TE Connectivity (TEL) Baird 2026 Global Industrial Conference summary

Growth outlook

• FY2026 organic growth was 12%, and 15% including M&A; FY2027 organic growth is expected to be another 12%, with the outlook range unchanged.

• Growth breadth spans AI, energy and aerospace; AI is expected to add over $1B of growth in FY2027, while energy and aerospace are positioned for strong double-digit growth.

• Backlog grew, led by AI and defense customers; engineering and capacity investments support growth through FY2027 and beyond.

M&A and capital allocation

• M&A approach remains disciplined, targeting accretive industrial assets; Richards complements energy, utility, grid-hardening and underground connectivity offerings.

• Astrodyne adds power filtering for semiconductor equipment and aerospace applications; expected to close in Dec. 2026, adding over $200M to FY2027 revenue.

• Acquisition targets typically seek mid-teen returns by year five; current ROIC is over 20%.

Digital data networks and AI

• DDN doubled over the past couple of years; FY2027 growth is expected to exceed $1B, with hyperscaler programs and next-generation architectures supporting continued expansion.

• Management sees potential to add $1B annually in DDN over the longer term, driven by copper, fiber, power and expanded opportunities in CPO/NPO connectivity.

• Copper remains the rack workhorse; fiber attach units are in engineering, prototype and design validation, while some switch-level copper may be cannibalized.

• Power products are ~30% of DDN revenue and expected to outgrow the segment in FY2027; 800 V architectures raise content by ~1.5x, but adoption will not be widespread in 2026.

• Inference adds copper content, though GPU training racks carry more content per rack; engineering spending was ~$200M higher last year and is expected to rise by a similar amount this year.

• CapEx rose ~$200M last year and is expected to increase by a similar amount this year; company-level fall-through remains ~30%, with some investment-related lumpiness.