any of you who missed the release, you can find it on our website at ti.com slash ir. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website. This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description. Today, we'll provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he will provide insight into second quarter revenue results with some details of what we are seeing with respect to our end markets. Lastly, Rafael will cover financial results, give an update on capital management, as well as share the guidance for third quarter 2025. With that, let me turn it over to Haviv.

Thanks, Mike. Let me start with a quick overview of the second quarter. Revenue came in about as expected at $4.4 billion, an increase of 9% sequentially, and an increase of 16% year-over-year. Both analog and embedded grew year-on-year and sequentially. Analog revenue grew 18% year-over-year, and embedded processing grew 10%. Our other segment grew 14% from the year-ago quarter. Let me provide some comments on the current environment and what we saw in the second quarter. We continue to see two distinct dynamics at play. First, tariffs and geopolitics are disrupting and reshaping global supply chains. As we work closely with our customers, we are leveraging our global manufacturing capabilities to support their needs. We have flexibility and are prepared to navigate as things evolve. Second, the semiconductor cycle is playing out. Cyclical recovery is continuing, while customer inventories remain at low levels. In times like this, it is important to have capacity and inventory, and we are well positioned. Now, I'll share some additional insights into second quarter revenue by end market. First, the industrial market increased upper teens year on year, and mid-teens sequentially with recovery across all sectors. The automotive market increased mid-single digits year-on-year and decreased low single digits sequentially. Personal electronics grew around 25% year-on-year and grew upper single digits sequentially. Enterprise systems grew about 40% year-on-year and grew about 10% sequentially. And lastly, communications equipment grew more than 50% year-on-year and was up about 10% sequentially. With that, let me turn it over to Rafael to review profitability and capital management.

Thanks, Aviv, and good afternoon, everyone. As Aviv mentioned, second quarter revenue was $4.4 billion. Gross profit in the quarter was $2.6 billion, or 58% of revenue. Sequentially, gross profit margin increased 110 basis points. Operating expenses in the quarter were $1 billion, up 5% from a year ago and about as expected. On a trailing 12-month basis, operating expenses were $3.9 billion, or 23% of revenue. Operating profit was $1.6 billion in the quarter, or 35% of revenue, and was up 25% from the year-ago quarter. Net income in the quarter was $1.3 billion, or $1.41 per share. Earnings per share included a two-cent benefit not in our original guidance. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $1.9 billion in the quarter and $6.4 billion on a trading 12-month basis. Capital expenditures were $1.3 billion in the quarter and $4.9 billion over the last 12 months. Free cash flow on a trailing 12-month basis was $1.8 billion. In the quarter, we paid $1.2 billion in dividends and repurchased $302 million of our stock. In total, we returned $6.7 billion to our owners in the past 12 months. Our balance sheet remains strong with $5.4 billion of cash and short-term investments at the end of the second quarter. In the quarter, we issued $1.2 billion of debt. Total debt outstanding is $14.15 billion with a weighted average coupon of 4%. Inventory at the end of the quarter was $4.8 billion, up $125 million from the prior quarter, and days were 231, down nine days sequentially. Turning to our outlook for the third quarter, we expect TA's revenue in the range of $4.45 to $4.80 billion dollars, and earnings per share to be in the range of $1.36 to $1.60. Our earnings per share outlook does not include changes related to recently enacted U.S. tax legislation and assumes an effective tax rate of about 12% to 13%. In closing, as we transition into the second half of 2025 and going into 2026, we're prepared for a range of scenarios. We are and will remain flexible to navigate, especially in the immediate term. We will stay focused in the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long-lived positions. We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities, which we believe will enable us to continue to deliver free cash flow per share growth over the long term. With that, let me turn it back to Mike. Thanks, Rafael.