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    TEL
    Earnings call· Dec 2025(Q1 FY26)

    TE Connectivity plc TEL

    Jan 21, 2026 Source

    Executive summary

    TE Connectivity plc Q1 FY26 — Record Orders and Strong AI Revenue Growth

    TE Connectivity delivered strong Q1 FY26 results, driven by record orders and robust organic growth across both segments, particularly in Digital Data Networks (AI revenue) and Industrial Solutions. The company is increasing capital expenditure to support growing customer awards for AI programs, reinforcing its strategy to capitalize on data and power connectivity trends. Management expects continued margin expansion and double-digit EPS growth, with full-year sales growth ahead of its long-term target.

    Highlights

    5

    • Sales grew 22% on a reported basis and 15% organically year-over-year.

    • Record orders exceeded $5 billion, an increase of over $1 billion versus the prior year, with a book-to-bill ratio of 1.1.

    • Adjusted earnings per share reached a record $2.72, up 30% versus the prior year.

    • Adjusted operating margins expanded by 180 basis points to 22%.

    • Generated over $600 million in free cash flow, returning 100% to shareholders.

    Concerns

    3

    • Fiscal Year 2026 auto production is expected to be roughly 88 million units, down slightly versus the last year.

    • The North America truck market remains negative, with no significant order improvement yet.

    • Ongoing inflationary pressure on metals requires quick pass-through pricing to maintain margins.

    Guidance & targets

    8
    CategoryTargetConfidence
    Q2 FY26 Sales
    $4.7 billion
    high materiality
    High
    Q2 FY26 Adjusted EPS
    $2.65
    high materiality
    High
    FY26 AI Revenue
    couple of hundred million dollars higher
    high materiality
    High
    FY26 Capital Expenditure
    closer to 6% of our sales
    medium materiality
    High
    FY26 Free Cash Flow Conversion
    at least 100%
    medium materiality
    High
    FY26 Adjusted Effective Tax Rate
    approximately 23%
    low materiality
    High
    Long-term Annual Average Sales Growth
    6 to 8 points
    high materiality
    High
    FY26 Sales Growth
    ahead of this target
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Industrial Solutions
    Strong operational performance and benefits of higher volume drove margin expansion of over 500 basis points. AI revenue was higher than expectations, creating backlog into 2027. Recovery seen in factory automation applications across all regions. Energy growth driven by increased investments in grid hardening and renewable applications in the U.S. and Europe. Favorable demand trends in commercial aerospace and defense.
    Digital Data Networks grew 70% year-over-yearAutomation and Connected Living grew 12% organically year-over-yearEnergy sales grew 88% (15% organic)AD&M sales grew 11% organicallyMedical business grew 5% organically
    		—38% reported, 26% organic—23% adjusted operating margin
    Transportation Solutions
    Auto sales driven by content growth in Asia and Europe, balanced between data connectivity, e-mobility, and electronification. FY26 auto production view remains consistent at roughly 88 million units. Commercial transportation recovery seen in Asia and Europe after two years of cyclical declines.
    Auto sales grew 7% organicallyGrowth over market at high end of 4- to 6-point rangeCommercial transportation organic growth of 16% year-over-yearSensors sales were essentially flat
    		—10% reported, 7% organic—above 21% adjusted operating margin

    Operational metrics

    9
    Non-GAAP EPS
    $2.72up 33% YoY
    Q1 FY26

    Record adjusted earnings per share.

    Non-GAAP operating margin
    22.2%expanded 180 bps YoY
    Q1 FY26

    Record adjusted operating margin driven by strong operational performance.

    Free cash flow conversion
    100%
    Q1 FY26

    100% of free cash flow returned to shareholders through share buybacks and dividends.

    Adjusted effective tax rate
    22%
    Q1 FY26

    Expected to be 22% in Q2 FY26 and approximately 23% for the full year FY26.

    Restructuring and other charges
    $10 million
    Q1 FY26

    Included in GAAP operating income. Expected to be roughly $100 million for full year FY26.

    Amortization expense
    $57 million
    Q1 FY26

    Included in GAAP operating income.

    Acquisition-related charges
    $6 million
    Q1 FY26

    Included in GAAP operating income.

    Incremental operating margins
    30%+
    FY26

    Expected for both segments for the full fiscal year. Volume growth and reduced operating footprint contribute to flow-through.

    Global truck build
    up 200 bps
    FY26

    Expected for the full year, company expects to outgrow this.

    Industry KPIs

    9
    MetricValueDetails
    M a contributionRichards acquisition
    Orders book to bill$5.1B orders, 1.1 book-to-billUSD, ratio
    Segment revenue growthIndustrial Solutions: 38% reported, 26% organic; Transportation Solutions: 10% reported, 7% organic%
    Content per device per vehicleHigh end of 4- to 6-point rangepoints
    Design wins product cycle rampsNew program awards
    Order visibility backlog policyBacklog created
    Capacity expansion internal sourcingIncreased CapEx
    End market revenue mix organic growth15% organic growth%
    Operating margin incremental leverage22.2% adjusted operating margin%

    Orderbook & backlog

    6
    Total orders$5.1 billionQ1 FY26 end

    up >$1 billion YoY

    Record orders, broad-based across businesses and geographies. DDN orders creating backlog for H2 FY26 and into FY27.

    Book-to-bill1.1Q1 FY26 end

    Reinforces momentum.

    Digital Data Networks ordersup 70%Q1 FY26 end

    YoY

    Played a part in overall order strength.

    Industrial segment orders (excluding DDN)up double digitQ1 FY26 end

    YoY

    Broad-based strength across 4 of 5 businesses.

    Industrial segment ordersup >40%Q1 FY26 end

    YoY

    Strong growth across essentially every business.

    Transportation ordersup 11%Q1 FY26 end

    YoY

    Grew in all businesses, reflecting production patterns.

    Deals & partnerships

    1
    RichardsAcquisition to capitalize on strong growth opportunities in the U.S. utility market.

    The Richards acquisition enables TE Connectivity to expand its presence and capitalize on growth in the U.S. utility market, contributing to the strong performance of the Energy business.

    Capital programs

    1
    Increased CapEx for AI programsunderway
    Period spend: closer to 6% of sales

    Benefit: support production of specific program wins

    Increased capital expenditure for FY26 to support the growing pipeline of customer awards for AI programs. Primarily for specific tooling in existing production facilities in Asia and North America.

    Risks & headwinds

    4
    Macro unevennessongoing

    ongoing

    Mitigation: Strong execution by teams to deliver record adjusted operating margins and EPS, improved operating resilience through localization of supply chain.

    Auto production declineFY26, Q2 FY26

    FY26: roughly 88 million units (down slightly YoY); Q1 to Q2: down 3 million units

    Mitigation: Content growth above market (high end of 4-6 point range) in automotive.

    North America truck market weaknesscurrent

    negative

    Mitigation: Monitoring the market; hoping for an uptick in production environment.

    Inflationary pressure on metalscurrent

    exploding prices (copper, gold, silver)

    Mitigation: Quickly passing costs through pricing; leveraging purchases; strong pipeline of opportunities to reduce costs; not expected to impact margins or flow-through.

    What to watch in Q2 FY26

    5

    AI revenue growth

    Q3 FY26, Q4 FY26, into FY27
    CurrentFY26 AI revenue expected to be $200M higher than 90 days ago
    TargetContinued ramp of new AI programs in Q3/Q4 FY26

    Why it matters

    AI revenue is a key growth driver and investment thesis for the company, with significant capital being allocated to support its expansion.

    our AI revenue was higher than our expectations. We now expect our AI revenues in fiscal 2026 to be a couple of hundred million dollars higher than our view 90 days ago, with growth expected across every hyperscale customer.

    Q&A highlights

    6

    Confirm the raised AI revenue forecast and discuss the linkage between capacity additions, scaling, and margin improvement.

    Confirmed FY26 AI revenue forecast is $200 million higher than 90 days ago, with growth across all hyperscalers. Emphasized that programs are large and scale over time, with new awards for later in FY26 and into FY27. Stated that margins are improving in Industrial Solutions, benefiting from AI volumes and overall business improvements.

    “we do think the number for this year will be $200 million more than what we just shared. And what's nice is this year, we're going to have growth across all hyperscaler customers.”

    asked by Scott Davis · answered by Terrence Curtin

    2 min read5 chapters

    Detailed Narrative

    01

    Broadened Growth Drivers and Strategic Reinforcement

    TE Connectivity's Q1 FY26 results reinforce its strategy to benefit from secular trends in data and power connectivity, as outlined at its Investor Day. The company's co-creation engineering models and global supply chain investments are driving value for customers, leading to new program awards and record orders. This momentum demonstrates the broadening of growth across the business, with sales growth and order trends exceeding expectations.

    02

    Accelerating AI Momentum and Increased Investment

    AI revenue in Q1 FY26 surpassed expectations, with the full-year FY26 AI revenue forecast now projected to be a couple of hundred million dollars higher than previously guided. This growth is expected across all hyperscale customers, driven by new program awards that are creating backlog for the second half of FY26 and into FY27. To support this acceleration, the company is increasing its capital expenditure for FY26 to closer to 6% of sales, primarily for specific program wins and tooling in existing production facilities.

    03

    Strong Performance in Industrial Solutions Segment

    The Industrial Solutions segment delivered robust performance, with sales growing 38% reported and 26% organically year-over-year. Digital Data Networks (DDN) had an outstanding quarter, growing 70% YoY, with AI revenue exceeding expectations. The energy business saw sales growth of 88% (15% organic), benefiting from increased investments in grid hardening and renewables in both the U.S. and Europe. Automation and Connected Living (ACL) grew 12% organically, indicating a recovery in factory automation applications across all regions.

    04

    Transportation Segment Driven by Content Growth and Regional Recovery

    The Transportation segment reported sales growth of 10% reported and 7% organically year-over-year. Auto sales grew 7% organically, with content growth over market at the high end of the 4-6 point range, driven by data connectivity, e-mobility, and electronification trends in Asia and Europe. Commercial transportation showed strong organic growth of 16% YoY, primarily due to market recovery in Asia and Europe after two years of cyclical declines, though the North America truck market remains negative.

    05

    Operational Efficiency and Balanced Capital Allocation

    TE Connectivity achieved record adjusted operating margins of 22% and adjusted EPS of $2.72, reflecting strong operational performance and volume leverage. The company generated $608 million in free cash flow, returning 100% to shareholders through buybacks and dividends. Despite increased capital expenditure for AI programs, the company maintains a healthy balance sheet and expects at least 100% free cash flow conversion for FY26, demonstrating disciplined capital allocation.

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