TE Connectivity (NYSE:TEL) reported record adjusted earnings per share and record orders in its fiscal 2026 third quarter, with executives pointing to accelerating demand tied to artificial intelligence infrastructure, power investment, electrification and automation.
Chief Executive Officer Terrence Curtin said the company’s “strategic positioning around the accelerating data and power trend continues to drive broad-based outperformance,” adding that TE is participating in what he described as one of the largest global technology and infrastructure investment cycles. The company now expects full-year fiscal 2026 sales to grow approximately 15%, representing more than $2.5 billion of incremental revenue, while adjusted earnings per share are expected to rise 23% year over year.
Adjusted earnings per share increased 22% year over year to a record $2.94. Adjusted operating margin expanded 90 basis points to 21.9%. GAAP operating income was $981 million, while GAAP EPS was $2.55, including restructuring, acquisition and other charges as well as amortization expense.
AI and Power Demand Drive Industrial Segment Growth
TE’s Industrial Solutions segment posted third-quarter sales growth of 22% on a reported basis and 21% organically. Curtin said the segment benefited from growth across the portfolio, led by more than 30% organic growth in both the Digital Data Networks, or DDN, business and the energy business.
In DDN, sales increased 34% year over year and were up $100 million sequentially. Curtin said the company continues to see demand tied to AI architectures, including increasing deployment of CPUs and networking that expands the market for high-speed copper connectivity. He also said TE sees longer-term opportunities in optical connectivity following its RAM Photonics acquisition, though meaningful revenue from fiber-attached unit technology is not expected until 2028 and beyond.
Responding to analyst questions about copper versus optical connectivity in AI infrastructure, Curtin said TE views the opportunity as “copper and optical,” rather than one replacing the other. He said copper is expected to remain important within racks and scale-up architectures, while optical is already prevalent in scale-out applications. He also noted that rising power requirements in AI systems are creating additional opportunities for TE’s power connectivity products.
Energy sales grew 33% organically in the quarter. Curtin said the business is benefiting from utility grid hardening, aging infrastructure replacement and data center build-outs. He estimated that about one-third of the energy market growth where TE is positioned is driven by data center build-outs, and said the company views the energy business as more of a “mid-teens” grower for the year and into next year.
Automation and Connected Living sales rose 16%, or 14% organically, with growth across every region. Aerospace and defense sales increased 12%, supported by strength in commercial aerospace and defense markets. Curtin said defense is seeing a stronger inflection, particularly in Europe and the U.S., with backlog building as program velocity increases.
Transportation Segment Outperforms Vehicle Production
TE’s Transportation Solutions segment grew 7% on a reported basis and 5% organically. Automotive sales increased 5% reported and 3% organically, despite what management described as a decline in vehicle production. Curtin said the company continues to benefit from higher content per vehicle, including data connectivity, electrification of the powertrain and software-defined vehicle architectures.
Curtin said TE expects automotive content outperformance in the range of four to six percentage points for fiscal 2026 and over the longer term. In China, he said TE’s business grew 6% against a 2% decline in production, reflecting eight points of outperformance. He added that exports by Chinese original equipment manufacturers are helping offset a weaker domestic market.
Commercial Transportation sales increased 20% on a reported basis and 18% organically. Curtin cited improving cycle trends across regions and market verticals, new program wins and further electrification of trucks in Asia. Transportation segment adjusted operating margin was 21%.
Record Orders Build Visibility Into Fiscal 2027
Management emphasized that order strength was broad-based. Industrial segment orders increased 36% from the prior year, while Transportation orders rose 19%. Curtin said every business across both segments delivered double-digit order growth.
Within Industrial, year-to-date DDN orders were up more than 70% versus last year, while energy, aerospace and defense, and Automation and Connected Living each posted 20% year-to-date order growth. Curtin said roughly half of the year-over-year Industrial order increase came from DDN, with AI program ramps contributing to backlog that is expected to support fiscal 2027 growth.
Chief Financial Officer Heath Mitts said the company will exit fiscal 2026 with a strong backlog position in both Industrial and Transportation. He said order momentum and backlog growth give management confidence that TE’s performance will continue into next year.
Cash Flow, Capital Returns and Astrodyne TDI Acquisition
TE generated $1.2 billion of cash from operations and $883 million of free cash flow in the quarter. Year to date, free cash flow was approximately $2.2 billion. Mitts said TE has returned about $2 billion to shareholders through dividends and share repurchases so far this year and continues to expect free cash flow conversion of roughly 100% for fiscal 2026.
The company also announced an agreement to acquire Astrodyne TDI, a bolt-on acquisition expected to add more than $250 million in annual sales. TE said the purchase price is approximately $1.4 billion and the transaction is expected to close by the end of the calendar year, subject to customary closing conditions.
Curtin said Astrodyne TDI expands TE’s portfolio of power filters and custom power supplies for mission-critical applications, including semiconductor equipment, defense and medical markets. Mitts said the acquisition will be funded with cash and is expected to be accretive to TE’s growth rates and margins at both the company level and within the Industrial segment.
Fourth-Quarter Outlook
For the fiscal fourth quarter, TE expects sales of approximately $5.25 billion, up 11% from the prior year, and adjusted EPS of about $3.05. Mitts said the adjusted effective tax rate is expected to be between 22% and 23% in the fourth quarter, while cash taxes are expected to remain well below the adjusted effective rate.
Management said the company continues to manage inflationary pressures through pricing and cost actions while investing in engineering and manufacturing capacity to support future growth.
About TE Connectivity (NYSE:TEL)
TE Connectivity (NYSE: TEL) is a global industrial technology company that designs and manufactures connectivity and sensor solutions used to enable the flow of power and data in a wide range of applications. Its product portfolio includes electrical connectors, cable and wire harness assemblies, sensors, relays and switches, fiber-optic and coaxial interconnects, and other passive and active components that provide mechanical and electrical connections in complex systems.
The company’s products and engineered solutions serve diverse end markets such as automotive and transportation, industrial equipment, data communications and networks, aerospace and defense, medical devices, and energy.
