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    TEL
    Earnings call· Mar 2026(Q2 FY26)

    TE Connectivity Q2 FY26 earnings call TEL

    Apr 22, 2026 Source

    Executive summary

    TE Connectivity Q2 FY26 — Record Orders and Strong Earnings Growth

    TE Connectivity delivered strong Q2 FY26 results, driven by record orders and robust earnings growth, underscoring the effectiveness of its strategy to capitalize on data and power proliferation. The company saw broad-based momentum, particularly in its Industrial segment and AI-related revenues, leading to an upward revision in its full-year AI outlook. Management remains focused on strategic investments and operational efficiency to navigate a dynamic global environment and sustain double-digit earnings growth.

    Highlights

    5

    • Sales grew 15% reported and 7% organically year-over-year, exceeding guidance.

    • Adjusted earnings per share reached a record $2.73, up 24% versus prior year.

    • Record orders of $5.3 billion, resulting in a book-to-bill of 1.12, with growth across all businesses and regions.

    • Industrial segment orders grew 40% year-over-year, with Digital Data Networks (DDN) orders up over 60%.

    • Free cash flow was a record $1.3 billion for the first half of the fiscal year, with 100% conversion expected for FY26.

    Concerns

    2

    • Auto sales declined 4% organically in the second quarter, despite market outperformance.

    • Increased inflationary pressures were noted across certain input costs like oil-based resins and freight charges.

    Guidance & targets

    9
    CategoryTargetConfidence
    Q3 FY26 Sales
    $5 billion
    high materiality
    High
    Q3 FY26 Adjusted EPS
    $2.83
    high materiality
    High
    FY26 AI revenues
    about $150 million higher
    high materiality
    High
    FY26 Restructuring charges
    roughly $100 million
    medium materiality
    High
    FY26 Full year tax rate
    approximately 22%
    medium materiality
    High
    FY26 Free cash flow conversion
    100%
    high materiality
    High
    FY26 Total growth
    over $2 billion
    high materiality
    High
    FY26 Auto content growth
    4 to 6-point range
    medium materiality
    High
    FY26 CapEx as % of revenue
    about 6%
    medium materiality
    High

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    Industrial Solutions
    Benefiting from secular growth trends in digital data networks and energy, along with continued growth in aerospace and defense and factory automation. Strong operational performance and benefits of higher volume drove margin expansion.
    Organic Growth YoY: 17%Adjusted Operating Margins expanded: 260 bps
    		—27% reported—nearly 22%
    Industrial Solutions - Digital Data Networks (DDN)
    Another outstanding quarter, with sales as expected. Continuing to win new programs and building backlog into 2027. AI revenues in FY26 expected to be $150 million higher than 90 days ago.
    		—nearly 50%——
    Industrial Solutions - Automation and Connected Living
    Growth in each region. Expect momentum in general and industrial markets to improve through the year.
    		—8% organically——
    Industrial Solutions - Energy
    Includes Richards acquisition. Organic growth driven by energy grid hardening, data center, and clean energy applications. Capitalizing on growth opportunities in the U.S. utility market.
    Organic Growth YoY: 11%
    		—60% reported——
    Industrial Solutions - Aerospace and Defense
    Driven by growth across commercial aerospace and defense applications. Favorable demand trends coupled with ongoing supply chain improvements.
    		—5% organically——
    Industrial Solutions - Medical
    Driven by continued investment in growth in key therapy applications such as structural heart and electrophysiology.
    		——sequentially—
    Transportation Segment
    Delivering growth over market in both automotive and commercial transportation, reflecting leading global position and customer co-creation model. Demonstrated operational resiliency.
    Organic Growth: down slightly
    		—5% reported—nearly 22%
    Transportation Segment - Auto
    Market outperformance against declining Auto production driven by content growth in Asia and Europe. Averaging growth over market at the low end of 4 to 6-point range year-to-date.
    Organic Growth YoY: declined 4%
    		—2% reported——
    Transportation Segment - Commercial Transportation
    Seeing continued improvement in demand trends across regions with growth in Europe and Asia and stabilization in North America. Delivering growth significantly above market driven by share gains and increasing content per vehicle.
    Organic Growth YoY: 17%
    		—21% reported——
    Transportation Segment - Sensors
    In line with expectations.
    Organic Growth YoY: declined 3%
    		—2% reported——

    Operational metrics

    16
    Adjusted Operating Income
    over $1 billion
    Q2 FY26

    Driven by strong operational performance in both segments.

    Adjusted Operating Margins
    21.7%expanded 130 bps year-over-year
    Q2 FY26

    Driven by strong operational performance and sales growth.

    GAAP Operating Income
    $954 million
    Q2 FY26

    Included $8 million of acquisition-related charges, $10 million of restructuring and other charges, and $57 million of amortization expense.

    Adjusted EPS
    $2.73up 24% year-over-year
    Q2 FY26

    Above guidance, driven by sales growth and margin expansion.

    GAAP EPS
    $2.90
    Q2 FY26

    Included a $0.39 tax benefit primarily related to a settlement of prior period tax matters, as well as restructuring, acquisition, and other charges of $0.06 and amortization expense of $0.15.

    Acquisition-related charges
    $8 million
    Q2 FY26

    Included in GAAP operating income.

    Restructuring and other charges
    $10 million
    Q2 FY26

    Included in GAAP operating income.

    Amortization expense
    $57 million
    Q2 FY26

    Included in GAAP operating income.

    Tax benefit
    $0.39
    Q2 FY26

    Primarily related to a settlement of prior period tax matters, included in GAAP EPS.

    Adjusted effective tax rate
    approximately 21%
    Q2 FY26

    For the quarter.

    Dividend increase
    10%
    Q2 FY26

    Board approved increase to quarterly cash dividend.

    Total company growth
    $1.4 billion
    FY25

    Growth delivered last year.

    Operating income flow-through
    at least 30%
    year-over-year

    Committed to achieving this on the operating income side year-over-year.

    Auto production
    88 million to 89 million unitsexpected to be slightly down
    FY26

    Company's view for the full fiscal year.

    Commercial Transportation market growth
    4%
    Q2 FY26

    Global market growth for the quarter.

    Content uplift per vehicle (Commercial Transport)
    up to $2,000versus $400 today
    future

    For next-generation powertrains in Commercial Transportation.

    Industry KPIs

    10
    MetricValueDetails
    M a contribution—
    Orders book to bill1.12
    Ai data center content revenueapproaching $2.4 billionUSD
    Content per device per vehicle4 to 6-point rangepoints
    Design wins product cycle ramps—
    Order visibility backlog policy—
    Supply demand imbalance lead times—
    Capacity expansion internal sourcing—
    End market revenue mix organic growth—
    Operating margin incremental leverageat least 30%%

    Orderbook & backlog

    7
    Orders$5.3 billionQ2 FY26

    growth of over $1 billion versus the prior year

    Book-to-bill of 1.12. Orders growth in every business and in all regions year-over-year.

    Industrial segment orders40%Q2 FY26

    grew 40% year-over-year

    Essentially every business in the segment posted double-digit orders growth.

    Digital Data Networks (DDN) ordersover 60%Q2 FY26

    grew over 60% in the quarter

    Orders are building backlog into 2027.

    DDN orders$2 billionH1 FY26

    Year-to-date orders in the DDM business.

    Transportation segment orders13%Q2 FY26

    increased 13% versus the prior year

    Year-over-year and sequential growth in all three businesses. Supporting growth and content outlook for automotive in H2 FY26.

    Commercial Transportation organic ordersvery strong double digitQ2 FY26

    grew year-over-year

    Seeing continued recovery in the global market in every region.

    Automotive ordersmid-single digitQ2 FY26

    up mid-single digit

    Showing confidence in growth despite a non-positive production environment.

    Product announcements

    1
    ProductTypeDetails
    Passive optical connectivity technology (RampPhotonics)launch

    Deals & partnerships

    1
    RampPhotonicsacquisition

    Acquisition of a leading technology for passive optical connectivity solutions, strengthening TE's roadmap to offer customer solutions for both copper and optical connectivity. The technology enables advancements in high-density fiber array connections, connecting optical fiber to CPO.

    Risks & headwinds

    3
    Increased inflationary pressures on input costsCurrent (Q2 FY26) and ongoing

    Oil-based resins and freight charges

    Mitigation: Proven playbook including optimization of factory footprint, targeted pricing actions, ongoing productivity initiatives, and localization strategy for supply chain resiliency.

    Auto production declineFY26

    Expected to be slightly down for FY26 (88-89 million units globally)

    Mitigation: Company's strong global position and content opportunities across data connectivity, powertrain electrification, and vehicle electronification are expected to drive content growth in the 4-6 point range.

    Memory component tightnessCurrent

    Memory is tight

    Mitigation: TE does not directly procure these components. Customers are placing orders further out to reserve capacity, building backlog for TE. TE is not seeing availability issues for its own procured components or slowdowns from hyperscaler customers.

    Q&A highlights

    7

    When will the additional $150 million in AI revenue be recognized?

    The $150 million AI revenue increase is for the second half of FY26, driven by ramping existing programs and new ramps, reflecting continued strong momentum in the DDN business. All businesses are expected to grow sequentially from Q2 to Q3.

    “the $150 million that I mentioned about on the statements are things that relate to the second half. Part of it is ramping of programs we have, part of it is new ramps that are coming along, and it continues to show the momentum that we have in the space.”

    asked by Scott Davis · answered by Terrence Curtin

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus and Value Creation

    TE Connectivity's strategy, outlined at its Investor Day, focuses on capitalizing on the proliferation of data and power by providing leading interconnect products across target markets. This approach aims to deliver sustained margin expansion and double-digit earnings growth, driving ongoing value creation for shareholders. The company's performance in Q2 FY26, with significant sales and earnings growth, is presented as evidence of this strategy's effectiveness.

    02

    AI Momentum and Digital Data Networks (DDN)

    The Digital Data Networks business had an outstanding quarter, growing nearly 50% year-over-year, driven by new program wins and strong order trends. The company has built backlog into 2027 for DDN and expects FY26 AI revenues to be $150 million higher than previously anticipated, totaling approaching $2.4 billion. TE is innovating with customers on roadmaps and architectures, making organic and inorganic investments to strengthen its offerings in both copper and optical solutions.

    03

    Energy Segment Growth Drivers

    The Energy segment's organic sales increased 11% year-over-year, benefiting from significant demand tied to energy grid investments. Key drivers include energy grid hardening (60-66% of business), data center power infrastructure (20% of business), and clean energy applications. The company is capitalizing on increased utility investment, build-out of power infrastructure for AI, and ongoing investment in utility-scale solar, expecting double-digit growth in grid hardening and industrial/data center for a while.

    04

    Commercial Transportation Outperformance

    Commercial Transportation sales grew 17% organically, significantly outperforming a global market that grew approximately 4%. This growth is attributed to continued improvement in demand trends across regions (Europe, Asia, and stabilizing North America) and share gains from new program wins. Content per vehicle is increasing, particularly in next-gen vehicles and electrification, with potential content uplift up to $2,000 on some next-generation powertrains compared to $400 today.

    05

    Inflationary Pressures and Mitigation

    TE Connectivity is experiencing increased inflationary pressures on certain input costs, such as oil-based resins and freight charges, driven by higher energy costs and geopolitical tensions. The company employs a 'proven playbook' to manage these impacts, including factory footprint optimization, targeted pricing actions, and ongoing productivity initiatives. Its localization strategy also enhances supply chain resiliency, allowing it to manufacture close to customers and respond quickly to changing conditions.

    06

    Copper vs. Optical Connectivity Strategy

    Management views the future of data connectivity as 'copper and optical,' not an 'either/or' scenario. Copper is expected to remain the workhorse in the rack due to its cost, power, and reliability benefits, ensuring continued TAM growth for copper solutions. Optical solutions are anticipated to be introduced more for scale-out applications. TE's recent acquisition of a passive optical connectivity technology aims to strengthen its roadmap for high-density fiber array connections, particularly for connecting optical fiber to CPO, enhancing its position for future architectural evolutions.

    AI-generated summary of the company’s earnings call. Not investment advice.