TE Connectivity Ltd. (TEL) Earnings & Analysis

Latest quarter

TE Connectivity reported Q3 FY2026 revenue of $5.2 billion, up 13.8% from $4.5 billion a year earlier. The company’s revenue exceeded the consensus of $5.0 billion by 3.14%. TE Connectivity reported adjusted EPS, as the consensus counts it, of $2.94, above the $2.85 consensus by 3.16%, while diluted EPS was $2.55, up 19.2% from $2.14.

The filing attributed sales growth to both Industrial Solutions and Transportation Solutions. Industrial Solutions sales increased 21.9%, led by digital data networks, energy, automation and connected living, and aerospace, defense and marine; Transportation Solutions sales increased 6.7%, led by automotive and commercial transportation. The filing reported gross margin of 35.6%, compared with 35.3%, and operating margin of 19.0%, compared with 18.9%. Free cash flow was $883.0 million, compared with $962.0 million a year earlier.

TE Connectivity had guided for Q3 sales of $5.0 billion, and the company reported $5.2 billion, above that outlook. The company had expected Q3 adjusted EPS of around $2.83 and reported $2.94 on that measure.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the earnings call, Chief Executive Officer Terrence Curtin said demand from AI infrastructure was supporting the company’s digital data networks and energy businesses, while electrification, automation and compute-at-the-edge applications were contributing across other businesses. Curtin said Q3 orders were $5.7 billion, up 27% from a year earlier, and said the backlog was expected to contribute to growth in fiscal 2027.

Responding to questions about Industrial Solutions orders, Curtin said Digital Data Networks order growth was building backlog as multiple customer programs ramped, with more of that momentum expected to translate into next year than the current fiscal year. He said the company expected Digital Data Networks sales to increase sequentially in Q4. Curtin also said energy demand reflected utility grid hardening, data-center power infrastructure and clean-energy applications, and that TE expected the energy business to grow at a mid-teens rate in fiscal 2026 and the following year.

Curtin said TE was addressing both data and power connectivity requirements in AI architectures. In response to questions about potential competition in power connectivity, he said he did not see new entrants coming in because customers were considering power and signal-chain requirements together. He said approximately one-third of the company’s AI business involved power connectivity.

On Transportation Solutions, Curtin said automotive sales growth reflected content per vehicle despite lower global vehicle production, while commercial transportation benefited from improving cycle trends and program wins. He said Chinese exports were offsetting weak local demand in China and that Asia and Europe were offsetting a weak North American market.

Chief Financial Officer Heath Mitts said adjusted operating margins were 21.9% in Q3 and that the company was managing inflationary pressures through pricing and cost actions. Mitts said TE would continue to invest in engineering and manufacturing capacity. He also said the planned Astrodyne TDI acquisition would add power-filter and custom-power capabilities to Industrial Solutions, with closing expected by the end of calendar 2026 subject to customary conditions.

Guidance

TE Connectivity expects Q4 FY2026 revenue of $5.3 billion and adjusted EPS of $3.05. The company expects GAAP EPS from continuing operations of $2.84 and an adjusted effective tax rate between 22.0% and 23.0% for the quarter. For FY2026, Curtin said TE expects sales growth of 15.0% and adjusted EPS growth of 23%; Mitts said the company continues to expect free-cash-flow conversion of roughly 100.0% and restructuring charges of roughly $100.0 million.