TE Connectivity reports record Q2 adjusted EPS of $2.73, up 23.5% year-over-year

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• 🔥 Quick Facts
• Earnings Performance Exceeds Guidance Across the Board
• Record Orders Signal Sustained Demand into 2027
• AI Revenue Tailwind Accelerates Beyond Initial Expectations
• Market Context: Connector Industry Momentum Continues
• Q3 Guidance and Full-Year Outlook Suggest Continued Momentum
• Stock Performance Reflects Investor Caution on Guidance Risk
• What Risk Could Derail This Narrative?
• Does TE Connectivity’s New AI Revenue Guidance Change Your Outlook for 2026?
  • Sources

TE Connectivity reported record Q2 adjusted earnings per share of $2.73, marking a 23.5% year-over-year increase and surpassing analyst expectations. The company delivered net sales of $4.74 billion, up 15% from the prior year, while securing record orders of $5.3 billion that positions the connector and sensor specialist for sustained momentum through 2026. The results reflect broad-based strength across industrial, transportation, and data center markets, with a notable acceleration in artificial intelligence-related revenue opportunities.

Earnings Performance Exceeds Guidance Across the Board

TE Connectivity delivered second-quarter results that topped the company’s April guidance on all major metrics. The $2.73 adjusted EPS surpassed guidance of approximately $2.65, while net sales of $4.74 billion exceeded the guided range of $4.65 to $4.75 billion. This represents the fifth consecutive quarter of earnings beats, demonstrating consistent operational execution and disciplined pricing power in a challenging environment.

CEO Terrence Curtin emphasized the breadth of the results, citing strong performance in automotive, industrial, and emerging data center and AI applications. The company’s ability to exceed guidance despite macroeconomic uncertainty and geopolitical tensions reflects competitive advantages in mission-critical connector and sensor technologies that serve industries with limited substitution options.

Record Orders Signal Sustained Demand into 2027

Order intake reached $5.3 billion in Q2, the highest level in company history and representing a 1.12x book-to-bill ratio. This metric—which measures new orders relative to shipments—indicates that demand is outpacing production capacity, suggesting the company can sustain price realization and revenue growth even if market conditions soften in coming quarters.

Breaking down by end market, industrial and commercial transportation sectors remain the largest drivers, accounting for approximately 45% of revenue. Communications data center orders surged, reflecting accelerating infrastructure investments by hyperscalers preparing for AI workload deployment. Major technology companies like Microsoft are investing heavily in data center capacity, creating structural demand for advanced interconnect solutions that TE uniquely provides.

Metric	Q2 FY2026	Q2 FY2025	Change
Net Sales (millions)	$4,740	$4,124	+14.9%
Adjusted EPS	$2.73	$2.21	+23.5%
GAAP Diluted EPS	$2.90	$2.31	+25.5%
Order Intake (millions)	$5,300	$4,600	+15.2%
Book-to-Bill Ratio	1.12x	1.09x	+0.03x

The backlog expansion carries strategic significance. With 12+ months of forward visibility into customer requirements, TE can optimize supply chain investments and negotiate longer-term pricing contracts, protecting margins even if competitive pressures intensify. This advantage distinguishes TE from broader semiconductor companies facing shorter booking cycles.

“Our teams delivered another quarter of results above guidance, including double-digit sales growth and record adjusted EPS. We now expect our AI revenues in fiscal 2026 to be about $150 million higher than our view 90 days ago, and this entire increase will come from our legacy customer base, validating the breadth of the AI opportunity across multiple solutions.”

— Terrence Curtin, CEO, TE Connectivity

AI Revenue Tailwind Accelerates Beyond Initial Expectations

Perhaps the most significant development was TE’s upward revision of AI revenue guidance from $2.25 billion to $2.4 billion for fiscal 2026—a $150 million increase in just 90 days. This revision reflects accelerated customer design wins in high-density interconnect solutions for AI processors and networking equipment, rather than new product categories. Management emphasized that the upside comes from existing customers expanding their AI infrastructure orders, reducing execution risk inherent in new market penetration.

Breaking down AI revenue streams, the company benefits from three distinct channels: (1) direct hyperscaler orders for data center networking and compute infrastructure; (2) original equipment manufacturer (OEM) partnerships providing connectors and sensors to AI chip makers; and (3) enterprise customer orders for AI-capable infrastructure at the edge. TSMC’s elevated guidance reflects similar momentum in semiconductor demand for AI applications, creating a favorable backdrop for TE’s connector ecosystem.

The $2.4 billion AI revenue projection represents approximately 5% of total fiscal 2026 sales, but carries significantly higher margins due to mission-critical specifications and limited competition. Management implied these revenues are expanding at 30%+ growth rates, creating an earnings multiplier as the company scales production to meet bookings.

Market Context: Connector Industry Momentum Continues

TE’s results align with broader trends in the global connector market, valued at $94 billion in 2025 and projected to grow at a 6.85% compound annual growth rate through 2035. Within this landscape, TE maintains approximately 20% market share, benefiting from long-standing relationships with automotive OEMs, industrial control suppliers, and telecom infrastructure providers. The barrier to entry remains exceptionally high due to decades of design validation, compliance certifications, and customer qualification locks that protect pricing and volume assumptions.

Peer performance validates the secular growth thesis. Nokia’s pivot toward AI and networking solutions demonstrates industry-wide acceleration in connectivity solutions for next-generation infrastructure. TE’s advantage lies in vertical integration of sensor and connector IP, reducing customer dependency on multiple suppliers.

Q3 Guidance and Full-Year Outlook Suggest Continued Momentum

For the third quarter of fiscal 2026 (ending June 26, 2026), management guided for:

• Net sales of approximately $5 billion, representing 10% organic year-over-year growth
• Adjusted EPS of approximately $2.83, implying continued margin expansion
• Ongoing benefit from AI customer orders as the company works through record backlog

This guidance implies flat sequential sales (seasonal patterns typically see Q3 slightly above Q2), with all growth driven by organic expansion and pricing realization. The company maintains flexibility to outperform if order acceleration continues or if supply chain constraints ease, allowing faster inventory replenishment. Conversely, management acknowledged modest geopolitical risks in Eastern Europe and the Middle East could impact logistics, though exposure appears limited to less than 5% of total revenue.

Full-year fiscal 2026 EPS guidance implies approximately $10.50 to $10.70 adjusted EPS, representing 20%+ growth versus fiscal 2025. This would mark TE’s strongest earnings growth rate in over a decade, driven by operating leverage from fixed cost absorption and favorable pricing dynamics in high-demand categories.

Stock Performance Reflects Investor Caution on Guidance Risk

Despite record earnings and a major AI revenue upside revision, TE Connectivity stock declined approximately 7% in the days following earnings, closing around $202.78 per share on May 22, 2026. This muted reaction—typically observed when guidance growth rates slow from prior quarters—suggests investors are pricing in deceleration in 2027 and beyond, even as 2026 delivers double-digit growth.

Current valuation stands at approximately 20.7x forward P/E based on guidance, which aligns with semiconductor equipment and connectivity peers but remains below high-growth cloud infrastructure companies. Wall Street consensus calls for $264.74 average price target across 19 analysts, implying 30%+ upside potential if the company sustains mid-teens revenue growth and maintains adjusted operating margins above 20%.

What Risk Could Derail This Narrative?

Several scenarios could pressure TE Connectivity stock despite stellar fundamentals. First, macro slowdown: A significant contraction in commercial capital expenditures—particularly in data centers—could reduce the $5.3 billion order backlog as customers delay projects. Second, margin compression: Rising logistics costs or raw material inflation could erode the 40+ basis points of operating leverage implied in current guidance. Third, competitive pressure: Competitors like Amphenol could aggressively price to gain share, forcing TE to choose between volume and margin. Fourth, geopolitical escalation: Potential sanctions or supply chain disruptions in key markets could disrupt fulfillment rates.

Management’s track record suggests these risks are manageable. The company navigated supply chain chaos in 2021-2022 and inventory corrections in 2023 with minimal margin erosion, demonstrating operational discipline and customer relationship strength.

Does TE Connectivity’s New AI Revenue Guidance Change Your Outlook for 2026?

TE Connectivity’s $150 million upward revision of AI revenue for 2026 marks a significant inflection point for the $60 billion connector and sensor industry. For most investors, the key question centers on whether this expansion is sustainable through 2027 or represents a one-time benefit as hyperscalers front-load AI infrastructure investments. The company’s emphasis that existing customers are driving the upside rather than new customer wins provides confidence in the cycle’s durability, but execution risk remains material as TE scales production across geographically dispersed manufacturing footprint. Broader market sentiment on technology spending will ultimately determine whether TE’s backlog converts to 2027 revenue.

Sources

• TE Connectivity Investor Relations – Official press release and earnings webcast, April 22, 2026
• Seeking Alpha – Earnings call recap and guidance analysis
• Investing.com – Earnings call transcript with CEO commentary
• Yahoo Finance – Analyst consensus ratings and Q2 earnings highlights
• Market Research Reports – Global connector market sizing and CAGR projections through 2035