Texas Instruments Incorporated

Welcome to the Texas Instruments Third Quarter 2025 Earnings Conference Call. I'm Mike Beckman, Head of Investor Relations, and I'm joined by our Chief Executive Officer, Haviva Lahn, and our Chief Financial Officer, Rafael Lazzardi. 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. You likely saw last week we announced that the Board of Directors has elected Haviv Ahlan, Chairman of the Board, beginning January 2026. Haviv succeeds Rich Templeton, who will retire as Chairman after a 45-year career with TI. I'm sure you will join me in congratulating them both. Today, we'll provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he'll provide insight into third quarter revenue results with some details on what we are seeing with respect to our end markets. Lastly, Rafael will cover the financial results, give an update on capital management, as well as share the guidance for fourth quarter 2025. With that, let me turn it over to Haviv.

Thanks, Mike. I'll start with a quick overview of the third quarter. Revenue came in about as expected at $4.7 billion, an increase of 7% sequentially, and an increase of 14% year over year. Analog and embedded both grew year on year and sequentially. Analog revenue grew 16% year over year, and embedded processing grew 9%. Our other segment grew 11% from the year-ago quarter. Let me provide a few comments about the current market environment. The overall semiconductor market recovery is continuing, though at a slower pace than prior upturns, likely related to the broader macroeconomic dynamics and overall uncertainty. That said, customer inventories remain at low levels and their inventory depletion appears to be behind us. We are well positioned with capacity and inventory and have flexibility to support a range of scenarios. Now I'll share some additional insights into third quarter revenue by end market. First, the industrial market increased about 25% year-on-year and was up low single digits sequentially, following a strong result in the second quarter. The automotive market increased upper single digits year-on-year and around 10% sequentially, with growth across all regions. Personal electronics grew low single digits year-on-year and grew upper single digits sequentially. Enterprise systems grew about 35% year-on-year and grew about 20% sequentially. And lastly, communications equipment grew about 45% 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, third quarter revenue was $4.7 billion. Gross profit in the quarter was $2.7 billion, or 57% of revenue. Sequentially, gross profit margin decreased 50 basis points. Operating expenses in the quarter were $975 million, up 6% 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 $1.7 billion in the quarter, or 35% of revenue, and was up 7% from the year-ago quarter. Net income in the quarter was $1.4 billion, or $1.48 per share. Earnings per share included a 10-cent reduction not in our original guidance. This includes 8 cents of restructuring charges related to efforts to drive operational efficiencies to support our long-term strategy, including the planned closures of our last 250-millimeter fabs. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $2.2 billion in the quarter and $6.9 billion on a 12-month basis. Capital expenditures were $1.2 billion in the quarter and $4.8 billion over the last 12 months. Free cash flow on a 12-month basis was $2.4 billion. This includes $637 million of CHIPS Act incentives, including a $75 million payment received in the third quarter related to the direct funding agreement. In the quarter, we paid $1.2 billion in dividends and repurchased $119 million of our stock. In September, we announced we would increase our dividend by 4%, marking our 22nd consecutive year of dividend increases. This reflects our continued commitment to return free cash flow to our owners over time. In total, we returned $6.6 billion to our owners in the past 12 months. Our balance sheet remains strong with $5.2 billion of cash and short-term investments at the end of the third quarter. Total debt outstanding is $14 billion with a weighted average coupon of 4%. Inventory at the end of the quarter was $4.8 billion, up $17 million from the prior quarter, and days were 215, down 16 days sequentially. We have executed well on building an inventory position which we believe will allow us to consistently deliver high levels of customer service. Turning to our outlook for the fourth quarter, we expect TI's revenue in the range of $4.22 to $4.58 billion and earnings per share to be in the range of $1.13 to $1.39. Our fourth quarter outlook includes changes related to the new U.S. tax legislation and now assumes an effective tax rate of about 13%. In addition, we expect our effective tax rate in 2026 to be about 13% to 14%. In closing, 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.