TE Connectivity
Designs and manufactures engineered connectivity and sensor components sold to OEMs across transportation, industrial, energy, data-center, aerospace/defense, and medical end markets; a broad catalog of engineered components plus custom-engineered content designed into customer platforms, monetized per-unit with multi-year design-win stickiness. Growth via organic content-per-unit gains plus bolt-on M&A.
Earnings, margins, COGS & capex
FY2025 was a record year: $17.26B sales (+9% reported / +6% organic), record 20% adjusted operating margin, record $8.76 adjusted EPS ($6.16 GAAP), and record $3.2B free cash flow. The mix shifted decisively in FY2026: Industrial Solutions (AI datacenter, energy grid) is now the growth engine, driving Q1 FY2026 sales +22% and record orders, while Transportation Solutions net sales actually declined ~1% in FY2025 on soft auto/sensor/commercial-transport demand. TE reorganized from three segments to two (Transportation Solutions, Industrial Solutions) beginning FY2025.
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~66¢ is cost of goods and ~14¢ operating expense, leaving ~20¢ of operating profit.
Revenue trend
Margins
expanding on volume leverage + Industrial mix
improving with adjusted margin; quarterly GAAP figure not itemized in summary releases
double-digit growth; FY2026 tracking toward ~$11+
strong; near-term pressure as capex rises to ~6%
COGS structure
Bill-of-materials is metals-heavy: copper, gold and other precious metals for contacts/plating, plus engineered plastics/resins for housings; commodity and FX swings flow through gross margin. High-mix stamping, molding and assembly across a global low-cost manufacturing footprint; automation and vertical integration underpin the ~34% gross margin.
Capex
~5% of sales FY2025 (~$0.9B), rising to ~6% in FY2026 to add AI-datacenter high-speed interconnect and grid capacity; management frames the step-up as demand-backed (backlog extending into 2027), not speculative.
Latest earnings
Beat - Q1 and Q2 FY2026 both came in above guidance; Q1 FY2026 posted +22% sales and $5.1B record orders, Q2 FY2026 set a fresh $5.3B orders record
Q3 FY2026 guided to ~$5.0B sales (double-digit growth) and ~$2.83 adjusted EPS (+17% YoY); management guides to sustained double-digit growth from AI, energy grid and vehicle connectivity
- Q2 FY2026 orders
- $5.3B record (+25% YoY)
- Q1 FY2026 orders
- $5.1B record (+28% YoY, +9% sequential)
- DDN (AI datacenter) revenue
- ~$707M in Q1 FY2026, +70% YoY
- Q2 FY2026 adjusted EPS
- $2.73 record (+24% YoY)
- FY2025 free cash flow
- $3.2B (record)
Growth drivers
- AI datacenter / Digital Data Networks (DDN) high-speed connectivity for hyperscalers - grew ~70% YoY to ~$707M in Q1 FY2026, ~a third of Industrial; backlog into 2027
- Energy grid hardening + renewables interconnect (Energy among the fastest-growing businesses)
- Next-gen vehicle content — EV electrified powertrain + rising data connectivity content per vehicle, growing content-per-vehicle even as auto unit volumes stay soft
- Factory automation / industrial recovery within the Automation & Connected Living business
- Bolt-on M&A (~$2.6B deployed in FY2025, e.g. Richards Manufacturing) adding capability in industrial/energy/medical
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2025-11-10. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
TE is a picks-and-shovels winner of two secular capex supercycles - AI datacenters and grid electrification - re-rating from an auto-cyclical component maker to a structural double-digit grower with expanding margins and record cash generation.
- AI-driven Digital Data Networks growing ~70% YoY (~$707M in Q1 FY2026) with backlog into 2027 and a raised FY2026 AI outlook - a durable, hyperscaler-funded demand leg
- Industrial Solutions +24% in FY2025 and accelerating further in Q1/Q2 FY2026 now leads the company, diversifying away from auto cyclicality
- Record orders - $5.1B in Q1 FY2026 (+28% YoY) then $5.3B in Q2 FY2026 (+25% YoY) - alongside a 22%+ adjusted operating margin show demand and pricing power simultaneously
- Record $3.2B FCF + investment-grade balance sheet funds capacity, bolt-on M&A and shareholder returns
- Analyst consensus Buy with ~$262 average price target (~30% upside from ~$200) reflects confidence in the AI/grid thesis
Over half of revenue is still tied to cyclical auto production (which shrank ~1% in FY2025), and the AI-datacenter growth that is re-rating the stock is now heavily priced in - leaving TE exposed to both an auto downturn and any AI-order digestion.
- Transportation Solutions (~54% of sales) rides global auto build rates and already declined ~1% in FY2025; an auto recession or EV-adoption stall deepens the drag on the largest segment
- AI expectations are elevated - shares dropped ~12.8% after Q2 FY2026 despite record orders and a raised AI outlook, signaling a high bar
- Capex rising to ~6% of sales pressures near-term free cash flow while TE builds ahead of demand that could normalize
- Connector competition is fierce: Amphenol is an equally strong AI-datacenter beneficiary, and Chinese players (Luxshare, FIT Hon Teng) are moving up-market on price
- Commodity (copper/gold) and FX volatility can compress the record margins the bull case extrapolates
What it is worth
Forward P/E and EV/EBITDA vs connector peers (Amphenol APH, Aptiv APTV), cross-checked against the AI/grid growth trajectory and analyst targets.
~$150-170
an auto downturn plus AI-capex digestion drives growth back toward mid-single digits, EPS stalls near ~$10.5, and the multiple de-rates to ~14-15x - roughly the level the post-Q2-FY2026 selloff gestured toward.
~$210-245
Industrial growth offsets soft auto, adjusted EPS ~$11-12, multiple holds ~18-20x forward - modest upside from current levels as the AI leg proves durable but order growth normalizes off peak rates.
~$270-300
AI datacenter + grid sustain double-digit organic growth, adjusted operating margin holds 22%+, and the market re-rates TEL to ~22-24x on ~$12-13 adjusted EPS (in line with/above the ~$262 Street target).
At ~$200 (2026-07-06) and ~$58.4B market cap, TEL trades ~20.4x trailing GAAP P/E and ~17x forward earnings on FY2026 adjusted EPS tracking toward ~$11+ (Q1 $2.72 + Q2 $2.73 delivered; Q3 guided ~$2.83). That is a growth-premium multiple justified only if AI/grid demand persists; the ~12.8% post-Q2 selloff shows how sensitive the stock is to any AI-order digestion. Consensus is Buy with an average target of ~$262 (~30% upside).
SWOT
Strengths
- Global #1 in connectors by share with unmatched breadth across transportation, industrial, energy, datacenter, aero/defense and medical
- Deep design-win moat — components engineered into customer platforms with multi-year switching costs and content-per-unit growth
- Record profitability — 20% adjusted operating margin and $3.2B FCF in FY2025 - funding capex, M&A and shareholder returns (~$2.2B returned in FY2025)
- Structural AI + grid demand converting the Industrial segment into a double-digit grower with backlog into 2027
Weaknesses
- Transportation Solutions (~54% of FY2025 sales) is tied to cyclical global auto production - and its net sales actually declined ~1% in FY2025, a soft-volume anchor
- Commodity/FX exposure (copper, gold, precious metals) pressures gross margin
- Capital intensity stepping up to ~6% of sales, a near-term free-cash-flow headwind
- Growth increasingly concentrated in AI/hyperscaler demand — a lumpier, expectations-sensitive customer base than the broad auto base
Opportunities
- AI datacenter interconnect (high-speed copper + optical-adjacent) is early-innings; DDN backlog extends into 2027
- Grid modernization, renewables and electrification are multi-decade capex cycles for connectivity content
- Rising electronic content per vehicle (EV powertrain, ADAS, data) lifts Transportation even in flat-to-down unit markets
- Bolt-on M&A optionality in energy, industrial and medical with an investment-grade balance sheet
Threats
- Auto production downturn or EV-adoption slowdown hitting the largest segment (already down ~1% in FY2025)
- AI-capex digestion / order normalization — stock fell ~12.8% after Q2 FY2026 despite record orders, showing how priced-in growth is
- Intense competition from Amphenol and Aptiv, plus Chinese connector makers (Luxshare, FIT Hon Teng) climbing the value chain
- Tariffs / supply-chain and commodity-cost shocks
Moats, dependencies & bottlenecks
Moats
Components are custom-engineered into customer platforms (a car model, a server, a grid system) with multi-year qualification cycles; switching mid-program is costly and risky, giving revenue visibility and pricing power.
Largest connector portfolio and manufacturing footprint yields cost, catalog-breadth and global-support advantages competitors struggle to match.
Moderate-Strong Deep systems/applications engineering (high-speed signal integrity, harsh-environment, high-voltage EV) is a technical barrier, especially in AI high-speed interconnect and EV powertrain.
Once designed in, TE captures the aftermarket and follow-on programs; erodes only at platform-redesign inflection points.
Dependencies
Customer/end-market Transportation Solutions ~54% of FY2025 sales; directly geared to auto build rates and EV mix, and already down ~1% in FY2025.
Customer/end-market DDN growth (+70% YoY) rides a small set of hyperscaler buyers; powerful but lumpier and more expectations-sensitive than the auto base.
Metals-heavy BOM; price and FX swings flow through gross margin.
Energy and Automation demand tracks utility and factory-automation investment cycles.
Operational/geopolitical Low-cost country manufacturing exposes TE to tariffs, trade policy and supply-chain disruption.
Advantages
- Largest connector maker globally - scale, breadth and cost leadership
- Design-win stickiness with multi-year revenue visibility and content-per-unit growth
- Dual secular tailwinds (AI datacenter + grid electrification) now driving Industrial
- Record margins (20% adjusted OM) and FCF ($3.2B) funding capacity, M&A and buybacks/dividends
- Diversified across transportation, industrial, energy, datacenter, aero/defense, medical - reduces single-market dependence
Weaknesses
- Majority of revenue still tied to cyclical auto production (Transportation -1% in FY2025)
- Rising capital intensity as a near-term FCF drag
- AI-growth premium leaves the stock expectations-sensitive (post-Q2 FY2026 ~12.8% selloff)
- Commodity/FX margin exposure
- Chinese competitors advancing on price up the value chain
Bottlenecks
- Capacity to meet AI/grid demand — capex stepping to ~6% of sales to add high-speed interconnect and grid capacity; execution/ramp risk
- Skilled applications-engineering and manufacturing capacity for next-gen high-speed and high-voltage designs
- Commodity availability/cost (copper, gold) and precious-metal sourcing
- Auto end-market demand is the volume ceiling on the larger segment regardless of TE execution
Top signals & trends
Top signals
Orders leading revenue - forward demand strength, especially AI/grid.
Confirms the structural AI leg is real and accelerating.
Growth is heavily priced in; high bar for beats, valuation-sensitive.
Volume leverage + Industrial mix lifting profitability.
Demand-backed capacity build, but a near-term FCF headwind.
Bullish (with optimism caveat) · ~30% implied upside reflects Street conviction in AI/grid thesis.
Trends
High-speed copper interconnect content per rack rising; TE and Amphenol are core beneficiaries as hyperscalers scale GPU clusters.
Multi-decade utility/renewables capex cycle lifts energy-connectivity content.
EV powertrain, ADAS and in-vehicle networking grow content-per-vehicle even in flat-to-down unit markets.
Soft global auto volumes and uneven EV adoption drove Transportation sales down ~1% in FY2025.
Automation & Connected Living recovering on industrial capex.
Luxshare and FIT Hon Teng pressuring price and winning share, incl. in datacenter/consumer.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Copper / gold / precious-metal producers (e.g. Freeport-McMoRan) Metals for contacts and plating are the key commodity input; TE sources broadly and hedges some exposure rather than contracting directly with any single miner.
Celanese, DuPont) Thermoplastics for connector housings from major chemical suppliers.
molding, automation) Manufacturing tooling and automation for high-mix production.
GM, Toyota, Stellantis, Tesla, VW) Transportation Solutions' core; content-per-vehicle growth drives the segment even as unit volumes soften.
Microsoft, Alphabet, Meta) via server/networking OEMs Drive DDN high-speed interconnect demand (+70% YoY).
GPU-cluster buildouts pull TE high-speed connector content per rack.
Aerospace, Defense & Marine content within Industrial.
Energy segment customers for grid-hardening and renewable interconnect.
Closest public peer and the other scale connector/interconnect leader; an equally strong AI-datacenter beneficiary with high-speed IT-datacom exposure and aggressive M&A.
Automotive electrical architecture, connectors and wiring; direct competitor in Transportation/vehicle connectivity.
Private (Koch-owned); major global connector maker competing across datacenter, auto and industrial.
Sensors and electrical protection; competes in TE's sensor and transportation-sensing lines.
Optical fiber/connectivity for datacenters - adjacent competitor and partial partner as AI interconnect blends copper and optical.
Chinese connector/assembly maker climbing up-market into datacenter and auto; a share/price threat. Named for competitive context only, not as an investment.
Circuit protection and sensing - adjacent overlap in industrial/transportation electronics.