A：During the conference call, updates included a quick overview of the quarter by Haviva, insight into fourth quarter revenue results and end market trends, an annual summary of revenue by end market, and financial results and guidance for the first quarter of 2026 by Rafael.

A：In the fourth quarter, the industrial market revenue grew 14% year over year and was down mid-single digits sequentially, the automotive market increased upper single digits year on year and was down low single digits sequentially, data center grew around 70% year on year and mid-single digits sequentially, personal electronics declined upper teens year on year and mid-teens sequentially, and communications equipment declined low single digits year on year and mid-teens sequentially.

A：In the fourth quarter, industrial was $5.8 billion (up 12% year on year), automotive was also $5.8 billion (up 6% year on year), data center was $1.5 billion (up 64% year on year), personal electronics was $3.7 billion (up 7% year on year), and communications equipment was about $500 million (up about 20% year on year). For the year 2025, the revenue distribution was as follows: industrial and automotive combined made up about 69% of TI's revenue, with data center being 9%, personal electronics at 21%, and communications equipment at 3%.

A：The new end market segments are data center, which includes sectors related to data center compute, data center networking, and power and thermal management; industrial, automotive, personal electronics, and communications equipment. The change impacts the revenue breakdown by making data center a new major segment, with industrial, automotive, and data center combined making up about 75% of TI's revenue in 2025.

A：The forecasted revenue for the first quarter of 2026 is in the range of $4.32 to $4.40 billion, and the earnings per share are expected to be in the range of $1.22 to $1.48. The effective tax rate for 2026 is expected to be about 13% to 14%.

A：The stronger-than-seasonal first quarter guidance is attributed to several factors: revenue growth of close to 20% in the industrial market, which is expected to continue due to its recovery trajectory; the data center market growing more substantial as a percentage of revenue, with growth expected to persist; and an improving order trend throughout the quarter leading to strong booking. Sequentially improved linear revenue and backlog were also contributing factors.

A：The company expects the revenue growth to continue in the upcoming first quarter based on several factors. Fourth quarter results showed a typical seasonality with revenue coming in as expected, while year-end results indicated a recovery in industrial revenue growing close to 20%. The data center market is also anticipated to grow, continuing a 7-quarter growth streak and contributing to the revenue footprint. Additionally, improving order trends throughout the quarter have led to a stronger booking guide for the first quarter.

A：The company's inventory management positively impacted fourth quarter results and first quarter guidance. Inventory levels were reduced, which is beneficial for serving customers with just-in-time demand, especially in the current business environment. The guidance for the first quarter indicates that revenue will be in a given range, with Opex expected to increase by low single digits, and gross margin will be a reasonable number, adjusted as needed. The specific puts and takes on gross margin in the first quarter are not detailed in the transcript.

A：The company is pleased with the inventory levels and proud of the progress made, especially given the current business environment. The inventory is an asset that allows for customer service, particularly in the context of just-in-time demand. The strategy moving forward is to maintain these levels, as discussed in the fourth quarter, without further specifics provided in the transcript.

A：The personal electronics market grew by about 7% for the full year, but Q4 showed a slight decline below typical seasonality. The business has varied within the sector, with home theater and mobile phone categories performing the best and worst, respectively. Subsidy expirations in China and the market's position in the cycle contribute to the fluctuations. Despite the challenges, personal electronics is expected to continue its recovery trajectory, which is somewhat tougher compared to other end markets.

A：The industrial business is showing signs of picking up order activity, especially among China-based industrial customers. Although there was hesitation and wait-and-see posture from customers regarding manufacturing activity and factory automation in the prior quarter, this trend seems to be reversing. Industrial revenue growth is indicative of underlying secular growth and is expected to establish new highs in the future, supported by a moderate recovery, particularly on the industrial side.

A：The current behavior of orders in industrial sectors is seen to be seasonally picking up in Q4, although the increase is not attributed to any specific causes. There have been some noise in the last several months due to certain issues with suppliers and memory shortages, but the exact reason for the pickup in orders is unclear and needs to be observed.

A：The progress on the Fab 2 construction is on track and ahead of schedule with high yields. The new equipment is capable of higher throughput than originally hoped, which will support customers for the next 5 and 10 years. There is an opportunity to build additional capacity in Sheman 1 with the shell structure, and with strong demand, the company could be well-positioned to support high volume production. Also, the transition from 3 wafers to 5 is going well and is expected to continue providing a tailwind in 2026.

A：The updated outlook for CapEX in 2026 is between $2 to $3 billion, consistent with previous guidance. For depreciation in 2026, the new number is expected to be between $2.2 to $2.4 billion. In 2027, there will be upward pressure on the depreciation number but at a slower rate of increase compared to recent years. The direct funding has not changed and is expected to remain the same.

A：The expectation is that the IC investment tax credit will increase to 35% as of January 1, 2026. Any qualifying CapEX and equipment investments made in 2026 will receive a 30% tax credit.

A：Revenue growth in Q1 is attributed to growing orders across the quarter, with no significant pricing component. There is a seasonal aspect to the revenue growth, but it's not primarily driven by price increases. The industrial market is due for a correction, and the inclusion of data centers, which is now a larger part of the business, is contributing to the revenue growth by influencing the company's numbers positively.

A：The company has not seen any implications from higher memory pricing on demand for consumer electronics, PCs, phones, and automotive. However, there is speculation that when customers encounter issues with memory, they may seek to preserve inventory. There have been instances where customers have made last-minute orders to ensure product availability due to delays in obtaining other necessary parts for their bill of materials. Nonetheless, it's not a case of immediate concern, and the company continues to monitor the situation.

A：The speaker indicates that this year's CapEx is expected to be between 2 to 3 billion, and the maintenance CapEx is characterized as a mid single-digit revenue run rate with no zero margin, implying continuous spending. There's a mention of potential for next year's CapEx to be lower than 5% of revenue, which could put it at around 1 billion dollars, suggesting a possible reduction.

A：The speaker states that the company is pleased with current inventory levels and is well-positioned with capacity. Loadings will be adjusted as needed based on observed demand, and this strategy is expected to continue for the remainder of the year.

A：The speaker notes that the automotive market showed strength in the second half of the year, with a return to pre-pandemic peak levels in Q4. The automotive sector is expected to continue experiencing secular growth, with more content per vehicle and despite a single-digit drop in sales versus the peak automotive period. This growth is anticipated to persist for at least the next five years.

A：The company has been clear that they do not expect pricing to affect the forecasted seasonal margin. They anticipate overall pricing effects to be in the low single digits for 2026, with an exact expectation of a 2-3% decrease. The company plans to respond if pricing changes but currently, there are no plans to adjust prices. The sequential growth in Q1 is not attributed to pricing but is a result of internal factors.

A：The growth prospects for data centers are positive, with ongoing investments in CapEx continuing to be made. There are various opportunities within the data center space, particularly in power and signaling chains, where there is a diversity of parts. TI plays across different segments, including large components like VRM and VCO voltage regulators, as well as a multitude of analog and embedded parts.

A：TI has invested in technology to support higher power calls, with work being done in Sherman, Texas, where the BCD process is productive and sampling is in progress. This technology is expected to serve TI well in the data center market and allow the company to play across different sockets as long as CapEx continues in the market.

A：The semiconductor industry outlook is positive, with secular growth anticipated across several sectors such as automotive and industrial, which are seeing more content and investment in data centers. There is a point where the capacity and inventory that have been put in place will serve the industry well, responding to customer needs promptly. There is also optimism about future investments, as equipment is being redesigned with more semiconductors, suggesting a continuing bright outlook.

A：The factors influencing bookings and revenue include the industrial market recovery, strength in the data center end market, and the trend of increased semiconductor content in equipment. These factors, along with others, are reflected in the company's guidance for the upcoming periods.

A：Customers are placing orders slightly further into the future due to the ability to change their demand within the quarter. This is supported by customer-friendly terms that allow for real-time demand visibility and increased customer support. Despite this, lead times remain very competitive and inventory levels enable the company to support customer needs.

A：The company has the flexibility to adjust factory loadings based on demand, as it did in the third quarter. However, there is no disclosure being made at this time regarding any significant changes in factory loadings from the levels in the fourth quarter. The company maintains the ability to make adjustments as necessary due to the flexibility in its manufacturing process.

A：Revenue performance in China for the automotive sector is typically lower in Q1 due to Chinese New Year. However, the backlog from the automotive sector has been pretty even across geographies. Sequentially, China's revenue was about the same as the top level, down about 7% year-on-year in the fourth quarter, and did not significantly differ from the overall top level results.

A：TI's strategy for managing capacity and inventory involves investing in these areas over the past few years to be ready for the current market environment. With real-time demand coming in during the fourth quarter, TI was able to support it. There is also a sign of strengthening in orders in the first quarter. TI has the capability to adjust its loading and inventory levels as needed to respond to market changes. As a result, TI is well-prepared for whatever the market presents in 2023.