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TE Connectivity plc (TEL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 delivered $3.84B net sales (flat YoY), record adjusted operating margin of 19.4%, and adjusted EPS of $1.95 above guidance; GAAP EPS was $1.75. Orders were $4.0B with book-to-bill 1.05, supported by accelerating AI momentum in Digital Data Networks and strong FCF of $674M .
  • Versus prior quarter, revenue declined sequentially (Q4 FY24: $4.07B), but margins held strong (Q1 GAAP OM 18.0%, adj. 19.4% vs Q4 GAAP 16.0%, adj. 18.6%). Cash generation remained robust (CFO $878M; FCF $674M), despite ~$50M FX headwind vs guidance .
  • Management guided Q2 FY25 net sales ~$3.95B, adjusted EPS ~$1.96 (up 5% YoY), GAAP EPS ~($0.05) on a one-time non-cash tax law charge; expects ($0.06) combined FX/tax headwind and >$300M FX headwind for FY25 ($100M per remaining quarter) .
  • Near-term stock catalysts: continued AI revenue ramp (FY25 now “> $600M”), record margins/FCF, and sequential sales growth outlook; offsets include FX headwinds, uneven auto/commercial vehicle cycles, and a Q2 GAAP EPS tax charge .

What Went Well and What Went Wrong

What Went Well

  • Record adjusted operating margin (19.4%) and adjusted EPS ($1.95) above guidance, driven by “strong operational execution” and restructuring savings; FCF reached a Q1 record of $674M .
  • Industrial Solutions grew double digits (reported +11%, organic +9%); DDN up 48% with AI orders >$1.5B over the last 3 quarters; AD&M +15% organic; Energy +7% organic .
  • Management secured >$1B design wins with a leading Chinese OEM for in-vehicle data connectivity, highlighting secular content growth from software-defined architectures .

What Went Wrong

  • Top line fell short of guidance due to ~$50M stronger-dollar FX headwind; transportation end markets (commercial trucks, sensors) remained weak, pulling segment sales down 6% reported .
  • Medical declined 25% YoY on inventory normalization; factory automation remains weak in Western geographies, though stabilizing overall .
  • Q2 GAAP EPS will be ~($0.05) on a one-time non-cash tax law charge; FY25 FX headwinds now expected to exceed $300M .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$3.979 $4.068 $3.836
GAAP Operating Margin (%)19.0% 16.0% 18.0%
Adjusted Operating Margin (%)19.3% 18.6% 19.4%
GAAP Diluted EPS ($)$1.86 $0.90 $1.75
Adjusted Diluted EPS ($)$1.91 $1.95 $1.95

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentNet Sales Q1 2024 ($MM)Net Sales Q1 2025 ($MM)GAAP Op Margin Q1 2024 (%)GAAP Op Margin Q1 2025 (%)Adjusted Op Margin Q1 2024 (%)Adjusted Op Margin Q1 2025 (%)
Transportation Solutions$2,393 $2,243 20.4% 19.9% 21.1% 21.3%
Industrial Solutions$1,438 $1,593 14.7% 15.3% 15.8% 16.8%
Total$3,831 $3,836 18.2% 18.0% 19.1% 19.4%

KPIs and Cash Generation

KPIQ3 2024Q4 2024Q1 2025
Orders ($USD Billions)$4.1 0.94 Book-to-Bill (orders not disclosed) $4.0
Book-to-Bill0.98 0.94 1.05
Cash from Operations ($MM)$1,006 $1,042 $878
Free Cash Flow ($MM)$867 $833 $674
Adjusted Effective Tax Rate (%)23.1% 21.8% 23.0%

Notes: Q4 orders not separately disclosed in press release; book-to-bill captured from company presentation/8-K exhibits .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Net SalesQ1 2025~$3.9B $3.836B Slight below on FX headwinds
Adjusted EPSQ1 2025~$1.88 $1.95 Raised/Beat
Net SalesQ2 2025n/a~$3.95B New
Adjusted EPSQ2 2025n/a~$1.96 New
GAAP EPSQ2 2025n/a~($0.05) (one-time non-cash tax law charge) New
FX HeadwindFY 2025n/a>$300M total; ~$100M per next 3 quarters New/Updated
Adjusted Effective Tax RateFY 202523–24% 23–24% (reaffirmed) Maintained
Restructuring ChargesFY 2025~$100M ~$100M (reaffirmed) Maintained
Dividend per ShareNext Payment$0.65 (paid Mar 7) $0.71 (payable Jun 10) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3/Q4)Current Period (Q1 2025)Trend
AI/Technology initiativesQ3: Record orders, >20% Comm. growth on AI momentum ; Q4: AI momentum sustained DDN +48% organic; AI revenue outlook “> $600M” FY25; >$1.5B AI orders in last 3 quarters Accelerating ramp; broad hyperscaler programs
Auto production & contentQ3: Auto grew 4% organically despite production decline Auto down ~3% organically; strong Asia offsetting Europe; TE expects low end of 4–6 pts over market Mixed by region; content growth from electronification
Commercial transportationQ4: softer cycles Down ~12% organically; potential improvement later; 2027 emissions change may pull forward demand Near-term weak; medium-term recovery potential
Tariffs/Macro & footprintQ3/Q4: operational excellence; localization 80% in-region manufacturing; replay 2017 tariff playbook (lane/tooling/pricing) Prepared; mitigants identified
Regional trendsQ3: robust Asia; uneven elsewhere Strength in Asia; Europe weak; Americas neutral Asia-led growth; Europe softness
Factory automation & ACLQ3: mixed; in Comm >20% growth Stabilization in automation orders; Western weakness; Asia improving Stabilizing
MedicalQ3: modest -25% YoY on customer inventory normalization; book-to-bill >1; sequential recovery expected Short-term correction; recovery expected
Energy & GridQ3/Q4: strength; record cash; guided investment Energy +7% organic; acquisition of Harger; agreement to acquire Richards Manufacturing ($2.3B) to expand utility portfolio Strengthening via M&A

Management Commentary

  • CEO: “Adjusted EPS above guidance and records in both adjusted operating margin and first quarter free cash flow… momentum in AI programs across multiple customers… expect second quarter sales to be up sequentially and adjusted EPS to be up year over year” .
  • CEO on auto and data connectivity: “We just secured over $1 billion of new design wins… entirely around data connectivity in the car” .
  • CFO: “Adjusted operating income was $745M… record performance… restructuring charges in fiscal ’25 around the $100M level… adjusted ETR 23% in Q1 and expect Q2 at this level” .
  • CEO on tariffs and footprint: “80% of what we manufacture is in-region… we will deploy our playbook from the 2017 tariff cycle” .

Q&A Highlights

  • Orders and AI ramp: Industrial orders were ahead of expectations; excluding AI, segment orders +10% YoY; AI orders continue to grow; revenue outlook “> $600M” for FY25, share ~30–35% across programs .
  • Margins leverage: Transportation margins sustainably ~20% with footprint optimization; outsized leverage expected as commercial transportation recovers into 2026 .
  • Tariffs mitigation: Replay 2017 tariff mitigations (logistics, tooling relocation, pricing pass-through); 80% in-region manufacturing aids resilience .
  • Medical & automation: Medical decline is a one-time inventory normalization; book-to-bill >1 and sequential recovery expected; automation orders stabilizing, Asia strengthening .
  • DDN/IP: Cross-licensing is traditional in connectors to ensure supply; TE does not play in co-packaged optics, focuses on copper connectivity; margins benefit as ramps scale .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) Wall Street consensus for TEL EPS/Revenue/EBITDA (Q1/Q2) but encountered API daily limit errors, so estimates were unavailable at this time. As a result, comparisons anchor to company guidance/outcomes rather than consensus. Values that would normally be cited from S&P Global are not included due to unavailability (attempts: Primary EPS Consensus Mean; Revenue Consensus Mean; EBITDA Consensus Mean; Revenue/ EPS # of Estimates) [GetEstimates errors].

Key Takeaways for Investors

  • Margin durability: Record 19.4% adjusted OM and $1.95 adjusted EPS show operational resilience despite FX; restructuring benefits and footprint localization underpin margins through cycles .
  • AI momentum is now a core growth vector: DDN up 48% organic; FY25 AI revenue “> $600M” with >$1.5B orders over 3 quarters; broad hyperscaler engagements support multi-year visibility .
  • Transportation mixed but content rising: Auto down modestly with Asia strength; data-in-car design wins and electronification should drive content per vehicle even as unit production remains uneven .
  • Industrial breadth offsets pockets of weakness: AD&M and Energy strong; medical recovery likely from Q2; automation stabilizing with regional divergence (Asia stronger) .
  • Near-term headwinds manageable: FX >$300M in FY25 and one-time tax law charge driving Q2 GAAP EPS ~($0.05); adjusted EPS still expected up 5% YoY to ~$1.96 .
  • Capital deployment: Record cash generation, active buybacks/dividends (dividend raised to $0.71), and Energy-focused bolt-ons (Harger; Richards $2.3B) reinforce long-term compounding .
  • Trading lens: Watch for sequential sales uptick in Q2, continued AI order/revenue prints, and any updates on tariff regimes; FX sensitivity remains a variable for reported sales and EPS .