Texas Instruments Incorporated (TXN): A Bull Case Theory

We came across a bullish thesis on Texas Instruments Incorporated on Best Anchor Stocks’ Substack. In this article, we will summarize the bulls’ thesis on TXN. Texas Instruments Incorporated's share was trading at $185.69 as of July 24^th. TXN’s trailing and forward P/E were 35.17 and 33.78, respectively according to Yahoo Finance.

Texas Instruments (TI) posted Q2 results that beat revenue and EPS estimates, but management’s cautious tone and wide Q3 guidance range surprised investors, leading to a sharp post-earnings drop. Revenue of $4.45 billion beat estimates by 2% and EPS of $1.41 exceeded forecasts by 4%, supported by double-digit growth in both Analog and Embedded segments.

Despite the pullback, TI’s cyclical recovery continues, with four of five end markets expanding, though automotive remains in a downcycle softened by secular demand. The Q3 guide, with a midpoint of $4.625 billion, still sits above consensus but implies a potential pull-forward in industrial demand, especially in China.

Operating leverage will weaken as gross margins flatten and interest expenses rise, but expectations for full-year revenue remain 2% above initial forecasts. Management faced criticism for poor visibility and failure to temper expectations amid a 52% run-up to all-time highs. Capital allocation raised questions, with a $300 million buyback and significant Capex funded partly by debt, pushing net leverage slightly above 1× EBITDA.

However, TI’s financial position remains solid, aided by new U.S. tax legislation expected to cut annual cash taxes by nearly $1 billion in 2025 and over $1 billion in 2026, boosting free cash flow per share by 10–14%. This includes higher investment tax credits, immediate expensing of U.S. R&D and eligible Capex, and a one-time catch-up of prior R&D spending. The mismatch between rising free cash flow power and the stock’s pullback presents a favorable risk/reward profile, with near-term volatility overshadowing structurally stronger cash generation.

Previously, we covered a bullish thesis on Texas Instruments Incorporated (TXN) by The Wolf of Harcourt Street in January 2025, highlighting early signs of recovery in Analog, prolonged cyclical headwinds, and benefits from capacity expansion. TXN’s stock has stayed roughly flat since, as the thesis remains supported by structural advantages. Best Anchor Stocks shares a similar view but stresses rising free cash flow from new U.S. tax legislation.

Texas Instruments Incorporated is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 69 hedge fund portfolios held TXN at the end of the first quarter which was 66 in the previous quarter. While we acknowledge the potential of TXN as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.