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TE Connectivity plc (TEL)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 delivered record sales of $4.75B (+17% reported, +11% organic) and adjusted EPS of $2.44 (+25% y/y), both above guidance; GAAP EPS was $2.23 and adjusted operating margin reached ~20% .
  • Orders rose to $4.7B (+22% y/y, +5% q/q) with strong momentum in Industrial (AI/energy) and Transportation; free cash flow was a record ~$1.15B for the quarter .
  • Management guided Q1 FY26 sales ~$4.5B, GAAP EPS ~$2.33 and adjusted EPS ~$2.53, with ~11% organic growth and ~22% adjusted ETR; non-GAAP will exclude intangible amortization (≈$0.15 per quarter impact) beginning FY26 .
  • Strategic drivers: Industrial DDN grew ~80% y/y on AI ramps; TE generated >$900M AI revenue in FY25 (tripled y/y), while non‑AI cloud revenue doubled to ~$500M; Transportation content growth offset Western production weakness .
  • Near-term catalysts: Above-guide prints and double-digit FY26 Q1 outlook, >100% FCF conversion, and clarity on non-GAAP recast could drive estimate revisions and sentiment; dividend declared at $0.71 payable Dec 12, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Record quarter and year: “Our performance resulted in records on the top line, earnings and cash flow in 2025” (CEO) .
  • AI momentum: “For the full year we generated over $900 million in AI revenue, tripling our AI sales versus the prior year” .
  • FY26 setup: “We expect sales and EPS in the first quarter of fiscal 2026 to each be up double digits year over year” .

What Went Wrong

  • Mixed end-market dynamics: Sensors sales down in Western regions; Commercial Transportation declines in North America persist .
  • Medical softness: Medical down ~16% y/y in Q4; sequentially ~flat as expected .
  • Tax headwinds and margin noise: Q4 included ~$0.10 tax charge related to valuation allowance; some tariff pass-through adds revenue with no margin .

Financial Results

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Billions)$4.143 $4.534 $4.749
GAAP Diluted EPS ($)$0.04 $2.14 $2.23
Adjusted EPS ($)$2.10 $2.27 $2.44
Operating Margin (%)18.1% 18.9% 19.3%
Adjusted Operating Margin (%)19.4% 19.9% 19.9%
Free Cash Flow ($USD Millions)$424 $962 $1,154

Segment breakdown:

SegmentQ2 2025 Net Sales ($MM)Q3 2025 Net Sales ($MM)Q4 2025 Net Sales ($MM)Q2 2025 Adj. Op Margin (%)Q3 2025 Adj. Op Margin (%)Q4 2025 Adj. Op Margin (%)
Transportation Solutions$2,314 $2,418 $2,413 20.7% 19.4% 19.4%
Industrial Solutions$1,829 $2,116 $2,336 17.9% 20.4% 20.3%

KPIs:

KPIQ2 2025Q3 2025Q4 2025
Orders ($USD Billions)$4.25 $4.5 $4.7
Book-to-Bill1.02 0.99 0.99

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Sales ($B)Q4 FY25~$4.55 $4.75 (actual) Beat
Adjusted EPS ($)Q4 FY25~$2.27 $2.44 (actual) Beat
Sales ($B)Q1 FY26—~$4.5 Introduced
GAAP EPS ($)Q1 FY26—~$2.33 Introduced
Adjusted EPS ($)Q1 FY26—~$2.53 Introduced
Organic Net Sales Growth (%)Q1 FY26—~10.6% Introduced
Adjusted Effective Tax Rate (%)Q1 FY26—~22% Introduced
Non-GAAP methodologyFY26—Exclude intangible amortization (≈$0.15/quarter) Updated methodology
Restructuring charges ($MM)FY26—~100 Outlook
Dividend ($/share)Q4 FY25Prior increase announced in Mar 2025 $0.71 declared; payable Dec 12, 2025 Maintained cadence

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current PeriodTrend
AI/technology initiatives (DDN)DDN +78% y/y in Q2; +84% y/y in Q3; strong hyperscaler ramps DDN +80% y/y; FY25 AI revenue >$900M (tripled) Continued strong growth; broadening beyond pure AI
Supply chain/localizationGlobal manufacturing localization emphasized in Q2/Q3 Continued operational resilience cited Stable/positive
Tariffs/macroQ2 guidance included ~2 pts price for tariff recovery Tariff pass-through revenue carries no margin (noise) Neutral to slightly negative on margins
Product performance – TransportationQ2: Auto flat org.; Q3: Auto +2% org., sensors weak Auto content growth in Asia; Western declines; sensors weaker in West Mixed; more balanced expected
Regional trendsQ3: Asia strength; Europe/NorthAm mixed Industrial order momentum in NA utilities; factory automation improving across regions Improving in industrial; transportation stabilizing
Energy/grid hardeningQ2/Q3 growth; Richards acquisition closed Energy +83% reported; organic +24% Strong secular tailwind
Tax rate/valuation allowancesQ2 one-time non-cash tax charge; Q3 adjusted ETR ~24% Q4 adjusted ETR ~21.4%; Q1 FY26 ~22% Normalizing
Capex for AI capacityCapex up vs FY24 to support AI/cloud programs Incremental increase expected into FY26; still ~5% of sales Increasing, aligned to ramps
M&A/bolt-onsRichards ($2.3B) in Q3; active pipeline Optionality from strong FCF; appetite for bolt-ons of varying size Ongoing

Management Commentary

  • “Record results… against an uneven macro environment demonstrate the strategic positioning of our portfolio” (CEO) .
  • “We generated over $900 million of AI sales in 2025… tripled our revenue in this product set” (CEO) .
  • “You can assume that amortization impact will be roughly $0.15 per quarter for fiscal 2026” (CFO) .
  • “We expect adjusted effective tax rate in the first quarter to be approximately 22%” (CFO) .
  • “Free cash flow of ~$3.2B with >100% conversion; ~$2.2B returned to shareholders & ~$2.6B used for bolt-on acquisitions” (slides) .

Q&A Highlights

  • AI scaling and share: Management sees continued AI ramps across hyperscalers; share opportunities hinge on technology inflections and execution; FY25 AI revenue >$900M; non-AI cloud revenue doubled to ~$500M .
  • Capex outlook: Capex stepped up a couple hundred million in FY25 for AI/cloud programs; modest incremental increase expected into FY26; still ~5% of sales .
  • Margins: Sequential margin lift into Q1 FY26 expected, led by Transportation; industrial flattish; tariff pass-through can dilute reported margins without impacting underlying profitability .
  • Orders/book-to-bill: Q4 orders $4.7B; into seasonally slower Q1, orders trend remains healthy despite book-to-bill optics .
  • Auto content growth: Expect more balanced regional outgrowth as Western production stabilizes; ongoing content gains from data connectivity and electrification .

Estimates Context

Results vs S&P Global consensus:

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD) Actual vs Consensus$4,143,000,000 vs $3,969,654,800*$4,534,000,000 vs $4,316,365,450*$4,749,000,000 vs $4,585,581,860*
Primary EPS ($) Actual vs Consensus$2.10 vs $1.96353*$2.27 vs $2.07502*$2.44 vs $2.28932*
EBITDA ($USD) Actual vs Consensus$994,000,000 vs $951,864,940*$1,107,000,000 vs $1,047,067,200*$1,183,000,000 vs $1,150,305,250*
# of EPS Estimates17*17*15*
# of Revenue Estimates17*16*16*

Values retrieved from S&P Global.*

  • Q4: Revenue, EPS, and EBITDA all beat consensus; similar beats occurred in Q3 and Q2 as well, reinforcing estimate momentum into FY26 .

Key Takeaways for Investors

  • Industrial engine is the growth driver: AI DDN and energy/grid hardening underpin double-digit growth with margin expansion to ~20%+ in the segment .
  • Transportation resilient: Content gains (data connectivity, electrification) offset uneven regional production; margins ~20% FY25 with Q1 seasonality favoring auto .
  • Quality of earnings: Adjusted operating margin ~20%, >100% FCF conversion, and rising FCF (Q4 ~$1.15B) support continued buybacks/bolt-ons .
  • FY26 non-GAAP change lifts adjusted EPS optics by excluding amortization (~$0.15/quarter); communicate recast to avoid confusion and recalibrate comp sets .
  • Near-term setup: Double-digit Q1 FY26 sales/EPS growth, healthy orders, and Industrial momentum are supportive for estimate revisions and multiple resilience .
  • Watch points: Sensors and North American commercial transportation softness; tariff pass-through revenue can obscure margin optics; tax valuation allowances add noise .
  • Capital allocation: Strong balance sheet and FCF enable continued bolt-ons and shareholder returns; Richards integration augments Energy exposure .