Texas Instrument is one of the most shareholder-friendly semiconductor companies. The management aims to return 100% of the free cash flow to shareholders through dividend and share buyback, and they delivered. Over the past decade, from 2011 to 2020, the company generated $42 billion of free cash flow, paid $18 billion in dividends, and spent $28 billion on share buyback. It has worked well for shareholders as free cash flow per share almost tripled even without significant revenue growth.

Texas Instruments Share Buyback

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Texas Instruments Share Buyback

However, something seems to have changed over the past few quarters. Since September 2020, the company has essentially stopped repurchasing, bought back less than $300 million of shares over the past four quarters, compared to $5 billion in 2018 and $3 billion in 2019. At the same time, the free cash flow generated from the operation has reached a record high of over $6 billion during the same period. 

What will the company do with all that cash if they are not buying back stock? All the operating metrics look good in FQ2'21: revenue, margin, FCF, inventory, lead time. Nothing alarming. However, the very conservative revenue guidance for FQ3, combined with this record low buyback, doesn't give investors much confidence. It makes it look like the management is preparing for the downturn?