tapebrief
TEL · Q4 2025

TEL · Q1 2026 Earnings

Bullish

TE Connectivity

Reported January 21, 2026

30-second summary

30-second take: TE Connectivity beat its own Q1 guide on every line — revenue $4.67B (+22% YoY) vs $4.5B guide, organic growth 15% vs 11% guide, adjusted EPS $2.72 vs $2.53 guide — while raising the AI revenue forecast for FY2026 by a "couple hundred million dollars" above the $1.5B run-rate signaled 90 days ago. Industrial Solutions printed +38% YoY with Digital Data Networks +71% and Energy +88%, and management explicitly committed to growing above the 6-8% through-cycle target. The Q2 guide of $4.7B (+13% reported, +6% organic) implies meaningful deceleration off the Q1 print, but management framed it as auto seasonality (3M-unit Q1-to-Q2 production decline) against still-accelerating order momentum — record $5.1B Q1 orders, +28% YoY, double-digit in every region.

Headline numbers

EPS

Q1 FY2026

$2.72

Revenue

Q1 FY2026

$4.67B

+22.0% YoY

Gross margin

Q1 FY2026

37.2%

Free cash flow

Q1 FY2026

$0.61B

Operating margin

Q1 FY2026

20.6%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$4.67B+22.0%$4.75B-1.7%
EPS$2.72—$2.44+11.5%
Gross margin37.2%—34.9%+230bps
Operating margin20.6%—19.3%+130bps
Free cash flow$0.61B—$1.15B-47.3%

Guidance

Strong Q1 FY2026 beat across revenue, organic growth, and EPS; Q2 FY2026 guidance implies growth deceleration with 6% organic growth and 20% EPS growth vs. Q1's 15% organic and 33% EPS growth.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ1 FY2026$4.5 billion$4.669 billion+$0.169 billion (+3.8%) above guideBeat
Revenue YoY growth (reported)Q1 FY202617%22%+5 percentage points above guideBeat
Revenue YoY growth (organic)Q1 FY202611%15.0%+4.0 percentage points above guideBeat
Adjusted EPSQ1 FY2026$2.53$2.72+$0.19 (+7.5%) above guideBeat
Adjusted EPS YoY growthQ1 FY202623%33%+10 percentage points above guideBeat

New guidance

MetricPeriodGuideYoY
RevenueQ2 FY2026$4.7 billion13%
Revenue YoY growth (organic)Q2 FY20266%—
Adjusted EPSQ2 FY2026$2.6520%
GAAP EPS from continuing operationsQ2 FY2026$2.26—

Segment performance

Q1 FY2026
SegmentQ1 FY2026YoY
Transportation Solutions$2.467B+10.0%
Industrial Solutions$2.202B+38.2%

Platform metrics

Q1 FY2026
SegmentQ1 FY2026
Record Orders$5.1 billion
Orders Growth YoY28%
Orders Growth QoQ9%
Organic Net Sales Growth15.0%

Profitability

Q1 FY2026
SegmentQ1 FY2026
Adjusted Operating Margin22.2%
Free Cash Flow$608 million
EPS Non-GAAP Growth YoY33%

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Cash Returned to Shareholders$615 million

Management tone

Q1 customer-optimization caution → Q2 AI-as-emerging → Q3 AI-as-executing → Q4 AI-and-Industrial-as-structural → Q1 FY2026 above-through-cycle commitment

Management has crossed a rhetorical line by committing to growth above the 6-8% through-cycle target. For most of the last four quarters TE communicated growth in framings tethered to that target band; this quarter the framing inverted. Anchor quote: "With the momentum that we're seeing, we expect to deliver growth in fiscal 2026 that is ahead of this target. For the full year, we are set up to deliver sales growth that is ahead of our through cycle growth target while expanding operating margins and very strong earnings per share growth." A company that historically prized guidance conservatism is now explicitly committing to exceeding its own multi-year algorithm.

The AI disclosure has moved from forward-looking dollar signaling to mid-cycle upward revision. Three quarters ago AI was a tailwind without dollar figures; in Q4 management put $1.5B run-rate on the table; this quarter the FY2026 number is being raised by a "couple hundred million" vs that view from 90 days ago, with growth across every hyperscale customer. Anchor quote: "We now expect our AI revenues in fiscal 2026 to be a couple hundred million dollars higher than our view 90 days ago, with growth expected across every hyperscale customer." The signal is that the program-win cadence is accelerating rather than steady-stating.

Capex framing shifted from maintenance/expansion to AI-program-tied commitment. Last quarter capex was discussed as supporting Industrial growth broadly; this quarter management raised the FY2026 capex ratio to ~6% of sales and tied the increment specifically to AI program tooling and 2027 production ramps. The Evercore exchange surfaced the underlying logic: "we would not spend capex if not tied to revenue and profits" — i.e., the step-up is anchored to committed awards, not speculative buildout.

Commercial transportation has flipped from cyclical headwind to recovery contributor. A year ago this was a multi-quarter drag; this quarter it printed +16% organic and management is now framing the segment as benefiting from architectural content growth on top of cyclical recovery. Anchor quote: "After two years of cyclical declines in the commercial transportation market, we're now seeing recovery in the end markets outside the United States." The non-US qualifier matters — North American commercial transport is not yet called a recovery.

Customer-level transparency on AI remains tightly held. The Bank of America Q&A pressed for NVIDIA vs TPU vs other-ASIC breakdown; management declined. Tone here was confident, not defensive — the message is breadth across power and signal content rather than single-architecture exposure — but the refusal does cap how granularly investors can model concentration risk.

Recurring themes management leaned on this quarter:

AI demand acceleration and hyperscale customer program winsBroadening growth across geographies and all regions posting double-digit order growthMargin expansion with 180+ bps improvement and 30%+ incremental marginsRecord orders ($5.1B) and elevated backlog into H2 2026 and 2027Digital data networks explosive growth (70% YoY) driven by AI and data connectivityCommercial transportation recovery after two-year decline

Risks management surfaced:

Ongoing macro unevenness acknowledged but not elaboratedAuto production projected down slightly to 88 million units in fiscal 2026Transportation segment typical auto seasonality expected to offset industrial growth sequentiallyForward-looking statement cautionary language referenced but not detailed in prepared remarks

Q&A highlights

Scott Davis · Milius Research

Analyst sought confirmation that AI revenue forecast was raised by a couple hundred million from Analyst Day, and asked for detail on how capacity additions drive revenue scaling and margin improvement, with historical reference points for precedent.

Management confirmed $200M upside to AI revenue guidance for the year versus Analyst Day expectations. They emphasized scaling is occurring with new program awards across all hyperscaler customers, with some awards extending into 2027. Management noted orders are strong, and they expect margin improvement from ramp volumes across all businesses, not just AI.

$3 billion AI revenue target in a couple of years (from Analyst Day), on track$200 million upside to AI revenue forecast for current year versus Analyst DayGrowth across all hyperscaler customersSome awards extend into Q3/Q4 and into 2027

Mark Delaney · Goldman Sachs

Analyst requested detail on order trends sequentially and year-over-year, and their implications for revenue by end market. Also asked about the delta between record $5.1B orders and $4.7B Q2 guidance, and whether order duration is changing.

Management noted record orders of $5.1B with $1B growth, driven by broad-based strength across segments (DDN up significantly, TE orders double-digit, Industrial up in 4 of 5 businesses). AI and energy drove momentum, with ADM accelerating as well. ACL showing market improvement across all regions. Management explained Q2 guidance reflects normal automotive seasonality (3M unit production decline Q1 to Q2) despite strong order momentum, particularly in longer-lead-time programs like aerospace/defense.

Record orders of $5.1 billion, up $1 billion year-over-yearOrders broad-based: TE orders double-digit excluding DDN, Industrial orders up double-digits in 4 of 5 businessesDDN orders very strong; AI and energy major drivers3 million unit auto production decline Q1 to Q2 (vs. typical 2 million)

Amit Daryanani · Evercore

Analyst asked what is driving the $200M upside in AI revenue expectations—whether existing programs ramping faster or new program wins/share gains. Also requested detail on required CapEx and OpEx investments to meet demand.

Management attributed upside to new program awards with hyperscalers (not just ramps of existing programs), with backlog ramping over next couple quarters and significant contribution in Q3/Q4. Growth is across all hyperscalers. On investment side, management emphasized aggressive ramps requiring specific tooling in existing facilities (mostly Asia, some North America). CapEx being increased for Q2/Q3 spend to support H2 production and 2027 ramps. Management stated they would not spend capex if not tied to revenue and profits.

Mix of existing programs continuing to ramp plus new programs with customersNew programs expected to ramp in second half (Q3/Q4 bulk of $200M increase)Programs extend into 2027Growth across all hyperscalers

Wamsi Mohan · Bank of America

Analyst asked for granularity on whether AI programs are NVIDIA-centric vs. TPU or other ASIC-centric, and requested breakdown of signal versus power content to understand revenue mix.

Management declined to provide customer-level detail, stating they will not disclose whether programs are NVIDIA, TPU, or other ASIC-specific. They confirmed programs span both power and data/signal, noting breadth across both spectrums in next-generation architectures. Reiterated these are hyperscaler programs driving growth.

Will not disclose customer-level specificity (NVIDIA vs. TPU vs. other ASICs)Programs span across power and data/signalBroad content across power and signal spectrums in next-gen architecturesContinued momentum with hyperscale customers visible in orders

Luke Junk · Baird

Analyst asked about ACL trend improvement and whether industrial solutions strength could drive incremental margin expansion as volume recovers.

Management confirmed ACL and industrial transportation both recovering from multi-year downturns, with orders strengthening broadly across regions (especially Asia, Europe). ACL strength in factory automation and capex-driven applications; residential HVAC and appliances still soft. Management expects incremental margins of 30%+ for both segments in FY26, with volume leverage helping as businesses scale. Noted these are naturally better profit pools than the soft categories.

ACL and industrial transportation both in recovery from multi-year downturnsACL orders up broadly across all regions (Asia, China, Europe, North America)ACL strength in factory automation and capex sideResidential HVAC and appliances remain soft

Answers to last quarter's watch list

Does AI revenue track to the implied ~$1.5B FY2026 run-rate? DDN growth sustaining above 50% YoY? — DDN printed +71% YoY in Q1, comfortably north of the 50% threshold, and management raised the FY2026 AI revenue forecast by a "couple hundred million dollars" vs the Q4 view, putting the implied number above $1.5B. The composition is new wins plus ramps across every hyperscaler. Status: Resolved positively
Industrial organic growth — can 24% hold through a tougher comp? Is Industrial still printing 20%+ organic on the Q1 11% organic guide? — Total organic growth was 15% vs 11% guide; Industrial Solutions printed +38% reported on the segment line, and Q&A confirmed broad-based double-digit order growth in 4 of 5 Industrial businesses. The segment is decelerating from Q4's +34% reported but only modestly, and the order book points to continued breadth. Status: Resolved positively
General industrial stabilization — real or premature? — Management confirmed ACL recovering across all regions in factory automation and capex applications, with residential HVAC and appliances still soft. Order momentum across geographies (double-digit organic order growth in every region) supports the stabilization call, but the soft pockets persist. Status: Resolved positively
Transportation content outgrowth — does it move above 4-6% with Western production flatter? — Automotive printed +9.5% organic growth and commercial transportation +16% organic after a two-year decline. The blended Transportation print of +10% YoY is materially above the historical 4-6% content outgrowth band, though some of that is commercial transport cyclical recovery rather than auto content per se. The Investor Day content walk that management teed up last quarter remains the cleaner reference point. Status: Resolved positively
Capex and FCF conversion as AI capacity builds out — FY2026 capex is being raised to ~6% of sales to support AI program pipeline. Q1 FCF was $608M on $4.67B revenue (13.0% FCF margin), down from FY2025's 18.6% — meaningful compression, but Q1 is seasonally the lowest FCF quarter for TE and management did not flag a change to the >100% conversion bar. Worth continued attention. Status: Continue monitoring

What to watch into next quarter

Does Q2 organic growth come in above the 6% guide? The Q1 beat was 400bps above the 11% guide; a similar magnitude beat against 6% would put Q2 organic at ~10% and signal management is still building conservatism into the second-derivative deceleration story.

AI revenue trajectory — does Q3/Q4 visibility firm up? Management said the $200M AI upside is back-half loaded with new programs. Q2 commentary on DDN booking velocity is the leading indicator for whether the H2 ramp materializes on schedule.

Capex pacing toward 6% of sales and the impact on FCF margin — FY2025 ran at 18.6% FCF margin; Q1 was 13.0%. Watch whether Q2 FCF margin recovers toward 15-18% or whether AI capacity build pulls full-year conversion meaningfully below 100%.

Transportation segment trajectory off the +10% Q1 print — The typical 3M-unit Q1-to-Q2 auto production decline this year is a unit headwind; watch whether organic transportation growth holds at high-single-digits despite that, which would confirm structural content gains independent of unit cyclicality.

Commercial transportation recovery breadth — Q1's +16% organic was non-US driven. Watch whether North American commercial transport order momentum picks up, which would convert this from a regional story to a global recovery.

Capital returns cadence — $615M returned in Q1 alone vs $2.2B for all of FY2025. Watch whether the elevated repurchase pace persists alongside the higher AI capex commitment, or whether one of the two moderates.

Sources

  1. TE Connectivity Q1 FY2026 press release, filed January 21, 2026: https://www.sec.gov/Archives/edgar/data/1385157/000110465926005219/tel-20260121xex99d1.htm
  2. TE Connectivity Q1 FY2026 earnings call commentary (prepared remarks and Q&A) as captured in tone and Q&A extraction.

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