Texas Instruments (TXN) delivered a strong performance in the second quarter of 2025, signaling a broad-based recovery across key end markets and underscoring the company’s disciplined approach to capital management. Revenue rose to $4.45 billion, marking a 9% sequential and 16% year-over-year increase, driven primarily by strength in the Analog segment, which contributed $3.45 billion, up 18% year-over-year. Overall net income climbed 15% to $1.30 billion, with earnings per share (EPS) of $1.41, reflecting a 16% year-over-year increase and benefiting from a $0.02 upside not included in original guidance.

Gross profit reached $2.58 billion, representing 58% of revenue, with gross margin improving 110 basis points sequentially. Operating profit surged 25% to $1.56 billion, while operating expenses grew a modest 5% year-over-year to $1.01 billion. On a trailing twelve-month basis, free cash flow rose 18% to $1.76 billion, supported by $6.44 billion in operating cash flow and $4.94 billion in capital expenditures. Texas Instruments returned $6.71 billion to shareholders through $4.90 billion in dividends and $1.81 billion in share repurchases, emphasizing its ongoing commitment to shareholder returns.

Segment results showed balanced contributions across business lines. Embedded Processing revenue increased 10% year-over-year to $679 million, with improved profitability, while the “Other” segment—which includes DLP, calculators, and custom ASICs—grew 14% year-over-year to $317 million.

End-market demand showed strong momentum. The industrial sector led growth, with revenue up in the upper teens year-over-year and mid-teens sequentially, boosted by a standout performance in China, which rose 32% year-over-year and 19% sequentially. Enterprise systems grew ~40% year-over-year, led by data center compute, which surged over 50%. Personal electronics rebounded with ~25% year-over-year growth, and communications equipment soared more than 50%. In contrast, automotive remained subdued, rising mid-single digits year-over-year but declining slightly sequentially, as recovery in this segment continues to lag.

Geographically, China was the primary growth engine, while other regions, including the U.S., Europe, and Japan, showed similar sequential trends, particularly in automotive.

Management noted a cyclical upturn in semiconductors, with four of five key end markets in recovery, though they acknowledged Q2 demand may have been inflated by tariff-driven inventory pull-ins. Texas Instruments is leveraging its U.S.-based manufacturing footprint as a strategic advantage amid geopolitical uncertainties, a move it expects to pay long-term dividends as customers prioritize supply chain security.

The company ended the quarter with $5.4 billion in cash and short-term investments and $14.15 billion in total debt. Inventory stood at $4.8 billion, up slightly from the prior quarter, with days of inventory at 231, down 9 days sequentially. Lead times reached their lowest levels, and customer inventories remained lean.

Looking ahead, Texas Instruments offered Q3 guidance of $4.45 billion to $4.80 billion in revenue and EPS between $1.36 and $1.60, reflecting caution around Q2’s “hot” industrial and China-driven demand, and the potential for normalization. The company also highlighted recent U.S. tax legislation, which increases investment tax credits and allows for full expensing of U.S. R&D and CapEx—expected to increase GAAP tax rates short-term but lower cash tax payments in the years ahead, ultimately boosting free cash flow.

Overall, Texas Instruments delivered a solid quarter characterized by top-line strength, expanding margins, and continued operational discipline. While near-term uncertainty persists, especially in automotive and tariff-sensitive regions, the company is well-positioned with a resilient business model, strong balance sheet, and growing exposure to secular trends in data center, industrial automation, and AI-driven infrastructure.