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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.

Our strategy to maximize long-term free cash flow per share growth has three elements:

1.A great business model that is focused on analog and embedded processing products and built around four sustainable competitive advantages. The four sustainable competitive advantages are powerful in combination and provide tangible benefits:

(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.

(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.

3.Efficiency, which means constantly striving for more output for every dollar spent.

We believe that our business model with the combined effect of our four competitive advantages sets TI apart from our peers and will for a long time to come. We will invest to strengthen our competitive advantages, be disciplined in capital allocation and stay diligent in our pursuit of efficiencies. Finally, we will remain focused on the belief that long-term growth of free cash flow per share is the ultimate measure to generate value.

For more information about market and business characteristics, see the Business discussion in Item 1 of this Form10-K.

Results of operations

Management’s discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the financial statements and the related notes that appear elsewhere in this document. In the following discussion of our results of operations:

•Our segments represent groups of similar products that are combined on the basis of similar design and development requirements, product characteristics, manufacturing processes and distribution channels, and how management allocates resources and measures results. See Note 1 to the financial statements for more information regarding our segments.

•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.

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◦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.

•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.

Macroeconomic factors

In 2025, the overall analog and embedded semiconductor market recovery continued, though at a slower pace than prior upturns, likely related to broader macroeconomic dynamics and overall uncertainty. At the same time, global semiconductor shipments remain at levels below the prior peak. In addition, growth of semiconductor content in electronics has continued to drive demand for our products, particularly in the automotive, industrial and data center end markets, and we believe we are well-positioned with inventory and capacity to meet immediate customer demand.

U.S. legislative update

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (OBBBA). The OBBBA provides changes to U.S. federal tax law, including expensing of U.S. research expenditures and eligible capital expenditures, increasing the U.S. CHIPS and Science Act (CHIPS Act) investment tax credit (ITC) and changing other tax provisions. The effect of the new law resulted in a higher effective tax rate in 2025. For 2026 and beyond, we expect the effective tax rate and tax-related cash payments to be lower than they would have been under prior tax law.

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Details of financial results – 2025 compared with 2024

Revenue of $17.68 billion increased $2.04 billion, or 13.0%, due to higher revenue from increased demand in our Analog segment and, to a lesser extent, in our Embedded Processing segment, which were both impacted by the macroeconomic factors discussed above.

Gross profit of $10.08 billion was up $989 million, or 10.9%, due to higher revenue. Our gross profit was also impacted by higher manufacturing costs associated with our planned capacity expansions, partially offset by reduced costs related to increased factory loadings. As a percentage of revenue, gross profit decreased to 57.0% from 58.1%.

Operating expenses (R&D and SG&A) were $3.94 billion compared with $3.75 billion.

Restructuring charges/other was $117 million due to efforts to drive operational efficiencies to support our long-term strategy, including the planned closures of our two remaining factories with 150mm production, as well as a non-cash goodwill impairment related to our custom ASIC products. During 2024, we recognized a credit of $124 million primarily due to a gain on the sale of a property. See Note 11 to the financial statements.

Operating profit was $6.02 billion, or 34.1% of revenue, compared with $5.47 billion, or 34.9% of revenue. This increase was primarily due to higher revenue and associated gross profit, partially offset by higher operating expenses.

Other income and expense (OI&E) was $230 million of income compared with $496 million of income. This decrease was due to lower interest income. See Note 11 to the financial statements.

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.

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)

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.

Embedded Processing (includes microcontrollers and processors)

Operating profit % of revenue 11.3 % 13.9 %

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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.

Other (includes DLP® products, calculators and custom ASIC products)

Operating profit % of revenue 31.4 % 53.3 %

*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.

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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.

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.

Reconciliation to the most directly comparable GAAP measures is provided in the table below.

For Years Ended December 31,

Cash flow from operations (GAAP) * $ 7,153 $ 6,318

Proceeds from CHIPS Act incentives 335 —

Free cash flow (non-GAAP) $ 2,938 $ 1,498

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.

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.

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.

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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.

Commitments and contingencies

See Note 10 to the financial statements for a discussion of our commitments and contingencies.

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ITEM 7A. Quantitative and qualitative disclosures about market risk

Foreign exchange risk

The U.S. dollar is our functional currency for financial reporting. Our non-U.S. entities own assets or liabilities denominated in U.S. dollars or other currencies, and exchange rate fluctuations in those jurisdictions may impact our effective tax rate.

Our balance sheet also reflects amounts remeasured from non-U.S. dollar currencies. Because most of the aggregate non-U.S. dollar balance sheet exposure is hedged by forward currency exchange contracts, which are based on year-end 2025 balances and currency exchange rates, a hypothetical 10% plus or minus fluctuation in non-U.S. currency exchange rates relative to the U.S. dollar would result in a pretax currency exchange gain or loss of approximately $5 million.

We use these forward currency exchange contracts to reduce the earnings impact that exchange rate fluctuations may have on our non-U.S. dollar net balance sheet exposures. As of December 31, 2025, we had forward currency exchange contracts outstanding with a notional value of $675 million to hedge net balance sheet exposures (including $174 million to sell Malaysian ringgit, $169 million to buy Indian rupee and $107 million to sell British pounds). Similar hedging activities existed at year-end 2024.

Interest rate risk

We have the following potential exposure to changes in interest rates: (i) the effect of changes in interest rates on the fair value of our investments in cash equivalents and short-term investments, which could produce a gain or a loss; and (ii) the effect of changes in interest rates on the fair value of our debt.

As of December 31, 2025, a hypothetical 100 basis point increase in interest rates would decrease the fair value of our investments in cash equivalents and short-term investments by about $11 million and decrease the fair value of our long-term debt by $969 million. Because interest rates on our long-term debt are fixed, changes in interest rates would not affect the cash flows associated with long-term debt.

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ITEM 8. Financial statements and supplementary data

List of financial statements:

•Income for each of the three years in the period ended December 31, 2025.

•Comprehensive income for each of the three years in the period ended December 31, 2025.

•Balance sheets as of December 31, 2025 and 2024.

•Cash flows for each of the three years in the period ended December 31, 2025.

•Stockholders’ equity for each of the three years in the period ended December 31, 2025.

•Reports of independent registered public accounting firm (PCAOB ID: 42).

Schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements or the notes thereto.

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Consolidated Statements of Income For Years Ended December 31,

Restructuring charges/other 117 (124) —

Other income (expense), net (OI&E) 230 496 440

Earnings per common share (EPS):

Average shares outstanding:

Income allocated to RSUs (28) (24) (33)

Income allocated to common stock for diluted EPS $ 4,973 $ 4,775 $ 6,477

See accompanying notes.

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Consolidated Statements of Comprehensive Income For Years Ended December 31,

Changes in other comprehensive income (loss), net of tax

Net actuarial losses of defined benefit plans:

Recognized within net income 14 10 15

Prior service cost (credit) of defined benefit plans:

Adjustments (18) — —

Recognized within net income 1 1 1

Available-for-sale investments and other:

Adjustments (1) 1 6

Other comprehensive income (loss) 55 65 49

See accompanying notes.

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Consolidated Balance Sheets December 31,

(In millions, except par value) 2025 2024

Assets

Current assets:

Cash and cash equivalents $ 3,225 $ 3,200

Accounts receivable, net of allowances of ($22) and ($21) 1,963 1,719

Prepaid expenses and other current assets 2,102 1,200

Property, plant and equipment at cost 17,682 15,254

Capitalized software licenses 238 257

Overfunded retirement plans 324 233

Liabilities and stockholders’ equity

Current liabilities:

Current portion of long-term debt $ 500 $ 750

Income taxes payable 67 159

Accrued expenses and other liabilities 1,007 1,075

Underfunded retirement plans 124 110

Deferred tax liabilities 66 53

Stockholders’ equity:

Preferred stock, $25 par value. Shares authorized – 10; none issued — —

Treasury common stock at cost

Accumulated other comprehensive income (loss), net of taxes (AOCI) (85) (140)

Total liabilities and stockholders’ equity $ 34,585 $ 35,509

See accompanying notes.

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Consolidated Statements of Cash Flows For Years Ended December 31,

Cash flows from operating activities

Adjustments to net income:

Amortization of capitalized software 81 72 63

(Gains) losses on sales of assets 2 (127) —

Increase (decrease) from changes in:

Prepaid expenses and other current assets 10 7 46

Accounts payable and accrued expenses 77 125 (33)

Accrued compensation (28) (12) 29

Changes in funded status of retirement plans (7) 33 45

Cash flows from investing activities

Proceeds from U.S. CHIPS and Science Act (CHIPS Act) incentives 335 — —

Proceeds from asset sales 1 195 3

Cash flows from financing activities

Proceeds from common stock transactions 400 517 263

Net change in cash and cash equivalents 25 236 (86)

Cash and cash equivalents at beginning of period 3,200 2,964 3,050

Cash and cash equivalents at end of period $ 3,225 $ 3,200 $ 2,964

Supplemental cash flow information

Investment tax credit (ITC) used to reduce income taxes payable $ 335 $ 588 $ —

Proceeds from CHIPS Act incentives 335 — —

Total cash benefit related to the CHIPS Act $ 670 $ 588 $ —

See accompanying notes.

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(In millions, except per-share amounts)

Net income — — 6,510 — —

Dividends declared and paid ($5.02 per share) — — (4,557) — —

Common stock issued for stock-based awards — 50 — 213 —

Stock repurchases — — — (283) —

Stock compensation — 362 — — —

Other comprehensive income (loss), net of taxes — — — — 49

Dividend equivalents on RSUs — — (23) — —

Other — (1) — — —

Net income — — 4,799 — —

Dividends declared and paid ($5.26 per share) — — (4,795) — —

Common stock issued for stock-based awards — 188 — 329 —

Stock repurchases — — — (940) —

Stock compensation — 387 — — —

Other comprehensive income (loss), net of taxes — — — — 65

Dividend equivalents on RSUs — — (25) — —

Other — (2) — — —

Net income — — 5,001 — —

Dividends declared and paid ($5.50 per share) — — (4,999) — —

Common stock issued for stock-based awards — 161 — 239 —

Stock repurchases — — — (1,474) —

Stock compensation — 419 — — —

Other comprehensive income (loss), net of taxes — — — — 55

Dividend equivalents on RSUs — — (28) — —

Other — (4) — — —

See accompanying notes.

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Notes to financial statements

1. Description of business, including segment and geographic area information

We design and manufacture semiconductors that we sell to electronics designers and manufacturers all over the world. We have two reportable segments, Analog and Embedded Processing, each of which represents groups of products that have similar design and development requirements, product characteristics and manufacturing processes. Our segments reflect how our chief operating decision maker (CODM), which is our chief executive officer, allocates resources and measures results.

•Analog semiconductors change real-world signals, such as sound, temperature, pressure or light, by conditioning them, amplifying them and often converting them to a stream of digital data that can be processed by other semiconductors, such as embedded processors. Analog semiconductors are also used to manage power in all electronic equipment by converting, distributing, storing, discharging, isolating and measuring electrical energy, whether the equipment is plugged into a wall or using a battery. Our Analog segment consists of two major product lines: Power and Signal Chain.

•Embedded Processing products are the digital “brains” of many types of electronic equipment. They are designed to handle specific tasks and can be optimized for various combinations of performance, power and cost, depending on the application.

We report the results of our remaining business activities in Other. Other includes operating segments that do not meet the quantitative thresholds for individually reportable segments and cannot be aggregated with other operating segments. Other includes DLP® products, calculators and custom ASIC products.

In Other, we also include items that are not used in evaluating the results of or in allocating resources to our segments. Examples of these items include acquisition, integration and restructuring charges (see Note 11); and certain corporate-level items, such as litigation expenses, environmental costs, insurance settlements, and gains and losses from other activities, including asset dispositions. We allocate the remainder of our expenses associated with corporate activities to our operating segments based on specific methodologies, such as percentage of operating expenses or headcount.

Costs incurred by our centralized manufacturing and support organizations, including depreciation, are charged to the operating segments, including those in Other, on a per-unit basis. Consequently, depreciation expense is not an independently identifiable component within the segments’ results and, therefore, is not provided.

With the exception of goodwill, we do not identify or allocate assets by operating segment, nor does the CODM evaluate operating segments using discrete asset information. We have no material intersegment revenue. The accounting policies of the segments are consistent with those described in the significant accounting policies and practices.

The CODM assesses the performance of our segments and decides how to allocate resources based on each segment’s revenue growth, gross margin and operating profit. The CODM utilizes these metrics by comparing budget versus actual results as well as benchmarking to our competitors.

Segment information

For Year Ended December 31, 2025

Analog Embedded Processing Other Total

Restructuring charges/other — — 117 117

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For Year Ended December 31, 2024

Analog Embedded Processing Other Total

Restructuring charges/other — — (124) (124)

For Year Ended December 31, 2023

Analog Embedded Processing Other Total

Restructuring charges/other — — — —

Geographic area information

Our estimate for revenue based on the geographic location of our end customers’ headquarters, which represents where critical decisions are made, is as follows:

For Years Ended December 31,

Revenue:

(a)Revenue from end customers headquartered in Germany was 10%, 11% and 13% of total revenue in 2025, 2024 and 2023, respectively.

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Property, plant and equipment by geographic area, based on physical location:

December 31,

Property, plant and equipment:

Europe, Middle East and Africa 71 74

Total property, plant and equipment $ 12,320 $ 11,347

(a)Property, plant and equipment at our sites in Malaysia was $1.40 billionand$931 million as of December 31, 2025 and 2024, respectively.

Major customer

One of our end customers accounted for 12% of revenue in both 2025 and 2024, recognized primarily in our Analog segment. No end customer accounted for 10% or more of revenue in 2023.

2. Basis of presentation and significant accounting policies and practices

Basis of presentation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The basis of these financial statements is comparable for all periods presented herein.

The consolidated financial statements include the accounts of all subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All dollar and share amounts in the financial statements and tables in these notes, except per-share amounts, are presented in millions unless otherwise indicated. We have reclassified certain amounts in the prior periods’ financial statements to conform to the 2025 presentation.

The preparation of financial statements requires the use of estimates from which final results may vary.

Significant accounting policies and practices

Revenue recognition

We generate revenue primarily from the sale of semiconductor products, either directly to a customer or to a distributor, and recognize revenue when control is transferred. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where required, when the customer has accepted the products. This transfer generally occurs at a point in time upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Payment for sales to customers and distributors is generally due on our standard commercial terms. For sales to distributors, payment is not contingent upon resale of the products.

Revenue from sales of our products that are subject to inventory consignment agreements is recognized at a point in time, when the customer or distributor pulls product from consignment inventory that we store at designated locations. Delivery and transfer of control occur at that point, when title and risk of loss transfers and the customer or distributor becomes obligated to pay for the products pulled from inventory. Until the products are pulled for use or sale by the customer or distributor, we retain control over the products’ disposition, including the right to pull back or relocate the products.

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The revenue recognized is adjusted based on allowances, which are prepared on a portfolio basis using a most likely amount methodology based on analysis of historical data and contractual terms. These allowances, which are not material, generally include adjustments for pricing arrangements, product returns andincentives. We recognize shipping fees received from customers, if any, in revenue. We include the related shipping and handling costs in cost of revenue. The majority of our customers pay these fees directly to third parties.

Advertising costs

We expense advertising and other promotional costs as incurred. This expense was $29 million, $30 million and $28 million in 2025, 2024 and 2023, respectively.

Income taxes

We account for income taxes using an asset and liability approach. We record the amount of taxes payable or refundable for the current year and the deferred tax assets and liabilities for future tax consequences related to events that have been recognized in the financial statements or tax returns. We record a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized.

Other assessed taxes

Some transactions require us to collect taxes such as sales, value-added and excise taxes from our customers. These transactions are presented in our Consolidated Statements of Income on a net (excluded from revenue) basis.

Leases

We determine if an arrangement is a lease at inception. Leases are included in other long-term assets, accrued expenses and other liabilities, and other long-term liabilities on our Consolidated Balance Sheets.

Lease assets represent our right to use underlying assets for the lease term, and lease liabilities represent our obligations to make lease payments over the lease term. On the commencement date, leases are evaluated for classification, and assets and liabilities are recognized based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. Operating lease expense is generally recognized on a straight-line basis over the lease term. Our lease values include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

We have agreements with lease and non-lease components, which are accounted for as a single lease component. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet.

Earnings per share (EPS)

We use the two-class method for calculating EPS because the restricted stock units (RSUs) we grant are participating securities containing nonforfeitable rights to receive dividend equivalents. Under the two-class method, a portion of net income is allocated to RSUs and excluded from the calculation of income allocated to common stock.

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Computation and reconciliation of earnings per common share are as follows:

For Years Ended December 31,

Net Income Shares EPS Net Income Shares EPS Net Income Shares EPS

Basic EPS:

Income allocated to RSUs (28) (24) (34)

Dilutive effect of stock compensation plans 4 7 8

Diluted EPS:

Income allocated to RSUs (28) (24) (33)

Potentially dilutive securities representing 10 million, 8 million and 10 million shares of common stock that were outstanding in 2025, 2024 and 2023, respectively, were excluded from the computation of diluted earnings per common share during these periods because their effect would have been anti-dilutive.

Investments

We present investments on our Consolidated Balance Sheets as cash equivalents, short-term investments or other long-term assets. See Note 6 for additional information.

•Cash equivalents and short-term investments – The primary objectives of our cash equivalent and short-term investment activities are to preserve capital and maintain liquidity while generating appropriate returns. We consider investments in available-for-sale debt securities with maturities of 90 days or less from the date of our investment to be cash equivalents. We consider investments in available-for-sale debt securities with maturities beyond 90 days from the date of our investment as being available for use in current operations and include them in short-term investments.

•Other long-term assets – Long-term investments, which are included within other long-term assets on our Consolidated Balance Sheets, consist of mutual funds, venture capital funds and nonmarketable securities.

Inventories

Inventories are stated at the lower of cost or estimated net realizable value. Cost is generally computed on a currently adjusted standard cost basis, which approximates cost on a first-in, first-out basis. Standard cost is based on the normal utilization of installed factory capacity. Cost associated with underutilization of capacity is expensed as incurred. Inventory held at consignment locations is included in our finished goods inventory.

We review inventory quarterly for salability and obsolescence. A statistical allowance is provided for inventory considered unlikely to be sold. The statistical allowance is based on an analysis of historical disposal activity and age of inventory. A specific allowance for each material type will be carried if there is a significant event not captured by the statistical allowance. We write off inventory in the period in which disposal occurs.

Government incentives

Incentives provided by government entities are recognized when we have reasonable assurance that we will comply with the conditions of the incentive, if any, and the incentive will be received. Incentives, which include non-income tax incentives, related to the acquisition or construction of fixed assets are recognized as a reduction in the carrying amounts of the related assets and reduce depreciation expense over the useful lives of the assets. Incentives for specific operating activities are offset against the related expense in the period the expense is incurred.

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The U.S. CHIPS and Science Act (CHIPS Act) provides funding for manufacturing grants and research investments, and it established an investment tax credit (ITC) for certain investments in U.S. semiconductor manufacturing. The enactment of the One Big Beautiful Bill Act (OBBBA) in 2025 increased the ITC from 25% to 35% for qualifying manufacturing investments placed in service after December 31, 2025. Additionally, we have entered into an agreement with the U.S. Department of Commerce to receive direct funding of up to $1.6 billion for our three large-scale 300mm wafer fabs located in Sherman, Texas, and Lehi, Utah. Direct funding of the award is based on the achievement of certain milestones. The agreement contains representations, warranties and covenants that relate to compliance with requirements for awards provided for in the CHIPS Act. The agreement also includes certain events of default and related rights and remedies, including clawbacks.

As of December 31, 2025, we have recognized $3.35 billion of CHIPS Act receivables, which are comprised of $1.71 billion in prepaid expenses and other current assets and $1.64 billion in other long-term assets. We have also recognized deferred income of $95 million in other long-term liabilities for eligible expenditures that have not yet been incurred. See Note 11 for additional information.

In 2025, the total cash benefit related to CHIPS Act incentives was $670 million, which included $335 million used to reduce our income taxes payable and $335 million of cash proceeds received. The CHIPS Act incentives have reduced the carrying amounts of manufacturing assets by $4.51 billion, of which $1.37 billion was recognized in 2025. Cost of revenue benefited by $353 million, $159 million and $45 million from the CHIPS Act incentives, recognized as a reduction of depreciation expense in 2025, 2024 and 2023, respectively.

Property, plant and equipment and other capitalized costs

Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Our cost basis includes certain assets acquired in business combinations that were initially recorded at fair value as of the date of acquisition. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. Capitalized software licenses are generally amortized on a straight-line basis over the term of the license. Fully depreciated or amortized assets are written off against accumulated depreciation or amortization.

Impairments of long-lived assets

We regularly review whether facts or circumstances exist that indicate the carrying values of property, plant and equipment or other long-lived assets, including intangible assets, are impaired. We assess the recoverability of assets by comparing the projected undiscounted net cash flows associated with those assets to their respective carrying amounts. Any impairment charge is based on the excess of the carrying amount over the fair value of those assets. Fair value is determined by available market valuations, if applicable, or by discounted cash flows.

Goodwill

Goodwill is reviewed for impairment annually in the fourth quarter or more frequently if certain impairment indicators arise. We perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value, including goodwill. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, or if we elect not to use a qualitative assessment, then we perform a quantitative goodwill impairment test. See Note 11 for additional information.

Foreign currency

The functional currency for our non-U.S. subsidiaries is the U.S. dollar. Accounts recorded in currencies other than the U.S. dollar are remeasured into the functional currency. Current assets (except inventories), deferred taxes, current liabilities and long-term liabilities are remeasured at exchange rates in effect at the end of each reporting period. Property, plant and equipment with associated depreciation and inventories are valued at historical exchange rates. Revenue and expense accounts other than depreciation for each month are calculated at the appropriate daily rate of exchange. Currency exchange gains and losses from remeasurement are credited or charged to OI&E.

Derivatives and hedging

We use derivative financial instruments to manage exposure to foreign exchange risk. These instruments are primarily forward foreign currency exchange contracts, which are used as economic hedges to reduce the earnings impact that exchange rate fluctuations may have on our non-U.S. dollar net balance sheet exposures. Gains and losses from changes in the fair value of these forward foreign currency exchange contracts are credited or charged to OI&E. We do not apply hedge accounting to our foreign currency derivative instruments.

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We are exposed to variability in compensation charges related to certain deferred compensation obligations to employees. We use total return swaps to economically hedge this exposure and offset the related compensation expense, recognizing changes in the fair value of the swaps and the related deferred compensation liabilities in SG&A.

In connection with the issuance of long-term debt, we may use financial derivatives such as treasury-rate lock agreements that are recognized in AOCI and amortized over the life of the related debt.

The results of these derivative transactions were not material. We do not use derivatives for speculative or trading purposes.

Changes in accounting standards – adopted standards for current period

We adopted the following Accounting Standards Updates (ASU) during the current period:

ASU Description Adopted for Year Ended

Changes in accounting standards – standards not yet adopted

We are currently evaluating the potential impact of the following ASUs on our financial statements and related disclosures. We plan to adopt these ASUs as of their effective dates.

ASU Description Effective for Period Ending

3. Stock compensation

We have stock options outstanding to participants under long-term incentive plans. The option price per share may not be less than the fair market value of our common stock on the date of the grant. The options have a 10-year term and generally vest ratably over four years. Options continue to vest after the recipient retires.

We also have RSUs outstanding to participants under long-term incentive plans. Each RSU represents the right to receive one share of TI common stock, issued on the vesting date, which is generally four years after the date of grant. RSUs continue to vest after the recipient retires. Holders of RSUs receive an annual cash payment equivalent to the dividends paid on our common stock. The fair value per share of RSUs is determined based on the closing price of our common stock on the date of grant.

We have options and RSUs outstanding to non-employee directors under director compensation plans. The plans generally provide for annual grants of stock options and RSUs, a one-time grant of RSUs to each new non-employee director and the issuance of TI common stock upon the distribution of stock units credited to director deferred compensation accounts.

We also have an employee stock purchase plan (ESPP) under which options are offered to all eligible employees in amounts based on a percentage of the employee’s compensation, subject to a cap. Under the plan, the option price per share is 85% of the fair market value on the exercise date. As of December 31, 2025, 30 million shares remain available for future issuance under this plan.

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Total stock compensation expense recognized is as follows:

For Years Ended December 31,

These amounts include expenses related to stock options, RSUs and options offered under our ESPP and are net of estimated forfeitures.

We recognize compensation expense for stock options and RSUs on a straight-line basis over the minimum service period required for vesting of the award, adjusting for estimated forfeitures based on historical activity. Awards issued to employees who are retirement eligible or nearing retirement eligibility are expensed on an accelerated basis. Options issued under our ESPP are expensed over a three-month period.

As of December 31, 2025, total future compensation related to equity awards not yet recognized in our Consolidated Statements of Income was $494 million, which we expect to recognize over a weighted average period of 1.7 years.

Fair value methods and assumptions

We account for all awards granted under our various stock compensation plans at fair value.

We estimate the fair values for stock options using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions:

For Years Ended December 31,

Weighted average grant date fair value, per share $ 44.97 $ 37.58 $ 46.23

Weighted average assumptions used:

Expected volatility 27 % 27 % 31 %

Expected lives (in years) 5.6 5.6 6.1

We use market-based measures of implied volatility to determine expected volatility. We determine expected lives of options based on historical option exercises using a rolling 10-year average.

Expected dividend yields are based on the annualized approved quarterly dividend rate and the current market price of our common stock at the time of grant. No assumption for a future dividend rate change is included unless there is an approved plan to change the dividend in the near term.

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Long-term incentive and director compensation plans

Stock option and RSU transactions under our long-term incentive and director compensation plans are as follows:

Stock Options RSUs

Stock options exercised/RSUs vested (4) $ 91.90 (1) $ 172.33

(a)Forfeited and expired shares were not material.

For Years Ended December 31,

Total grant date fair value of shares vested for RSUs $ 126 $ 113 $ 106

Aggregate intrinsic value of options exercised $ 382 $ 597 $ 319

As of December 31, 2025, 30 million shares remain available for future issuance under these plans.

Summarized information about stock options outstanding as of December 31, 2025, is as follows:

Options Fully Vested and Expected to Vest (a) Options Exercisable

Stock options outstanding (shares) 24 15

Weighted average remaining contractual life (in years) 5.8 4.2

Weighted average exercise price per share $ 150.97 $ 133.57

Intrinsic value (millions) $ 610 $ 589

(a)Includes effects of expected forfeitures. Excluding the effects of expected forfeitures, the aggregate intrinsic value of stock options outstanding was $611 million.

Effect on shares outstanding and treasury shares

Treasury shares were acquired in connection with the board-authorized stock repurchase program. As of December 31, 2025, $18.79 billion of stock repurchase authorizations remain, and no expiration date has been specified.

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Our practice is to issue shares of common stock from treasury shares upon exercise of stock options, distribution of director deferred compensation and vesting of RSUs. The following table reflects the changes in our treasury shares:

For Years Ended December 31,

Repurchases 8 5 2

Shares issued (4) (7) (5)

The effects on cash flows are as follows:

For Years Ended December 31,

Proceeds from common stock transactions (a) $ 400 $ 517 $ 263

Tax benefit realized from stock compensation $ 113 $ 158 $ 104

(a)Net of taxes paid for employee shares withheld of $34 million, $39 million and $46 million in 2025, 2024 and 2023, respectively.

4. Income taxes

Income before income taxes is comprised of the following components:

For Years Ended December 31,

Provision for income taxes is comprised of the following components:

For Years Ended December 31,

Current Deferred Total Current Deferred Total Current Deferred Total

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Applying the updated requirements in ASU 2023-09 on a prospective basis, the principal reconciling items from the U.S. statutory income tax rate to the effective tax rate (provision for income taxes as a percentage of income before income taxes) are as follows:

For Year Ended December 31,

U.S. statutory income tax rate $ 1,199 21.0 %

Foreign tax effects:

Malaysia:

Tax incentives (127) (2.2)

Other foreign jurisdictions 16 0.3

Effect of cross-border tax laws:

Foreign derived intangible income (231) (4.0)

Tax credits:

R&D tax credit (79) (1.4)

Nontaxable or nondeductible items:

Stock compensation (66) (1.1)

Other adjustments 18 0.3

Effective tax rate $ 709 12.4 %

For the years ended December 31, 2024, and 2023, prior to the adoption of ASU 2023-09, the principal reconciling items from the U.S. statutory income tax rate to the effective tax rate are as follows:

For Years Ended December 31,

U.S. statutory income tax rate 21.0 % 21.0 %

Foreign derived intangible income (6.1) (6.8)

Stock compensation (2.1) (1.0)

R&D tax credit (2.0) (1.3)

Changes in uncertain tax positions 0.1 —

Effective tax rate 12.0 % 12.2 %

The earnings represented by non-cash operating assets, such as fixed assets and inventory, will continue to be permanently reinvested outside the United States. Under current law, earnings of non-U.S. subsidiaries repatriated to the U.S. are not taxable. Consequently, no U.S. tax provision has been made for the future remittance of these earnings. However, withholding or distribution taxes in certain non-U.S. jurisdictions will be incurred upon repatriation of available cash to the United States. A provision has been made for deferred taxes on these undistributed earnings to the extent that repatriation of the available cash to the United States is expected to result in a tax liability. As of December 31, 2025, determination of any remaining unrecognized deferred taxes related to undistributed earnings is not practicable.

We have made an allowable policy election to account for the effects of GILTI as a component of income tax expense in the period in which the tax is incurred.

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The primary components of deferred tax assets and liabilities are as follows:

December 31,

Deferred tax assets:

Deferred loss and tax credit carryforwards 230 216

Total deferred tax assets, before valuation allowance 1,933 1,920

Valuation allowance (230) (212)

Total deferred tax assets, after valuation allowance 1,703 1,708

Deferred tax liabilities:

Property, plant and equipment (443) (441)

CHIPS Act incentives (299) (336)

International earnings (35) (33)

Total deferred tax liabilities (802) (825)

Net deferred tax asset $ 901 $ 883

The deferred tax assets and liabilities based on tax jurisdictions are presented on our Consolidated Balance Sheets as follows:

December 31,

Deferred tax assets $ 967 $ 936

Deferred tax liabilities (66) (53)

Net deferred tax asset $ 901 $ 883

We make an ongoing assessment regarding the realization of U.S. and non-U.S. deferred tax assets. This assessment is based on our evaluation of relevant criteria, including the existence of deferred tax liabilities that can be used to absorb deferred tax assets, taxable income in prior carryback years and expectations for future taxable income. Valuation allowances increased $18 million, $14 million and $9 million in 2025, 2024 and 2023, respectively. These changes had no impact to net income in 2025, 2024 or 2023.

As of December 31, 2025, tax loss carryforwards were not material.

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Applying the updated requirements in ASU 2023-09 on a prospective basis, cash payments made for income taxes, net of refunds, are as follows:

For Year Ended December 31,

U.S. federal taxes $ 253

U.S. state taxes 6

Foreign taxes:

Other foreign jurisdictions 174

Total cash taxes paid 556

ITC proceeds from CHIPS Act incentives (260)

Total cash taxes paid, net of refunds $ 296

Total cash taxes paid, net of refunds $ 296

ITC used to reduce income taxes payable 335

ITC proceeds from CHIPS Act incentives 260

Total cash taxes paid without CHIPS Act incentives $ 891

Cash payments made for income taxes, net of refunds, were $451 million and $1.35 billion in 2024 and 2023, respectively. In 2024, the total cash benefit related to the CHIPS Act ITC was $588 million, which was used to reduce our income taxes payable.

Uncertain tax positions

We operate in a number of tax jurisdictions, and our income tax returns are subject to examination by tax authorities in those jurisdictions who may challenge any item on these tax returns. Because the matters challenged by authorities are typically complex, their ultimate outcome is uncertain. Before any benefit can be recorded in our financial statements, we must determine that it is “more likely than not” that a tax position will be sustained by the appropriate tax authorities. We recognize accrued interest related to uncertain tax positions and penalties as components of OI&E.

The changes in the total amounts of uncertain tax positions are as follows:

Additions based on tax positions related to the current year 2 3 3

Additions for tax positions of prior years — — —

Reductions for tax positions of prior years — — (3)

Interest payable as of December 31 $ 22 $ 15 $ 10

The liability for uncertain tax positions is a component of other long-term liabilities on our Consolidated Balance Sheets.

All of the $87 million and $85 million liabilities for uncertain tax positions as of December 31, 2025 and 2024, respectively, are comprised of positions that, if recognized, would lower the effective tax rate. If these liabilities are ultimately realized, no existing deferred tax assets in 2025 or 2024 would also be realized.

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As of December 31, 2025, the statute of limitations remains open for U.S. federal tax returns for 2018 and following years. Certain tax treaty procedures for relief from double taxation remain pending for U.S. federal tax returns for the years 2018 through 2022.

In non-U.S. jurisdictions, the years open to audit represent the years still open under the statute of limitations. With respect to major jurisdictions outside the United States, our subsidiaries are no longer subject to income tax audits for years before 2016.

5. Financial instruments and risk concentration

Financial instruments

We hold derivative financial instruments such as forward foreign currency exchange contracts, the fair value of which was not material as of December 31, 2025. Our forward foreign currency exchange contracts outstanding as of December 31, 2025, had a notional value of $675 million to hedge our non-U.S. dollar net balance sheet exposures, including $174 million to sell Malaysian ringgit, $169 million to buy Indian rupee and $107 million to sell British pounds.

Our investments in cash equivalents, short-term investments and certain long-term investments, as well as our deferred compensation liabilities, are carried at fair value. Our postretirement plan assets are carried at fair value or net asset value per share. The carrying values for other current financial assets and liabilities, such as accounts receivable and accounts payable, approximate fair value due to the short maturity of such instruments. As of December 31, 2025, the carrying value of long-term debt, including the current portion, was $14.05 billion, and the estimated fair value was $13.24 billion. The estimated fair value is measured using broker-dealer quotes, which are Level 2 inputs. See Note 6 for a description of fair value and the definition of Level 2 inputs.

Risk concentration

We are subject to counterparty risks from financial institutions, customers and issuers of debt securities. Financial instruments that could subject us to concentrations of credit risk are primarily cash deposits, cash equivalents, short-term investments and accounts receivable. To manage our credit risk exposure, we place cash investments in investment-grade debt securities and limit the amount of credit exposure to any one issuer. We also limit counterparties on cash deposits and financial derivative contracts to financial institutions with investment-grade ratings.

Concentrations of credit risk with respect to accounts receivable are limited due to our large number of customers and their dispersion across different industries and geographic areas. We maintain allowances for expected returns, disputes, adjustments, incentives and credit losses. These allowances are deducted from accounts receivable on our Consolidated Balance Sheets.

Accounts receivable allowances changed to reflect amounts charged to operating results by $1 million, $5 million and $3 million in 2025, 2024 and 2023, respectively.

6. Valuation of debt and equity investments and certain liabilities

Investments measured at fair value

Money market funds, debt investments and mutual funds are stated at fair value, which is generally based on market prices or broker quotes. We classify all debt investments as available-for-sale. See Fair-value considerations. Unrealized gains and losses are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated Balance Sheets, and any credit losses are recorded as an allowance for credit losses with an offset recognized in OI&E in our Consolidated Statements of Income.

Our mutual funds hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation liabilities. We record changes in the fair value of these mutual funds and the related deferred compensation liabilities in SG&A.

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Other investments

Our other investments include equity-method investments and nonmarketable investments, which are not measured at fair value. These investments consist of interests in venture capital funds and other nonmarketable securities. Gains and losses from equity-method investments are recognized in OI&E based on our ownership share of the investee’s financial results. Nonmarketable securities are measured at cost with adjustments for observable changes in price or impairments. Gains and losses on nonmarketable investments are recognized in OI&E.

Details of our investments are as follows:

Measured at fair value:

Money market funds $ 844 $ — $ — $ 762 $ — $ —

Non-U.S. government and agency securities 184 99 — 249 99 —

Mutual funds — — 11 — — 11

Other investments — — 5 — — 12

As of December 31, 2025 and 2024, unrealized gains and losses associated with our debt investments were not material. We did not recognize any credit losses related to debt investments in 2025, 2024 or 2023.

The following table presents the aggregate maturities of our debt investments as of December 31, 2025:

Fair Value

One year or less $ 3,232

One to two years 421

In 2025, 2024 and 2023, the proceeds from sales, redemptions and maturities of short-term debt investments were $6.31 billion, $11.19 billion and $13.39 billion, respectively. Gross realized gains and losses from these sales were not material.

Fair-value considerations

We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The three-level hierarchy described below indicates the inputs used to estimate fair-value measurements.

•Level 1 – Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the measurement date.

•Level 2 – Uses inputs other than Level 1 that are either directly or indirectly observable as of the measurement date through correlation with market data. Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active and models or other pricing methodologies that do not require significant judgment. We utilize a third-party data service to provide Level 2 valuations, and we verify these valuations for reasonableness.

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•Level 3 – Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management judgment. As of December 31, 2025 and 2024, we had no Level 3 assets or liabilities.

The following are our assets and liabilities that were accounted for at fair value on a recurring basis. These tables do not include cash on hand, assets held by our postretirement plans, or assets and liabilities that are measured at historical cost or any basis other than fair value.

Level 1 Level 2 Total Level 1 Level 2 Total

Assets:

Non-U.S. government and agency securities — 283 283 — 348 348

Liabilities:

7. Postretirement benefit plans

Plan descriptions

We have various employee retirement plans, including defined contribution, defined benefit and retiree health care benefit plans. For qualifying employees, we offer deferred compensation arrangements.

U.S. retirement plans

Our principal retirement plans in the United States are a defined contribution plan, an enhanced defined contribution plan and qualified and non-qualified defined benefit pension plans. The defined benefit plans were closed to new participants in 1997. Current participants were allowed to make a one-time election to continue accruing a benefit in the plans or to cease accruing a benefit and instead to participate in the enhanced defined contribution plan.

Both defined contribution plans offer an employer-matching savings option that allows employees to make pretax and post-tax contributions to various investment choices. Employees who elected to continue accruing a benefit in the qualified defined benefit pension plans may also participate in the defined contribution plan, where employer-matching contributions are provided for up to 2% of the employee’s annual eligible earnings. Employees who elected not to continue accruing a benefit in the defined benefit pension plans and employees hired after November 1997 and through December 31, 2003, may participate in the enhanced defined contribution plan. This plan provides for a fixed employer contribution of 2% of the employee’s annual eligible earnings, plus an employer-matching contribution of up to 4% of the employee’s annual eligible earnings. Employees hired after December 31, 2003, do not receive the fixed employer contribution of 2% of the employee’s annual eligible earnings.

As of December 31, 2025 and 2024, as a result of employees’ elections, TI’s U.S. defined contribution plans held TI common stock totaling 4 million shares and 5 million shares valued at $699 million and $852 million, respectively. Dividends paid on these shares in 2025 and 2024 were $24 million and $26 million, respectively. Effective April 1, 2016, the TI common stock fund was frozen to new contributions or transfers into the fund.

Our aggregate expense for the U.S. defined contribution plans was $74 million, $76 million and $75 million in 2025, 2024 and2023, respectively.

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The defined benefit pension plans include employees still accruing benefits, as well as employees and participants who no longer accrue service-related benefits, but instead, may participate in the enhanced defined contribution plan. Benefits under the qualified defined benefit pension plan are determined using a formula based on years of service and the highest five consecutive years of compensation. We intend to contribute amounts to this plan to meet the minimum funding requirements of applicable local laws and regulations, plus such additional amounts as we deem appropriate. The non-qualified defined benefit plans are unfunded and closed to new participants.

U.S. retiree health care benefit plan

U.S. employees who meet eligibility requirements are offered medical coverage during retirement. We make a contribution toward the cost of those retiree medical benefits for certain retirees and their dependents. The contribution rates are based upon various factors, the most important of which are an employee’s date of hire, date of retirement, years of service and eligibility for Medicare benefits.The remaining costs are paid by the plan’s participants. Employees hired after January 1, 2001, are responsible for the full cost of their medical benefits during retirement.

Non-U.S. retirement plans

We provide retirement coverage for non-U.S. employees, as required by local laws or to the extent we deem appropriate, through a number of defined benefit and defined contribution plans. Retirement benefits are generally based on an employee’s years of service and compensation. Funding requirements are determined on an individual country and plan basis and are subject to local country practices and market circumstances.

As of December 31, 2025 and 2024, as a result of employees’ elections, TI’s non-U.S. defined contribution plans held TI common stock valued at $32 million and $34 million, respectively. Dividends paid on these shares of TI common stock in 2025 and 2024 were not material.

Effects on our Consolidated Statements of Income and Balance Sheets

Expenses related to defined benefit and retiree health care benefit plans are as follows:

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit

Amortization of prior service cost (credit) — — — — — — 1 1 1

Recognized net actuarial losses (gains) 8 4 6 (1) (3) (5) 4 11 12

Settlement losses (gains) 8 1 7 — — — (1) — —

All defined benefit and retiree health care benefit plan expense components other than service cost are recognized in OI&E in our Consolidated Statements of Income. Service cost is recognized within operating profit.

For the U.S. qualified pension and retiree health care plans, the expected return on plan assets is based upon a market-related value of assets. In accordance with U.S. GAAP, the market-related value of assets is the fair value adjusted by phasing in certain gains and losses over a period of three years.

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Changes in the benefit obligations and plan assets for defined benefit and retiree health care benefit plans are as follows:

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit

Change in plan benefit obligation

Participant contributions — — 14 13 1 1

Settlements (58) (2) — — (8) (6)

Plan amendments — — — — 23 —

Effects of exchange rate changes — — — — 109 (87)

Change in plan assets

Employer contributions (qualified plans) 6 — 2 1 2 2

Employer contributions (non-qualified plans) 8 2 — — — —

Participant contributions — — 14 13 1 1

Settlements (58) (2) — — (8) (6)

Effects of exchange rate changes — — — — 120 (99)

Changes in actuarial gains and losses in the projected benefit obligations are generally driven by discount rate movement.

Amounts recognized on our Consolidated Balance Sheets as of December 31, are as follows:

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit Total

Overfunded retirement plans $ — $ 19 $ 305 $ 324

Underfunded retirement plans (71) (2) (51) (124)

Overfunded retirement plans $ — $ 16 $ 217 $ 233

Underfunded retirement plans (83) (2) (25) (110)

Contributions to the plans meet or exceed all minimum funding requirements. We expect to contribute about $25 million to our retirement benefit plans in 2026.

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Accumulated benefit obligations, which are generally less than the projected benefit obligations as they exclude the impact of future salary increases, were $440 million and $470 million as of December 31, 2025 and 2024, respectively, for the U.S. defined benefit plans, and $1.47 billion in both periods for the non-U.S. defined benefit plans.

The change in AOCI is as follows:

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit Total

Changes in AOCI by category:

Recognized within net income (16) — 1 (3) (1) (18) (1)

Information on plan assets

We report and measure the plan assets of our defined benefit pension and other postretirement plans at fair value. The tables below set forth the fair value of our plan assets using the same three-level hierarchy of fair-value inputs described in Note 6.

Level 1 Level 2 Other (a) Total

Assets of U.S. defined benefit plan:

Fixed income securities and cash equivalents $ 72 $ 62 $ 96 $ 230

Assets of U.S. retiree health care plan:

Fixed income securities and cash equivalents $ — $ — $ 243 $ 243

Assets of non-U.S. defined benefit plans:

Fixed income securities and cash equivalents $ 12 $ 474 $ 885 $ 1,371

(a)Consists of bond index and equity index funds, measured at net asset value per share, as well as cash equivalents.

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Level 1 Level 2 Other (a) Total

Assets of U.S. defined benefit plan:

Fixed income securities and cash equivalents $ 92 $ 51 $ 101 $ 244

Assets of U.S. retiree health care plan:

Fixed income securities and cash equivalents $ 2 $ — $ 196 $ 198

Equity securities — — 50 50

Assets of non-U.S. defined benefit plans:

Fixed income securities and cash equivalents $ 15 $ 475 $ 820 $ 1,310

(a)Consists of bond index and equity index funds, measured at net asset value per share, as well as cash equivalents.

The investments in our major benefit plans largely consist of low-cost, broad-market index funds to mitigate risks of concentration within market sectors. Our investment policy is designed to better match the interest rate sensitivity of the plan assets and liabilities. The appropriate mix of equity and bond investments is determined primarily through the use of detailed asset-liability modeling studies that look to balance the impact of changes in the discount rate against the need to provide asset growth to cover future service cost. Most of our plans around the world have a greater proportion of fixed income securities with return characteristics that are more closely aligned with changes in the liabilities caused by discount rate volatility.

Assumptions and investment policies

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit

Weighted average assumptions used to determine benefit obligations:

Weighted average assumptions used to determine net periodic benefit cost:

We utilize a variety of methods to select an appropriate discount rate depending on the depth of the corporate bond market in the country in which the benefit plan operates. In the United States, we use a settlement approach whereby a portfolio of bonds is selected from the universe of actively traded high-quality U.S. corporate bonds. The selected portfolio is designed to simulate a portfolio that would provide cash flows sufficient to pay the plan’s expected benefit payments when due. The resulting discount rate reflects the rate of return of the selected portfolio of bonds. For our non-U.S. locations with a sufficient number of actively traded high-quality bonds, an analysis is performed in which the projected cash flows from the defined benefit plans are discounted against a yield curve constructed with an appropriate universe of high-quality corporate bonds available in each country. In this manner, a present value is developed. The discount rate selected is the single equivalent rate that produces the same present value. For countries that lack a sufficient corporate bond market, a government bond index is used to establish the discount rate.

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Assumptions for the expected long-term rate of return on plan assets are based on future expectations for returns for each asset class and the effect of periodic target asset allocation rebalancing. We adjust the results for the payment of reasonable expenses of the plan from plan assets. We believe our assumptions are appropriate based on the investment mix and long-term nature of the plans’ investments. Assumptions used for the non-U.S. defined benefit plans reflect the different economic environments within the various countries.

The target allocation ranges for the plans that hold a substantial majority of the defined benefit assets are as follows:

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit

Fixed income securities and cash equivalents 60% – 75% 85% – 100% 60% – 100%

We rebalance the plans’ investments when they are outside the target allocation ranges.

Weighted average asset allocations as of December 31 are as follows:

U.S. Defined Benefit U.S. Retiree Health Care Non-U.S. Defined Benefit

Fixed income securities and cash equivalents 60% 61% 100% 80% 77% 77%

None of the plan assets related to the defined benefit pension plans and retiree health care benefit plan are directly invested in TI common stock.

The following assumed future benefit payments to plan participants in the next 10 years are used to measure our benefit obligations. Almost all of the payments, which may vary significantly from these assumptions, will be made from plan assets and not from company assets.

Assumed health care cost trend rates for the U.S. retiree health care benefit plan as of December 31 are as follows:

Assumed health care cost trend rate for next year 8.00% 7.00%

Ultimate trend rate 6.00% 5.00%

Year in which ultimate trend rate is reached 2034 2033

Deferred compensation plans

We have deferred compensation plans that allow U.S. employees whose base salary and management responsibility exceed a certain level to defer receipt of a portion of their cash compensation. Payments under these plans are made based on the participant’s distribution election and plan balance. Participants can earn a return on their deferred compensation based on notional investments in the same investment funds that are offered in our defined contribution plans.

As of December 31, 2025, our liability to participants of the deferred compensation plans was $492 million and is recorded in other long-term liabilities on our Consolidated Balance Sheets. This amount reflects the accumulated participant deferrals and related earnings. We utilize total return swaps and investments in mutual funds that serve as economic hedges of our exposure to changes in the fair value of these liabilities. We record changes in the fair value of the liability and the related total return swaps and mutual funds in SG&A, as discussed in Note 6. As of December 31, 2025, we held $11 million in mutual funds related to these plans that are recorded in long-term investments on our Consolidated Balance Sheets.

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8. Debt and lines of credit

Short-term borrowings

We maintain a line of credit to provide additional liquidity through bank loans and, if necessary, to support commercial paper borrowings. As of December 31, 2025, the aforementioned line of credit was a variable-rate, revolving credit facility from a consortium of investment-grade banks that allows us to borrow up to $1 billion until March 2026. The interest rate on borrowings under this credit facility, if drawn, is indexed to the applicable Term Secured Overnight Financing Rate (Term SOFR). As of December 31, 2025, our credit facility was undrawn, and we had no commercial paper outstanding.

Long-term debt

In March 2025, we retired $750 million of maturing debt.

In May 2025, we issued two series of senior unsecured notes for an aggregate principal amount of $1.20 billion, consisting of $550 million of 4.50% notes due in 2030 and $650 million of 5.10% notes due in 2035. We incurred $6 million of issuance and other related costs. The proceeds of the offering were $1.20 billion, net of the original issuance discounts, which will be used for general corporate purposes.

In February 2024, we issued five series of senior unsecured notes for an aggregate principal amount of $3.00 billion, consisting of $650 million of 4.60% notes due in 2027, $650 million of 4.60% notes due in 2029, $600 million of 4.85% notes due in 2034, $750 million of 5.15% notes due in 2054 and $350 million of 5.05% notes due in 2063. We incurred $16 million of issuance and other related costs. The proceeds of the offering were $2.98 billion, net of the original issuance discounts, which will be used for general corporate purposes.

We retired $300 million of maturing debt in May 2024 and an additional $300 million in November 2024.

In March 2023, we issued two series of senior unsecured notes for an aggregate principal amount of $1.40 billion, consisting of $750 million of 4.90% notes due in 2033 and $650 million of 5.00% notes due in 2053. We incurred $11 million of issuance and other related costs. The proceeds of the offering were $1.40 billion, net of the original issuance discounts, which will be used for general corporate purposes.

In May 2023, we issued three series of senior unsecured notes for an aggregate principal amount of $1.60 billion, consisting of $200 million of 4.60% notes due in 2028, $200 million of 4.90% notes due in 2033 and $1.20 billion of 5.05% notes due in 2063. We incurred $7 million of issuance and other related costs. The proceeds of the offering were $1.60 billion, net of the original issuance discounts and premiums, which will be used for general corporate purposes.

In May 2023, we retired $500 million of maturing debt.

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Long-term debt outstanding is as follows:

December 31,

Net unamortized discounts, premiums and issuance costs (102) (104)

Current portion of long-term debt (500) (750)

Interest and debt expense was $543 million, $508 million and $353 million in 2025, 2024 and 2023, respectively. This was net of the amortized discounts, premiums and issuance and other related costs. Cash payments for interest on long-term debt were $542 million, $473 million and $321 million in 2025, 2024 and 2023, respectively. Capitalized interest was $12 million, $20 million and $11 million in 2025, 2024 and 2023, respectively.

9. Leases

We conduct certain operations in leased facilities and also lease a portion of our data processing and other equipment. In addition, certain long-term supply agreements to purchase industrial gases are accounted for as operating leases. Lease agreements frequently include renewal provisions and require us to pay real estate taxes, insurance and maintenance costs.

Our leases are included as a component of the following balance sheet lines:

December 31,

Other long-term assets $ 729 $ 786

Accrued expenses and other liabilities $ 119 $ 118

Other long-term liabilities 612 663

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Details of our operating leases are as follows:

For Years Ended December 31,

Lease cost related to lease liabilities $ 102 $ 85 $ 73

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for lease cost $ 80 $ 65 $ 65

Lease assets obtained in exchange for new lease liabilities $ 26 $ 241 $ 285