TE Connectivity (TEL) Bernstein 42nd Annual Strategic Decisions Conference summary

Growth strategy and market outlook

• Targeting 6%-8% long-term growth, about 50% higher than historical rates, driven by positioning in data and power acceleration markets.

• AI and data center revenue momentum is strong, with 70% growth in AI applications expected this year and revenue targets increasing from $2B to $2.4B.

• Energy business represents 10% of revenue, with double-digit organic growth, especially in North America and grid hardening applications.

• Automotive growth is driven by EV adoption in Asia, increased data content, and electronification, despite flat global auto production.

• Automation and commercial transportation are rebounding after a period of weakness, with early signs of cyclical recovery.

Technology and product development

• Both copper and optical solutions are used in data centers, with hybrid systems expected to continue as customers make architecture trade-offs.

• Power connectivity is a significant growth area, with content increasing as racks move to higher voltages and liquid cooling.

• Significant investments in engineering and manufacturing capacity, with CapEx running at about 6% of sales to support growth verticals.

• AI is used internally to improve engineering efficiency and throughput, focusing on manufacturing and product development.

• Product development is closely aligned with customer needs, with engineers co-located at design centers globally.

Financial performance and capital allocation

• Margin improvements are driven by volume leverage and operational efficiency, with all business units showing margin gains.

• Price increases are being implemented to offset material inflation, with cost recovery as a priority.

• Free cash flow conversion remains strong, with about a third returned as dividends and two-thirds allocated to share buybacks or M&A.

• M&A strategy focuses on bolt-on acquisitions in the industrial segment, with disciplined integration and value creation frameworks.

• Portfolio is regularly reviewed for potential divestitures, but current businesses are seen as enabling offensive growth.