TE Connectivity (TEL) Q4 2026 earnings review
TE Connectivity orders reach a record, and growth speeds up
TE Connectivity, which makes electrical connectors and sensors for vehicles, data centers, and power grids, accelerated sales while orders reached a record high. Underlying sales grew 13%, and profit per share excluding one-offs rose 21% on wider margins and share buybacks. Chief executive Terrence Curtin set a first-quarter plan for 15% underlying sales growth, though by our math the full-year outlook points to growth slowing to about 11% over the rest of the year.
| Sales from businesses owned a year ago | +13.4% from a year ago (reported sales $5.31B, +11.9%) |
|---|---|
| Profit per share, excluding one-offs | $3.14 +21.2% from a year ago |
| Total orders | $6.1B +29% from a year ago |
| First-quarter sales outlook | ~$5.35B +15.3% from businesses owned a year ago |
⚖️ Verdict: 🟢 Bullish
The story got better because record orders of $6.1 billion and a 15% first-quarter growth plan eased fears that order backlogs were stalling. Data center, defense, and car connector sales all sped up in the fourth quarter. One caution: the company committed $1.6 billion to acquisitions in optics and power filtering while full-year restructuring charges ran above budget.
The question now is whether growth after the first quarter slows to the 11% pace implied by the full-year plan or stays in the mid-teens. Either tougher comparisons in data centers slow the business down, or the $6.1 billion order book means Curtin's full-year plan is cautious. First-quarter orders and the second-quarter outlook will tell.
🐂 Bull Case
Record Orders Back Double-Digit Sales Plan
TE Connectivity makes electrical connectors and sensors for vehicles, factories, and data centers. Investors worried that a growing gap between customer orders and billed sales meant project delays. Instead, fourth-quarter orders reached a record $6.1 billion, up 29% from a year ago, and sales beat the company's July target.
- Fourth-quarter orders: $6.1 billion, up 6% from the third quarter
- Orders divided by sales (book-to-bill ratio): 1.15 by our math, meaning $1.15 of new orders for every $1.00 shipped
- First-quarter sales plan: $5.35 billion, up 15.3% from businesses owned a year ago
- Full-year 2027 plan: underlying sales growth near 2026's 11.9% pace
Because orders lead shipments by one to two quarters, this order book supports chief executive Terrence Curtin's plan for double-digit growth in fiscal 2027. Fourth-quarter sales equalled 93% of third-quarter orders by our math, above the 92% the July plan pointed to, so conversion held steady.
What to watch: first-quarter orders by segment in the quarterly filing. If orders stay near $6 billion while sales rise to $5.35 billion, backlog will keep building into the second half.
AI Data Center and Grid Demand Lifts Industrial
Industrial Solutions makes high-speed data center connectors, power grid equipment, factory automation parts, and aerospace hardware. A major risk was that cloud companies might pause artificial intelligence spending after two flat quarters earlier this year. Curtin said AI investments create demand "from inside the rack in the data center to the networking edge all the way to the energy grid".
Digital data networks, the unit that sells into data centers, grew sales from businesses owned a year ago by 34.4% to $949 million, adding $136 million from the third quarter. For the full year, the unit added $975 million in sales, matching management's rough $1 billion target. Factory automation grew 17.6%, aerospace and defense rose 16.0%, and energy rose 11.7% on an underlying basis.
What to watch: sequential dollar growth in Digital data networks next quarter. Another step up from $949 million would show cloud customers are still expanding capacity.
Car and Truck Connector Sales Accelerated
Transportation Solutions sells connectors and sensors for cars, heavy trucks, and construction equipment. Sluggish global car production was a persistent concern all year, holding automotive sales from businesses owned a year ago to 3.0% for fiscal 2026. In the fourth quarter, however, underlying automotive growth doubled to 5.9% from 2.9% in the third quarter.
Commercial transportation, which covers heavy trucks and buses, grew 17.8% on an underlying basis, keeping the pace of the prior three quarters. Higher volume lifted the division's operating margin excluding one-offs by 0.8 percentage points from a year ago to 21.0%.
What to watch: how many percentage points automotive sales beat global car production on the conference call. Staying inside management's 4 to 6 point target range would prove carmakers are buying more electronics per vehicle.
Lower Production and Overhead Costs Lifted Margins
Rising prices for silver, gold, and copper threatened to squeeze profitability this year. Instead, TE Connectivity raised its fourth-quarter operating margin excluding one-offs by 1.0 percentage point from a year ago to 22.1%, while GAAP operating margin rose 1.3 percentage points to 20.6%.
By our math, the cost of making products fell 0.6 percentage points of revenue to 64.5%, lifting gross margin to 35.5%. Selling and administrative overhead dropped 0.7 percentage points of revenue to 9.8%. Higher factory output and a shift toward data center products more than covered metal costs.
What to watch: first-quarter operating margin excluding one-offs, which the profit per share plan implies will stay above 22%. Holding that level would confirm pricing covers raw material costs.
🐻 Bear Case
Acquisition Spending Jumps as Underlying Growth Slows
TE Connectivity said it committed $1.6 billion for acquisitions in the Industrial division "to broaden the optics and power filtering portfolios", up from $212 million of cash spent in fiscal 2026. That includes the pending $1.4 billion purchase of power filter maker Astrodyne TDI, priced at more than five times its annual sales.
At the same time, Curtin's full-year plan points to slower growth after December. "For the full fiscal year, we expect to deliver organic sales growth that is similar to our strong performance in fiscal 2026," Curtin said. Because 2026 grew 11.9% and the first quarter is planned at 15.3%, by our math the rest of the year slows to about 10.9%, while restructuring charges of $117 million beat the $100 million budget.
What to watch: the closing date and profit margin of Astrodyne TDI once the deal completes by December. A margin below Industrial's 22.4% would dilute the division's profitability.
Risks this quarter didn't answer
Three standing concerns around product mix and lagging units could not be resolved from the earnings release alone.
- Artificial intelligence dollar sales: missing from the release after management shifted commentary to the broader Digital data networks unit; the conference call or annual filing will show if a year-end figure is given.
- Optical cables replacing copper inside server racks: the release notes $1.6 billion committed to acquisitions in optics and power filtering, but only call commentary will update organic optical progress ahead of 2028.
- Sensors and Medical stagnation: Sensors underlying sales fell 1.7% in the fourth quarter and Medical rose 1.3%; the call will show when both units return to steady growth.
👓 Other Themes
Tariff Refunds Cut Reported Fourth-Quarter Sales
TE Connectivity deducted $87 million from fourth-quarter reported sales as a reconciling item for "IEEPA tariff refunds received in fiscal 2026 that are expected to be returned to customers". Without that deduction, fourth-quarter sales would have grown 13.7% instead of 11.9% by our math. The refunds added $4 million to operating income, and the first-quarter plan includes another 0.7 percentage point sales drag from tariff refunds.
💲 Other KPIs
Free cash flow — operating cash left after capital spending — rose 7.5% from a year ago in the fourth quarter and 6.2% for the full year to a record $3.41 billion. That equalled 100.7% of profit excluding one-offs by our math, meeting management's 100% target and funding $2.8 billion in dividends and share buybacks.
The connectors maker spent $544 million on share buybacks in the fourth quarter and $1.89 billion across fiscal 2026, up from $1.35 billion the year before. Those purchases reduced the diluted share count by 2.3% from a year ago, adding about 2 percentage points to per-share profit growth.
Accounts receivable — money customers owe for delivered goods — rose 12.8% from a year ago to $3.84 billion, tracking the 13.4% underlying sales increase. Inventories grew slower than sales at 9.7% to $2.96 billion, helping release $67 million of working capital cash during the fourth quarter.
🔮 Guidance
New. The plan calls for sales to rise 14.6% as reported and 15.3% from businesses owned a year ago, up from 13.4% in the fourth quarter. Reported growth includes a 0.7 percentage point drag from tariff refunds returned to customers. TE Connectivity beat its quarterly sales plan by an average of 2.3% over the past four quarters; if the pattern holds, first-quarter sales would reach $5.47 billion by our math.
New. Curtin expects full-year underlying sales growth near fiscal 2026's 11.9% pace. By our math, after a 15.3% first quarter, that plan leaves about 10.9% growth for the rest of the year as comparisons get tougher against 2026's data center ramp.
New. The outlook calls for profit per share excluding one-offs to grow 21.3% from a year ago and 5.1% from the fourth quarter. It excludes $0.15 per share of intangible asset amortization, $0.06 of acquisition costs, and $0.05 of restructuring charges.
New. The company plans for GAAP profit per share to grow 20.2% from a year ago, slowing from 39.0% growth in the fourth quarter because the fourth quarter included a $0.20 per share tax valuation allowance release that does not repeat.
❓ Key Questions
What were artificial intelligence sales in fiscal 2026?
Management previously gave dollar updates for AI revenue and set a $3 billion target for fiscal 2027, but the release only reports the broader Digital data networks unit at $3.18 billion. Investors need the AI figure to track progress toward the $3 billion goal.
Which acquisitions make up the $1.6 billion commitment?
The release states TE Connectivity committed $1.6 billion for Industrial acquisitions in optics and power filtering. Since Astrodyne TDI accounts for about $1.4 billion and cash spent in 2026 was $212 million, management should detail the optics deals and their revenue.
How much of the $6.1 billion order book is Industrial?
Total orders rose 29% to $6.1 billion, but the release did not split orders between Industrial Solutions and Transportation Solutions. The segment breakdown will show whether data center orders drove the sequential jump or if automotive orders also rose.
Why did full-year restructuring charges exceed the $100 million budget?
Full-year net restructuring charges reached $117 million, above the $100 million management estimated in July, and the first-quarter plan includes another $0.05 per share. Clarifying the total cost and annual savings of the factory program will help model future margins.