TE Connectivity (TEL) Citi’s 2026 Global TMT Conference summary

Recent financial performance and demand drivers

• Fiscal Q3 saw 14% sales growth (12% organic), record orders, and expanding margins, with EPS growing faster than revenue due to volume leverage and cost recovery through pricing.

• Growth is broad-based across industrial, transportation, and data-driven markets, with CapEx-exposed segments and AI-related demand as key drivers.

• Industrial segment accounts for about 80% of growth, benefiting from energy infrastructure, factory automation, and aerospace/defense.

• Transportation content growth is strong in a flat market, especially in Asia, driven by self-driving, software-defined, and electric vehicles.

• Strong order backlog and momentum are expected to continue through 2027 and into 2028, especially in data and power segments.

Segment highlights and growth opportunities

• DDN (cloud and AI) orders up 70%, with sales growth in the 30% range; $3B AI/cloud target achieved faster than expected, with strong hyperscaler partnerships.

• Engineering activity is focused on next-gen architectures (800V, liquid/air cooling, optics), supporting growth into 2028-2029.

• Both copper and optics will play roles in future architectures, with new fiber attach units expanding addressable market.

• Power content is rising due to diverse voltage architectures and increased rack power needs, driving higher revenue per unit.

• Energy segment is now a mid-teens growth business, driven by grid hardening, utility upgrades, and data center power needs.

Competitive advantages and investment priorities

• Four key moats: deep engineering partnerships, advanced technology, material science expertise, and agile supply chain.

• Significant investments in engineering (up 2,500 people in three years), new facilities in Southeast Asia, and targeted acquisitions (e.g., Astrodyne) to strengthen portfolio.

• Capital allocation prioritizes high-return segments, with recent focus shifting from automotive to DDN and energy.

• Industrial segment receives the most investment, both organically and inorganically, to reinforce competitive position.