Executive Summary

TEL delivered Q2 FY25 revenue of $4.14B (+4% y/y; +5% organic) and record adjusted EPS of $2.10, both above guidance; GAAP EPS was $0.04 due to a one-time non-cash tax charge tied to tax law changes .
Segment performance was mixed: Industrial Solutions grew 17% reported (16% organic) with 260 bps adjusted margin expansion to 17.9%, while Transportation Solutions declined 4% reported (2% organic) but maintained ~21% adjusted margins .
Orders rose 6% y/y and sequentially to $4.25B (book-to-bill 1.02), supporting Q3 guidance of ~$4.30B revenue and ~$2.06 adjusted EPS; guidance factors in the Richards acquisition, ~2 pts of tariff-recovery pricing, and a ~$0.06 sequential tax headwind .
AI momentum accelerated: Digital Data Networks grew ~78% y/y; management now expects >$700M FY25 AI revenue (vs >$600M prior), citing 150% order growth and faster ramps across multiple hyperscalers—key near-term stock catalyst alongside tariff mitigation confidence and sustained margin discipline .

What Went Well and What Went Wrong

What Went Well
- Industrial outperformance: Industrial Solutions up 17% reported (16% organic) with adjusted operating margin up 260 bps to 17.9%; strength in AI (DDN +78% organic), Energy (+8% organic), and AD&M (+11% organic) .
- Record profitability: Adjusted EPS $2.10 (+13% y/y) and adjusted operating margin 19.4% (+90 bps y/y), driven by broad operational execution and mix .
- Management confidence on tariffs and localization: “We expect to effectively navigate the current trade environment” and don’t expect tariffs to “have a meaningful impact on our third quarter earnings,” backed by sourcing changes and tariff-recovery pricing .
What Went Wrong
- Transportation softness: Transportation Solutions revenue down 4% reported (2% organic) with weak Western auto and continued headwinds in Commercial Transportation and Sensors, partly offset by Asia strength .
- Medical destocking: Medical declined 14% y/y due to customer inventory normalization, although sequential trends improved double digits, and management expects ongoing 2H improvement .
- Tax headwinds: GAAP EPS suppressed by a $1.91 one-time non-cash tax charge; Q3 adjusted ETR raised to ~24–25%, creating a ~$0.06 sequential EPS headwind .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025	Q2 2025 Consensus*
Revenue ($B)	$4.07	$3.84	$4.14	$3.97*
GAAP Diluted EPS ($)	$0.90	$1.75	$0.04	N/A
Adjusted EPS ($)	$1.95	$1.95	$2.10	$1.96*
Adjusted Operating Margin (%)	18.6%	19.4%	19.4%	N/A

Result vs consensus (Q2): Revenue beat ($4.14B vs $3.97B*), adjusted EPS beat ($2.10 vs $1.96*) .
GAAP EPS impacted by one-time tax charge; adjusted EPS reflects underlying performance and aligns to guidance framework .
Orders and FCF: Orders $4.25B (+6% y/y and q/q; book-to-bill 1.02); Q2 FCF $424M; 1H FCF ~$1.10B .

Segment breakdown (sales and margins)

Segment	Q2 2024 Sales ($B)	Q2 2025 Sales ($B)	Q2 2024 Adj Op Margin	Q2 2025 Adj Op Margin
Transportation Solutions	$2.41	$2.31	20.6%	20.7%
Industrial Solutions	$1.56	$1.83	15.3%	17.9%

Industrial end-market KPIs (Q2 y/y)

End-Market	Q2 2025 Growth (Reported / Organic)	Commentary
Digital Data Networks (AI)	+77% reported / +78% organic	Hyperscaler ramps; >$700M FY25 AI revenue outlook
AD&M	+9% / +11% organic	Ongoing strength in commercial aero, defense, and space
Energy	+19% / +8% organic	Grid hardening and renewables; Richards enhances N. America utility exposure
ACL (Automation & Connected Living)	+2% / +2% organic	Stabilization; cautious Q3 outlook amid tariff uncertainty
Medical	(14)% / (14)% organic	Destocking; double-digit sequential improvement

Additional KPIs and balance sheet

Book-to-bill 1.02; Orders $4.25B .
Q2 Cash from Ops $653M; Q2 FCF $424M; 1H FCF ~$1.10B .
Ending cash $2.55B; Total debt $5.61B after April financing and Richards close; DSO 69; DOH 85 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	Q3 FY25	N/P	~$4.30B; +8% y/y; ~5% organic	New
GAAP EPS (cont. ops)	Q3 FY25	N/P	~$2.02	New
Adjusted EPS	Q3 FY25	N/P	~$2.06; +8% y/y	New
Adjusted ETR	Q3 FY25	N/P	~24.5%; ~$0.06 sequential EPS headwind	New
Tariff assumptions	Q3 FY25	N/P	~3% of sales cost impact; ~1/3 mitigated; ~2 pts price recovery	New
Richards contribution	Q3 FY25	N/P	~$70M sales; ~neutral to adj EPS incl. financing	New
Restructuring/Acq. in EPS	Q3 FY25	N/P	~$0.02 each in GAAP-to-non-GAAP bridge	New
Dividend	FY25	Base	+9% increase announced	Raised

N/P = Not previously provided specifically for Q3 in public materials reviewed.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
AI/Data center (DDN)	FY24: AI acceleration highlighted; Q1’25: FY25 AI >$600M; DDN orders >$1.5B over 3 qtrs	FY25 AI >$700M; 150% q/q orders increase; faster ramps with multiple hyperscalers	Accelerating
Supply chain/localization	Q1’25: ~80% in-region mfg; playbook for tariffs ready	Tariff cost ~3% of sales; ~2 pts price to recover; no meaningful Q3 EPS impact expected	Manageable
Auto regional mix/content	Q1’25: Low end 4–6% content growth; Asia strength, Europe weak	Asia auto growth offsetting Western declines; maintain low-end content growth outlook	Mixed but resilient
Commercial Transportation	Q1’25: Weak; recovery later; emissions rule 2027 pull-forward	Q3 guide “flat” vs Q2; recovery still later; higher-margin tailwind when volume returns	Bottoming/stable
Medical	Q1’25: Destock; sequential improvement expected	(14)% y/y; double-digit sequential improvement achieved	Improving
Energy/Grid	Q1’25: +7% organic	+8% organic; Richards expands N. America utility exposure	Strengthening
Tariffs/macro	Q1’25: Prepared; options include sourcing, pricing	~2 pts pricing in Q3 guide; stable orders early April; limited pull-ins	Controlled execution

Management Commentary

CEO Terrence Curtin on execution and guidance: “We are performing well and continue to execute on what we can control… record adjusted EPS… guidance for year-over-year improvement in sales and EPS” .
On tariffs and localization: “We expect to effectively navigate the current trade environment” due to localized manufacturing and tariff-recovery actions .
On AI momentum: “We now expect revenue from artificial intelligence applications to be above $700 million in fiscal 2025… ramps from hyperscale platforms across the customer base” .
CFO Heath Mitts on tax and guidance: “Adjusted effective tax rate… in the 24% to 25% range… will result in a $0.06 sequential headwind to EPS in the third quarter” .
On tariff economics: “~3% of sales cost impact… ~1/3 mitigated by sourcing… recover the vast majority of the remaining 2/3 through pricing actions (~2 points of price)” .

Q&A Highlights

Tariffs and pricing power: Tariff exposure is “much more in our Industrial segment” with mitigation via sourcing changes and surcharges; localization and regional manufacturing create competitive advantages versus less-localized peers .
AI demand and pull-ins: Management did not observe meaningful pull-ins; higher guide reflects firmer orders and faster program ramps; AI customer concentration diversified across hyperscalers .
Margins sustainability: Industrial expected to drive the next leg of margin expansion; Transportation to hold ~20–21% with leverage when CT cycles recover .
Automation stabilization: Orders inflected in Europe and Asia; cautious near term given tariff uncertainty; modeling Q3 ACL roughly flat q/q .
Auto content growth: FY content growth at low end of 4–6% amid European weakness; Asia ramps in data connectivity (Ethernet/zonal architectures) support outperformance .

Estimates Context

Q2 FY25 beat: Revenue $4.14B vs $3.97B consensus; adjusted EPS $2.10 vs $1.96 consensus (both beats) .
Q1 FY25: EPS beat ($1.95 vs $1.89*) but revenue slightly below ($3.84B vs $3.91B*) .
FY25 cadence: Q3 guide implies continued y/y growth with tariff-recovery pricing and Richards contribution .
Values retrieved from S&P Global.*

Key Takeaways for Investors

Industrial-led upside: AI server interconnect, Energy grid hardening, and AD&M are driving growth and mix-led margin gains; DDN momentum is robust and accelerating into 2H .
Transportation resilient despite macro: Asia is offsetting Western weakness; TEL maintains ~21% adjusted margins and expects low-end content growth (4–6%) via data connectivity ramps .
Tariff risk managed: Localization and pricing (~2 pts in Q3) largely offset a ~3% of sales cost impact, limiting EPS risk near term .
Cash generation supports capital deployment: 1H FCF ~$1.1B with a 9% dividend increase, opportunistic buybacks, and Richards closing adding utility exposure .
Near-term catalysts: Q3 delivery vs guide (sales $4.3B, adj EPS ~$2.06), AI order flow and ramps, stabilization in ACL/Medical, and visibility on CT recovery timeline .
Watch the tax line: Higher adjusted ETR (24–25%) creates a ~$0.06 sequential EPS headwind in Q3; underlying operations still expanding margins .

Other Q2-period corporate items: Completed $2.3B Richards Manufacturing acquisition; announced 9% dividend increase; incremental debt issuance executed in April to support liquidity and M&A .

Notes:

All financials and commentary are as reported by TEL in the Q2 FY25 8-K/press release and earnings call. Adjusted metrics are non-GAAP as defined by the company .
Consensus estimates marked with an asterisk are from S&P Global.

TE Connectivity plc (TEL)·Q2 2025 Earnings Summary