Texas Instruments Inc. (NASDAQ:TXN)

The short-term operating activity ratios demonstrate notable shifts over the observed period. Generally, a declining trend is apparent in several efficiency metrics, particularly from 2022 through 2024, followed by some stabilization and modest improvement in 2025. This suggests evolving dynamics in the company’s operational management of inventory, receivables, and payables.

Inventory Management

Inventory turnover consistently decreased from 2.88 in March 2022 to 1.44 in March 2025. This indicates a lengthening of the time inventory is held, potentially due to slowing sales, overstocking, or shifts in inventory strategy. Correspondingly, the average inventory processing period increased from 127 days to 254 days over the same timeframe, confirming the slower inventory movement. A slight recovery is observed in the latter half of the period, with the processing period decreasing to 231 days by December 2025.

Receivables Management

Receivables turnover exhibited a fluctuating pattern, initially decreasing from 10.56 to 8.95 between March and June 2022, then showing some recovery before declining again to 8.44 by September 2024. It then showed a slight increase to 9.01 by December 2025. The average receivable collection period generally increased from 35 days in March 2022 to 42 days in March 2025, indicating a lengthening of the time taken to collect payments from customers. This trend mirrors the inventory turnover, potentially suggesting broader challenges in converting sales into cash.

Payables Management

Payables turnover showed a decline from 9.27 in March 2022 to 6.63 in March 2023, followed by increased volatility. It peaked at 11.89 in March 2024 before settling at 10.05 by December 2025. The average payables payment period increased from 39 days to 55 days between March 2022 and March 2023, then decreased to 36 days by December 2025. This suggests a shifting strategy in managing payments to suppliers, potentially influenced by cash flow considerations or supplier negotiations.

Overall Operating Cycle & Cash Conversion Cycle

The operating cycle lengthened from 162 days in March 2022 to 296 days in March 2025, reflecting the combined effect of slower inventory turnover and receivable collection. The cash conversion cycle followed a similar trend, increasing from 123 days to 249 days over the same period, indicating a longer time between paying for inventory and receiving cash from sales. Both cycles showed some improvement in the final periods, decreasing to 272 and 236 days respectively by December 2025.

Working Capital Turnover

Working capital turnover decreased from 1.65 in March 2022 to 1.21 in March 2024, indicating a less efficient utilization of working capital. A modest recovery was observed in the latter part of the period, with the ratio reaching 1.67 by December 2025. This suggests that the company generated less revenue for each dollar invested in working capital during the earlier periods, but improved slightly towards the end of the observed timeframe.

In summary, the observed trends suggest a period of increasing operational inefficiency, particularly concerning inventory and receivables management, followed by a potential stabilization and slight improvement in the most recent periods. The changes in payables turnover indicate a dynamic approach to supplier relationships and cash flow management. Continued monitoring of these ratios is recommended to assess the sustainability of the recent improvements and identify areas for further optimization.

Inventory turnover exhibited a consistent downward trend over the observed period, spanning from March 31, 2022, to December 31, 2025. Initially, the ratio stood at 2.88, but progressively declined to 1.58 by the end of the analyzed timeframe. This indicates a lengthening of the time it takes to sell inventory.

Overall Trend

A clear and sustained decline in inventory turnover is apparent. The ratio decreased from 2.88 in the first quarter of 2022 to 1.58 in the final quarter of 2025, representing a roughly 45% reduction. This suggests increasing inefficiencies in inventory management or a shift in sales patterns.

Phases of Decline

The rate of decline was not uniform. A more rapid decrease occurred between March 31, 2022, and December 31, 2022, falling from 2.88 to 2.27. The decline moderated somewhat between March 31, 2023, and September 30, 2024, but resumed a more pronounced downward trajectory in the final quarters of 2024 and 2025.

Cost of Revenue and Inventory Relationship

While cost of revenue generally increased over the period, the growth in inventories was proportionally higher. This disparity is a primary driver of the declining inventory turnover. The increase in inventory levels, from US$2,060 million in March 2022 to US$4,804 million in December 2025, outpaced the increase in cost of revenue, which rose from US$1,463 million to US$1,951 million over the same period.

Recent Stabilization

The decline in inventory turnover appears to be slowing in the most recent periods. The ratio moved from 1.45 in December 2024 to 1.58 in December 2025, indicating a potential stabilization, although further monitoring is needed to confirm this trend.

The observed trend warrants further investigation to determine the underlying causes. Potential factors include changes in product mix, increased lead times, overestimation of demand, or strategic decisions to build inventory in anticipation of future sales.

The receivables turnover ratio exhibits fluctuations over the observed period, generally ranging between 8.37 and 10.57. An initial decline is noted from the first quarter of 2022 through the second quarter of 2022, followed by a period of relative stability and then a more pronounced downward trend beginning in the third quarter of 2023, continuing into the first half of 2024. A slight recovery is then observed in the latter half of 2024 and into the first half of 2025.

Overall Trend

The ratio demonstrates a cyclical pattern. While generally maintaining a value above 8.0, a clear downward trajectory is visible from the third quarter of 2023 through the first half of 2024. The most recent periods suggest a potential stabilization, but further observation is needed to confirm a sustained reversal of this trend.

2022-2023 Performance

The ratio began at 10.56 in the first quarter of 2022, decreased to 8.95 in the second quarter, and then recovered to 9.90 and 10.57 in the subsequent quarters. This suggests efficient collection of receivables during this period, with a slight dip in collection speed during the second quarter. The ratio remained relatively stable in the first half of 2023, but began a decline in the second half of the year, falling to 9.17 and 9.80.

2024-2025 Performance

A more significant decrease in receivables turnover is observed in 2024, reaching a low of 8.44 in the third quarter. While the ratio recovered somewhat in the fourth quarter (9.10), it remained below the levels seen in 2022 and the first half of 2023. The first half of 2025 shows a slight increase, reaching 8.62 and 8.37 respectively, but remains lower than prior periods. The final reported value for the period, 9.01, indicates a modest improvement, but does not fully offset the earlier decline.

Relationship to Revenue

The observed decline in receivables turnover does not appear to be directly correlated with a proportional decrease in revenue. While revenue also decreased over the period, the decline in receivables turnover suggests a potential lengthening of the collection cycle, or a change in credit terms offered to customers. Further investigation into accounts receivable aging and credit policies would be beneficial.

In conclusion, the receivables turnover ratio indicates a potential weakening in the efficiency of collecting receivables, particularly from the third quarter of 2023 onwards. While recent periods show some signs of stabilization, continued monitoring is recommended to assess the sustainability of this trend.

The accounts payable turnover ratio exhibits fluctuations over the observed period, generally decreasing from March 2022 through December 2022, then increasing through December 2023, followed by further variability. A detailed examination reveals specific trends and potential areas of interest.

Overall Trend

The ratio demonstrates a general decline from 9.27 in March 2022 to a low of 6.63 in March 2023. Subsequently, the ratio increased to 10.05 by December 2025, indicating improved efficiency in paying suppliers in the latter part of the period. However, this improvement isn’t consistent, with intermediate declines observed.

Initial Decline (Mar 31, 2022 – Mar 31, 2023)

A consistent downward trend is apparent from March 2022 through March 2023. This suggests a lengthening of the time it took to pay suppliers during this period. This could be due to several factors, including increased bargaining power with suppliers, a deliberate strategy to manage cash flow, or potentially, a build-up of payables due to operational challenges. The decrease from 9.27 to 6.63 represents a significant reduction in turnover.

Recovery and Subsequent Fluctuations (Jun 30, 2023 – Dec 31, 2025)

Beginning in June 2023, the ratio began to recover, reaching 9.03 in September 2023. This recovery continued, albeit with some volatility, peaking at 10.05 in December 2025. The increase suggests a return to more efficient payment practices. However, the fluctuations between quarters, such as the dip to 7.62 in March 2024, indicate that this efficiency is not consistently maintained. The ratio in June 2025 (9.42) is lower than in September 2025 (9.42), suggesting a possible seasonal effect or temporary disruption.

Correlation with Cost of Revenue and Accounts Payable

The cost of revenue generally increased over the period, while accounts payable exhibited a more complex pattern. The initial decline in payables turnover coincided with an increase in accounts payable, suggesting that the company was taking longer to pay its bills as its purchasing activity increased. The subsequent recovery in turnover appears to be linked to a decrease in accounts payable, indicating a more efficient management of supplier obligations. The relationship between these variables warrants further investigation.

In conclusion, the accounts payable turnover ratio demonstrates a dynamic pattern over the analyzed timeframe. While an overall improvement is observed from the low point in March 2023, the presence of fluctuations suggests that the company’s payment practices are subject to external factors or internal strategic adjustments.

The working capital turnover ratio exhibited fluctuations over the observed period, generally trending downward before a recent stabilization and slight increase. Initial values indicated a relatively efficient utilization of working capital, which diminished over time before showing signs of improvement in the latest periods.

Overall Trend

From March 31, 2022, to December 31, 2023, the working capital turnover ratio generally decreased. Starting at 1.65, it declined to 1.48. This suggests a decreasing efficiency in generating revenue from each dollar of working capital. However, from December 31, 2023, through December 31, 2025, the ratio stabilized and then showed a modest upward trend, reaching 1.67.

Peak and Trough Values

The highest recorded ratio was 1.87 in June 30, 2022, indicating the most efficient use of working capital during that quarter. The lowest ratio was 1.21 in March 31, 2024, suggesting the least efficient use of working capital during that period.

Correlation with Revenue

A review of the revenue figures alongside the working capital turnover ratio suggests a complex relationship. While revenue generally decreased from 2022 to 2024, the working capital turnover ratio’s decline was not perfectly synchronized. This indicates that changes in working capital management, rather than solely revenue fluctuations, contributed to the observed trends in the ratio. The recent increase in the ratio, concurrent with relatively stable revenue, suggests improved working capital efficiency.

Recent Performance

The most recent quarters (March 31, 2025, and June 30, 2025) demonstrate a potential reversal of the earlier downward trend. The ratio increased to 1.51 and 1.39 respectively, followed by 1.60 and 1.67, indicating a possible improvement in working capital management and a more effective generation of revenue from available working capital. This recent improvement warrants further investigation to determine its sustainability.

In summary, the working capital turnover ratio experienced a period of decline followed by a recent stabilization and slight improvement. The fluctuations suggest a dynamic relationship between revenue and working capital management, with recent performance indicating a potential positive shift in efficiency.

The average inventory processing period exhibited a consistent upward trend throughout the observed timeframe. Initially, the period stood at 127 days in March 2022, and progressively increased to 231 days by March 2025. This indicates a lengthening in the time required to convert inventory into sales.

Overall Trend

A clear and sustained increase in the average inventory processing period is evident. The period nearly doubled over the thirteen quarters analyzed, rising from 127 days to 231 days. While a slight decrease was observed between September 2025 (240 days) and December 2025 (231 days), the overall trajectory remains upward.

Phases of Change

The rate of increase was not constant. From March 2022 to June 2022, the period increased by 6 days. The period then increased by 10 days between June 2022 and September 2022. A more substantial increase of 18 days occurred between September 2022 and December 2022. The most significant increases were observed between March 2023 and June 2023 (25 days) and between March 2024 and June 2024 (1 day). The period stabilized somewhat in the latter half of the observed period, with smaller incremental changes.

Relationship to Inventory Turnover

The observed increase in the average inventory processing period correlates inversely with the inventory turnover ratio. As the inventory turnover ratio decreased from 2.88 in March 2022 to 1.58 in December 2025, the average inventory processing period increased. This suggests that the company is taking longer to sell its inventory, resulting in a lower turnover rate.

The lengthening inventory processing period warrants further investigation. Potential contributing factors could include shifts in product mix, changes in supply chain dynamics, increased inventory levels, or a slowdown in sales. Understanding the underlying causes is crucial for optimizing inventory management and improving operational efficiency.

The average receivable collection period exhibited fluctuations over the observed timeframe, generally trending upwards before stabilizing and showing a slight decrease towards the end of the period. An initial period of stability is followed by a period of increasing collection times, then a return to more consistent levels.

Overall Trend

The average number of days to collect receivables began at 35 days in March 2022. It increased to 41 days by June 2022, then decreased to 37 days by September 2022, and returned to 35 days by December 2022. From March 2023 through September 2025, the collection period generally increased, peaking at 44 days in September 2025, before decreasing to 41 days by December 2025.

Short-Term Fluctuations (2022)

Within 2022, the collection period demonstrated volatility. An increase from 35 to 41 days in the first half of the year was followed by a decrease back to 35 days by year-end. This suggests potential seasonal effects or changes in credit policies during that period.

Medium-Term Trend (2023-2025)

From 2023 to 2025, the average collection period generally increased. The period moved from 35 days in March 2023 to a high of 44 days in September 2025. This sustained increase could indicate a loosening of credit terms, a shift in the customer base towards those with longer payment cycles, or increasing difficulties in collecting receivables. The slight decrease in the final quarter of 2025 may suggest a renewed focus on collections or a temporary improvement in customer payment behavior.

Recent Performance

The most recent values indicate a collection period of 41 days in December 2025. This is higher than the initial value observed in March 2022, suggesting a potential lengthening of the cash conversion cycle. Further investigation into the underlying causes of this increase would be warranted.

The observed changes in the average receivable collection period should be considered in conjunction with other financial metrics and industry benchmarks to gain a more comprehensive understanding of the company’s financial health and operational efficiency.

The operating cycle has demonstrated a consistent lengthening trend over the analyzed period, spanning from March 31, 2022, to December 31, 2025. This indicates that the time required to convert investments in inventory and other resources into cash from sales is increasing. Both components of the operating cycle – the average inventory processing period and the average receivable collection period – contribute to this overall trend.

Average Inventory Processing Period

The average inventory processing period exhibits a clear upward trajectory. Starting at 127 days in March 31, 2022, it steadily increased to 231 days by December 31, 2025. The rate of increase appears to have been most pronounced between March 31, 2022, and December 31, 2022, and again between March 31, 2024, and September 30, 2024. A slight decrease is observed in the final two quarters, but the period remains significantly higher than the initial value. This suggests a potential slowdown in inventory turnover or an increase in the time required to process and sell inventory.

Average Receivable Collection Period

The average receivable collection period also shows an increasing trend, though less dramatic than the inventory processing period. Beginning at 35 days in March 31, 2022, it rose to 41 days by December 31, 2025. Fluctuations are present, with peaks at 44 days in September 30, 2025, and 43 days in June 30, 2024. This indicates a lengthening of the time it takes to collect payments from customers, potentially due to changes in credit terms, customer payment behavior, or collection efficiency.

Operating Cycle

As a result of the increases in both inventory processing and receivable collection periods, the operating cycle has expanded from 162 days in March 31, 2022, to 272 days by December 31, 2025. The most substantial increase occurred between March 31, 2022, and June 30, 2023. While there is a slight contraction in the final quarter, the overall trend remains upward. This extended operating cycle ties up working capital for a longer duration, potentially impacting liquidity and requiring increased financing to support operations.

The consistent increases in both the average inventory processing period and the average receivable collection period warrant further investigation. Understanding the underlying causes of these trends is crucial for optimizing working capital management and maintaining financial health.

The average payables payment period exhibited a generally increasing trend from March 31, 2022, through December 31, 2022, followed by fluctuations and a subsequent decrease towards the end of the analyzed period. This indicates changes in the company’s management of its payment obligations to suppliers.

Overall Trend

The average payables payment period began at 39 days in March 2022 and increased to 55 days by March 2023. A subsequent decline was observed, reaching 36 days by December 2025. This suggests an initial lengthening of the time taken to settle supplier invoices, followed by a return towards a shorter payment cycle.

Initial Increase (Mar 31, 2022 – Mar 31, 2023)

From March 31, 2022, to March 31, 2023, the average payables payment period consistently increased. It rose from 39 days to 43 days, 46 days, 50 days, and ultimately peaked at 55 days. This could be attributed to a deliberate strategy to preserve cash flow, potentially in response to changing economic conditions or internal financial goals. Alternatively, it might reflect evolving supplier terms or increased invoice processing times.

Fluctuation and Decline (Mar 31, 2023 – Dec 31, 2025)

Following the peak of 55 days, the average payables payment period experienced some volatility. It decreased to 53 days in June 2023, then increased to 40 days in September 2023, and 45 days in December 2023. From December 2023 through December 2025, a more consistent downward trend was observed, with the period decreasing to 36 days. This suggests a renewed focus on optimizing payment cycles, potentially driven by improved cash flow management or strengthened supplier relationships.

Recent Performance

The most recent reported period, December 31, 2025, shows an average payables payment period of 36 days. This represents the lowest value observed throughout the entire analyzed timeframe, indicating efficient management of payables and potentially favorable supplier terms.

The observed changes in the average payables payment period warrant further investigation to understand the underlying drivers and their impact on the company’s financial health and supplier relationships.

The short-term operating activity of the company, as measured by its cash conversion cycle and component ratios, demonstrates a generally increasing trend over the observed period. A significant lengthening of the cash conversion cycle is apparent, particularly from 2022 through 2025. This lengthening is driven by changes in inventory management, receivables collection, and payables payment practices.

Average Inventory Processing Period

The average inventory processing period exhibits a consistent upward trend throughout the period. Starting at 127 days in March 2022, it steadily increased to 254 days by March 2025, with a slight decrease to 231 days by December 2025. This suggests a growing amount of time required to convert inventory into finished goods and ultimately, sales. The increase may indicate challenges in inventory management, potentially due to overstocking, slower production cycles, or obsolescence.

Average Receivable Collection Period

The average receivable collection period shows more fluctuation but generally trends upward. It began at 35 days in March 2022, peaked at 44 days in September 2025, and concluded at 41 days in December 2025. This indicates a lengthening of the time it takes to collect payments from customers. Potential causes include changes in credit terms offered to customers, a shift in the customer base towards those with longer payment cycles, or inefficiencies in the collection process.

Average Payables Payment Period

The average payables payment period also demonstrates variability. It increased from 39 days in March 2022 to a high of 55 days in March 2023, then decreased to 36 days by December 2025. While there is a decrease towards the end of the period, the period was generally longer in 2022 and 2023 than in 2024 and 2025. This suggests the company has, at times, been taking longer to pay its suppliers, potentially to manage cash flow. The recent decrease may reflect improved supplier relationships or a change in payment strategies.

Cash Conversion Cycle

The cash conversion cycle increased substantially over the period, rising from 123 days in March 2022 to 236 days in December 2025. The most significant increase occurred between March 2022 and September 2023, reaching a peak of 222 days. The cycle remained elevated throughout the remainder of the period. This lengthening cycle indicates that the company is tying up more cash in its operations for longer periods. The combined effect of the increasing inventory processing period and receivable collection period, partially offset by fluctuations in the payables payment period, drives this trend. A longer cash conversion cycle can potentially indicate reduced operational efficiency and increased financing needs.

Overall, the observed trends suggest a need for review of inventory management practices, credit and collection policies, and supplier payment terms. Further investigation is warranted to understand the underlying causes of these changes and to identify opportunities to optimize the company’s working capital management.