Amphenol - Earnings Call - Q2 2025

Executive Summary

• Record quarter: revenue $5.65B (+57% y/y, +17% q/q), adjusted diluted EPS $0.81 (+84% y/y); both materially above prior guidance high end; GAAP diluted EPS $0.86 (+110% y/y).
• Street beat: vs S&P Global consensus, revenue +$0.61B (+12%) and EPS +$0.14; EBITDA beat by ~$0.23B; estimates will likely move higher given breadth of outperformance and record margins [GetEstimates: Q2 2025]*.
• Margin expansion: adjusted operating margin reached a record 25.6% (+430 bps y/y, +210 bps q/q), driven by high-technology mix and operating leverage, with management signaling an incremental conversion target approaching 30% longer term.
• AI as key catalyst: IT datacom sales +133% y/y; management shipped part of Q3 demand early on superior execution; expects mid-to-high single-digit moderation in Q3 off a very strong base but remains in “early innings” of AI buildout.
• Capital allocation: $160M buybacks (2.0M shares) and $200M dividends returned in Q2; declared $0.165/share Q3 dividend; total liquidity $6.2B; net leverage 0.9x.

What Went Well and What Went Wrong

• What Went Well

  • “Record sales and Adjusted Diluted EPS, both significantly exceeding the high end of our guidance,” with adjusted operating margin 25.6% at a record level.
  • IT datacom strength: “We were actually able to outperform even our customers’ very high expectations for deliveries of AI-related products… shipped substantially more than expected”.
  • Broad-based growth: All end markets saw robust organic growth; orders were a record $5.523B (book-to-bill 0.98) indicating durable demand momentum.

• What Went Wrong

  • Near-term moderation: IT datacom expected to “moderate in the mid to high single digits” in Q3 due to pull-forward from Q2’s outperformance.
  • Mobile devices volatility persists; management notes prior tariff-related pull-forward in Q1 and inherently lumpy call-offs, though Q2 proved better than expected.
  • Acquisition integration costs and inventory step-up impacted GAAP results: $16.9M inventory step-up in Q2 (Andrew acquisition), plus $12.0M external acquisition costs; EPS effects were $0.01 and $0.01 respectively.

Transcript

Speaker 0

Hello and welcome to the second quarter 2025 earnings conference call for Amphenol Corporation. Following today's presentation, there will be a formal question-and-answer session. Until then, all lines will remain in a listen-only mode. At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I'd now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Speaker 1

Thank you. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our second quarter of 2025 conference call. Our second quarter 2025 results were released this morning. I will provide some financial commentary, and then Adam will give an overview of the business and current market trends, and then we'll, of course, take questions. As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements, so please refer to the relevant disclosures in our press release for further information. The company closed the second quarter of 2025 with record sales of $5,650,000,000 and record GAAP and adjusted diluted EPS of $0.86 and $0.81, respectively.

Second quarter sales were up 57% in US dollars, 56% in local currencies, and 41% organically compared to the second quarter of 2024. Sequentially, sales were up 17% in US dollars, 16% in local currencies, and 14% organically. Adam will comment further on trends by market in a few minutes. Orders in the quarter were a record $5,523,000,000, up a strong 36% compared to the second quarter of 2024 and up 4% sequentially, resulting in a book-to-bill ratio of 0.98 to 1. GAAP operating income was $1,419,000,000 in the quarter, and GAAP operating margin was a record 25.1%. GAAP operating margin included $29,000,000 of acquisition-related costs. Excluding these acquisition-related costs, adjusted operating income in the second quarter of 2025 was $1,448,000,000, resulting in a record adjusted operating margin of 25.6%. On an adjusted basis, operating margin increased by a strong 430 basis points from the prior year.

Sorry, from the prior quarter and 210 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on the significantly higher sales volumes, which was only modestly offset by the diluted impact of acquisitions. On a sequential basis, the increase in adjusted operating margin reflected strong conversion on the higher sales levels, as well as further progress on the profitability improvement initiatives on acquisitions. I'm extremely proud of the company's record operating margin performance in the second quarter, which reflects continued strong execution by our team. Breaking down second quarter results by segment compared to the second quarter of 2024, sales in the communication solution segment were $2,910,000,000 and increased by 101% in US dollars and 78% organically. Segment operating margin was 30.6%. Sales in the harsh environment solution segment were $1,445,000,000 and increased by 38% in US dollars and 18% organically.

Segment operating margin was 25.2%. Sales in the interconnect sensors and systems segment were $1,295,000,000, increased by 16% in US dollars and 14% organically, and segment operating margin was 19.5%. The company's GAAP effective tax rate for the second quarter was 18.3%, and the adjusted effective tax rate was 24.5%, which compared to 20.4% and 24% in the second quarter of 2024, respectively. GAAP diluted EPS was a record $0.86 in the second quarter, up 110% compared to the prior year period. On an adjusted basis, diluted EPS increased 84% to a record $0.81 compared to $0.44 in the second quarter of 2024. This was an outstanding result. Operating cash flow in the second quarter was a record $1,417,000,000, or 130% of net income, and free cash flow was a record $1,122,000,000, or 103% of net income. An excellent result, especially considering the growth we have experienced.

In the third quarter, we expect capital spending to again be somewhat elevated versus our typical 3-4% of sales levels as we continue to invest to support the significant growth we are seeing in the IT data comp market. From a working capital standpoint, inventory days, day sales outstanding, and payable days were all within our normal range. During the quarter, the company repurchased 2 million shares of common stock at an average price of approximately $78. When combined with our normal quarterly dividend, total capital return to shareholders in the second quarter of 2025 was approximately $360,000,000. Total debt on June 30 was $8.1 billion, and net debt was $4.8 billion. Total liquidity at the end of the quarter was $6.2 billion, which included cash and short-term investments on hand of $3.2 billion, plus availability under our existing credit facilities.

Excluding acquisition-related costs, second quarter 2025 EBITDA was $1.7 billion, and at the end of the second quarter of 2025, our net leverage ratio was 0.9 times. During the quarter, the company completed a successful $750,000,000 US bond offering and a EUR 600,000,000 bond offering. As of June 30, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs, and we expect quarterly interest expense, net of interest income earned on cash on hand, to be approximately $70,000,000, which is reflected in our third quarter guidance. I will now turn the call over to Adam, who will provide some commentary on current market trends. Thank you very much, Craig, and I'd like to extend my welcome to all of you from sunny Wallingford, Connecticut.

I hope that all of you on the call here today, together with your family and friends and colleagues, are enjoying a wonderful summer so far. As Craig alluded to, I'm going to highlight our achievements in the second quarter. I'll talk about our trends and progress across our serve markets. We'll make some comments on our outlook for the third quarter, and then, of course, we'll have time for questions at the end. Let me just say that we drove outstanding performance in the second quarter of 2025. In fact, our results were much stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Our sales grew from prior year by a very strong 57% in US dollars and 56% in local currencies, reaching a new record $5,650,000,000.

On an organic basis, our sales increased by 41%, with all of our end markets experiencing robust organic growth. I'll talk about those markets specifically here in a few moments. The company booked a record $5,523,000,000 in orders in the second quarter, and that represented a book-to-bill of 0.98 to 1. These orders grew by 36%, very strong compared to prior year, and were also up sequentially from our previous record orders in the first quarter. I want to say that we're particularly pleased to have delivered record adjusted operating margins of 25.6% in the quarter. This is an increase of 430 basis points from prior year and 210 basis points sequentially. This strong profitability is a direct result of the outstanding execution of the Amphenol team around the world, who continued to manage well in what continues to be a challenging cost environment.

Adjusted diluted EPS grew 84% from prior year and reached a new record of $0.81. Finally, the company generated record operating and free cash flow in the second quarter of $1.4 billion and $1.1 billion, respectively, both clear reflections of the quality of the company's earnings. I cannot express enough my pride in our team. Amphenol's results this quarter once again reaffirmed the value of the drive, discipline, and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment. We were very pleased in May to have closed on the acquisition of Narda-MITEQ, based in Hauppauge, New York, with annual sales of approximately $120,000,000. Narda-MITEQ is a leading provider of active RF and microwave components, primarily for the defense market.

Together with our previously announced acquisitions of XMA and Q-Microwave, and now with Narda-MITEQ, we're building a strengthened presence in RF interconnect and active RF components, which is a great complement to our leading position across RF connector, cable, cable assembly, and antenna products for this important market. We remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions and then to successfully bring these companies into the Amphenol family remains a core competitive advantage for the company. Now, turning to our served markets, we're very pleased that the company's end market exposure remains highly diversified, balanced, and broad. This diversification continues to create great value for the company, enabling us to participate across all areas of the global electronics industry while not being overly exposed to the volatility of any given market or application.

The defense market represented 9% of our sales in the quarter. Sales grew from prior year by a very strong 25% in US dollars and 18% organically, and this was driven by broad-based growth across most segments within the defense market. Sequentially, our sales increased by 13%, which was better than our expectations coming into the quarter for a high single-digit increase. Looking into the third quarter, we expect sales to increase modestly from these second quarter levels, including the benefit of our acquisition. We remain encouraged by the company's leading position in the defense interconnect market, where we continue to offer the industry's widest range of high-technology products. With the addition of Narda-MITEQ, we continue to diversify our already broad product offering to capitalize on the increasing adoption of electronics in defense equipment.

Amidst the current dynamic geopolitical environment, countries around the world are expanding their spending on both current and next-generation defense technologies, and we're positioned better than ever to capitalize on this long-term demand trend. The commercial aerospace market represented 5% of our sales in the quarter, and sales increased by 50% in US dollars and 8% organically from prior year as we benefited from the addition of CIT last year, as well as our continued progress in expanding content on next-generation commercial aircraft. Sequentially, our sales grew by 6% in US dollars from the first quarter, which was better than our expectations coming into the quarter. Looking to the third quarter, we expect our sales to be up in the low single digits from these second quarter levels. I'm truly proud of our team working in the commercial air market.

With the ongoing growth and demand for jetliners, our efforts to expand our product offering both organically and through our acquisition program are paying real dividends. In particular, we continue to be very encouraged by the progress of the CIT team as part of Amphenol, and we look forward to further capitalizing on our expanded range of product solutions for the commercial air market long into the future. The industrial market represented 19% of our sales in the quarter, and our sales in this market grew 25% in US dollars and 12% organically as we continued to see improvements across our diversified industrial market. In particular, our organic growth was driven by expansions in alternative energy, instrumentation, medical, industrial EV, and factory automation. I'm especially pleased that we grew organically in all of our served geographic regions during the quarter, including in Europe.

On a sequential basis, our sales grew by a much better than expected 11% from the first quarter. Looking into the third quarter, we do expect sales to moderate slightly from the second quarter levels on typical seasonality. We remain encouraged by the company's strength across the many diversified segments of this important market. As demand has continued to recover, I'm confident that our long-term strategy to expand our high-technology interconnect, antenna, and sensor offering, both organically and through complementary acquisitions, has positioned us to capitalize on the many electronic revolutions that continue to occur across the industrial market. This creates exciting opportunities for our outstanding team working in this important area. The automotive market represented 14% of our sales in the second quarter, and sales in this market grew 10% in $ and 8% organically as we experienced growth really in all regions.

Sequentially, our sales in automotive grew by 7% from the first quarter, which was also much better than our expectations coming into the quarter and really reflected strong execution by our team. For the third quarter, we expect sales to be slightly lower than these second quarter levels as customers plan for their traditional summer shutdowns. I remain proud of our team working in the automotive market. While there are still areas of uncertainty in this market, our team continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. We look forward to benefiting from our strong position in the automotive market for many years to come. The communications networks represented 11% of our sales in the second quarter. Sales grew from prior year by 143% in $ which was driven primarily by the addition of Andrew.

On an organic basis, our sales increased by a robust 16% from prior year as we benefited from increased spending by communications networks operators as well as wireless equipment manufacturers. Sequentially, sales in the second quarter grew by 30% from the first quarter, driven in part by the Andrew acquisition, which was completed in the first quarter. Organically, our sales grew by a better than expected 7%. Looking into the third quarter, we expect sales to remain at these very strong Q2 levels. With our expanded range of technology offering, especially following the acquisition of Andrew, we are well positioned with both service provider and OEM customers across the global communications networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint, have positioned us to support customers around the world.

As those customers continue to drive their systems to higher levels of performance, we look forward to supporting them for many years to come. The mobile devices network market represented 6% of our sales in the quarter, and our sales grew by 14% in $ and organically in the second quarter, as strength in smartphones and laptops was only partially offset by declines in products sold into tablets. Sequentially, our sales increased by 4%, which was actually much better than our expectations coming into the quarter for a high teens decline. As we look into the third quarter, we anticipate sales to increase in the high single digits compared to these strong second quarter levels. I'm very proud of our team working in the always dynamic mobile devices market, as their agility and reactivity have once again enabled us to capture incremental sales in the quarter.

I'm confident that with our leading array of antennas, interconnect products, and mechanisms designed in across a broad range of next-generation mobile devices, we're well positioned for the long term. Finally, the IT data comm market represented 36% of our sales in the quarter. Sales in the second quarter grew by a very strong 133% in US dollars and organic. This was driven by continued acceleration in demand for our products used in artificial intelligence applications, together with continued robust growth in our base IT data comm business. I'm very proud of our team's outstanding execution in the second quarter, as we were actually able to outperform even our customers' very high expectations for deliveries of AI-related products. As a result, we shipped substantially more than expected, including some modest portion of third quarter demand.

In fact, without this additional output, our IT data comm sales would have represented roughly a similar percentage of overall company sales as we saw in the first quarter, or approximately 33%. On a sequential basis, our sales increased by a very strong 29% from the first quarter, substantially better than our expectation for a high single-digit increase, again reflecting that outperformance of our team executing beyond what anybody expected. This growth was driven by sales of AI-related products as well as growth in our base IT data comm. In our base IT data comm business. As we look into the third quarter, and due to the stronger than expected execution of our team in the second quarter, we expect our sales to moderate in the mid to high single digits from these very strong second quarter levels.

I got to tell you, we're more encouraged than ever by the company's position in the global IT data comm market. Our team has done an outstanding job securing future business on next-generation IT systems with a broad array of customers. The revolution in AI continues to create unique opportunity for Amphenol, giving our leading high-speed and power interconnect products. In fact, whether high-speed, power, or fiber optic interconnect, our products are critical components in these next-generation networks. This creates a continued long-term growth opportunity for Amphenol. Turning to our outlook and assuming current market conditions as well as constant currency exchange rates, for the third quarter, we expect sales in the range of $5.4 billion-$5.5 billion and adjusted diluted EPS in the range of $0.77-$0.79.

This would represent sales growth from prior year of 34%-36% and adjusted diluted EPS growth of 54%-58% compared to the third quarter of last year. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow our market position while driving sustainable and strong profitability over the long term. Finally, I'd like to take this opportunity to thank our entire global team for their truly outstanding performance here in the second quarter. With that, Operator, we'd be very happy to take any questions. Thank you. The question and answer period will now begin. Please limit to one question per caller. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two.

When preparing to ask your question, please ensure your device is unmuted locally. The first question is from the line of William Stein with Truist. Your line's now open. Great. Thank you for taking my question. Congrats on the fantastic quarter. And what really sticks out to me is the operating margin, which is now, I believe it's above even your drop-through target. I wonder if this might be a time to revisit that bogey. I think historically you've talked about 25% fall-through. You're now above that on an aggregate basis. What should we think about going forward? Yeah. Thanks, Will. I really appreciate the question. Yeah. Listen, I would agree. I mean, the team really has just done an exceptional job really driving operating margin. I mean, 25.6% in the quarter is really an amazing achievement that the team should be really proud of, and we certainly are.

I mean, Q3 also reflects our guidance. It really reflects another strong quarter of profitability, kind of essentially at the same levels on slightly lower revenue guidance. We certainly expect this operating margin to continue. As you know, and as you just mentioned, we've long targeted the 25% conversion margin in the last couple of years. We've really meaningfully exceeded that benchmark. It's partially due to just the exceptional organic growth, but also the bottom line is we're really just selling higher technology products, and we continue to do a really good job of controlling our costs in our traditional kind of Amphenolian fashion. Now, listen, we do expect some normalization of conversion margins as we continue to kind of scale our cost structure in line with these higher sales volumes as we move into kind of maybe 2026.

We really believe that the overall impact of that will be modest, and our conversion margins will continue to remain higher and meaningfully higher than kind of that 25% conversion target that we've historically had. As you say, it's not lost on us that we just did close a quarter here well above 25%. Going forward, as we continue to grow, we do believe there's still room for really further margin expansion. This reflects the increased level of technology we've had that's embedded in our products, our differentiated value that we consistently deliver, and certainly the innovation and execution that we've had. I think looking ahead, we do expect to convert incremental sales on operating income, maybe I would say approaching 30%. I think close to 30% would be our target kind of moving forward. I think it's appropriate given where we're at and kind of where we're heading.

Of course, there are going to be periods due to M&A and other factors where we'll be above or below that. I think 30% is kind of, I think, the targeted conversion that you should think about kind of as we continue to move forward and we continue to grow. I think we should certainly be able to continue to increase those margins as the company continues to increase our revenue in the future. Thank you. The next question is from the line of Steven Fox with Fox Advisors. Your line's now open. Hi. Good afternoon. Just to follow up on that margin question, Adam, can you talk a little bit about how that sales mix is sort of becoming richer? I would imagine a good portion is due to the mix of sales from GenAI data centers.

Can you sort of describe to us what's changing in sort of the tech roadmap for Amphenol that's driving the margins? Thanks. Yeah. Thanks very much, Steve. I mean, look, I think Craig just alluded to the fact that for sure, when you grow really fast, and we did grow by 133% in IT data comm, you really would expect conversion margins to be a little bit higher in that high growth area. That's true in whichever market where we would grow at that speed. Relative to Craig's comment about technology, I would tell you this is really across the company.

When we think about the importance of our products to our customers and ultimately the value that we create for our customers with these next-generation high-technology products, whether that is in the defense market, the industrial market, the automotive market, the communications networks, and of course, in IT data comm, by creating more value for our customers and by continuing to instill that Amphenolian cost mindset into everything we do, we are not, because we're selling higher technology products, all of a sudden moving out of our kind of shabby chic headquarters here in Wallingford. Quite the contrary. We continue to watch every penny of the company's money as if it were coming out of our own pockets.

By selling that high-technology product across the board, that allows us to have the confidence that Craig just talked about to where we can think about a conversion margin target of closer to 30% instead of our traditional 25%. Yeah, for sure, we're enabling more in IT data comm and growing very significantly. That's contributive. That's not by definition the only area where we're selling high-technology products. Thank you. The next question is from the line of Amit Daryanani with Evercore ISI. Your line's now open. Thanks, love. Good afternoon, everyone. Adam, I guess there's always this worry around peak revenues, peak margins when we have strong prints like this one. Perhaps you can touch on it. I realize there was about $150 million. Of shipment in June versus September that you talked about.

But really, away from that, can you spend some time talking about how do you think about the durability of growth on the AI infrastructure side as you go out over the next few quarters? And then anyway, the size of how much of the growth in IT data comm that you folks had came from AI versus the traditional kind of IT data comm markets? Thank you. Yeah. Thanks very much, Amit. And certainly, I can understand the question. I mean, look, we talked about the fact that we overperformed. I mean, this was a very, very strong outperformance. If you think about our second quarter, we originally guided the quarter to be at the high end, $5 billion in sales, and we ultimately achieved $650 million more than that. And on the IT data comm side, we outperformed very, very significantly.

And you gave a size to that, and that's, I think, a good rough estimate of how much we kind of shipped of what would be Q3 demand. And if you factor that in, you certainly do not see a peakiness to the performance. I mean, there is continued momentum in that space. And when we think about the durability, are we always going to grow IT data comm by 133%? No, of course, we are not going to. I think that would not be reasonable to expect it. But do we see future growth opportunities in this revolution of AI? No doubt about it. No doubt about it.

I mean, when I look at what we have already secured, what we are already shipping to support across up and down the stack of the folks who are investing from the web scale providers all the way down to the chip makers and everything in between, including the OEMs, including the data center configures, all of that, there is no doubt that there remains great opportunities for us. And I can tell you that our team continues to win. I mean, when you have not only the best product portfolio, the broadest, the deepest set of technologies that help to enable these next-generation systems, but also the proven capability to ramp up and to build those around the world in multiple locations as our customers navigate the same geopolitics that everybody else is with tariffs and trade and the like, and to satisfy their demand.

And actually, in the second quarter, to more than satisfy their demand, I can tell you that our reputation precedes us. As we look at new customers, looking at new configurations, new architectures, we are really the first phone call on all of these. And our team continues to do an excellent job of prosecuting these next-generation opportunities. I think that that is a very durable continuation. I would consider that we are kind of in the early innings of the adoption of AI on a broad basis across the economy. We're very excited about that. In terms of AI and its contribution to our growth, I would say roughly two-thirds of our growth on a year-over-year basis, and actually roughly two-thirds of our growth sequentially in the quarter, were coming from AI. It's a significant contributor to the overall performance of our IT data comm business.

We look forward to it continuing to be so going forward many years in the future. Thank you. The next question is from Joe Giordano with TD Cowen. Your line's now open. Hey, guys. Thanks for taking my questions. Sticking with AI, just curious if your business there is getting more concentrated or less concentrated from a customer standpoint as you've moved along here. If you were to just average out your 2Q and your 3Q there to smooth for the pull forward here, I know you're not going to give guidance further than next quarter, but is what you've secured set you up to have further kind of sequential increases into the future off of that smooth base? Yeah. First, thanks very much, Joe. Number one, I'll tell you we have a very broad business here.

There are some big folks who are spending on this, and we have a broad representation across all of those big folks. Again, I've mentioned that includes at the ultimate consumer, the people who are spending the money putting in place these massive capabilities down through the builders of those data centers, the OEMs, and then all the way to the chip companies. I wouldn't say that that is overly concentrated. Quite the contrary. As you ask about, for sure, if you look at Q2 and Q3, and if you sort of factor out the kind of ship ahead that we had because of our execution, that's relatively stable performance. Do we see future growth opportunities? We do. Is every quarter going to be sequentially more than the quarter before it in a space like this? I wouldn't necessarily say that. We'll see.

I'm sure there will be quarters that will be up, and there will be quarters that will be down. Over the long term and over the medium term, we see continued progress and ability to continue to grow this business. Thank you. The next question is from Mark Delaney with Goldman Sachs. Your line's now open. Yes. Good afternoon. Thanks for taking my question. Let me add my congratulations for the strong results. I also had a question on AI and some of the dynamics there. You spoke to seeing some degree of pull-in from 3Q and 2Q. Maybe you can elaborate on what you think contributed to that and why you shipped early. As you think about your expectation for sales to be down somewhat next quarter, granted off of a high base, what's giving you the confidence to still invest at higher levels of CapEx?

I think maybe perhaps speaks to your longer-term view tied to AI that you spoke to. But are there commitments or visibility you're getting from customers that supports the higher levels of CapEx that you spoke to? Thanks. Yeah. Thanks very much, Mark. I mean, I wouldn't necessarily call it a pull-in, but rather that we were able to out-execute our customers' original demand plans, and they'll take whatever we can ship them. It was just us outperforming what really anybody expected, either us internally or what our customers with their already lofty expectations. As it relates to CapEx, I mean, Craig did mention that capital was a little bit elevated.

I talked just a few moments ago about the fact that we do have an expectation and a confidence that we are continuing to gain momentum in this space, winning programs, getting visibility from customers for their future plans, which create incremental opportunities for us. When we talk about CapEx, sometimes that's not only CapEx for just one quarter ahead, but rather a little bit to come. That is really where we would make those investments with that confidence for the future. I already said it, but I'll just reiterate it. Our team continues to win very broadly in this market in current and next-generation systems and architectures.

That kind of winning, the visibility that you get from the customers, the commitments you get from those customers, those all collect to give you the confidence to invest in these very high-technology products, which do sometimes require a little bit more capital. Thank you. The next question is from Samik Chatterjee with JPMorgan. Your line's now open. Hi. Thanks for taking my question. Adam, I know last quarter you had mentioned some of the pull ahead that you thought was happening in mobile devices, which is why you had guided a bit for sequential moderation, which didn't seem to have played out this quarter as much.

I'm just curious, obviously, with the book-to-bill at 0.98-1, if I take AI aside, is there anything to call out in terms of areas that you might be seeing some level of pull ahead from customers where maybe that's driving some of the book-to-bill to be closer to 1 than what we had been generally seeing as above 1 book-to-bill in the past few quarters? Just curious more outside of AI, if you're seeing anything that would be from an order trend. Sort of indicating a sequential moderation as such. Thank you. Oh, thanks very much, Samik. I mean, first, you mentioned mobile devices. In mobile devices, our bookings always equal our shipments because they're pretty quick call-offs. In the first quarter, we did talk about there was a pretty well-publicized pull ahead of some volumes in the first quarter, which we certainly helped to enable for our customer.

That was at the time related to the anticipation of some tariffs. I would not say that that happened here in the quarter. In fact, I would say that our team in mobile devices just did a really outstanding job of capitalizing on opportunities to support our customers better, whether that is taking a little bit of market share, shipping a little bit more than maybe customers expected, or customers needing a little bit more because of the volatility of that market. In terms of the rest of the company, I would not say that there is anything really notable around the book-to-bill. I would say that the book-to-bills were fairly clustered pretty close to that level, maybe a little bit stronger in the defense market. We have talked about the ongoing strength in defense previously, and we continue to see that here.

You can imagine with IT data comm, with us having shipped ahead as we did, that there was modestly a little bit lower book-to-bill, but nothing that gives us any concern about the visibility that we have. We continue to have still a very positive outlook for that market. Thank you. The next question is from Luke Junk with Baird. Your line is now open. Good afternoon. Thanks for taking the question. I want to circle back to operating margin dynamics. Of course, we have talked a lot about the higher technology underpinning that margin dynamic. Adam, hoping maybe you could talk about some of the pure operating pieces here in terms of blocking and tackling. I am just trying to wrap my head around 41 points of organic growth. I mean, we are talking billions and billions of incremental sales.

Maybe just give some life to some of the more practical considerations in terms of bringing that amount of incremental volume online, plus to the extent that it might be supporting what you are saying about the incremental margin moving up over time as well. Thank you. Luke, I am glad you asked that question because growing 41% organically is certainly not a trivial task, let alone 14% organic on a sequential basis, which is just 90 days of time. I mentioned it in my prepared remarks, how grateful I am and how proud I am of our team around the world for really moving mountains here. I mean, they have truly moved mountains. When you think about what does that mean, I mean, it is hiring the people. It is putting in place the automation machines, the testing, the validation. It is setting up new facilities.

We have set up a lot of new facilities over this time period, including diversifying our geographic footprint to insulate us and our customers from the dynamics that are going around related to trade and other areas. It is really every step of the way, every function in the company, which has to focus on exercising themselves, the organization, reacting in real time to grow the company by a 41% organic basis. Yes, there is a strong growth that happened in IT data comm. Even if you took out IT data comm, this was double-digit organic growth across the board in the company. All of our end markets, with the exception of two, grew in double digits. Those two that did not grew by 8% organically, which is also very, very strong.

No doubt about it, that kind of, as you say, blocking and tackling across the company was really impressive. Look, in maybe other enterprises, one would think about just throwing money at the problem. How much money can I throw to get the growth? That is not the Amphenol style. That is not our entrepreneurial culture, that Amphenolian culture that we talk about for so many years. It is rather, how do you get the most out of your resources, your facilities, your capabilities, and thereby ultimately convert that to the bottom line, as Craig talked about already. It is just a very, very impressive performance by the organization.

It is those little movements by the thousands of people around the world, nearly 150,000 Amphenolians globally today, that ultimately allowed us to satisfy our customers, to take advantage of the growth opportunity that was there, and then to convert that opportunity into the margins and ultimately the cash that creates the virtuous cycle that the company has been on for a long time. Thank you. The next question is from Joe Spak with UBS. Your line is now open. Thanks so much. Adam, I guess I just want to, not to beat the horse on this, but you mentioned it as sort of, I guess, not pull forward, but overperformance on the AI side. You are saying that is because your customers will take their hands on whatever they can get.

Then you did sort of, it did seem like part of the reason you are sort of talking about a little bit of maybe sequential software was to sort of account for that. Can you just sort of help us square that circle? I know you said this was always going to be a little bit lumpy, even if there is great long-term growth. Is that what you are sort of seeing, maybe a little bit of just digestion before we see some further gains? Yeah. I mean, look, I have always said, Joe, that it is going to be, there can be lumpiness. I would not call Q3 kind of like an air pocket.

The demand from our customers remains very strong. There is no doubt about it. It is just that when they think of their demand plans and what ultimately they are delivering out into the field, and they want to match all the various parts up to do that, we have gotten a little bit ahead in certain areas. That was just this outperformance that we had in the second quarter. But the overall demand, the investments that are being made by our customers and their customers remains very, very robust. Thank you. The next question is from Asiya Merchant, Citigroup. Your line's now open. Great. Thank you for taking my question. If I can just double-click a little bit on the industrial market as well, that did really well for you guys, better than expected, I think, even on an organic and sequential basis, definitely.

I think you mentioned Europe's growing too organically. Just if you could talk about the improvement that you're seeing there. And my impression is that that market should also help to improve incremental margins if this momentum sustains. If you could just talk about that as well. Thank you. Yeah. Thanks very much, Asiya. Let me just address the margin. I mean, I certainly wouldn't assume that there'd be any disproportionate contributions from industrial. We make good money across all of our markets. I think we've addressed that already. Relative to industrial, I mean, we are very encouraged by the performance. It's now been our third quarter in a row of year-over-year organic growth, which we've now seen in industrial. That included this quarter's strong sequential growth on an organic basis, growing 7% sequentially. You'll recall we had something like seven quarters in a row of industrial moderation.

We finally, in the third quarter of last year, saw a flat industrial market organically, and then 6% up and 6% up in Q4 and Q1. Now we've doubled that rate with a 12% growth. I think for sure, I think last quarter I talked about not just green shoots, but maybe even adaptability or two in the industrial market. I think we've now seen that, certainly. That includes not just in North America and Asia, which the last two quarters were drivers of, but also in Europe, where we actually saw double-digit organic growth in Europe in industrial in the second quarter.

The other thing that I'm encouraged by in industrial is that if I look at all the subsegments of our industrial market, and there's a lot of them, from medical to alternative energy, instrumentation, rail mass transit, factory automation, I mean, we saw good growth in most of our end markets. Strong growth in medical, strong growth in alternative energy, strong growth in instrumentation. Strong growth in areas like factory automation, with only a couple of the markets being a little more modest. The breadth of that, together with the regional growth that we've seen in industrial, I think was very encouraging for us. Thank you. The next question is from Andrew Buscaglia with BNP Paribas Exane. Your line's now open. Hey, good morning, everyone. Good morning. Or good afternoon. Good afternoon. Yeah, I wanted to ask on the acquisition of Narda-MITEQ.

Can you comment on what you paid for it, either valuation or dollar amount-wise? And then you're generating a ton of cash. Double what I was expecting just in the quarter. What do you plan to do with it in the second half? Are more deals on the horizon? Are they more Narda-like deals, or are we going to see kind of a CommScope deal in size? How do you comment on that? Thanks. Yeah. Thanks, Andrew, very much. I mean, look, Narda is a great company. And as I said, it's a very exciting new growth area for us in these RF components, which are really a very close complement with our RF interconnect, which is an industry-leading offering that we have. If you think about RF across the company, from antennas all the way to connectors and active components, now Narda really complements that very well.

We paid roughly $300 million for this, which is a reasonable multiple, as we always do look to pay. In terms of our acquisition pipeline, we have a great pipeline today. We continue to have companies, large, medium, and small, across all of our end markets. We continue to hunt for companies that have great people with great products and a great market position. I would tell you that today, looking at our pipeline, we're very encouraged by the potential going forward. Ultimately, we remain not very skilled at predicting when we'll sign and announce those acquisitions. The beauty of our acquisition program, if you look over the last two and a half, three years, we brought into Amphenol, into our family, I think roughly 15-16 companies.

They were across almost all of our end markets, geographically diverse, and also companies large, medium, and small, which included our two largest ever acquisitions of CIT and the Andrew business from CommScope. We're very encouraged by the performance of CIT and Andrew, which are certainly helping those great conversion margins that Craig talked about earlier, as well as the other acquisitions that we've made. There's no doubt that we believe that acquisitions still represent one of the best returns on the capital that we're generating. We're generating a lot of cash, and we have a lot of capital to go put to work, both in our own organic investments, but also through our M&A program. Thank you. The next question is from Serena Boroditsky with Jefferies. Your line is now open. Hi. Thanks for taking the question. Just maybe something high level.

There were a number of end markets in the quarter that came in better than your expectations. I know you kind of talked about the pull forward in AI, but maybe just talk about what surprised you in the quarter. Or was it just conservative, given some of the high-level uncertainty we're seeing? How does that apply to how you're thinking about the guidance for 3Q? Is there some conservativism there as well? Thank you. Thanks so much, Serena. Look, we always try to guide as best as we can. We have a bottoms-up approach to this. Have we outperformed that in many quarters? We have. I am not going to label our guidance conservative or aggressive or otherwise. I think we take a similar approach as we always have. What surprised us to the upside here?

I will say that just broadly, we saw strong performance across nearly all of our end markets, or stronger-than-expected performance across nearly all of our end markets. They each had their own dynamic. I think the one common thread is the ability of our organization to execute when there is demand available for us. We showed that in IT data comm. We demonstrated that in mobile devices. We are consistently demonstrating that in our defense market and, in fact, across the board. That ability to pivot quickly when the opportunities are there in this very exciting electronics industry, I think that is something that Amphenolians, the world over, never miss a chance to take advantage of. That real sort of execution across our team, I think, if anything, it is not surprising to me, but I would say that is the common theme across all of these end markets.

I will say it is encouraging on another side, which is that the demand that we see across our markets appears to be strengthening. A few markets which were maybe in the last few quarters more questionable, industrial, automotive, for example, it is nice to see those markets growing organically. It is really nice to see that in communications networks, where we had strong growth, 16% organic growth. ComAir, again, growing 8% organically. There is robust demand, I would say, almost across the board in all the areas that we serve. It is just up to our team to out-execute even that level of demand. I think we have demonstrated the ability to do that pretty consistently. Thank you. The next question is from Wamsi Mohan with Bank of America. Your line is now open. Yes. Thank you so much.

Adam, I just want to go back to AI and ask about what you said about shipping ahead because of superior execution. Would you say that that was something that happened just in 2Q, or was there some of that in 1Q as well, and then orders came back into quarter? I guess the question is really, how far out do you have visibility in the order book? Over the past few quarters, how much volatility have you seen in the order patterns in IT data comm, especially relative to AI, which might uptake mid-quarter? Thank you. Thanks, Wamsi. I mean, look, I would say that our out-execution to our customers' demands was really more clear here in the second quarter. Relative to orders, I mean, we have talked about we have had very, very strong orders over the last almost full year in AI.

Some of those orders were really maybe a little bit longer visibility because of the capital that we're spending on behalf of our customers to do these very significant ramp-ups for them around the world. There can be always a little bit of lumpiness in those orders. Given how well we're executing, I would say it's kind of a net of this kind of shipping ahead that we had in the quarter. I would say it's pretty close to one-to-one in the quarter. We've had much stronger orders as we've worked on investments and been awarded new programs. We will continue to be awarded new programs based on everything that we see with our customers. There will be some quarters where the orders are a little lumpier. Overall, we see a positive trend for quite some time into the future. Thank you.

The last question is from Scott Graham with Seaport Research. Your line's now open. Hey, thanks for taking the question. Congratulations on the quarter. I'm hoping you could answer this, either of you. Another question on the incremental margin, which for rounding purposes, let's just say it's up 500-plus basis points over the last couple of years, which also coincides with two years of your three most acquisitive years in the company's history. I'm wondering if, of that 500 basis points, how much of that would you say is organic versus how much is from the acquisitions with good assimilation, integration, that sort of thing? Yeah. Thanks, Scott. Yeah. Listen, I would say that certainly there are pieces of this.

A big piece, the meaningful piece of it is certainly the things that we talked about earlier, which is just the increased technology of our products, the more meaningful way that we are serving our customers in terms of our execution, in terms of our ability to really service them with great quality products, the things they need in their architectures. Those types of things are really, I think, have a big part of our margin expansion and really just creating value for our customers and then sharing in that value. There's no doubt about it. I mean, our acquisition program and our ability to improve the profitability of the acquisitions that we've been doing over time has certainly added to the profitability of the business, especially when you look sequentially over kind of a number of quarters.

We have seen meaningful profitability improvements in some of the larger acquisitions that we've more recently done, as well as some of the smaller ones. That certainly has had some impact on our profitability improvement over time. It's not just one thing. It's a lot of things that go into improving profitability, both organically and through the acquisitions and working with even some of the businesses that are within the company that are at lower profitability levels that may not be acquisitions. Certainly working with them on profitability improvement initiatives that we've seen kind of come along over the past years.

I think there's a variety of things, but there's no doubt that our success and the team's ability at the acquisitions that have come into the family to be able to improve on their margins has certainly been one of the things that have been helpful in improving our profitability. Appreciate it. Thank you. There are no further questions. I'll hand the call back to Mr. Norwitt for closing remarks. Thank you very much. I'd like to once again thank everybody for joining our call this quarter. I wish everybody a great continuation of your summer. We look forward to talking to you all again just in a short 90 days. Thanks very much, and have a great summer. Thank you. This concludes today's call. Thank you for joining. You may now disconnect your lines.