Q2 2026 Texas Instruments Inc Earnings Call

July 22, 2026

Speaker #1: You can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website.

Speaker #1: Assistance instruments, second quarter 2026, earnings conference call. I'm Mike Beckman, Head of Investor Relations. For any of you who missed the release, you can find it on our website at ti.com/ir.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: Today I'm joined by our Chief Executive Officer, Haviv Ilan, and our Chief Financial Officer, Rafael Lizardi. Also with us today is Julie Canet, who will become our Chief Financial Officer on August 1.

Speaker #1: Today I'm joined by our Chief Executive Officer, Haviv Allon, and our Chief Financial Officer, Rafael Lazzardi. Also with us today is Julie Canette, who will become our Chief Financial Officer on August 1.

Speaker #1: Julie has been with TI for more than 25 years, and has held a number of finance and accounting roles, most recently serving as Chief Accounting Officer since 2021.

Speaker #1: As you know, Rafael, who has been our CFO for nearly a decade, plans to retire at the end of August. Rafael's focus on disciplined capital allocation—including our investments in 300mm manufacturing capacity—and commitment to return all free cash flow to shareholders have positioned TI for continued long-term growth and value creation.

Speaker #1: As this is Rafael's final earnings call, I want to thank him personally for all of his contributions to TI; I'm sure you will join me in congratulating both Rafael and Julie.

Speaker #1: With that, today we'll provide the following updates: first, Haviv will start with a quick overview of the quarter; next, he will provide insight into Q2 revenue results with some details on what we're seeing with respect to our end markets; lastly, Rafael will cover the financial results and give an update on capital management as well as share the guidance for Q3 2026.

Speaker #1: Welcome to the Texas Instruments second quarter 2026 earnings conference call. I'm Mike Beckman, Head of Investor Relations. For any of you who missed the release, you can find it on our website at ti.com/ir.

Speaker #1: With that, 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 on what we're seeing with respect to our end markets; lastly, Rafael will cover the financial results and give an update on capital management as well as share the guidance for third quarter 2026.

Speaker #1: 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 as a replay on our website.

Speaker #1: With that, let me turn it over to Haviv.

Speaker #2: Thanks, Mike. Let me start with a quick overview of the Q2. Revenue was 5.5 billion dollars, an increase of 13% sequentially, and an increase of 23% year over year.

Speaker #1: 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.

Speaker #1: With that, let me turn it over to Haviv.

Speaker #2: Thanks, Mike. Let me start with a quick overview of the second quarter. Revenue was 5.5 billion dollars, an increase of 13% sequentially, and an increase of 23% year over year.

Speaker #2: Analog and embedded processing both grew sequentially and year-on-year. Analog revenue grew 26% year-on-year and embedded processing grew 16%. Our other segment declined 2% from the year-ago quarter.

Speaker #1: Today, I'm joined by our Chief Executive Officer, Haviv Ilan, and our Chief Financial Officer, Rafael Lizardi. Also with us today is Julie Canette, who will become our Chief Financial Officer on August 1.

Speaker #2: Analog and embedded processing both grew sequentially and year on year. Analog revenue grew 26% year on year and embedded processing grew 16%. Our other segment declined 2% from the year ago quarter.

Speaker #2: Let me provide a few comments about the current market environment. In the Q2, revenue came in above the range, as we saw continued growth in industrial and data center in addition to accelerated growth in automotive.

Speaker #1: Julie has been with TI for more than 25 years and has held a number of finance and accounting roles, most recently serving as Chief Accounting Officer since 2021.

Speaker #2: Let me provide a few comments about the current market environment. In the second quarter, revenue came in above the range, as we saw continued growth in industrial and data center, in addition to accelerated growth in automotive.

Speaker #2: Our investments in inventory and capacity are serving us well, which allows us to support our customers during this time of increased demand. We are prepared with capacity, and have clean room space available, and are well positioned to support continued growth.

Speaker #1: As this is Rafael's final earnings call, I want to thank him personally for all of his contributions to TI. I'm sure you will join me in congratulating both Rafael and Julie.

Speaker #2: Now I'll share some additional insights into Q2 revenue by end market. First, industrial increased around 30% year-on-year and was up about 10% sequentially, growing broadly across sectors and regions.

Speaker #2: Now I'll share some additional insights into second quarter revenue by end market. First, industrial increased around 30% year on year, and was up about 10% sequentially, growing broadly across sectors and regions.

Speaker #1: With that, today we'll provide the following updates: First, Haviv will start with a quick overview of the quarter. Next, he will provide insight into Q2 revenue results, with some details on what we're seeing with respect to our end markets.

Speaker #2: Automotive increased mid-teens year-on-year and increased upper single digits sequentially. Data center doubled year-on-year and grew around 20% sequentially. Personal electronics was flat year-on-year and grew upper single digits sequentially.

Speaker #1: Lastly, Rafael will cover the financial results and give an update on capital management, as well as share the guidance for Q3 2026. With that, let me turn it over to Haviv.

Speaker #2: Automotive increased mid-teens year on year, and increased upper single digits sequentially. Data center doubled year on year, and grew around 20% sequentially. Personal electronics was flat year on year, and grew upper single digits sequentially.

Speaker #2: And lastly, communications equipment grew both year-on-year and sequentially. With that, let me turn it over to Rafael, to review profitability and capital management.

Speaker #2: Thanks, Mike. Let me start with a quick overview of Q2. Revenue was $5.5 billion, an increase of 13% sequentially and an increase of 23% year-over-year.

Speaker #2: And lastly, communications equipment grew both year on year and sequentially. With that, let me turn it over to Rafael, to review profitability and capital management.

Speaker #3: Thanks, Haviv, and good afternoon, everyone. As Haviv mentioned, Q2 revenue was 5.5 billion dollars. Gross profit in the quarter was 3.4 billion dollars, or 61% of revenue.

Speaker #2: Analog and Embedded Processing both grew sequentially and year-on-year. Analog revenue grew 26% year-on-year, and Embedded Processing grew 16%. Our Other segment declined 2% from the year-ago quarter.

Speaker #3: Thanks, Haviv, and good afternoon, everyone. As Haviv mentioned, second quarter revenue was 5.5 billion dollars. Gross profit in the quarter was 3.4 billion dollars, or 61% of revenue.

Speaker #3: Sequentially, gross profit margin increased 340 basis points. Operating expenses in the quarter were 1 billion dollars, about as expected. On a trailing 12-month basis, operating expenses were 3.9 billion dollars, or 20% of revenue.

Speaker #2: Let me provide a few comments about the current market environment. In Q2, revenue came in above the range, as we saw continued growth in industrial and data center, in addition to accelerated growth in automotive.

Speaker #3: Operating profit was 2.3 billion dollars in the quarter, or 42% of revenue, and it was up 48% from the year-ago quarter. Net income in the quarter was 2 billion dollars, or $2.14 per share.

Speaker #2: Our investments in inventory and capacity are serving us well, which allows us to support our customers.

Speaker #3: Operating profit was 2.3 billion dollars in the quarter, or 42% of revenue, and it was up 48% from the year ago quarter. Net income in the quarter was 2 billion dollars, or $2.14 per share.

Speaker #3: Earnings per share included a 5-cent benefit not in our original guidance due to discrete tax benefits. Let me now comment on our capital management results, starting with our cash generation.

Speaker #3: Cash flow from operations was 2.7 billion dollars in the quarter, and 8.7 billion dollars on a trailing 12-month basis. Capital expenditures were 514 million dollars in the quarter and 3.3 billion dollars over the last 12 months.

Speaker #3: Free cash flow on a trailing 12-month basis was 6.5 billion dollars, up from 1.8 billion dollars in the Q2 of 2025 and continuing to trend up as growth returns.

Speaker #3: Free cash flow on a trailing 12-month basis was 6.5 billion dollars, up from 1.8 billion dollars in the second quarter of 2025 and continuing to trend up as growth returns.

Speaker #3: Free cash flow in the trailing 12 months includes 1.6 billion dollars of chips act incentives, which includes both the investment tax credit and direct funding.

Speaker #3: In Q2, we received 549 million dollars of ITC-related payments for qualifying capital expenditures. In the quarter, we paid 1.3 billion dollars in dividends. In total, we returned 5.8 billion dollars to our owners in the past 12 months.

Speaker #3: In second quarter, we received 549 million dollars of ITC-related payments for qualifying capital expenditures. In the quarter, we paid 1.3 billion dollars in dividends.

Speaker #3: Our balance sheet remains strong, with 7 billion dollars of cash and short-term investments at the end of the Q2. Total debt outstanding is 14 billion dollars, with a weighted average coupon of 4%.

Speaker #3: In total, we returned 5.8 billion dollars to our owners in the past 12 months. Our balance sheet remains strong, with 7 billion dollars of cash and short-term investments at the end of the second quarter.

Speaker #3: Inventory at the end of the quarter was 4.6 billion dollars, down 90 million dollars from the prior quarter, and these were 196, down 13 days sequentially.

Speaker #3: Total debt outstanding is 14 billion dollars with a weighted average coupon of 4%. Inventory at the end of the quarter was 4.6 billion dollars, down 90 million dollars from the prior quarter, and these were 196, down 13 days sequentially.

Speaker #3: Turning to our outlook for the Q3, we expect TI's revenue in the range of 5.65 to 6.15 billion dollars, and earnings per share to be in the range of $2.23 to $2.57.

Speaker #3: Turning to our outlook for the third quarter, we expect TI's revenue in the range of 5.65 to 6.15 billion dollars, and earnings per share to be in the range of $2.23 to $2.57.

Speaker #3: We expect our effective tax rate to be about 13% in the Q3. In closing, we will stay focused in the areas that add value in the long term.

Speaker #3: We expect our effective tax rate to be about 13% in the third quarter. In closing, we will stay focused in the areas that add value in the long term, with continued investing in our competitive advantages, which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long-lived positions.

Speaker #3: 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.

Speaker #3: We will continue to strengthen this 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.

Speaker #3: Before I turn it over to Mike to start Q&A, I want to say that it has been an honor to work at TEXAS INS for the last 25 years, and to have been CFO during the last decade.

Speaker #3: Before I turn it over to Mike to start Q&A, I want to say that it has been an honor to work at Texas Instruments for the last 25 years, and to have been CFO during the last decade.

Speaker #3: I have thoroughly enjoyed working with so many wonderful people. Over that time, we have made TI stronger and positioned it for continued success. I feel confident about the future at TI, and I'm looking forward to what's ahead for the company.

Speaker #1: Thanks, Rafael. Operator, you can now open the line for questions. In order to provide as many of you as possible an opportunity to ask your questions, please let me yourself to a single question.

In the quarter, we paid $1.3 billion in dividends. In total, we returned $5.8 billion to our owners in the past 12 months.

Speaker #1: After our response, we'll provide you an opportunity for an additional follow-up. Operator?

Our balance sheet remains strong with $7 billion of cash and short-term investments at the end of the second quarter.

Speaker #4: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker #1: After our response, we'll provide you an opportunity for an additional follow-up. Operator?

Total debt outstanding is $14 billion. We have a weighted average coupon of 4%.

Speaker #4: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. And for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #4: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Inventory at the end of the quarter was $4.6 billion, down $90 million from the prior quarter. Days were 196, down 13 days sequentially.

Speaker #4: One moment. While we pull for questions. Our first question comes from the line of Harlan Sur with JP Morgan. Please proceed with your question.

Speaker #4: One moment. While we pull for questions. Our first question comes from the line of Harlan Sir with JPMorgan. Please proceed with your question.

Turning to our outlook for the third quarter, we expect the ICE revenue to be in the range of $5.65 to $6.15 billion, and earnings per share to be in the range of $2.23 to $2.57.

We expect our effective tax rate to be about 13% in the third quarter.

Speaker #5: Good afternoon. Thank you for taking my question. Julie, congrats on the promotion, and Rafael, thanks for all of the great support and execution of these.

Speaker #5: Good afternoon. Thank you for taking my question. Julie, congrats on the promotion, and Rafael, thanks for all of the great support and execution. Haviv, you know, last call, there was some concern stepping into the second half that we might see some slight deceleration kind of similar to last year, right?

Speaker #5: You know, last call. Some concerns stepping into the second half that we might see some slight deceleration kind of similar to last year, right?

In closing, we will stay focused on the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing technology, a broad product portfolio of our tens and diverse and long-lived positions.

Speaker #5: But given your above-seasonal guidance for Q3, it seems like the strengths in the first half is continuing into the second half. You also are now starting to see the acceleration in automotive.

Speaker #5: But given your above-seasonal guidance for Q3, it seems like the strength in the first half is continuing into the second half. You also are now starting to see the acceleration in automotive.

We will continue to strengthen these advantages through discipline, 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.

Speaker #5: Do you expect this profile of strength to continue and market-wise, and to Q3 and maybe second half? And then what's driving the inflection in automotive?

Speaker #5: Do you expect this profile of strength to continue and market-wise into Q3 and maybe second half? And then what's driving the inflection in automotive?

Speaker #6: Thanks, Harlan. I think you characterized what you're seeing well. The I think we right now, as we stand in July, we see a setup that of a stronger demand, and it's broader.

Speaker #6: It's not only in the last couple of quarters. It was really an industrial and data center play right now we're seeing demand growing to the automotive market.

Speaker #6: It's not only in a you know, in the last couple of quarters, it was really an industrial and data center play. Right now, we're seeing demand growing to the automotive market.

Speaker #6: I think my you know, I'll talk about Q3. When you think about the above-seasonal guide, I think the contribution will come from all markets.

Before I turn it over to Mike to start Q&A, I want to say that it has been an honor to work at Texas Instruments for the last 25 years and to have been CFO during the last decade. I have thoroughly enjoyed working with so many wonderful people over that time. We have made TI stronger and positioned it for continued success. I feel confident about the future at TI, and I'm looking forward to what's ahead for the company. Thanks. Operator, you can now open the line for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we'll provide you an opportunity for an additional follow-up. Operator.

Speaker #6: I think my you know, I'll talk about Q3. When you think about the above-seasonal guide, I think the contribution will come from all markets.

Speaker #6: The three markets that we've that drove to Q growth, meaning industrial data center and automotive. But, you know, Q3 is traditionally a quarter of personnel electronic strength.

Speaker #6: The three markets that we've that drove to Q growth, meaning industrial data center and automotive. But, you know, Q3 is traditionally a quarter of personal electronic strength, so I expect a strong demand across the board.

Speaker #6: So I expect a strong demand across the board. Now, regarding automotive, I think we saw a combination of a couple of things. I think with this we did see an uptick in and by the way, developed throughout the quarter.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions.

Speaker #6: Now, regarding automotive, I think we saw a combination of a couple of things. I think with this we did see an uptick in and by the way, developed throughout the quarter.

Our first question comes from the line of Harlander with J.P. Morgan. Please proceed with your question.

Speaker #6: So when we came to the call in April, we didn't have the same visibility. It built up, as we went through the quarter, led by China.

Speaker #6: And I think it's really led by EVs and hybrids, you know, cost of fuel drove that, I believe. In addition, I think our automotive customers have taken their inventory to very low levels, and now, as there is a little bit more demand, they find themselves in a situation that is not sustainable.

Speaker #6: So when we came to the call in April, we didn't have the same visibility. It built up as we went through the quarter, led by China.

Speaker #6: I think that also drove part of the demand. I think we are in the start of a cycle that is very, very broad. That's kind of when I look at it right now, that would be my prediction.

Can you also talk about not seeing acceleration in automotive? Do you expect this profile of strength to continue?

Speaker #6: I think that also drove part of the demand. I think we are in the start of a cycle that is very, very broad that's kind when I look at it right now, that would be my prediction.

Uh, and market-wise, into Q3 and maybe the second half. And then, what’s driving the inflection in Automotive?

Speaker #1: Harlan, do you have a follow-up?

Speaker #5: Yeah. Yes, I do. Thanks for the great color there, Haviv. So input costs are moving higher. Demand remains strong. I assume that the TI team is still seeing expanding short lead time orders, not anticipated, in your customers' initial forecast coming into the quarter.

Speaker #1: Harlan, do you have a follow-up?

Thanks, Alan. I thank you. You characterize what you're seeing? Uh, well, uh, the, um, I think we right now, as we stand in July, we see, uh,

Speaker #5: Yeah. Yes, I do. Thanks for the great color there, Haviv. So input costs are moving higher. Demand remains strong. I assume that the TI team is still seeing expanding short lead time orders, not anticipated in your customers' initial forecast coming into the quarter.

Speaker #5: You put all of this together, right? You guys had talked about potential for pricing increases. In the second half of the year and the last earnings call, are you executing positive pricing initiatives with customers?

A setup that—oh, stronger demand, and it's broader. It's not only— you know, in the last couple of quarters, it was really an industrial and data center play. Right now, we're seeing demand drawing...

Speaker #5: When do these go into effect, and is the breadth of these increases across both your analog and embedded segments?

Uh, to the automotive market, uh, I think my, um, you know—well, I'll talk about Q3. When you think about, um, the above seasonal guide, I think...

The contribution will come from all markets.

Speaker #6: Yeah, thanks, Harlan. I will just first let me just recap what we said in the previous call regarding the first half of the year.

Speaker #5: When do these go into effect, and is the breadth of these increases across both your analog and embedded segments?

Speaker #6: Yeah, thanks, Harlan. I will I will just first let me just recap what we said in the previous call regarding the first half of the year.

Speaker #6: We now have the full six-month behind us, and as we predicted, pricing was stable in the first half of the year, meaning flat. If you will.

Speaker #6: And that's an above-average year for us, right? Typically, prices do go down a couple of points every year. And this time, they held. I will say that we started executing price increases, yes.

the 3 markets that we've that drove to Q growth, meaning industrial Data Center and Automotive, but you know, Q3 is traditionally a quarter of of, um, personal electronic strength. So I I expect a strong demand across the board now regarding Automotive. I think we saw, um, a combination of a couple of things. I think with this. We did see an uptick in uh, and by the way developed throughout the quarter, so when we came to the call in April, we didn't have the same visibility it built up

Speaker #6: And that's a that's an above-average year for us, right? Typically, prices do go down a couple of points every year. And this time, they held.

Speaker #6: And because we go to the market direct, we have it the discussion you know, this is not a one-time discussion with our distribution channel.

As we went through the quarter, led by China, and I think it's really led by EVs and hybrid—you know, cost of fuel drove that, I believe.

Speaker #6: I will say that we have started executing price increases, yes. And because we go to the market direct, we have it the discussion, you know, this is not a one-time discussion with our distribution channel.

Speaker #6: It's really a discussion customer by customer. So if you will, it will be it will depend it will depend on the customer. Some of it will start to play in in Q3, but I expect that to continue into the fourth quarter and also, you know, some of our customers, we decide pricing once a year during our annual price discussions, and that happens only at the end of Q4.

Speaker #6: And also, you know, some of our customers, we decide pricing once a year during our annual price discussions, and that happens only at the end of Q4.

In addition, I think our Automotive customers have, um, taken their inventory to very low levels. And now, as there is a little bit more demand, they find themselves in a situation that is um not sustainable. I think that's also drove part of the demand. I think we are in the start of um of of a cycle that is very, very broad that that kind when I look at it right now, that would be my prediction.

From when you have a follow-up.

Speaker #6: So that can continue also into the next year. Regarding the segments, meaning analog and embedded, look, where we see the most pressure, the also the within lead time escalations, I mentioned automotive.

Speaker #6: So that can continue also into the next year. Regarding the segments, meaning analog and embedded, look, where we see the most pressure, also within lead time escalations, I mentioned automotive.

Speaker #6: It's right now mainly on the analog side. That's what we saw in the first part of the year. But I would say that embedded is joining is joining the trend.

Speaker #6: It's right now mainly on the on the analog side. That's what we saw in the first part of the year. But I would say that embedded is joining is joining the trend.

Speaker #6: So if I can if I look at our opportunity for the second half of the year, I think we have an opportunity across all markets, but also across the two segments.

Yeah, yes, I do. Thanks for the great color there. So input costs are moving higher. Demand remains strong. I assume that the TI team is still seeing expanding short lead-time orders not anticipated in your customers' initial forecasts coming into the quarter. You put all of this together, right? You guys had talked about potential for pricing increases in the second half of the year on the last earnings call. Are you executing positive pricing initiatives with customers? When do these go into effect, and is the breadth of these increases across both your Analog and Embedded segments?

Speaker #6: So if I can if I look at our opportunity for the second half of the year, I think we have an opportunity across all markets, but also across the two segments.

Speaker #6: I think the pricing discussions for embedded will be more centered towards the next year.

Speaker #1: Thank you, Harlan. Move on to our next caller.

Speaker #6: I think the pricing discussions for embedded will be more centered towards the next year.

Speaker #5: Thank you.

Speaker #4: Thank you. Our next question comes from the line of James Snyder with Goldman Sachs. Please proceed with your question.

Speaker #1: Thank you, Harlan. Move on to our next caller.

Speaker #5: Thank you.

Speaker #7: Good evening. Thanks for taking my question. I was wondering if you could maybe comment on where your factory loading stand today? How much you plan to increase them in the next couple of quarters?

Speaker #4: Thank you. Our next question comes from the line of James Snyder with Goldman Sachs. Please proceed with your question.

Speaker #7: And then maybe to sort of comment on your. Your kind of desired inventory position went down slightly this quarter. Do you expect us that to stabilize in absolute dollars or go down?

Speaker #7: And then maybe to sort of comment on your your kind of desired inventory position went down slightly this quarter. Do you expect us that to stabilize in absolute dollars or go down?

Speaker #7: Thank you.

Speaker #6: Thank you, Jim. Let me frame it at a very high level, and then I'll let Julie comment on this one. First, look, as I said, we saw the demand developing through the quarter.

Speaker #7: Thank you.

Speaker #6: Thank you, Jim. Let me frame it at a very high level, and then I'll let Julie comment on this one. First, look, as I said, we saw the demand developing through the quarter.

Speaker #6: So it was very dynamic. And as we also mentioned in the last call, the best way to demand or demand that materializes very quickly through inventory, and that helped in the quarter.

Yeah, thanks, Alan. I will. Uh, I will just first, let me just recap what we said in the previous, uh, call regarding the first half of the year. We now have the full 6 month um behind us. And as we predicted pricing was stable in the first half of uh, of the remaining flat, uh, if you will. And that's a that's an above average year for us, right? Typically prices do go down a couple of, uh, points, um, every year and this time, uh, they held, uh, I will say that we have started executing, uh, price increases. Yes. Um, and because we go to the market, um, direct. We have it. The discussion, you know, this is not a 1 time discussion with our distribution channel. It's really a discussion customer by customers. So if you will, it will be uh, it will depend. It will depend on the customer. Uh, some of it will start to play in in Q3 but I expect that to continue into the SEC. The the

Speaker #6: So it was very dynamic. And as we also mentioned in the last call, the best way to support short-term demand or demand that materializes very quickly through inventory, and that helped in the quarter.

Speaker #6: But of course, we also have to prepare for the future. And that's where loadings come into play. Julie, maybe you can give some color on this.

Speaker #2: Sure. Sure. So our loadings did increase from first to second quarter. And throughout the second quarter, it did continue to increase. For third quarter, it really depends on what demand looks like.

Speaker #6: But of course, we also have to prepare for the future. And that's where loadings come into play. Julie, maybe you can give some color on this.

Speaker #2: But we do have clean room space available that we can equip and ramp so we can support a wide range of scenarios from a customer demand standpoint.

Fourth quarter. And also, you know, some of our customers. We decide pricing once a year during our annual price discussions, and that happens only at the end of Q4, so that can continue your to into the next year regarding, uh, the segments, meaning analog and embedded, look where we see the most, um, pressure. They also the, within lead time. Escalations I mentioned Automotive. It's right now, mainly on the, uh, on the analog side, that's what we saw in the first part of the year.

Speaker #2: But we do have clean room space available that we can equip and ramp so we can support a wide range of scenarios from a customer demand standpoint.

Speaker #1: Thanks. Jim, do you have a follow-up?

Speaker #7: Yes. You know, given the free cash flow strength that you reported in Q2, can you maybe comment on whether you're on pace to, you know, exceed the range of free cash flow outcomes you sort of provided back at your capital management date earlier?

Year. But I would say that embedded with joining um, is joining the, uh, the trend. Uh, so if I can, if I look at our opportunity for the second half of the year, I think we have an opportunity across all markets, but also across the 2 segments.

Speaker #1: Thanks. Jim, do you have a follow-up?

Uh, I think the pricing discussions for Embedded will be more centered towards, um, next year.

Thank you, Harlen. Let's move on to our next caller. Thank you.

Speaker #6: So let me just again remind everyone that we gave a framework of, you know, revenue and free cash flow. I think the case of revenue if I think if I remember well, a $20 billion, it was 8 to 9.

Thank you.

Our next question comes from the line of Jim Snider with Goldman Sachs. Please proceed with your question.

Speaker #6: So let me just, again, remind everyone that we gave a framework of, you know, revenue and free cash flow. I think the case of revenue, if I think if I remember well, a $20 billion, it was A to 9, and I think a $22, it was 9 to 10.

Good evening. Thanks for taking my question. I was wondering if you could maybe comment on...

Speaker #6: And I think a $22, it was 9 to 10. So that framework is still valid, Jim. You can use it as you model the company moving forward.

Speaker #1: All right. Thanks for the questions, Jim. Move on to our next caller, please.

Speaker #6: So that framework is still valid, Jim. You can use it as you model the company moving forward.

Speaker #4: Thank you. Our next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your question.

Absolute dollars or go down. Thank you.

Speaker #1: All right. Thanks for the questions, Jim. Move on to our next caller, please.

Speaker #8: Hi, guys. Thanks for taking my questions. One of the first ask about an OPEX. Usually, it's typically down seasonally a few points in the Q3.

Speaker #4: Thank you. Our next question comes from the line of Stacey Razagan with Bernstein Research. Please proceed with your question.

Speaker #7: Hi, guys. Thanks for taking my questions. One of the first to ask about OPEX. Like, usually it's typically down seasonally a few points in the Q3.

Speaker #8: Are you still anticipating that, or are there some differences in your spending plans given the growth profile that we're seeing now?

Speaker #1: Hi, Stacy. This is Rafael.

Speaker #7: Are you still anticipating that, or are there some differences in your spending plans given the growth profile that we're seeing now?

Speaker #8: I'll take that one. On OPEX, net other income and expense, and acquisition charges, you should expect all of those to be flat second quarter to third quarter.

Speaker #8: Hi, Stacey. This is Rafael. I'll take that one. On OPEX, net other income and expense and acquisition charges, you should expect all of those to be flat second quarter to third quarter.

Speaker #8: That should help you with modeling the company and modeling gross margins. Got it. That's super helpful. For my follow-up, I just wanted to ask about personal electronics.

Speaker #8: That should help you with modeling the company and modeling gross margins.

Speaker #8: I mean, I kind of got from your comments, it sounded like you were almost expecting strength in the Q3 in personal electronics. I'm just wondering what you're seeing in that market given the current memory dynamics.

Speaker #7: Got it. That's super helpful. For my follow-up, I just wanted to ask about personal electronics. I mean, I kind of got from your comments it sounded like you were almost expecting strengths in the Q3 in personal electronics.

Thank you. Let me frame it at a very high level, and then I'll let Julie comment on this one here. But of course, we also have to prepare for the future, and that's where loading comes into play. Julie, maybe you can give some color on this. Sure, sure. So our loadings did increase from first to second quarter, and throughout the second quarter, they did continue to increase. For third quarter, it'll really depend on what demand looks like. But we do have clean room space available that we can equip and ramp, so we can support a wide range of scenarios from a customer demand standpoint.

Thanks. Uh, Jim, do you have a follow-up?

Speaker #6: Let me maybe clarify that. Thanks for the question, Stacy. It's very good.

Speaker #7: I'm just wondering what you're seeing in that market given the current memory dynamics.

Speaker #8: Thank you.

Speaker #6: The we have a typically a very. A high if you look at our PE or personal electronics, this is typically in three Q. It's growing nicely.

Yes. Um, you know, given the free cash flow strength that you reported in Q2, can you maybe comment on, whether you're on Pace to you know, exceed the range of free cash flow outcomes. You sort of provided back at your Capital Management date earlier

Speaker #6: Let me maybe clarify that. Thanks for the question, Stacey. It's very good.

Speaker #7: Thank you.

Speaker #6: The we have a typically a very high if you look at our PE or personal electronics, this is typically in three Q. It's growing nicely.

Speaker #6: Sometimes mid-tins. I expect this business to be growing sequentially, but maybe at a lower level. You saw our results in two Q, year over year, it was PE was flat.

So let me just again, remind everyone that uh, we gave a framework of uh, you know, revenue and free cash flow. I think at the the case of Revenue, if I think if I remember well, a 20 billion, it was 8 to 9. And I think at 22, it was 9 to 10, so that, that framework is still valid Jim. You can use it as you model the company moving forward.

Speaker #6: We are seeing challenges in PE, as you know, some shortages are putting pressure on our customers. So I think that the growth is typically in Q3, the growth is driven by PE.

All right, thanks for the question. Jim, move on to our next caller, please.

Speaker #6: We are seeing challenges in PE as, you know, some shortages are putting pressure on our customers. So I think that the growth, if typically in Q3, the growth is driven by PE, this time it's more broad, okay?

Thank you. Our next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your question.

Speaker #6: This time, it's more broad, okay? So think about all the markets. But PE will be a participant I believe, because we see the demand breadth is very, very high.

Questions. Um,

One of the first questions about OpEx, like usual, is it's typically down seasonally a few points.

Speaker #6: So think about all the markets, but PE will be a participant I believe because we see the demand breadth as very, very high.

Speaker #1: All right. Well, thanks for the question.

In, uh, in the Q3, are you still anticipating that? Or are there some differences in your spending plans, given the, uh, growth profile that we're seeing now?

Speaker #8: Of course, we were down in Q3. Sorry. So do you think it's like down year over year in Q3, given it was flat in Q2 and given it's sort of weaker versus normal trends in the Q3?

Hi, Stacey. This is

Speaker #1: All right. Well, thanks for the question.

I'll take that one, uh, on topics.

Speaker #7: We were down in Q3.

Speaker #1: Sorry. Can you repeat the question?

Speaker #8: I'm just trying to dial in the model.

Speaker #7: Sorry. So do you think it's like down year over year in Q3 given it was flat in Q2 and given it's sort of weaker versus normal trends in the Q3?

Speaker #1: Don't have a buy-in market guide for each of the markets, but I think as Haveef talked about what we saw, I think that's a good characterization what we saw in second quarter.

Speaker #7: I'm just trying to dial in the model.

Speaker #1: Don't have a buy-in market guide for each of the markets, but I think it's have you talked about what we saw? I think that's a good characterization of what we saw in second quarter, so.

Net other income and expense and acquisition charges. You should expect all of those to be flat. Second quarter to third quarter, that should help you with uh uh with modeling the company and and modeling uh gross margins.

Speaker #1: So thank you for the question, Stacy.

Speaker #8: Thank you.

Speaker #1: Move on to the next caller.

No, that's super helpful. Um,

For my follow-up.

Speaker #4: Thank you. Our next question comes from the line of Ateef Malik with Citi. Please proceed with your question.

Speaker #1: Thank you for the question, Stacey. Move on to the next caller.

I just wanted to ask about personal electronics. I mean, I kind of got from your comments—it sounded like you were almost expecting strength.

Speaker #7: Hi. Thank you for taking my questions, and welcome, Julie. I have a question on the data center sales, the double year over year. Can you talk about your full-year outlook?

Speaker #4: Thank you. Our next question comes from the line of Atif Malik with Citi. Please proceed with your question.

In Q3, in personal electronics, I'm just wondering what you're seeing in that market, given the current memory dynamics.

Speaker #5: Hi. Thank you for taking my questions and welcome, Julie. I have a question on the data center sales, the double year over year. Can you talk about your full-year outlook and then as the industry transitions to 800 volts, how do you see your competitive position versus incumbents?

Speaker #7: And then as the industry transitions to 800 volts, how do you see your competitive position versus incumbents?

Uh, let me maybe clarify that. Thanks for the question, State. It's very good, thank you. Uh, we have a—

Speaker #6: Yeah. Again, we do continue to see strong demand in the data center market, Ateef. And I don't expect that to change in the foreseeable future.

Speaker #6: Yeah. Again, we do continue to see strong demand in the data center market, Atif. And I don't expect that to change in the foreseeable future.

Speaker #6: I think when we talk about think about future architectures like 800 volts, you know, it will be phased in into the market. I think you can envision at the beginning, you know, maybe an AC to DC, maybe AC to 800 volts, and then an 800 to 48, 48 to 12, for example, right?

Quickly a very uh, uh hi. Uh, if you look at our our PE or person electronic, this is typically in 3Q. It's it's, it's growing nicely sometimes meetings. I expect these visits to be growing sequentially, but maybe at the lower level. It's so our resulting 2 year over year. It was P. It was flat. We are seeing challenges in p as you know, strong strategies are putting pressure on our customers.

Speaker #6: That's how you bring in the technology. know, higher growth of the TAM, more conversion stages, and that helps our market on the analog and embedded side.

Speaker #6: That's how you bring in the technology. So to me, that just means you know, higher growth of the TAM, more conversion stages, and that helps our market.

So I think that the growth is typically in Q3. The growth is driven by PE; this time it's more broad, okay? So think about all the market, but people will be a participant, I believe, because we see the demand—uh, uh—breadth is very, very high.

All right, you're down in Q3.

Speaker #6: If you think about the different analog parts participating in every conversion stage, and also the embedded controllers and the signal chain parts. So I think that is a tailwind to our market.

Speaker #6: On the analog and embedded side, if you think about the different analog path participating in every convergence stage and also the embedded controllers and the signal chain path.

Sorry, can you repeat the question? Sorry. So, do you think it's, like, down year-over-year in Q3 given it was flat in Q2, and given it's sort of weaker versus normal trends in Q3? I'm just trying to dial in the model.

Speaker #6: Now, in the longer term, and that's going to take some time once we have the SST established, data center input will be at a DC voltage of 800 volts.

Speaker #6: So I think that is a tailwind to for our market. Now, in the longer term, and that's going to take some time once we have the SST established, data center input will be at a DC voltage of 800 volts.

Speaker #6: And then I envision maybe direct conversion from 800 directly to 12 or 6 volts. And but that's coming later. And this is where the TAM continues to show strength.

I don't have a bias in market guide for each of the markets. But I think it's—have you talked about what we've saw? I think that's a good characterization. This characterization always sounds second quarter. So, thank you for the question, Stacy. Thank you. We'll move on to the next caller.

Speaker #6: And then I envision maybe direct conversion from 800 directly to 12 or 6 volts. And but that's coming later. And this is what the TAM continues to show strength.

Thank you. All right, next question comes from the line of Latif Malik with Citi. Please proceed with your question.

Speaker #6: The higher voltage, the more opportunity we see.

Speaker #1: I think that layers on top of the foundational position that we have in data center, which has been growing very nicely as well. So we are looking forward to both those types of chips contributing in the future.

Speaker #6: The higher voltage, the more opportunity we see.

Hi, thank you for taking my questions, and welcome, Julie. I have a question on the data center sales—the double year-over-year. Can you talk about your full-year outlook? And then, as the industry transitions to 800 volts, how do you see your competitive position versus incumbents?

Yeah, again.

Speaker #1: Ateef, do you have a follow-up?

Speaker #7: Yes. On the growth margins for the data center business, as this business grows, are your expectations that the profitability of the data center business will be in line with the corporate average over time?

Speaker #1: Atif, do you have a follow-up?

Speaker #5: Yes. On the growth margins for the data center business, as this business grows, are your expectations that the profitability of the data center business will be in line with the corporate average over time?

Speaker #1: So up to where we are now, it's been pretty similar to the overall corporate average. So yeah, I wouldn't skew you in either direction far on that.

Speaker #1: We'll have to see where it goes. I think we'll have to see as it ramps, you know, what that's going to mean. But today, I wouldn't skew you in either direction on what it's going to do to the gross margins overall.

Um, I think you can envision in the beginning, you know, maybe in AC to DC, maybe, maybe AC to 800 volts, and then—

Speaker #1: Now, what I will say is the good news is that as we ramp and any of the end markets, including data center, it's going to be 300 millimeter on newer assets that do have excellent ability to fall through for us.

Um, an 800 to 48, 48 to 12, for example, right? That's how you bring in the technology. So to me, that just means, you know,

Speaker #1: Now, what I will say is the good news is that as we ramp and any of the end markets, including data center, it's going to be on 300 millimeter on newer assets that do have excellent ability to fall through for us.

Speaker #1: So we are looking forward to that. Thank you, Ateef. Move on to the next caller, please.

Speaker #4: Thank you. Our next question comes from the line of Vivek Arya with Bank of America. Please proceed with your question.

Speaker #1: So we are looking forward to that. Thank you, Atif. Move on to the next caller, please.

Speaker #7: Thank you. And best wishes to both Rafael and to Julie. Having my first question is for you, which is where are we in the industrial recovery cycle?

Speaker #4: Thank you. Our next question comes from the line of Yvette Aria with Bank of America. Please proceed with your question.

Speaker #5: Thank you. And best wishes to both Rafael and to Julie. Having my first question is for you. Which is, where are we in the industrial recovery cycle?

Speaker #7: You know, how many more above seasonal quarters should one expect? And I think you mentioned pricing. As a lever for Q3, can you help us quantify how much pricing is contributing to this?

Speaker #5: You know, how many more above-seasonal quarters should one expect? And I think you mentioned pricing. As a lever for Q3, can you help us quantify how much pricing is contributing to this?

Speaker #7: I think 8% or so sequential growth in Q3 and can prices go up again in Q4?

Speaker #6: Yeah. Let me start with the industrial market and maybe I'll say a few words about pricing at the end. So look, I think Vivek, we have a lot of opportunity in front of us.

Speaker #5: I think 8% or so sequential growth in Q3 and can prices go up again in Q4?

Speaker #6: Yeah. Let me start with the industrial market and maybe I'll say a few words about pricing at the end. So look, the I think we have a lot of opportunity in front of us.

higher growth of the time, more conversion stages and, um, that that helps that helps our Market. Uh, on the analog embedded side, if you think about the different analog part participating in every every convergence stage and also, the, um, the embedded controllers and the, uh, the signal chain part. So I think that is a Tailwind to, for a market now in the longer term, and that's going to take some time. Once we have the SST established uh, data center, input will be at a at a DC voltage of 800 volts. And then I envisioned uh maybe direct conversion from 800 directly to 12 or 6 volts. And but that's coming later and um, this is what the, uh, the time continues to show. Um, um, strength and the higher, uh, voltage. Uh, the more opportunity, we see I think that layers on top of the foundational position that we have in data center which has been growing very nicely as well.

Speaker #6: Even with a nice growth in Q2, we are still I have to go back to 2022. And we are still lower than that peak, maybe 5 or 6 points lower than 2022 peak.

So, we were looking forward to both those types of chips contributing in the future at TI. If you have a follow-up.

Speaker #6: We even with a nice growth in Q2, we are still I have to go back to 2022. And we are still lower than that peak, maybe 5 or 6 points lower than 2022 peak.

Yes, and the gross margins for the data center business—as this business grows, are your expectations that the profitability of the data center business will be in line with the corporate average over time?

Speaker #6: So if you think about a trend line of the industrial market, and I like to think about it as, you know, mid to high single-digit growth on a market TAM opportunity.

Speaker #6: And your four years later, one can argue that we still have a lot of room to grow ahead of us. On top of it, I think the data center market is also providing tailwind into the industrial market.

Speaker #6: You and your four years later, one can argue that we still have a lot of room to grow ahead of us. On top of it, I think the data center market is also providing tailwind into the industrial market.

Speaker #6: Think about sectors like the energy infrastructure and think about test and measurement. And there were our fastest growing segments, or sectors, as we call them, in the second quarter over the first half of the year.

So up to where we are now, it's been pretty similar to the overall corporate average. So yeah, I wouldn't skew, you know, either direction far on that. Um, we'll have to see where it goes. I think we'll have to see as it ramps, you know, what that's going to mean. But today I wouldn't skew in either direction on what it's going to do to their gross margins overall. And what I will say is the good news is that as we ramp in any of the end markets, including data center, it's going to be on 300 millimeter. It's on newer assets that do have, you know, excellent ability to fall through for us. So, um, so we are looking forward to that.

Thank you. Atif, move on to the next caller, please. Thank you. Our next question comes from the line of Eva Karyea with Bank of America. Please proceed with your question.

Speaker #6: So I think there is no tailwind yet. I do believe that customers are early and are not yet building inventory. So I think the setup is very positive.

Speaker #6: So I think there is no tailwind ahead. I do believe that customers are early and are not yet building inventory. So I think the setup is very positive.

Speaker #6: Regarding pricing, look, as I said, it's in our case, it will be really whipped into the future. It depends on the customer. So if I think about the forecast for Q3, the vast majority of it is just unit growth and maybe a little contribution from pricing, but almost insignificant.

Speaker #6: Regarding pricing, look, as I said, it's in our case, it will be really whipped into the future, depends on the customer. So if I think about the forecast for Q3, the vast majority of it is just unit growth and maybe a little contribution from pricing, but almost insignificant.

Thank you. And, uh, best wishes to both Rafael and to Julie, um, have been. My first question is for you, which is uh, where are we in the industrial recovery? Uh cycle, you know how many more above seasonal quarters should run expect and I think you mentioned pricing as a level for uh, Q3 uh, can you help us quantify how much pricing is contributing to this. Uh, I think 8% or so sequential growth in Q3 and and can prices go up again in Q4.

Speaker #1: All right. You have a follow-up, Vivek?

Speaker #7: Yes. Thanks. So Haviv Ise tried to think about DI's opportunity in the data center beyond 2026, right? So 2027, 2028, and beyond. What is the right kind of growth rate that, you know, one should, you know, think about?

Speaker #1: All right. You have a follow-up with Yvette?

Speaker #5: Yes. Thanks. So having the fee tried to think about TI's opportunity in the data center beyond 26, right? So 27, 28, and beyond. What is the right kind of growth rate that, you know, one should, you know, think about?

Yeah, let me start with the industrial market. And uh, maybe I'll say a few words about pricing in the end. So look the uh, I think, uh, um like we have um, a lot of opportunity in front of us. We even with a nice growth in, in queue, in Q2. Uh, we are still, I go have to go back to 2022.

Speaker #7: Is it 40%? Is it 50%? Like, what is that right way that one should model DI's growth rate? And as part of thinking about growth rate, do you think that, you know, achieving that growth rate kind of exposes you to, you know, winning or losing specific sockets at specific, you know, GPU or ASIC vendors?

Speaker #5: Is it 40%? Is it 50%? Like, what is that right way that one should model TI's growth rate? And as part of thinking about that growth rate, do you think that, you know, achieving that growth rate kind of exposes you to, you know, winning or losing specific sockets at specific, you know, GPU or ASIC vendors?

Um, and we are still lower than that peak—maybe 5 or 6 points lower than that 2022 peak. So if you think about, um, a trend line of the industrial market—and I like to think about it as, um,

Speaker #7: Just how is your visibility? How should we think about TI's long-term growth rate in the data center business? Thank you.

You know, mid to high single-digit growth on a market that time opportunity. Uh,

Speaker #6: Yeah. I don't think I can help there, but maybe, Mike, you can say a few words about what we're seeing. But look, our opportunity in data center is growing.

Speaker #5: Just how is your visibility? How should we think about TI's long-term growth rate in the data center business? Thank you.

Speaker #6: Yeah. I don't think I can help there, but maybe Mike, you can say a few words about what we're seeing. But look, our opportunity in data center is growing.

Speaker #6: And the reason it's growing, Vivek, is because of our R&D investment and also our ability to supply. That's the way I look at it.

Speaker #6: So as we move on and that market becomes the most substantial part for the analog and embedded market in general, ability to supply, ability to supply from geopolitical dependable capacity, like we hold, is becoming an advantage.

Speaker #6: And the reason it's growing, Yvette, is because of our R&D investment and also our ability to supply. That's the way I look at it.

You and your 4 years later, 1 can argue that we still have a lot of room to grow ahead of us on top of it. I think the data center Market is also uh, providing Tailwind into the industrial Market think about sectors like the energy infrastructure and think about the test and measurement and there are passes growing segments or sectors as we call them in in in the second quarter or the first half of the year. So I think there is no Tailwind ahead.

Speaker #6: So I think as long as we continue to see capex coming into data center, I think TI can do very well there. Our objective is not to put a certain growth rate, but actually to outgrow the market.

Uh, I do believe that customers are early and are not yet building inventory. So, I think the setup is, um, very positive.

Speaker #6: I believe we will do it in 2026. And that's our plan into 2027.

Speaker #1: Yeah. And I would just add, you know, as Haviv talked about, a lot of our chips are used in the power tree involved in the data center.

Speaker #6: I believe we will do it in 2026. And that's our plan into 2027.

Uh, regarding uh, pricing look. As I said, we it's in our case. It will be, uh, it will be really whipped into the future. Uh, depends on the customer. So if I think about the forecast for Q3, uh, the vast majority of it is just uh unit growth and uh, maybe a little contribution from pricing but almost insignificant.

Speaker #1: And there's other chips that are also that would sit more in the signal chain side that are also there too. But as you have more power, that's dedicated to data centers, as you have a larger number of them out there.

All right, you have a follow-up to the deck.

Speaker #1: Yeah. And I would just add, you know, as Yvette talked about, a lot of our chips are used in the power tree involved in the data center.

Speaker #1: And there's other chips that are also that would sit more in the signal chain side that are also there too. But as you have more power that's dedicated to data centers, as you have a larger number of them out there, you know, we're going to benefit from that.

Speaker #1: And we're going to benefit from that, just given the amount of chips that we have in those systems. So it really depends on what that build-out looks like.

Speaker #1: But as Haviv pointed out, we're in an excellent position from the portfolio that we have and the opportunities that are in front of us that we're working on as well.

Speaker #1: Just given the amount of chips that we have, in those systems. So it really depends on what that build-out looks like. But as Yvette pointed out, we're an excellent position from the portfolio that we have and the opportunities that are in front of us that we're working on as well on the ASSP side, to be able to grow faster.

Speaker #1: And the ASSP side, to be able to grow faster in that market compared to the overall. So I look forward to that. And with that, we'll move on to our next caller.

Speaker #1: In that market, compared to the overall. So I look forward to that. And with that, we'll move on to our next caller.

Speaker #4: Thank you. Our next question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.

Send is at 50%. Like what, what is that? That right way that 1 should model TI as a growth rate. And as, as part of thinking about that growth rate, do you think that, you know, achieving that growth rate kind of exposes you to, you know, winning or losing specific sockets at specific, you know, GPU or or Asic vendors? Just how is your visibility? How should we think about TI's long-term growth rate, in the data center business. Thank you.

Speaker #8: Thanks a lot. I wanted to ask about capex and the ITD. So Rafael, you're kind of run rating it looks like at the lower end of the 2 to 3 gross capex guidance for the year.

Speaker #4: Thank you. Our next question comes from the line of Timothy Arkeri with UBS. Please proceed with your question.

Speaker #7: Thanks a lot. I wanted to ask about capex and the ITC. So Rafael, you're kind of run rating it looks like at the lower end of the 2 to 3 gross capex guidance for the year.

Speaker #8: So I'm wondering, is it right to think that we'll be at the low end for the year? And then also, as part of that, net capex is basically been zero during the first half of the year because of the ITC.

Speaker #7: So I'm wondering, is it right to think that we'll be at the low end for the year? And then also, as part of that net capex is basically been zero during the first half of the year because of the ITC.

Speaker #8: So is it right to think that the ITC is going to still contribute about the same amount that it did during the first half of the year per quarter?

Speaker #7: So is it right to think that the ITC is going to still contribute about the same amount that it did during the first half of the year per quarter?

Speaker #1: Yeah. So a couple of things in your question. First, on the capex expectation for 2026, it continues to be 2 to 3 billion dollars.

Speaker #1: I could not skew it. I would not skew it or bias it lower, on the lower end at this point. If anything, it could be on the higher end of that midpoint.

Speaker #6: Yeah. So a couple of things in your question. First, on the capex expectation for 2026, it continues to be 2 to 3 billion dollars.

Speaker #6: I could not skew it. I would not skew it or bias it lower. On the lower end at this point. If anything, it could be on the higher end of that midpoint.

Speaker #1: Just given demand and how we want to support that for the subsequent years. On your ITC question, you know, ITC can be choppy because it's for equipment that was placed in service.

Yeah, I I don't think I can help there, but maybe Mike, you can say a few words about what you, what we are saying, but look our opportunity, uh, in data center is, is growing. And the reason it's growing, is because of our R&D Investments and also our ability to supply. That's the way I look at it. So as we move on and that market becomes the most substantial part for of the analog and embedded Market in general, uh, ability to supply ability to supply from, uh, geopolitical Dependable capacity. Like we hold is becoming an advantage. So, I think, as long as we continue to see a capex coming into Data Center, I think TI can do very well there. Our objective is not to put a a certain, uh, growth rate, but actually to out grow the market, I believe we will do it in 2026.

Speaker #6: Just given demand and how we want to support that for the subsequent years. On your ITC question, you know, ITC can be choppy because it's for equipment that was placed in service.

Speaker #1: The prior year in. So you just saw the first half or even the quarter, it was net, it was more ITC than capex, but you shouldn't expect that.

Speaker #6: The prior year in so you just saw the first half or even the quarter, it was net it was more ITC than capex, but you shouldn't expect that.

Speaker #1: In fact, if anything, going forward, because a lot of the capex will be disproportionately placed in the assembly test operation, which is not in the United States, that portion does not get ITC.

Speaker #6: In fact, if anything, going forward, because a lot of the capex will be disproportionately placed in the assembly test operation, which is not in the United States, that portion does not get ITC.

Speaker #1: So we'll continue to file and get 35% ITC on US manufacturing. Front end and expect that benefit, but just it can be a little choppy over the years.

And that's our plan into 2027. Yeah. I would just add you know, to have you talked about a lot of our chips are used in the power tree involved in the data center and there's other chips that are also, it would say more in the signal chain side that are also there too. But as you have more power, that's dedicated to Data Centers. Um, as you have a larger number of them out there and we're going to benefit from that and just given the amount of chips that we have uh in those systems. So it really depends on what that buildout looks like. But as if he pointed out, we're an excellent position from the portfolio that we have and the opportunities that are in front of us that we're uh, working on as well. And the assp side, uh, to be able to, uh, to grow faster in that market, compared to the overall. So look forward to that and uh, with that, we'll move on to our next caller.

Speaker #6: So we'll continue to file and get 35% ITC on US manufacturing. Front end and expect that benefit, but just it can be a little choppy over the years.

Speaker #2: Tim, do you have a follow-up?

Thank you. Our next question comes from the line of Timothy Arie with UBS. Please proceed with your question.

Speaker #8: I do, Mike. Thanks. So Haviv, I also had a question on data centers. So I think you're qualified for some new designs on phase two.

Speaker #1: Tim, do you have a follow-up?

Speaker #8: And I guess in that business, because you have a high catalog business, I would think that you should be able to take advantage of like hotspots more so than maybe some of your peers could.

Speaker #7: I do, Mike. Thanks. So Yvette, I also had a question on data centers. So I think you're qualified for some new designs on phase two.

Speaker #7: And I guess in that business, because you have a high catalog business, I would think that you should be able to take advantage of like hotspots more so than maybe some of your peers could.

Speaker #8: So what are you seeing? I mean, are you really going in and you're able to gain share because you do have a lot of inventory sitting there?

Speaker #8: Or is that more like the exception versus the rule things?

Speaker #7: So what are you seeing? I mean, are you really going in and you're able to gain share because you do have a lot of inventory sitting there?

Thanks a lot. Um, I wanted to ask about capex and the ITC. So, Rafael, you're kind of run-rating—it looks like at the lower end of the $2–$3 billion gross capex guidance for the year. So I'm wondering, is it right to think that we'll be at the low end for the year? And then also, as part of that, net capex has basically been zero during the first half of the year because of the ITC. So is it right to think that the ITC is going to still contribute about the same amount that it did during the first half of the year, per quarter?

Speaker #6: So Tim, I think you and I discussed maybe end of last year, I do like the market or the complexity of a rack, if you will, just because of the diversity of sockets.

Speaker #7: And or is that more like the exception versus the rule things?

Speaker #6: So Tim, I think you and I discussed maybe the end of last year. I do like the market or the complexity of a rack, if you will, just because of the diversity of sockets.

Speaker #6: And we like them all. We like the more complex one that are, you know, higher AUP and usually very competitive sockets. We like to call them ASSPs.

Yeah. So a couple of things in your questions. Uh, first on the capex expectation for 2026, it continues to be 2 to 3 billion dollars. I uh, could not, uh, uh, skew it. Uh, I would not skew it or buy it lower on the lower end at this point, if anything, it could be on the higher end of that, uh, of that midpoint, uh, just given demand, uh, demand and how we want to support that, uh, for the subsequent years.

Speaker #6: We also like, as you mentioned, the catalog ones that, you know, you can have several options to solve the problem, but when you have inventory and capacity, you can benefit.

Uh, on your ITC question, you know, it can be choppy because it's uh, it's for equipment. That was placed in service the prior year in. Uh, so

Speaker #6: So yes, we are seeing examples real-time examples of, hey, we are lying down, please help us. And every time that happens, that's an opportunity because it's a discussion with the customer and it's when you solve the problem, I think they make more bets on you for the future.

Speaker #6: So yes, we are seeing examples real-time examples of, hey, we are lying down, please help us. And every time that happens, that's an opportunity because it's a discussion with the customer and it's when you solve a problem, I think they make more bets on you for the future.

Speaker #6: So that's part of the reason why you've seen our doubling more or less year to date. And we plan to continue to have capacity, clean room, inventory, ahead of demand.

Speaker #6: So that's part of the reason why you've seen our business doubling more or less year to date. And we plan to continue to have capacity, clean room, inventory, ahead of demand.

Speaker #6: So we can react or we can respond to these opportunities.

You just saw the first half, uh, or even the quarter. It was Ned. It was more ITC than than than capex. What you shouldn't expect that. In fact, if anything going forward because a lot of the capex will be disproportionately placed in the assembly test operation, which is not in the United States that portion does not get ITC. So we'll continue to file and get 35% ITC on us manufacturing, uh, front end, uh, and expect that benefit. But just uh, it can be a little choppy, uh, over over the years. Tim, you, you have a follow-up?

Speaker #1: All right. Thanks, Tim. We'll move on to our next caller.

Speaker #6: So we can react or we can respond to these opportunities.

Speaker #4: Thank you. Our next question comes from the line of Joshua Buchalter with TD Cowan. Please proceed with your question.

Speaker #1: All right. Thanks, Tim. We'll move on to our next caller.

Speaker #7: Hey, guys. Thanks for taking my question and let me echo the congrats to both Rafael and good luck to Julie. Maybe to start following up on some of the earlier ones, I think if we, you know, plug in the flat opex, you know, it implies sort of flat-ish gross margins for the third quarter despite, you know, what should be an increase in volume.

Speaker #4: Thank you. Our next question comes from the line of Joshua Batalta with TD Cowan. Please proceed with your question.

Speaker #8: Hey, guys. Thanks for taking my question and let me echo the congrats to both Rafael and good luck. To Julie, maybe to start following up on some of the earlier ones, I think if we, you know, plug in the flat opex, you know, it implies sort of flat-ish gross margins for the third quarter despite, you know, what should be an increase in volume.

I do my thanks. So, um, Habib. I also had a question on data center. So, uh, I think you're qualified for some new designs on Phase 2 and, and, and, and I guess in in that business because you have a high catalog business. I would think that you should be able to take advantage of like, hotspots more so than maybe some of your peers could. So what what what are you seeing? I mean, are you really going in and you're able to gain share because you do have a lot of inventory sitting there and or is that more like a more like the exception versus the rule things.

Speaker #7: Any, you know, can you just walk through some of the puts and takes into gross margins for the third quarter across pricing, increased loadings, and also 300 millimeter mix?

I think you and I discussed, uh, maybe...

Speaker #8: Any, you know, can you just walk through some of the puts and takes into gross margins for the third quarter across pricing, increased loadings, and also 300 millimeter mix?

Speaker #7: Because I think, you know, it's basically that the tailwinds are being offset by depreciation. Anything else going on we should be aware of? Thank you.

Speaker #3: Yeah. So yeah, so as a reminder, Rafael said earlier on the call that opex acquisition charges and net between OIN and interest should all be about flat.

Speaker #8: Because I think, you know, is it basically that the tailwinds are being offset by depreciation? Anything else going on we should be aware of?

We have last year I I do like the the the market or the complexity of Iraq if you will just because of the diversity of your sockets and we liked them all. We like the more complex 1 that are, you know, higher AUP and uh usually very competitive sockets.

Speaker #8: Thank you.

Speaker #2: Yeah. So yeah, so as a reminder, Rafael said earlier on the call that opex acquisition charges and net between O-90 and interest should all be about flat.

Speaker #3: For second quarter. And then if you play that in, then you have the fall through of 70 to 85 percent excluding depreciation, you should get in the right zip code.

We like to call them ASP. So you, we also, like, as you mentioned, the catalog ones that, you know, you can have several options to solve the problem. But when you have inventory and capacity,

Speaker #2: For second quarter. And then if you play that in, then you have to fall through of 70 to 85 percent excluding depreciation. You should get in the right zip code.

Speaker #3: But as far as second quarter, third quarter is, that 70 to 85 percent is a good placeholder. There's always some puts and takes in there.

Lying down. Please help us.

Speaker #3: But it'll depend. The loadings will depend on what revenue looks like. But that model should get you close.

Speaker #2: But as far as second quarter, third quarter is, that 70 to 85 percent is a good placeholder. There's always some puts and takes in there.

Speaker #6: But it shouldn't be flat. It should be a little higher.

Speaker #2: But it'll depend. The loadings will depend on what revenue looks like. But that model should get you close.

Speaker #1: Okay.

Speaker #7: Thank you. Sorry. I'm on the road and might have screwed something up.

Speaker #6: But it shouldn't be flat. It should be a little higher.

Speaker #1: All right.

Speaker #7: Anyway, maybe bigger picture. I was hoping you could give an update on how you're thinking about capacity and capex coming out of this year, you know, with Sherman and Lehigh shells built out.

Speaker #8: Thank you. Sorry. I'm on the road and might have screwed something up.

And every time that happens, that's an opportunity because it's a discussion with the customer and it's, um, when you solve a problem, I think they make more bets on you for the future. So, uh, that's part of the reason why you've seen our business doubling, um, more or less here today and, uh, we plan to continue to have a capacity, clean room, inventory ahead of demand, so we can react or we can respond, uh, to these opportunities.

Speaker #1: All right.

Speaker #8: Anyway, maybe bigger picture. I was hoping you could give an update on how you're thinking about capacity and capex coming out of this year, you know, with Sherman and Lehigh shells built out.

Speaker #7: You're at the point where you can be more nimble. But there's still probably like a year. From spending to capacity outlook output. So like, I guess, how comfortable with the runway and the amount of capacity you have online you are now?

All right, thanks, Tim. We'll move on to our next caller.

Speaker #8: You're at the point where you can be more nimble. But there's still probably like a year runway from spending to capacity outlook output. So like, I guess, how comfortable with the runway and the amount of capacity you have online you are now?

Thank you. Our next question comes from the line of Joshua Balter with TD Cowen. Please proceed with your question.

Hey guys. Thanks for

Speaker #7: And any early indications of how we should be thinking about 2027 capex as we think about being a couple quarters into this upcycle? Thank you.

My question—and let me echo the congrats to both Rafael, and good luck to Julie.

Um,

Speaker #6: Thanks, Joshua. I think I also said in my prepared remark, we are excited about where we are because we have the clean room. The clean room was our biggest headache in the previous cycle.

Speaker #8: And any early indications of how we should be thinking about 2027 capex as we think about being a couple of quarters into this upcycle?

Speaker #8: Thank you.

Speaker #6: Thanks, Josh. I think I also said in my prepared remarks, we are excited about where we are because we have the clean room. The clean room was our biggest headache in the previous cycle that, as you know, takes two to three years to be able to equip a clean room and that behind us.

Speaker #6: That, as you know, takes two to three years to be able to equip a clean room and that's behind us. When you think about the combination of while we are equipping in a very high-level Richardson, R52, we have a full clean room available almost in Sherman one.

Speaker #6: When you think about the combination of while we are equipping in a very high level our Richardson, R52, we have a full clean room available almost in Sherman one.

Some of the earlier ones I think if we you know plug in the flat Opex, you know it implies sort of flattish gross margins for the third quarter. Despite you know, what should be an increase in volume? Any, you know, can you just walk through some of the puts and takes into gross margins for the third quarter across, you know, pricing increased loadings and also 300 millimeter mix because I think uh you know it's a basically that the Tailwinds are being offset by depreciation and anything else going on? We should be aware of. Thank you.

Speaker #6: So not to mention a shell, a second shell in Sherman too. So when I think about our analog opportunity to grow into the brick-and-mortar we have, we are in a great shape.

Yeah. So uh, yeah, so as a reminder Rafael said earlier on the call that Opex, uh, acquisition charges and that the net between o and interests should all be about flat,

Speaker #6: So not to mention a shell, a second shell in Sherman too. So when I think about our analog opportunity to grow into the brick and mortar we have, we are in a great shape.

Speaker #6: On Lehigh, we do have to execute on Lehigh because, as you remember, Lehigh 1 enjoys the transfer of external manufacturing done in foundries into Lehigh 1.

Speaker #6: On Lehigh, we do have to execute on Lehigh too because, as you remember, Lehigh one enjoys the transfer of external manufacturing done in foundries into Lehigh one.

Speaker #6: But we are also starting to see growth that is not insignificant on the embedded side. So Lehigh 2 will come in just in time.

Uh, for the second quarter, um, and then if you, if you play that in, then you have the follow-through of 70% to 85% excluding the depreciation. Um, you should get in the right zip code, um, but as far as second quarter, third quarter is, um, that 70% to 85%, so good placeholder. There's always some puts and takes in there.

Uh, but the loadings will depend on what revenue looks like. Um,

Speaker #6: At the end of this year, we'll have the shell and we can again grow into it seamlessly as it's not a new site and we don't need new customer qualifications.

But that model should get you close.

Speaker #6: But we are also starting to see growth that is not insignificant on the embedded side. So Lehigh two will come in just in time.

But it shouldn't be flat. It's a little higher.

Speaker #6: At the end of this year, we'll have the shell and we can again grow into it seamlessly as it's not a new site and we don't need new customer qualifications.

Speaker #6: Now, what we will need to do, and I think Rafael alluded to it, we need to equip the fabs. And we are prepared for a wide range of scenarios.

Speaker #6: But I think uniquely prepared versus the competition. I think we are we have done the hard work ahead of time. And we have capacity to build into.

Speaker #6: And regarding the exact numbers, I'll let we'll keep that for the capital management call in February but with Rafael, discuss. We are already making decisions right now to think about not only 27 and 28, even beyond.

Okay, thank you. Sorry, I'm on the road and, uh, my discrete something might be messed up, so maybe I'll ask a bigger picture question. I was hoping you could give an update on how you're thinking about capacity and capex coming out of this year. You know, with Sherman and Lehi shells built out, you're at the point where you can be more nimble, but there's still probably like a year runway from spending to capacity output. So I guess, how comfortable are you with the runway and the amount of capacity you have online now? And any early indications of how we should be thinking about 2027 capex, as we are a couple quarters into this upcycle? Thank you.

Speaker #6: And regarding the exact numbers, I'll let we'll keep that for the capital management call in February. But as Rafael discussed, we are already making decisions right now that think about not only 27 and 28, even beyond.

Speaker #6: Anything to add, Rafael?

Speaker #7: Thank you.

Speaker #2: No, I would just say, high-level, you can always use our framework we've given you with 1.2 times the growth to calculate capital intensity. And that's not a bad rule of thumb to use to get a ballpark figure of where capex could go based on your expectations for top-line growth.

Speaker #6: Anything to add, Rafael?

Speaker #8: Thank you.

Speaker #3: No, I would just say, high level, you can always use our framework we've given you with 1.2 times the growth to calculate capital intensity.

Speaker #3: And that's not a bad rule of thumb to use to get a ballpark figure of where capex could go based on your expectations for top line growth.

Speaker #1: All right. Josh, thanks for the questions. We'll move on to the next caller.

Speaker #4: Thank you. Our next question comes from the line of Tom O'Malley with Barclays. Please proceed with your question.

Speaker #1: All right. Josh, thanks for the questions. We'll move on to the next caller.

Speaker #4: Thank you. Our next question comes from the line of Tom O'Malley with Barclays. Please proceed with your question.

Speaker #8: Hey, Rafael. Thanks for taking the question. Occasionally, you guys will give a little color on the out quarter by segment. It sounded like you kind of broadly said you saw strength across the board.

Speaker #7: Hey, Rafael. Thanks for taking the question. Occasionally, you guys will give a little color on the out quarter by segment. It sounded like you kind of broadly said you saw strength across the board.

Speaker #8: I think the question was on personal electronics before, but you answered, you know, we're seeing strength across the board, which the seasonality. But anything that you could offer in terms of vectors of growth, particularly with auto acting a bit better in Q2, do you think that continues into Q3?

Thank Josh. I think I, I also said, in my prepared remarks, we are excited about where we are because we have the clean room. The clean room was our biggest headache in the previous cycle that as, you know, takes 2 to 3 years to, to be able to equip a clean room. And that's behind us. When you think about the combination of of, um, while we are equipping in a very high level, our rituals on our Fab too, we have a full clean room available, almost in German 1. So not to mention a shell, a second shell in German too. So, and I think about our analog opportunity to grow into the, the, um, the brick and mortar. We have, we are in a great shape on Lehigh. We do have to execute on the Lehigh too. Because, as you remember Lehigh 1, uh, enjoy the transfer of extella manufacturing done in foundries into into Liang, but we also starting to see growth that is not insignificant on the embedded side. So Lehigh 2 will come in just in time.

Speaker #7: I think the question was on personal electronics before, but you answered, you know, we're seeing strength across the board, which is typical seasonality. But anything that you could offer in terms of vectors of growth, particularly with auto acting a bit better in Q2, do you think that continues into Q3?

Speaker #8: And do you think this mentality of kind of just in time to just in case continues to kind of spur, you know, above seasonal growth in the near term?

Speaker #7: And do you think this mentality of kind of just in time to just in case continues to kind of spur, you know, above seasonal growth in the near term?

Speaker #6: Yeah, I think, you know, typically I don't provide so much color on the future. But this time, it's just easy. It's everywhere, okay? So when I look at the demand signal, it's just very strong and broad.

At the end of uh, of this year, we'll have the shell and we can again grow into it as seamlessly as it's not a new site and uh, we don't need new customer qualification. Now, what we will need to do and I think uh Rafael alluded to it. Uh we need to equip the Fabs and um we are prepared for a wide range of scenarios, but I think uh uniquely prepared uh versus uh the competition

Speaker #6: Yeah, I think, you know, typically I don't provide so much color on the future, but this time it's just easy. It's everywhere, okay? So when I look at the demand signal, it's just very strong and broad.

Speaker #6: And now we need to execute, right? Inventory helped. We are amping our factories. We are going after it. And let's meet again in October.

Speaker #6: I'll tell you how it went. But the team has executed in Q2 and I expect them to do the same in Q3.

Speaker #1: Tom, you have a follow-up?

Speaker #6: I'll tell you how it went. But the team has executed in Q2 and I expect them to do the same in Q3.

Speaker #8: Just in terms of the capacity expansion, I think that you guys have alluded to your ability to increase utilization. But you also talked about clean rooms.

Uh, I think we are. Um, we have done the hard work ahead of time, uh, and, um, we have capacity to build into, and regarding the exact numbers, I’ll keep that for the Capital Management call in February. But as Rafael discussed, we are already making decisions right now that think about not only '27 and '28, even beyond.

Okay, anything to add? Thank you.

Speaker #1: Tom, do you have a follow-up?

Speaker #7: Just in terms of the capacity expansion, I think that you guys have alluded to your ability to increase utilization, but you also talked about clean rooms.

Speaker #8: Is there a way to think about when you are going to decide to expand your footprint? Just obviously you have plenty of ability that you stated at the last capital management day or at least for some time now.

No, I would just say, uh, at a high level, you can always use the framework we've given you with 1.2 times the growth.

Speaker #7: Is there a way to think about when you are going to decide to expand your footprint? Just obviously your plans already that you stated at the last capital management day, or at least for some time now.

Speaker #8: But the assumption here with inventory where it is, is that you would take up utilization first. Any kind of metric that we should be looking at or market dynamic or revenue targets that could help us just understand when you decide to put more capacity in place versus just kind of turning the key on the existing facilities?

Uh, to calculate capital intensity, and that's not a bad, uh, rule of thumb to use, uh, to, uh, to get a ballpark figure of our capex could go based on your expectations for Topline growth.

Speaker #7: But the assumption here with inventory, where it is, is that you would take up utilization first. Any kind of metric that we should be looking at or market dynamic or revenue targets that could help us just understand when you decide to put more capacity in place versus just kind of turning the key on the existing facilities?

All right, Josh. Thanks for the questions. We'll move on to the next caller.

Speaker #8: Thank you.

Speaker #6: Yeah, I'll just touch the clean room question. And again, we'll give you more color during the 2027 capital management call. But in general, we are good for the next three years, okay?

Our next question comes from the line of Tom Ali with Barclays. Please proceed with your question.

Speaker #7: Thank you.

Occasionally.

Speaker #6: So you know what you can go back to our capital management slides. You can see the facilities between Richardson and Sherman 1 and the shell in Sherman 2.

Speaker #6: So you know what you can go back to our capital management slides. You can see the facilities between Richardson and Sherman one and the shell in Sherman two.

Speaker #6: And Lehigh 1 and 2, it's for us, okay, we are in phase three. Let's modulate, take equipment. That was our vision. We are now executing to it.

Speaker #6: And Lehigh one and two, it's for us, okay, we are in phase three. Let's modulate, take equipment. That was our vision. We are now executing to it.

Speaker #6: Of course, I also think about 29 and beyond. But we can give a little bit more color there. During the capital management call. Thank you.

Will give a little color on the out quarter by segment. Uh, it sounded like you kind of broadly said, you saw strength across the board. I think the question was on personal electronics before, but you answered, you know, we're seeing straight across the board, but it's, it's typical seasonality. But anything that you could offer in terms of vectors of growth, particularly with auto acting a bit better in QT, do you think that continues into Q3 and um, do you think this mentality is kind of just in time to just in case, uh, continues to kind of spur? You know, above seasonal growth in the near term?

Speaker #6: Of course, I also think about 29 and beyond. But we can give a little bit more color there during the capital management call. Thank you.

Speaker #1: Okay, thanks, Tom. Move on to our next caller.

Speaker #4: Thank you. Our next question comes from the line of William Stein with Truist Securities. Please proceed with your question.

Speaker #1: Okay. Thanks, Tom. Move on to our next caller.

Speaker #5: Great. I want to offer my congrats to Rafael and Julie. And I don't think it's been asked, but can you offer us any update on the timing or update on terms or conditions and approvals regarding Silicon Labs and the potential close of that transaction?

Speaker #4: Thank you. Our next question comes from the line of William Stein with Truist Securities. Please proceed with your question.

Yeah, I think you know typically I I don't provide so much color on the future but this time it's it's just easy. It's, it's everywhere. Okay, so I when I look at the demand signal it's just very strong and Broad and now it's we need to execute, right? We inventory Health, we are ramping, our factories, we are going after it and, uh, let's meet again in, October, I tell you how it went, but, uh, the team is executed in Q2 and I expect them to do the same in Q3.

Tom, you have a follow-up.

Speaker #3: Yeah. So regulatory approvals are moving as planned. We still expect to close in the first half of next year. And really no changes on how we're planning for the transaction to be financed.

Speaker #2: Yeah. So regulatory approvals are moving as planned. We still expect to close in the first half of next year. And really no changes on how we're planning for the transaction to be financed.

Speaker #3: Still expect it to fund the transaction with cash on hand and debt.

Just uh, in terms of the, the capacity expansion, I think that you guys have alluded to your ability to increase the utilization but you also talked about clean rooms. Is there a way to think about? When you are going to decide to expand your your footprint, just obviously you have plans already that you stated at the the last Capital minute that they are at least for some time now. But the, the Assumption here with inventory where it is, is that you would take up Mutual

Speaker #1: You have a follow-up, Will?

Speaker #7: Yeah. I'm hoping

Speaker #2: Still expect it to fund the transaction with cash on hand and debt.

Speaker #4: you can talk a bit about backlog and the duration of backlog. I wonder if you're seeing any extension in that that might, for example, result in a change in lead time quotes.

Speaker #1: Do you have a follow-up, Will?

First, are there any kinds of metrics we should be looking at, or market dynamics, or revenue targets that could help us understand when you decide to put more capacity in place versus just turning the key on the existing facilities? Thank you.

Speaker #4: Yeah. I'm hoping you can talk

Speaker #5: a bit about backlog and the duration of backlog. I wonder if you're seeing any extension in that that might, for example, result in a change in lead time quotes.

Speaker #4: Thank you.

Speaker #6: We have seen backlog. First of all, you look at what second quarter did. We did see backlog build throughout the quarter, both in orders that are for immediate shipment, but also for backlog that's further out in time.

Speaker #5: Thank you.

Speaker #6: We have seen backlog, first of all, you look at what, second quarter did? We did see backlog build throughout the quarter, both in orders that are for immediate shipment, but also for backlog that's further out in time.

Speaker #6: We did see that build. And it's reflected in the guide and as you heard, we've talked about what we're seeing. We are seeing strength across our core markets.

Yeah, I just I just the clean room question and again, we'll give you more color during the, the, the 2027 Capital Management call. But in general, we are good for the next 3 years. Okay, so we you know what, we we've you can go back to our Capital Management slides. You can see the the facilities between Richardson and Sherman 1 and the shelling Sherman 2.

Speaker #6: We did see that build. And it's reflected in the guide and as you heard, we've talked about what we're seeing. We are seeing strength across our core markets.

And Lehigh 1 and 2, it's for us. Okay, we are in Phase 3. Let's modulate the equipment—uh, that was our vision.

Speaker #1: With that, we'll move on to our next caller.

Speaker #6: Let me just maybe just on the lead time, let me just add one point over there, Mike. So lead times are still, I think, very competitive.

Speaker #1: With that, we'll move on to our next caller.

Uh we are now executing to it. Uh of course I also think about 29 and Beyond but we can give a little bit more color there there during the Capital Management call.

Speaker #6: Let me just maybe just on the lead time, let me just add one point over there, Mike. So lead times are still, I think, very competitive, but they were below I think we talked about it in the last quarter when one of my fireside chats on a conference.

Speaker #6: But they were below I think we talked about it in the last quarter when one of my fireside chats on a conference. They were below 13 weeks in Q2, but we are seeing a little bit of an uptick there, not dramatic.

Thank you. Okay, thanks, Tom. Moving on to our next caller.

Thank you. Our next question comes from the line of William Stein with Jefferies Securities. Please proceed with your question.

Speaker #6: Maybe a couple of weeks higher. Simply because the demand is growing. And I do, when I talk with customers, I do believe our lead times are the most competitive in the market.

Speaker #6: They were below 13 weeks in Q2, but we are seeing a little bit of an uptick there, not dramatic. Maybe a couple of weeks higher.

Speaker #6: Simply because the demand is growing. And I do, when I talk with customers, I do believe our lead times are the most competitive in the market.

Great. Uh, I want to offer my congrats to Rafael and Julie, and um, I don't think it's been asked, but can you offer us any update on the timing or, uh, update on terms or conditions, uh, and approvals regarding Silicon Labs and the potential close of that transaction?

Speaker #1: All right.

Speaker #4: Great. Thank you.

Speaker #1: We'll move on to our last caller.

Speaker #4: Thank you. Our last question comes from the line of Tore Svanberg with Stifel. Please proceed with your question.

Speaker #1: All right.

Speaker #5: Great. Thank you.

Speaker #1: We'll move on to our last caller.

Speaker #5: Yes. Thank you. And congrats to Rafael and Julie. Maybe on that last point there, Haviv, obviously, you know, this cycle you're very differently prepared than the last cycle.

Speaker #4: Thank you. Our last question comes from the line of Tori Svamberg with Stiefel. Please proceed with your question.

Yeah, so regulatory approvals are moving as planned. We still expect to close in the first half of next year, and really no changes on how we're planning for the transaction to be financed—still expected to fund the transaction with cash on hand and debt.

You have a follow-up. Well,

Speaker #7: Yes. Thank you. And congrats to Rafael and Julie. Maybe on that last point there, Habib, obviously, you know, this cycle you're very differently prepared than the last cycle.

Yeah. Um, I'm hoping you can talk, uh,

Speaker #5: You know, with good capacity, low lead times and so on and so forth. And I know share gains is something that you measure over time, especially in analog.

Speaker #5: But are you starting to see more and more customers come to you, especially in this environment, you know, with those low lead times?

Speaker #7: You know, with good capacity, low lead times and so on and so forth. And I know share gains is something that you measure over time, especially in analog.

A bit about backlog and the duration of backlog. I wonder if you're seeing any extension in that that might, for example, result in a change in lead time quotes. Thank you.

Speaker #7: But you started to see more and more customers come to you, especially in this environment, you know, with those lower lead times?

Speaker #6: Look, as you know, we're sharing this in our market moves move slowly. And this is why we like to measure it over time. But as I gave some examples, I think there was a previous question of immediate solving problems in immediate way.

Speaker #6: I think we many times are the answer. And as you mentioned, in this upcycle, our plan is not to be the problem. We want to be the solution, okay?

Uh, we have seen backlog. First of all, you look at what second quarter did. We did see backlog build throughout the quarter, both in orders that are, you know, for immediate shipment, but also for backlog that's further out in time. We did see that build, um, and it's reflected in the guide. And, as you heard, if you've talked about what we're seeing, you know, we are seeing strengths across, you know, our core markets.

With that, I will move on to our next caller.

Speaker #6: I think we many times are the answer. And as you mentioned, in this upcycle, our plan is not to be the problem. We want to be the solution, okay?

Speaker #6: So in that sense, we are ready for that. I will say that when some of the competition talks about lead times that are 52 weeks away, that's an opportunity for TI because that means that there is a little bit less visibility for customers.

Speaker #6: And sometimes they will start a new design, even on a very complex part. So we are seeing more opportunities coming our way. But we'll have to measure it over time.

Let me just maybe, just on the lead time. Let me just add 1 point over there. Mike, so lead times are still, I think very competitive but they were below. I think we talked about it in the last quarter on 1 of our my um, my uh, as far as I checked on a conference, uh, there will be lower uh 13 weeks uh in Q2, but we are seeing a little bit of an uptick there, not dramatic. Um,

Speaker #6: And sometimes they will start a new design, even on a very complex part. So we are seeing more opportunities coming away. But we'll have to measure it over time.

Speaker #6: As I mentioned, I think we picked some market share last year. We need to let this year play out. And see how we did in 2026.

Speaker #6: But I think this cycle will provide more opportunity. And when we get to the peak, we'll see how we did.

Speaker #6: As I mentioned, I think we picked some market share last year. We need to let this year play out. And see how we did in 2026.

Maybe a couple of weeks higher simply because the demand is growing, and, uh, I do, when I talk with customers, I do believe our lead times are the most competitive in the market.

All right, great. Thank you.

Speaker #1: Tore, do you have a follow-up?

We'll move on to our last caller.

Speaker #6: But I think this cycle will provide more opportunity. And when we get to the peak, we'll see how we did.

Speaker #5: Yes. Thank you, Mike. I wanted to ask a question in the industrial markets. Obviously, very strong. And you talked about all the reasons why and I know sometimes maybe it's a little bit difficult to dissect exactly what's driving the strength.

Thank you. Our last question comes from the line of Tori Vanberg with Stifel. Please proceed with your question.

Speaker #1: Tori, do you have a follow-up?

Speaker #7: Yes. Thank you, Mike. I wanted to ask a question on the industrial markets. Obviously, very strong. And you talked about all the reasons why and I know sometimes maybe it's a little bit difficult to dissect exactly what's driving the strength.

Speaker #5: But you mentioned pricing. You obviously mentioned customer inventory levels. And then there's the indirect impact from AI and so on and so forth. But I'm also wondering for your specific products, is there's also an element of just higher prices here, meaning you have newer products now that perhaps have higher value that carry higher ASPs?

Speaker #7: But you mentioned pricing. You obviously mentioned customer inventory levels. And then there's the indirect impact from AI and so on and so forth. But I'm also wondering for your specific products, is there's also an element of just higher prices here, meaning you have newer products now that perhaps have higher value that carry higher ASPs?

Speaker #5: Because obviously, I think we're all quite surprised about how strong this market continues to be.

Obviously, you know, this cycle, you're very differently prepared than the last cycle, you know, with good capacity, a little lead time, and so on and so forth. And I know share gains is something that you measure over time, especially in analog. But are you starting to see more and more customers come to you, especially in this environment, you know, with those low lead times?

look, uh,

Speaker #1: Yeah. I mean, I'll take that and have you prefer to add. But what we saw in second quarter, and you saw this leading up through first as well, was broad strength across the sector base and the region base.

Speaker #7: Because obviously, I think we're all quite surprised about how strong this market continues to be.

Speaker #1: Yeah. Maybe I'll take that and have you prefer to add. But what we saw in second quarter, and you saw this leading up through first as well, was broad strength across the sector base and the region base.

Speaker #1: I think that to Haviv's point earlier, you had four years of secular content growth that's happened. That has added content to industrial automation. We've seen aerospace and defense grow at higher rates.

As you know, we were sharing this in our market moves—moves slowly. And this is why we like to measure it over time. But as I gave some examples, I think there was a previous question about immediate, you know, solving problems in an immediate way. I think many times we are the answer.

Speaker #1: I think that to Habib's point earlier, you had four years of secular content growth that's happened. That has added content to industrial automation. We've seen aerospace and defense grow at higher rates.

And as you mentioned in this upcycle, our plan is not to be the problem—we want to be the solution. Okay, so in that sense, we are ready for that.

Speaker #1: Energy infrastructure for reasons that were probably adjacent to some of the data center reasonings. Robotics grew at a higher rate as well. But if you look at the entire sector base and industrial, they all the sectors grew both sequentially and year on year.

Speaker #1: Energy infrastructure for reasons probably adjacent to some of the data center reasonings. Robotics grew at a higher rate as well. But if you look at the entire sector base and industrial, they all the sectors grew both sequentially and year on year.

Speaker #1: And every region grew as well. So it's pretty broad. And I would chalk it up more to higher secular content growth than pricing. And as Haviv mentioned, the first half pricing was stable about flat for us.

Speaker #1: And every region grew as well. So it's pretty broad. And I would chalk it up more to higher secular content growth than pricing. And as Habib mentioned, the first half pricing was stable about flat for us.

Speaker #1: If we see that benefit, it would likely be in third and beyond as those conversations happen.

I will say that, um, when some of the competition talks about lead times that are, you know, 52 weeks away, that that's an opportunity for TI because that means that there is a little bit less visibility for customers, and sometimes they will start a new design even on a, on a very complex part. So we are seeing more opportunities coming our way, but we'll have to measure it over time. As I mentioned the, I think we picked some market share last year. Uh, we need to let this year play out and see how we did in 206, but I I think the cycle will provide more opportunity and when we get to the peak, we'll see how we did.

Speaker #6: Yeah. Let me just to Mike's point, I think it was spot on. This is really driven by secular growth. So you can ask, hey, why did we have to wait so long?

To where do you have a follow-up?

Speaker #1: If we see that benefit, it would likely be in third and beyond as those conversations happen.

Speaker #6: It's all about inventory. It's inventory of parts, but it's also inventory of finished goods of the customer. So the customer that I think they've overbuilt during the previous cycle and they have to go through that inventory depletion.

Speaker #6: Yeah. Let me just to Mike's point, I think he was fine on this is really driven by secular growth. So you can ask, hey, why did we have to wait so long?

Speaker #6: Once they are done, what's waiting? New systems. New systems that were designed in the last four or five years. As you know, design cycles in industrial are long.

Speaker #6: And I think that's what we're seeing. We're seeing no more depletion of inventory on top of it. You see new generation of systems with higher secular growth.

Yes, thank you, Mike. Um, I wanted to ask a question on the industrial markets, obviously very strong, and, you know, you talked about all the reasons why, and I know sometimes it's a little bit difficult to dissect exactly what's driving the strength. But, um, you mentioned pricing, you obviously mentioned, you know, customer inventory levels, and then there's the indirect impact from AI and so on and so forth. But I'm also wondering, for your specific products, is there also an element of just higher prices here? Meaning, you know, you have newer products now that perhaps have higher value, that carry higher ASPs, because obviously, you know, I think we're all quite surprised about, you know, how strong these markets continue to be.

Speaker #6: And to me, industrial is not different than automotive. If you look at an end equipment and you look at a generation-to-generation content, the content growth is quite significant.

Speaker #6: And I think that's what we're seeing. We're seeing no more depletion of inventory on top of it. You see new generation of systems with higher secular growth.

Speaker #6: And to me, industrial is not different than automotive. If you look at an end equipment and you look at a generation-to-generation content, the content growth is quite significant.

Speaker #6: I also want to believe, and again, time the results will tell, that we grew share on a larger content opportunity. So let's see how it does.

Speaker #6: But I think that's the reason you see such strong growth in industrial. I expect that to continue.

Speaker #1: Right. Tore, thanks.

Speaker #5: Thank you. Thank you.

Speaker #1: And we'll go ahead and close the call. I'm going to move with Haviv and let him wrap us up.

Speaker #6: But I think that's the reason you see such strong growth in industrial. I expect that to continue.

Speaker #6: Thanks, Mike. Let me wrap up with what we've said previously at our call. We are engineers and technology is the foundation of our company.

Speaker #1: Right. Tori, thanks.

Yeah, maybe I'll take that, and, and have you prefer to add, but I what we saw in second quarter, you know, and you saw this, you know, leading up through first as well was, you know, broad strength across the sector base and, and the region base, you know, I think that, you know, to haves Point earlier you had had 4 years of secular content growth, that's happened. Uh, that has added content to Industrial Automation. We've seen Aerospace and defense grow at higher rates. Um, energy infrastructure for for reasons, that probably adjacent to some of the data center reasoning robotics through it at a higher rate as well. But if you look at the entire sector based Industrial

Speaker #7: Thank you. Thank you.

Speaker #1: And we'll go ahead and close the call. I'm going to move with Habib and let him wrap us up.

Speaker #6: But ultimately, our objective and best metric to measure progress and generate value for owners is the long-term growth of free cash flow per share.

Speaker #6: Thanks, Mike. Let me wrap up with what we've said previously at our call. We are engineers and technology is the foundation of our company.

Speaker #6: But ultimately, our objective and best metric to measure progress and generate value for owners is the long-term growth of free cash flow per share.

They all all the sectors grew both sequentially in year on year, uh, and every region grew as well, so it's pretty broad. I would I would chalk it up more to higher kuehler content growth than than pricing. And as you mentioned, you know, the first half pricing was stable about flat for us. Um if you know, we see that, you know, benefit it would likely be in third and Beyond as as those conversations happen.

Yeah, let me just, uh, to Mike's point, I think it was fun on this is really driven by secular growth. So you cannot say, why did we have to wait so long? It's all about inventory, its inventory of of, of, of, of, of, of part. But it's also inventory of finished goods of the customer. So, the customer that I think they've overbuilt during the previous cycle and they have to go through that inventory. Um, depletion

Once they are done, what's waiting new systems new systems that were designed in the last 4 or 5 years, as you know, design Cycles in in industrial are long. And I think that's what we're seeing. We're seeing no more depression of inventory. On top of it, you see new generation of systems with higher secular growth and, and to me industrial is not different and Automotive. If you look, if you look at an end equipment, and you look at a generation to generation content, the content growth is quite significant. I also want to believe, and again time, you know, the results will will will tell uh, that we grew share on a larger content opportunity. So let's see how it does that. I think that's the reason you see such strong growth in industrial, and I expect that

To continue.

All right, thanks. We'll go ahead and close the call. I'm going to move it to him and let him wrap us up. Thanks, Mike. Let me wrap up with what we've said previously. At our core, we are engineers, and technology is the foundation of our company. But ultimately, our objective and best metric to measure progress and generate value for owners is the long-term growth of free cash flow per share.

Thank you, and have a good evening.

Thank you. This concludes today's conference. You may disconnect your line at this time. Thank you for your participation.

Q2 2026 Texas Instruments Inc Earnings Call

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