Texas Instruments Inc
Management Discussion analysis.

Interest and debt expense of $543 million increased $35 million due to the issuance of additional long-term debt. See Note 8 to the financial statements. Our provision for income taxes was $709 million compared with $654 million. This increase was primarily due to changes in the effect of U. S. tax benefits, including the effect of OBBBA, and higher income before income taxes, partially offset by higher discrete tax benefits of $37 million, primarily related to our non-U. S. operations. Our effective tax rate, which includes discrete tax items, was 12.4% in 2025 compared with 12.0% in 2024. See Note 4 to the financial statements for a reconciliation of the U. S. statutory corporate tax rate to our effective tax rate.

Embedded Processing (includes microcontrollers and processors) 2025 2024 Change ─────────────────────────────────────────────────────────────────────────────────────── Revenue $ 2,697 $ 2,533 6 Operating profit 304 352 (14) Operating profit % of revenue 11.3 13.9 Embedded Processing revenue increased due to higher demand, which was impacted by the macroeconomic factors discussed above. Operating profit decreased primarily due to higher manufacturing costs and operating expenses, partially offset by higher revenue.

*Includes Restructuring charges/other Other revenue increased $32 million, and operating profit decreased $198 million. Financial condition At the end of 2025, total cash (cash and cash equivalents plus short-term investments) was $4.88 billion, a decrease of $2.70 billion from the end of 2024. Accounts receivable were $1.96 billion, an increase of $244 million compared with the end of 2024. Days sales outstanding at the end of 2025 were 40 compared with 39 at the end of 2024. Inventory was $4.80 billion, an increase of $277 million from the end of 2024. Days of inventory at the end of 2025 were 222 compared with 241 at the end of 2024, which reflects the continued execution of our inventory strategy.

Liquidity and capital resources Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and access to debt markets. We also have a variable-rate, revolving credit facility. As of December 31, 2025, our credit facility was undrawn, and we had no commercial paper outstanding. Cash flows from operating activities for 2025 were $7.15 billion, an increase of $835 million primarily due to higher net income and non-cash items, partially offset by higher cash used for working capital. Cash flows from operating activities for 2025 and 2024 include cash benefits of $335 million and $588 million, respectively, from the CHIPS Act ITC used to reduce income taxes payable. Investing activities for 2025 used $1.44 billion compared with $3.20 billion in 2024. Capital expenditures were $4.55 billion compared with $4.82 billion in 2024 and were primarily for semiconductor manufacturing equipment and facilities in both periods. In 2025, we received proceeds of $335 million from CHIPS Act incentives, including $75 million in direct funding. Short-term investments provided cash proceeds of $2.78 billion in 2025 compared with $1.47 billion in 2024. We are nearing the end of our six-year elevated capital expenditures cycle, and consistent with our capital management strategy, we are expecting to spend about $2 billion to $3 billion in 2026. Beyond 2026, capital expenditures will be dependent on revenue and growth expectations. We expect to continue benefiting from the CHIPS Act, including the 35% ITC on qualifying manufacturing investments for assets placed in service after December 31, 2025, and direct funding of up to $1.6 billion for our three large-scale 300mm wafer fabs located in Sherman, Texas, and Lehi, Utah. Financing activities for 2025 used $5.69 billion compared with $2.88 billion in 2024. In 2025, we received net proceeds of $1.20 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $750 million. In 2024, we received net proceeds of $2.98 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $600 million. Dividends paid in 2025 were $5.00 billion compared with $4.80 billion in 2024, reflecting an increased dividend rate. We used $1.48 billion to repurchase 8.5 million shares of our common stock compared with $929 million used in 2024 to repurchase 4.7 million shares. Employee exercises of stock options provided cash proceeds of $400 million compared with $517 million in 2024. We had $3.23 billion of cash and cash equivalents and $1.66 billion of short-term investments as of December 31, 2025. We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures, dividend and debt-related payments and other business requirements for at least the next 12 months. As announced on February 4, 2026, we have entered into a definitive agreement to acquire Silicon Labs for $231.00 per share in an all-cash transaction, representing a total enterprise value of approximately $7.5 billion. Under the terms of the agreement, Silicon Labs stockholders will receive $231.00 in cash for each share of Silicon Labs common stock they hold at the time of closing, which is currently expected to close in the first half of 2027, subject to receipt of regulatory approvals and other customary closing conditions, including approval by Silicon Labs stockholders. We expect to fund the transaction with a combination of cash on hand and debt financing to be arranged prior to closing.

Reconciliation to the most directly comparable GAAP measures is provided in the table below. For Years Ended December 31, 2025 2024 ───────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────── Cash flow from operations (GAAP) * $ 7,153 $ 6,318 Capital expenditures (4,550) (4,820) Proceeds from CHIPS Act incentives 335 - Free cash flow (non-GAAP) $ 2,938 $ 1,498 Revenue $ 17,682 $ 15,641 Cash flow from operations as a percentage of revenue (GAAP) 40.5 40.4 Free cash flow as a percentage of revenue (non-GAAP) 16.6 9.6 * Includes cash benefits of $335 million and $588 million from the CHIPS Act ITC used to reduce income taxes payable for 2025 and 2024, respectively.

•When we discuss our results: ◦ Unless otherwise noted, changes in our revenue are attributable to changes in customer demand, which are evidenced by fluctuations in shipment volumes. ◦ New products do not tend to have a significant impact on our revenue in any given period because we sell such a large number of products. ◦ From time to time, our revenue and gross profit are affected by changes in demand for higher-priced or lower-priced products, which we refer to as changes in the "mix" of products shipped. ◦ Because we own much of our manufacturing capacity, a significant portion of our operating cost is fixed. When factory loadings decrease, our fixed costs are spread over reduced output and, absent other circumstances, our profit margins decrease. Conversely, as factory loadings increase, our fixed costs are spread over increased output and, absent other circumstances, our profit margins increase. ◦ Our LFAB facility, which primarily supports our Embedded Processing business, was purchased as an operating fab and is in the early stages of ramping, so we expect factory loadings to increase over time. Until LFAB ramps, we expect Embedded to carry manufacturing costs that disproportionately affect Embedded Processing operating profit as compared to Analog.

Net income was $5.00 billion compared with $4.80 billion. EPS was $5.45 compared with $5.20. Segment results - 2025 compared with 2024 Analog (includes Power and Signal Chain product lines) 2025 2024 Change ───────────────────────────────────────────────────────────────────────────────────────── Revenue $ 14,006 $ 12,161 15 Operating profit 5,412 4,608 17 Operating profit % of revenue 38.6 37.9 Analog revenue increased in both product lines about evenly due to higher demand, which was impacted by the macroeconomic factors discussed above. Operating profit increased primarily due to higher revenue and associated gross profit, partially offset by higher operating expenses.

Non-GAAP financial information This MD& A includes references to free cash flow and ratios based on that measure. These are financial measures that were not prepared in accordance with generally accepted accounting principles in the United States (GAAP). Free cash flow is calculated as cash flows from operating activities (also referred to as cash flow from operations) less capital expenditures, plus proceeds from CHIPS Act incentives. We believe that free cash flow and the associated ratios provide insight into our liquidity, our cash-generating capability and the amount of cash potentially available to return to shareholders, as well as insight into our financial performance. These non-GAAP measures are supplemental to the comparable GAAP measures.

(a) A strong foundation of manufacturing and technology that provides lower costs and greater control of our supply chain. (b) A broad portfolio of analog and embedded processing products that offers more opportunity per customer and more value for our investments. (c) The reach of our market channels that gives access to more customers and more of their design projects, leading to better insight and knowledge of customer needs and the opportunity to sell more of our products into each design.

• For an explanation of free cash flow, see the Non-GAAP financial information section. • All dollar amounts in the tables are stated in millions of U. S. dollars. Our results of operations provides details of our financial results for 2025 and 2024 and year-to-year comparisons between 2025 and 2024. Discussion of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in " Management's discussion and analysis of financial condition and results of operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Performance summary Our strategic focus is on analog and embedded processing products. We sell our products into the following markets: industrial, automotive, data center, personal electronics and communications equipment. While all of these markets represent good opportunities, we place additional strategic emphasis on designing and selling our products into the industrial, automotive and data center markets, which we believe represent the best long-term growth opportunities. Our focus on analog and embedded processing allows us to generate strong cash flow from operations. Our cash flow from operations of $7.15 billion underscored the strength of our business model, the quality of our product portfolio and the benefit of 300mm production. Free cash flow was $2.94 billion and represented 16.6% of revenue. During 2025, we invested $3.94 billion in R& D and SG& A, invested $4.55 billion in capital expenditures and returned $6.48 billion to shareholders.

Net income was $4.80 billion compared with $6.51 billion. EPS was $5.20 compared with $7.07. Segment results - 2024 compared with 2023 Analog (includes Power and Signal Chain product lines) 2024 2023 Change ───────────────────────────────────────────────────────────────────────────────────────── Revenue $ 12,161 $ 13,040 (7) Operating profit 4,608 5,821 (21) Operating profit % of revenue 37.9 44.6 Analog revenue decreased due to the mix of products shipped in both product lines, led by Signal Chain. Operating profit decreased primarily due to lower revenue and higher manufacturing costs.

Embedded Processing (includes microcontrollers and processors) 2023 2022 Change ─────────────────────────────────────────────────────────────────────────────────────── Revenue $ 3,368 $ 3,261 3 Operating profit 1,008 1,253 (20) Operating profit % of revenue 29.9 38.4 Embedded Processing revenue increased due to the mix of products shipped. Operating profit decreased primarily due to higher manufacturing costs, partially offset by higher revenue.

Details of financial results - 2023 compared with 2022 Revenue of $17.52 billion decreased $2.51 billion, or 12.5%, primarily due to lower revenue from Analog, partially offset by higher revenue from Embedded Processing. Gross profit of $11.02 billion was down $2.75 billion, or 20.0%, primarily due to lower revenue and, to a lesser extent, higher manufacturing costs associated with planned capacity expansion and reduced factory loadings. As a percentage of revenue, gross profit decreased to 62.9% from 68.8%. Operating expenses (R& D and SG& A) were $3.69 billion compared with $3.37 billion. This increase was primarily due to higher employee-related costs as we invest to strengthen our competitive advantages. Restructuring charges/other in the year-ago period was $257 million due to preproduction costs at our Lehi, Utah, manufacturing facility. These costs transitioned primarily to cost of revenue after production began in December 2022. See Note 11 to the financial statements.

Operating profit was $5.47 billion, or 34.9% of revenue, compared with $7.33 billion, or 41.8% of revenue. Other income and expense (OI& E) was $496 million of income compared with $440 million of income, due to interest income. See Note 11 to the financial statements.

Interest and debt expense of $508 million increased $155 million due to the issuance of additional long-term debt. See Note 8 to the financial statements. Our provision for income taxes was $654 million compared with $908 million. This decrease was due to lower income before income taxes. Our effective tax rate, which includes discrete tax items, was 12.0% in 2024 compared with 12.2% in 2023. See Note 4 to the financial statements for a reconciliation of the U. S. statutory corporate tax rate to our effective tax rate.

*Includes restructuring charges/other Other revenue decreased $164 million, and operating profit increased $3 million. Financial condition At the end of 2024, total cash (cash and cash equivalents plus short-term investments) was $7.58 billion, a decrease of $995 million from the end of 2023. Accounts receivable were $1.72 billion, a decrease of $68 million compared with the end of 2023. Days sales outstanding at the end of 2024 and 2023 were 39. Inventory was $4.53 billion, an increase of $528 million from the end of 2023. Days of inventory at the end of 2024 were 241 compared with 219 at the end of 2023.

Liquidity and capital resources Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and access to debt markets. We also have a variable-rate, revolving credit facility. As of December 31, 2024, our credit facility was undrawn, and we had no commercial paper outstanding. Cash flows from operating activities for 2024 were $6.32 billion, a decrease of $102 million due to lower net income, partially offset by lower cash used for working capital. Cash flows from operating activities for 2024 include a cash benefit of $588 million from the U. S. CHIPS and Science Act (CHIPS Act) investment tax credit (ITC) used to reduce income taxes payable. Investing activities for 2024 used $3.20 billion compared with $4.36 billion in 2023. Capital expenditures were $4.82 billion compared with $5.07 billion in 2023 and were primarily for semiconductor manufacturing equipment and facilities in both periods. Short-term investments provided cash proceeds of $1.47 billion in 2024 compared with $682 million in 2023. As we continue to invest to strengthen our competitive advantages in manufacturing and technology, as part of our long-term capacity planning, our capital expenditures are expected to remain at elevated levels. We expect to receive between $7.5 billion to $9.5 billion through 2034 from the CHIPS Act. This includes the ITC for qualified U. S. manufacturing investments and direct funding of up to $1.6 billion for our three large-scale 300mm wafer fabs currently under construction in Sherman, Texas, and Lehi, Utah. We received $588 million in associated cash benefit from qualifying capital expenditures in 2024. Financing activities for 2024 used $2.88 billion compared with $2.14 billion in 2023. In 2024, we received net proceeds of $2.98 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $600 million. In 2023, we received net proceeds of $3.00 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $500 million. Dividends paid in 2024 were $4.80 billion compared with $4.56 billion in 2023, reflecting an increased dividend rate. We used $929 million to repurchase 4.7 million shares of our common stock compared with $293 million used in 2023 to repurchase 1.8 million shares. Employee exercises of stock options provided cash proceeds of $517 million compared with $263 million in 2023. We had $3.20 billion of cash and cash equivalents and $4.38 billion of short-term investments as of December 31, 2024. We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures, dividend and debt-related payments and other business requirements for at least the next 12 months.

Reconciliation to the most directly comparable GAAP measures is provided in the table below. For Years Ended December 31, 2024 2023 ───────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────── Cash flow from operations (GAAP) * $ 6,318 $ 6,420 Capital expenditures (4,820) (5,071) Free cash flow (non-GAAP) $ 1,498 $ 1,349 Revenue $ 15,641 $ 17,519 Cash flow from operations as a percentage of revenue (GAAP) 40.4 36.6 Free cash flow as a percentage of revenue (non-GAAP) 9.6 7.7

Income taxes In determining net income for financial statement purposes, we must make certain estimates and judgments in the calculation of tax provisions and the resultant tax liabilities that arise from temporary differences between the tax and financial statement recognition of revenue and expense. In the ordinary course of global business, there may be many transactions and calculations where the ultimate tax outcome is uncertain. The evaluation of tax liabilities involves dealing with uncertainties in the interpretation and application of complex tax laws, and significant judgment is necessary to determine whether, based on the technical merits, a tax position is more likely than not to be sustained. We determine potential liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on an estimate of the ultimate resolution of whether, and the extent to which, additional taxes will be due. Although we believe our analysis of the underlying issues and the associated estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different from what is reflected in the historical income tax provisions and accruals.

(d) Diversity and longevity of our products, markets and customer positions that provide less single point dependency and longer returns on our investments. Together, these competitive advantages help position TI in a unique class of companies capable of generating and returning significant amounts of cash for our owners. We make our investments with an eye towards long-term strengthening and leveraging of these advantages. 2. Discipline in allocating capital to the best opportunities. This spans how we select R& D projects, develop new capabilities, invest in manufacturing capacity or how we think about acquisitions and returning cash to our owners.

• For an explanation of free cash flow, see the Non-GAAP financial information section. • All dollar amounts in the tables are stated in millions of U. S. dollars. Our results of operations provides details of our financial results for 2024 and 2023 and year-to-year comparisons between 2024 and 2023. Discussion of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in " Management's discussion and analysis of financial condition and results of operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Results of operations Our strategic focus is on analog and embedded processing products. We sell our products into six end markets: industrial, automotive, personal electronics, enterprise systems, communications equipment and other. While all of these end markets represent good opportunities, we place additional strategic emphasis on designing and selling our products into the industrial and automotive markets, which we believe represent the best long-term growth opportunities. Our focus on analog and embedded processing allows us to generate strong cash flow from operations. Our cash flow from operations of $6.32 billion underscored the strength of our business model, the quality of our product portfolio and the benefit of 300mm production. Free cash flow was $1.50 billion and represented 9.6% of revenue. During 2024, we invested $3.75 billion in R& D and SG& A, invested $4.82 billion in capital expenditures and returned $5.72 billion to shareholders.

Embedded Processing (includes microcontrollers and processors) 2023 2022 Change ─────────────────────────────────────────────────────────────────────────────────────── Revenue $ 3,368 $ 3,261 3 Operating profit 1,008 1,253 (20) Operating profit % of revenue 29.9 38.4 Embedded Processing revenue increased due to the mix of products shipped. Operating profit decreased primarily due to higher manufacturing costs, partially offset by higher revenue.

Income taxes In determining net income for financial statement purposes, we must make certain estimates and judgments in the calculation of tax provisions and the resultant tax liabilities and in the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement recognition of revenue and expense. In the ordinary course of global business, there may be many transactions and calculations where the ultimate tax outcome is uncertain. The calculation of tax liabilities involves dealing with uncertainties in the interpretation and application of complex tax laws, and significant judgment is necessary to (i) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (ii) measure the amount of tax benefit that qualifies for recognition. We recognize potential liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on an estimate of the ultimate resolution of whether, and the extent to which, additional taxes will be due. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different from what is reflected in the historical income tax provisions and accruals. As part of our financial process, we must assess the likelihood that our deferred tax assets can be recovered. If recovery is not likely, the provision for taxes must be increased by recording a reserve in the form of a valuation allowance for the deferred tax assets that are estimated not to be ultimately recoverable. Our judgment regarding future recoverability of our deferred tax assets may change due to various factors, including changes in U. S. or international tax laws and changes in market conditions and their impact on our assessment of taxable income in future periods. These changes, if any, may require adjustments to the valuation allowances and an accompanying reduction or increase in net income in the period when such determinations are made.

• For an explanation of free cash flow, see the Non-GAAP financial information section. • All dollar amounts in the tables are stated in millions of U. S. dollars. Our results of operations provides details of our financial results for 2022 and 2021 and year-to-year comparisons between 2022 and 2021. Discussion of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in " Management's discussion and analysis of financial condition and results of operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The coronavirus (COVID-19) pandemic and its effects are impacting and will likely continue to impact market conditions and business operations across industries worldwide, including at TI. Therefore, we remain cautious about how the economy might behave for the next few years and continue to monitor potential impact on our operations. After a sustained period of growth, a market correction began in 2022. As a result, demand for our products weakened, and we expect this to continue into 2023. During this time, we will continue to manage our operating plan and expenses with a steady hand as we focus on long-term investments to strengthen our competitive advantages.

Interest and debt expense of $353 million increased $139 million due to the issuance of additional long-term debt. See Note 8 to the financial statements. Our provision for income taxes was $908 million compared with $1.28 billion. This decrease was due to lower income before income taxes. Our effective tax rate, which includes discrete tax items, was 12.2% in 2023 compared with 12.8% in 2022. See Note 4 to the financial statements for a reconciliation of the U. S. statutory corporate tax rate to our effective tax rate.

Net income was $6.51 billion compared with $8.75 billion. EPS was $7.07 compared with $9.41. Segment results - 2023 compared with 2022 Analog (includes Power and Signal Chain product lines) 2023 2022 Change ───────────────────────────────────────────────────────────────────────────────────────── Revenue $ 13,040 $ 15,359 (15) Operating profit 5,821 8,359 (30) Operating profit % of revenue 44.6 54.4

*Includes restructuring charges/other Other revenue decreased $297 million, and operating profit decreased $26 million. Financial condition At the end of 2023, total cash (cash and cash equivalents plus short-term investments) was $8.58 billion, a decrease of $492 million from the end of 2022. Accounts receivable were $1.79 billion, a decrease of $108 million compared with the end of 2022. Days sales outstanding at the end of 2023 were 39 compared with 37 at the end of 2022. Inventory was $4.00 billion, an increase of $1.24 billion from the end of 2022. Days of inventory at the end of 2023 were 219 compared with 157 at the end of 2022.

Liquidity and capital resources Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and access to debt markets. We also have a variable-rate, revolving credit facility. As of December 31, 2023, our credit facility was undrawn, and we had no commercial paper outstanding. Cash flows from operating activities for 2023 were $6.42 billion, a decrease of $2.30 billion due to lower net income and higher cash used for working capital, as we continued to strategically build inventory. Investing activities for 2023 used $4.36 billion compared with $3.58 billion in 2022. Capital expenditures were $5.07 billion compared with $2.80 billion in 2022 and were primarily for semiconductor manufacturing equipment and facilities in both periods. Short-term investments provided cash proceeds of $682 million in 2023 compared with $826 million of cash used in 2022. As we continue to invest to strengthen our competitive advantage in manufacturing and technology as part of our long-term capacity planning, our capital expenditures are expected to continue to be higher than historical levels. In August 2022, the U. S. government enacted the U. S. CHIPS and Science Act, which provides funding for manufacturing grants and research investments and establishes a 25% investment tax credit for certain investments in U. S. semiconductor manufacturing. We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods, and we have submitted applications for the manufacturing grants provided by the legislation. See Note 11 to the financial statements. Financing activities for 2023 used $2.14 billion compared with $6.72 billion in 2022. In 2023, we received net proceeds of $3.00 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $500 million. In 2022, we received net proceeds of $1.49 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $500 million. Dividends paid in 2023 were $4.56 billion compared with $4.30 billion in 2022, reflecting an increased dividend rate. We used $293 million to repurchase 1.8 million shares of our common stock compared with $3.62 billion used in 2022 to repurchase 22.2 million shares. Employee exercises of stock options provided cash proceeds of $263 million compared with $241 million in 2022. We had $2.96 billion of cash and cash equivalents and $5.61 billion of short-term investments as of December 31, 2023. We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures, dividend and debt-related payments and other business requirements for at least the next 12 months.

Reconciliation to the most directly comparable GAAP measures is provided in the table below. For Years Ended December 31, 2023 2022 ───────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────── Cash flow from operations (GAAP) $ 6,420 $ 8,720 Capital expenditures (5,071) (2,797) Free cash flow (non-GAAP) $ 1,349 $ 5,923 Revenue $ 17,519 $ 20,028 Cash flow from operations as a percentage of revenue (GAAP) 36.6 43.5 Free cash flow as a percentage of revenue (non-GAAP) 7.7 29.6

Results of operations Our strategic focus is on analog and embedded processing products. We sell our products into six end markets: industrial, automotive, personal electronics, communications equipment, enterprise systems and other. While all of these end markets represent good opportunities, we place additional strategic emphasis on designing and selling our products into the industrial and automotive markets, which we believe represent the best long-term growth opportunities. Our focus on analog and embedded processing allows us to generate strong cash flow from operations. Our cash flow from operations of $6.42 billion underscored the strength of our business model, the quality of our product portfolio and the benefit of 300mm production. Free cash flow was $1.35 billion and represented 7.7% of revenue. During 2023, we invested $3.69 billion in R& D and SG& A, invested $5.07 billion in capital expenditures and returned $4.85 billion to shareholders.

Operating profit was $7.33 billion, or 41.8% of revenue, compared with $10.14 billion, or 50.6% of revenue. Other income and expense (OI& E) was $440 million of income compared with $106 million of income, due to higher interest income. See Note 11 to the financial statements.

Liquidity and capital resources Our primary source of liquidity is cash flow from operations. Additional sources of liquidity are cash and cash equivalents, short-term investments and access to debt markets. We also have a variable-rate, revolving credit facility. As of December 31, 2022, our credit facility was undrawn, and we had no commercial paper outstanding. Cash flows from operating activities for 2022 were $8.72 billion, a decrease of $36 million due to higher cash used for working capital as we continued to strategically build our inventory, offset by higher net income. Investing activities for 2022 used $3.58 billion compared with $4.10 billion in 2021. Capital expenditures were $2.80 billion compared with $2.46 billion in 2021 and were primarily for semiconductor manufacturing equipment and facilities in both periods, including the purchase of our 300-mm semiconductor factory in Lehi, Utah, during 2021. Short-term investments used cash of $826 million in 2022 compared with $1.65 billion in 2021. As we continue to invest to strengthen our competitive advantage in manufacturing and technology as part of our long-term capacity planning, our capital expenditures are expected to be higher than historical levels. In August 2022, the U. S. government enacted the U. S. CHIPS and Science Act, which provides funding for manufacturing grants and research investments and establishes a 25% investment tax credit for certain investments in U. S. semiconductor manufacturing. We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and to apply for other incentives provided by the legislation. Financing activities for 2022 used $6.72 billion compared with $3.14 billion in 2021. In 2022, we received net proceeds of $1.49 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $500 million. In 2021, we received net proceeds of $1.50 billion from the issuance of fixed-rate, long-term debt and retired maturing debt of $550 million. Dividends paid in 2022 were $4.30 billion compared with $3.89 billion in 2021, reflecting an increased dividend rate, partially offset by fewer shares outstanding. We used $3.62 billion to repurchase 22.2 million shares of our common stock compared with $527 million used in 2021 to repurchase 2.9 million shares. Employee exercises of stock options provided cash proceeds of $241 million compared with $377 million in 2021. We had $3.05 billion of cash and cash equivalents and $6.02 billion of short-term investments as of December 31, 2022. We believe we have the necessary financial resources and operating plans to fund our working capital needs, capital expenditures, dividend and debt-related payments and other business requirements for at least the next 12 months.

• For an explanation of free cash flow, see the Non-GAAP financial information section. • All dollar amounts in the tables are stated in millions of U. S. dollars. Our results of operations provides details of our financial results for 2022 and 2021 and year-to-year comparisons between 2022 and 2021. Discussion of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in " Management's discussion and analysis of financial condition and results of operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The coronavirus (COVID-19) pandemic and its effects are impacting and will likely continue to impact market conditions and business operations across industries worldwide, including at TI. Therefore, we remain cautious about how the economy might behave for the next few years and continue to monitor potential impact on our operations. After a sustained period of growth, a market correction began in 2022. As a result, demand for our products weakened, and we expect this to continue into 2023. During this time, we will continue to manage our operating plan and expenses with a steady hand as we focus on long-term investments to strengthen our competitive advantages.

Details of financial results - 2022 compared with 2021 Revenue of $20.03 billion increased $1.68 billion, or 9.2%, due to higher revenue from Analog and, to a lesser extent, Embedded Processing. This increase benefited from higher prices and the mix of products shipped. Gross profit of $13.77 billion was up $1.40 billion, or 11.3%, primarily due to higher revenue. As a percentage of revenue, gross profit increased to 68.8% from 67.5%.

Reconciliation to the most directly comparable GAAP measures is provided in the table below. For Years Ended December 31, 2021 2020 ───────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────────── Cash flow from operations (GAAP) $ 8,756 $ 6,139 Capital expenditures (2,462) (649) Free cash flow (non-GAAP) $ 6,294 $ 5,490 Revenue $ 18,344 $ 14,461 Cash flow from operations as a percentage of revenue (GAAP) 47.7 42.5 Free cash flow as a percentage of revenue (non-GAAP) 34.3 38.0 This MD& A also includes references to an annual operating tax rate, a non-GAAP term we use to describe the estimated annual effective tax rate, a GAAP measure that by definition does not include discrete tax items. We believe the term annual operating tax rate helps differentiate from the effective tax rate, which includes discrete tax items.

ITEM 7. Management's discussion and analysis of financial condition and results of operations Overview We design and manufacture semiconductors that we sell to electronics designers and manufacturers all over the world. Technology is the foundation of our company, but ultimately, our objective and the best metric for owners to measure our progress is through the growth of free cash flow per share over the long term.

Net income was $8.75 billion compared with $7.77 billion. EPS was $9.41 compared with $8.26. Segment results - 2022 compared with 2021 Analog (includes Power and Signal Chain product lines) 2022 2021 Change ───────────────────────────────────────────────────────────────────────────────────────── Revenue $ 15,359 $ 14,050 9 Operating profit 8,359 7,393 13 Operating profit % of revenue 54.4 52.6

Embedded Processing (includes microcontrollers and processors) 2022 2021 Change ─────────────────────────────────────────────────────────────────────────────────────── Revenue $ 3,261 $ 3,049 7 Operating profit 1,253 1,174 7 Operating profit % of revenue 38.4 38.5

products, calculators and custom ASIC products) 2022 2021 Change ─────────────────────────────────────────────────────────────────────────────────────── Revenue $ 1,408 $ 1,245 13 Operating profit * 528 393 34 Operating profit % of revenue 37.5 31.6

*Includes acquisition charges and restructuring charges/other Other revenue increased $163 million, and operating profit increased $135 million. Financial condition At the end of 2022, total cash (cash and cash equivalents plus short-term investments) was $9.07 billion, a decrease of $672 million from the end of 2021. Accounts receivable were $1.90 billion, an increase of $194 million compared with the end of 2021. Days sales outstanding at the end of 2022 were 37 compared with 32 at the end of 2021. Inventory was $2.76 billion, an increase of $847 million from the end of 2021. Days of inventory at the end of 2022 were 157 compared with 116 at the end of 2021.

Critical accounting estimates Our accounting policies are more fully described in Note 2 of the consolidated financial statements. As disclosed in Note 2, the preparation of consolidated financial statements in conformity with U. S. GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Management believes it is unlikely that applying other estimates and assumptions would have a material impact on the financial statements. We consider the following accounting policies to be those that are most important to the portrayal of our financial condition and that require a higher degree of judgment.

Results of operations Our strategic focus is on analog and embedded processing products. We sell our products into six end markets: industrial, automotive, personal electronics, communications equipment, enterprise systems and other. While all of these end markets represent good opportunities, we place additional strategic emphasis on designing and selling our products into the industrial and automotive markets, which we believe represent the best long-term growth opportunities. Gross margin of 68.8% reflected the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-mm production. Our focus on analog and embedded processing allows us to generate strong cash flow from operations. Our cash flow from operations of $8.72 billion underscored the strength of our business model. Free cash flow was $5.92 billion and represented 29.6% of revenue. During 2022, we invested $3.37 billion in R& D and SG& A, invested $2.80 billion in capital expenditures and returned $7.91 billion to shareholders through dividends and stock repurchases.