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TE Connectivity plc (TEL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered record net sales of $4.534B (+14% reported, +9% organic) and record adjusted EPS of $2.27; GAAP diluted EPS was $2.14. Adjusted operating margin reached 19.9% (+60 bps YoY) and orders were $4.5B, up YoY and sequentially .
  • Results decisively beat Wall Street: revenue beat by ~$0.22B and adjusted EPS beat by ~$0.19; EBITDA also exceeded consensus. Momentum was driven by Industrial Solutions (DDN/AI, Energy) and resilient Transportation in Asia . Q3 vs consensus: Revenue $4.534B vs $4.316B*, Adjusted EPS $2.27 vs $2.08*, EBITDA $1.117B vs $1.047B* (Values retrieved from S&P Global).
  • Management guided Q4 FY25 net sales to ~$4.55B (+12% reported, +6% organic) and adjusted EPS to ~$2.27; GAAP EPS ~$2.18. FX tailwind in Q4: ~$111M sales and ~$0.03 EPS YoY; tariff impact ~1.5% of sales with minimal earnings effect expected to be similar to Q3 .
  • Catalysts: accelerating AI revenues (expected >$800M in FY25 with >$1B run rate next year), Industrial margins crossing 20%, and announced Investor Day on Nov 20 in Philadelphia .

What Went Well and What Went Wrong

What Went Well

  • Industrial Solutions strength: reported sales +30% and organic +21%, with DDN (AI) +84% reported and Energy +70% reported (+20% organic); Industrial adjusted operating margin expanded ~390 bps to 20.4% .
  • Cash generation: CFO ~$1.187B and FCF $962M—both quarterly records amid robust operating performance; YTD FCF ~$2.060B .
  • Management quote underscoring execution and AI momentum: “We delivered 14% sales growth and 19% adjusted earnings per share…capitalizing on the strong demand for artificial intelligence” . CEO also highlighted AI revenues expected above $800M in FY25 and above $1B next year .

What Went Wrong

  • Transportation margin and Western demand: Transportation adjusted margin fell to 19.4% vs 21.2% prior year; Western auto production down mid-single digits pressured content growth despite double-digit Asia strength .
  • Sensors and Medical softness: Sensors sales down YoY, reflecting western end-market weakness; Medical down 13% reported YoY in Q3 (inventory normalization) .
  • Book-to-bill ticked below 1.0 at 0.99 (driven by seasonal auto production declines expected from Q3→Q4); management framed it as seasonal and embedded in guidance .

Financial Results

Quarterly Trend

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$3.836 $4.143 $4.534
GAAP Diluted EPS (Cont. Ops)$1.75 $0.04 $2.14
Adjusted EPS ($)$1.95 $2.10 $2.27
Operating Margin (%)18.0% 18.1% 18.9%
Adjusted Operating Margin (%)19.4% 19.4% 19.9%

Year-over-Year (Q3 FY25 vs Q3 FY24)

MetricQ3 2024Q3 2025
Revenue ($USD Billions)$3.979 $4.534
GAAP Diluted EPS (Cont. Ops)$1.86 $2.14
Adjusted EPS ($)$1.91 $2.27
Operating Margin (%)19.0% 18.9%
Adjusted Operating Margin (%)19.3% 19.9%

Q3 FY25 vs Wall Street Consensus (S&P Global)

MetricConsensusActualBeat/(Miss)
Revenue ($USD Billions)$4.316*$4.534 +$0.218
Adjusted EPS ($)$2.08*$2.27 +$0.19
EBITDA ($USD Billions)$1.047*$1.117 +$0.070

Values retrieved from S&P Global.

Segment Breakdown (Q3 FY25)

SegmentQ3 2024 Net Sales ($MM)Q3 2025 Net Sales ($MM)Reported YoYAdjusted Op Margin Q3 2024Adjusted Op Margin Q3 2025
Transportation Solutions$2,351 $2,418 +3% 21.2% 19.4%
Industrial Solutions$1,628 $2,116 +30% 16.5% 20.4%
Total$3,979 $4,534 +14% 19.3% 19.9%

Industrial Sub-Segments (Q3 FY25)

Sub-SegmentSales ($MM)Reported YoYOrganic YoY
Digital Data Networks (DDN)$606 +84% +82%
Automation & Connected Living (ACL)$571 +10% +5%
Energy$384 +70% +20%
Aerospace, Defense & Marine (AD&M)$374 +8% +6%
Medical$181 (13)% (14)%

KPIs

KPIQ3 2024Q2 2025Q3 2025
Orders ($MM)$4,132 $4,246 $4,472
Book-to-Bill (Total TE)1.04 1.02 0.99
Cash from Operations ($MM)$1,006 —$1,187
Free Cash Flow ($MM)$867 —$962
DSO (days)65 —68
Inventory Days (days)89 —85
AP Days (days)58 —62

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($B)Q4 FY25—~$4.55 New
GAAP EPS ($)Q4 FY25—~$2.18 New
Adjusted EPS ($)Q4 FY25—~$2.27 New
Organic Net Sales Growth (%)Q4 FY25—~5.5% New
FX impact (Sales, $MM)Q4 FY25 YoY—~$111 New
FX impact (Adj EPS, $)Q4 FY25 YoY—~$0.03 New
Tariff impact (% of sales)Q3 FY25 (actual) / Q4 FY25 (assumed)~3% implied prior assumption ~1.5% Q3 actual; similar in Q4 with minimal EPS impact Lower than prior assumption
Adjusted ETR (%)Q4 FY25~24.5% ETR; Adj ETR 24.0% ~24.5% ETR; Adj ETR 24.0% Maintained
Dividend ($/share)Declared in Q3—$0.71 payable Sep 12, 2025 New declaration

Note: In April, management guided Q3 sales ~$4.30B and adjusted EPS ~$2.06; actual Q3 delivered $4.534B and $2.27—clear raise vs guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY25)Current Period (Q3 FY25)Trend
AI/technology (DDN)Q1: DDN +48% YoY; AI momentum across multiple customers . Q2: DDN +77% reported/+78% organic .Q3: DDN +84% reported/+82% organic; AI revenues expected >$800M FY25 and >$1B next year .Accelerating growth; scaling capacity.
Supply chainAD&M demand healthy; supply chain improving noted in Q3 .Ongoing improvement across aerospace and defense .Improving steadily.
Tariffs/macroQ2: localized footprint minimizes tariff impact; ~2 pts price recovery in guide .Q3: ~1.5% of sales tariff impact with minimal earnings effect; Q4 similar .Lower-than-expected tariff drag.
Product performanceTransportation stable; auto flat to down in West; Asia strong .Transportation sales +3% reported; strength in Asia offsets Western declines .Mixed geographically; Asia-led.
Regional trendsQ1/Q2: Asia strength; Europe/NA softer in auto and sensors .Asia +11% auto growth; Western auto down ~5% .Divergent; Asia up, West soft.
Regulatory/legal/taxQ2: one-time non-cash tax charge from changes in tax law .Adjusted ETR ~24%; Pillar Two impact noted .Structural tax headwinds manageable.
R&D/capexElevated capex for high-speed connectivity ramp .~30% capex growth; majority into AI capacity .Investing ahead of demand.

Management Commentary

  • “We are pleased that we've delivered double-digit increases in both sales and adjusted earnings per share…quarterly records for our company.” — CEO Terrence Curtin .
  • “AI revenues last year was $300 million. We now expect our revenue from artificial intelligence applications to be above $800 million in this fiscal 2025 year…and above $1 billion next year.” — CEO Terrence Curtin .
  • “Adjusted operating margins were 20%, and they increased 60 basis points over last year…both segments are now essentially running at 20%.” — CEO Terrence Curtin .
  • “Cash from operations was nearly $1.2 billion, and free cash flow was $962 million in the quarter…another year of free cash flow conversion well above 100%.” — CFO Heath Mitts .
  • “The impact from tariffs in the third quarter was approximately 1.5% of sales with minimal earnings impact…expect [Q4] to be similar to Q3 levels.” — CFO Heath Mitts .

Q&A Highlights

  • AI scaling and profitability: AI margin “a little bit above where the industrial segment plays,” with multi-customer hyperscaler ecosystem and >$1B run-rate next year .
  • Industrial margins sustainability: footprint consolidation plus volume leverage support ≥20% margins at current volumes; energy and AI help mix .
  • Book-to-bill and seasonality: Transportation book-to-bill below one driven by seasonal auto production decline (21M units in Q3 → ~20M in Q4); embedded in guide .
  • Auto content vs market: Asia strong (11% growth on 4% production); Western production down ~5% pressures content; expect ~400 bps over-market in Q4 .
  • Pricing/tariffs: Q3 tariff cost ~1.5% of sales with supply chain mitigation and selective pricing; Q4 assumptions similar .

Estimates Context

  • Q3 FY25 beats: Revenue $4.534B vs $4.316B consensus*; Adjusted EPS $2.27 vs $2.08 consensus*; EBITDA $1.117B vs $1.047B consensus* .
  • Q4 FY25 setup: Street at revenue ~$4.586B* and EPS ~$2.29*; company guides to ~$4.55B and ~$2.27 adjusted—slightly conservative vs consensus* .
  • Estimate implications: Upward revisions likely for Industrial DDN/Energy growth and consolidated margins; Transportation estimates may stay cautious on Western production softness and seasonal Q4 auto decline .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • TEL’s Q3 FY25 was a clean beat on sales, EPS, and EBITDA with record cash generation—driven by Industrial strength (AI/DDN and Energy) and resilient Transportation in Asia .
  • AI is now material and accelerating (>$800M FY25, >$1B run-rate in FY26), providing a secular tailwind to revenue growth and margins .
  • Industrial margins crossing 20% appear sustainable given footprint actions and mix; watch continued volume leverage and execution in Energy and AD&M .
  • Q4 guide implies continued double-digit EPS growth; FX tailwinds and tariff mitigation reduce macro risk, though seasonal auto production will weigh on Transportation .
  • TEL remains a cash compounder (FCF conversion >100%); optionality for shareholder returns and bolt-on M&A in fragmented Industrial markets (e.g., Richards) .
  • Near-term trading: favor strength into Q4 on AI/DDN momentum and strong FCF; monitor Western auto softness and any tariff policy changes .
  • Medium-term thesis: secular exposure to data and power connectivity across autos, AI data centers, grid hardening, aerospace; balanced geographic footprint and localized manufacturing support resilience .