TE Connectivity (NYSE: TEL)
continues to prove that high-quality industrial and technology companies can
deliver both strong earnings growth and reasonable valuation when positioned in
the right end markets. Following its Q1 fiscal 2026 earnings (ended December
2025), TE Connectivity once again demonstrated solid execution, benefiting from
secular growth trends such as electrification, automation, connectivity, and
data infrastructure. In this article we will dive into TE Connectivity recent
earnings, stock performance & valuation, growth potential, and the risks
investor should consider.
About TE Connectivity
TE Connectivity is a global
industrial technology leader specializing in connectivity and sensor solutions.
The company traces its roots back to 1941, originally founded as part of AMP
Incorporated, and later became TE Connectivity after its separation from Tyco
International in 2011. TE’s portfolio includes connectors, sensors, relays,
antennas, and electronic components that enable reliable power, signal, and
data transmission. With operations in over 140 countries, TE benefits from
scale, deep customer relationships, and strong engineering expertise, giving it
a durable competitive advantage.
TE Connectivity Financial
Performance
TE Connectivity delivered a
strong financial performance in Q1 fiscal 2026, which ended in December 2025,
reflecting both robust demand and effective cost management. Revenue for the
quarter reached $4.67 billion, up from $4.07 billion in Q1 2025, representing a
solid 21.71% year-over-year increase. Earnings growth was even more impressive,
with EPS rising to $2.53 in Q1 2026 from $1.75 in Q1 2025, an increase of
44.38%, highlighting meaningful operating leverage and margin expansion.
On a trailing twelve-month basis,
TE Connectivity continued to demonstrate consistent growth. TTM revenue for Q1
2026 totaled $18.09 billion, compared to $15.85 billion in Q1 2025, reflecting
a 14.16% increase, while TTM EPS rose to $6.93 from $6.27, delivering 10.54%
growth year over year. Free cash flow generation remained solid, with free cash
flow per share (TTM) increasing to $10.53, up from $9.48 in the prior year,
representing 11.08% growth.
Profitability metrics further
underscore the company’s financial quality, with a Gross profit margin of
35.69%, a Net profit margin of 11.41%, and a Free cash flow margin of 17.34%.
Capital efficiency remains healthy, as reflected by a Return on assets of 9.37%
and a Return on equity of 16.1%, while the balance sheet remains conservative
with a Debt-to-equity ratio of 0.46.
Over the past five years, TE
Connectivity’s revenue has grown at a 3.7% CAGR, net income has declined at a
5% rate, while free cash flow has grown at 12.7%. Although growth over the
five-year period has been slow, the company’s financial performance over the
past year indicates that TE Connectivity is making a turnaround.
TE Connectivity Fiscal 2026
Financial Forecast
Looking ahead, analysts forecast
2026 revenue of $19.43 billion, representing a 12.53% increase from 2025
revenue of $17.26 billion, and non-GAAP EPS of $11.05, implying a strong 26.11%
increase from 2025 EPS of $8.76. Reflecting these solid fundamentals and growth
outlook, Wall Street analysts maintain a Buy rating on the stock, with an
average price target of $272.11, offering 20.67% potential upside, and a
highest price target of $311, which implies 37.92% upside from current levels.
TEL Stock Price Performance
and Valuation
At the time this article was written TE Connectivity was trading at $225.49 per share. The stock has gained 50% over the past one year, significantly outperforming the S&P 500, which rose 15.6% over the same period. Meanwhile, TE Connectivity stock is up 87.2% over the past five years, closely matching the S&P 500’s 87.1% gain during the same timeframe.
In addition to capital appreciation, the stock has dividend yield of 1.26%, providing additional return. On the valuation side, the stock trades at a price-to-sales (TTM) ratio of 3.69 and a forward P/S ratio of 3.41, indicating modest valuation expansion expectations. On an earnings basis, TE Connectivity trades at a non-GAAP P/E (TTM) ratio of 23.66, which declines to a forward non-GAAP P/E of 20.41. While the price-to-free-cash-flow (TTM) ratio is 21.09.
Based on Fiscal.ai data, if we
look at valuations over the past five years, the forward P/S is above average,
while the forward P/E and P/FCF are around average. This indicates that despite
the stock’s price increase over the past year, TE Connectivity is still trading
at a fair valuation based on historical levels. Given the combination of
accelerating earnings growth, strong free cash flow, and exposure to long-term
secular trends, TE Connectivity remains a compelling investment opportunity.
TE Connectivity Growth
Potential
TE Connectivity growth potential
remains strong driven by several factors.
- Explosive Market Expansion in AI
Infrastructure & Digital Data Networks
TE Connectivity’s Digital Data Networks business is a key growth engine, growing 70% year-over-year and generating about $707 million in quarterly revenue. Hyperscaler capital expenditure has reportedly tripled over the past three years, while TE’s content per AI chip has increased roughly fivefold from about $500 million in 2023 toward a trajectory above $3 billion. Management raised its fiscal 2026 AI revenue outlook by $200 million and now expects AI-related revenue to reach several billion dollars, supported by new program awards that extend backlog into 2027.
This sits within a powerful macro backdrop: hyperscalers plan massive data center investment, global data center power demand is projected to soar, AI servers should grow far faster than traditional servers, and TE is increasing capital spending to capture this structural AI infrastructure buildout. - Energy Grid Infrastructure
& Electrification Acceleration
TE Connectivity's Energy segment within Industrial Solutions surged 88% in Q1 sales, with 15% organic growth reflecting robust demand beyond the Richards Manufacturing acquisition. Strategic buys including Harger (grounding/lightning protection) and Kries (smart grid monitoring) position TE to capture the full electrical infrastructure value chain amid global grid hardening, renewable integration, and modernization. Goldman Sachs projects $720 billion in grid spending through 2030 to support data center power needs, while worldwide electrification mandates across transportation, heating, and industry create tailwinds.
EU, US, and Asia-Pacific infrastructure programs drive demand for TE's connectors, surge arresters, and smart grid systems, bolstered by a new German facility. TE's 15,000+ patents and $750M R&D spending ensure competitive moats in harsh grid environments, supporting sustained double-digit organic growth through the medium term. - Electric Vehicle Market
Penetration & Next-Generation Automotive Content
TE Connectivity's Transportation Solutions segment grew 10% year-over-year, with automotive sales up 7% organically led by Asia and Europe where EV adoption accelerates and commercial transportation surging 19% organically from fleet electrification. Management notes TE's automotive content growth exceeds market rates, securing premium positions in electrical systems and powertrains. The global EV connector market, valued at $2.73B in 2023, is projected to reach $8.80B by 2032 about 18.2% CAGR, spanning charging infrastructure, battery systems, ADAS, infotainment, and powertrains requiring advanced high-current connectors beyond conventional vehicles' needs.
China's hyperscale EV makers drive significant demand. TE's OEM relationships, high-reliability design expertise, global manufacturing scale, and 19.8% operating margins in this commoditized space position it strongly for government-mandated zero-emission targets across Europe, North America, and Asia-Pacific, capitalizing on superior data and power density architectures.
Risks to Consider
While TE Connectivity growth
prospect is strong, we should be mindful of potential risks.
- Market Demand Volatility
Heavy reliance on AI development, energy infrastructure, and growing transportation demand in Asia could pose significant risks if economic growth slows. A potential slowdown may reduce revenue forecasts across these sectors, while the cyclical nature of the industry and high customer concentration could intensify the impact, particularly in electronics markets, where fluctuations in demand and investment patterns often magnify downturn effects on overall performance. - Margin and Execution Pressures
Although record orders exceeding $5 billion signal strong demand, rising expenses, capacity expansions to support AI-related growth, and ongoing acquisition integrations could pressure profit margins. The company faces notable execution risks as it scales new facilities and manages complex operational transitions. Additionally, potential supply chain disruptions remain a critical concern that could hinder efficiency, delay project timelines, and further challenge the company’s ability to sustain stable margins amid rapid growth. - Regulatory and Geopolitical
Risks
The company’s global operations face heightened exposure to regulatory and compliance risks, including antitrust, trade, export, and ESG requirements that could result in fines or legal challenges. In addition, political instability across key markets, shifting currency exchange rates, and evolving tax policies contribute to financial and operational uncertainty. These combined factors create a complex risk environment that may affect profitability, strategic planning, and long-term global performance.
Conclusion
TE Connectivity stands out as a
high-quality industrial technology company combining strong earnings growth,
solid free cash flow, and a disciplined balance sheet. With accelerating demand
across electrification, automation, and data connectivity markets, the company
is well-positioned for long-term expansion. Despite strong recent stock
performance, its valuation remains reasonable relative to growth prospects,
making TE Connectivity an attractive investment opportunity for long-term
investors seeking both growth and stability.
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