Amphenol Corporation - 3rd Quarter 2026 Earnings - AMPHENOL CORP

Hello, and welcome to the third quarter 2026 earnings conference call for Amphenol Corporation. Following today's presentation, there will be a formal question and answer session. Until then, all lines will remain in a listen-only mode. At the request of the company, today's call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin. Thank you very much. Good afternoon, everyone. This is Craig Lampa, Amphenol CFO, and I'm here together with Adam Norritt, our chairman and CEO. We would like to welcome you to our third quarter 2026 conference call. Our third quarter 2026 results were released this morning. I will provide some financial commentary and then Adam will give an overview of the business and current market trends then we will take your questions as a reminder during the call we may refer to certain non-gap financial measures and make certain forward-looking statements so please refer to the relevant disclosures in our press release for further information in addition as a result of our recently announced two for one stocks but effective on september 3rd of 2026 all share and per share data discussed on this earnings call will reflect that split the company closed the the third quarter of 2026 with record sales of $10.2 billion and gap and adjusted diluted EPS of $0.79 and $0,80, respectively. Third quarter sales were up 65% in U.S. dollars and in local currencies and 37% organically compared to the third quarterly of 2025. Sequentially, sales were 17% in US dollars and in the local currencies, and up 16% organics. Adam will comment further on trends by market in a few minutes. Orders in the quarter were a record $12,170,000,000 up a strong 99% compared to the third quarter of 2025 and up 13% sequentially resulting in another very strong book to bill ratio of 1.19 to 1. This impressive book to bill was driven by robust bookings in most of our end markets with positive book to bill in all but one of our end markets this quarter. Gap in adjusted operating income were both approximately $3 billion in the quarter, and gap in adjusted operation margin were 29.5% and 29.7% respectively. On an adjusted basis, operating margin increased by a strong 220 basis points from the prior year quarter and declined a modest 10 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by robust operating leverage on the significantly higher sales volumes, which more than offset the margin dilutive impact of recent acquisitions. On a sequential basis, the slight decrease in adjusted operation margin was driven by a meaningfully larger benefit from tariff recoveries in the second quarter. Excluding these benefits, our adjusted operating margin improved by approximately 70 basis points, reflecting strong conversion on higher sales levels, as well as continued progress on profitability improvement at recent acquisitions, in particular, Comscope. I am very proud of the company's operating margin performance in the third quarter, which reflects continued strong execution by our team. Bringing down third quarter results by segment compared to the third quarter of 2025, sales in the communications solution segment were $6.6 billion and increased by 99% in U.S. dollars and 51% organically, and segment operating margin was 33.1%. Sales in the harsh environment solution segment worth $2 billion and decreased by 35% in U.S. dollars and 29% organically, and segment operating margins was 30.1%. Sales in the interconnect and sensor system segment were $1.6 billion, increased by 17% in U. S. dollars at 11% organicoly, and the segment operating margin was 20%. The company's gap effective tax rate for the third quarter was 27.4%, and the adjusted effective tax rate was 27%, which compared to 23.5% and 27% in the third quarter of 2025, respectively. As is our typical practice, our adjusted tax rate excludes the tax-effective acquisition-related costs and the excess tax benefit from stock option compensation, as well as other discrete tax items. Gap diluted EPS was a record 79 cents in the 3rd quarter, up 61% compared to the prior year period, And on an adjusted basis, diluted EPS was a record $0.80 and increased by 74% compared to $0,46 in the third quarter of 2025. This was an outstanding result. Operating cash flow in the first quarter was $2.1 billion, or 102% of net income, and free cash flow was $1.6 billion, or 80% of that income, an excellent result considering the growth we have experienced. From a working capital standpoint, inventory days, day sales outstanding, and payable days were all within our normal ranges. During the quarter, the company repurchased 3 billion shares of common stock at an average price of approximately $81, and when combined with our normal quarterly dividend, total capital returned to shareholders in the third quarter of 2026 was approximately $553 million. As noted in the earnings release, the board of directors approved an increase to the company's quarterly dividend by 20% to 15 cents per share, effective for payments beginning in January of 2027. As also noted in the earnings release, the company's board of directors approved a new three-year, $4 billion stock repurchase plan, which will become effective on January 1st of 2026. The company expects to complete the remaining purchases under existing stock repurchase plan by December 31st of 2026. Total debt at September 30th was 17.9 billion and net debt was 12.6 billion dollars. Total liquidity at the end of the third quarter was 8.3 billion dollars which included cash and short-term investments on hand of 5.3 million dollars plus availability under existing credit facilities. third quarter 2026 adjusted EBITDA was 3.4 billion dollars and our net leverage ratio was 1.1 times at the end of the quarter we are very pleased with the company's robust financial position I will now turn the call over to Adam who will provide some commentary on current market trends well thank you very much Craig and I'd like to extend my welcome to everybody on the call here today. And I hope you're having an enjoyable fall. So far, I have to tell you that here in Wallingford, Connecticut is a truly beautiful New England fall day. As Craig mentioned, I'm going to highlight our third quarter achievements and include a few comments about the acquisitions that we announced today. I'll also discuss our trends and progress across our CERB markets, and I'll make some comments on our outlook for the fourth quarter and the full year 2026. And of course, we'll have time for questions thereafter. With respect to the third quarter, I'm just so proud of our team. They drove truly excellent performance once again in the third quarter. Our results were significantly stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Our sales grew from prior year by 65% in U.S. in local currencies, reaching a new record $10.2 billion. On an organic basis, our sales increased by 37%, driven by strong organic growth of more than 20% in five of our seven end markets. And I'll talk about each of those markets in a few moments. The company booked a record $12.2 billion in orders in the third quarter, representing a book-to-bill of 119 to 1, Orders essentially doubled from prior year and were up 13% sequentially. And as Craig commented, our book-to-bill was positive in nearly all of our end markets. We're also very pleased to have delivered robust adjusted operating margins of 29.7% in the quarter, an increase of 220 basis points from prior years. This strong profitability is a direct result of the outstanding execution of the Amphenol team around the world, who continue to manage well in a challenging cost environment. Adjusted diluted EPS grew 74% from prior year, reaching a new record of $0.80 per share. And we generated record operating and free cash flow in the quarter, $2.1 billion and $1.6 billion respectively. clear demonstration of the quality of the company's earnings. Finally, I'm really pleased that our Board of Directors has approved a 20% increase in our quarterly dividend to 15 cents a share, as well as a new $4 billion three-year stock repurchase program. I just can't emphasize enough my pride in and my gratitude to the Amphenol team around the world. Our results this quarter once again reaffirmed the value of the drive, discipline, and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment. We're also very pleased that this quarter we announced four acquisitions, one of which closed in the quarter and three of which we signed definitive agreements for and expect to close between now and the end of the first quarter. First, we closed on the acquisition of Empire Electronics at the beginning of September. With 2026 full-year revenue expected to reach approximately $320 million, Empire is the leading manufacturer of complex interconnect assemblies for the automotive market, with a particular focus on automotive lighting applications. The company is headquartered in Michigan, with approximately 4,800 employees worldwide. This company is included in our interconnect and sensor systems segment. We're also excited that we signed definitive agreements for the acquisition of Advanced PCB, Dex Green Limited, and Humanetics sensors. First, Advanced PCB is a U.S.-based manufacturer of high-technology printed circuit boards for the defense and industrial markets. The company is headquartered in Colorado and expects full-year sales of approximately $270 million this year. Advanced PCB has approximately 800 employees across their six facilities in the U.S. and will be included in our harsh environment solution segment post-closing. Next, DexGreen is an Ireland-based provider of fiber optic connectivity products primarily for the European fiber-to-home applications. in the communications network market with approximately 100 employees deck screens expected to generate full year 2026 sales of approximately 90 million and will be included in the communication solution segment post closing finally humanetic sensors is a leading provider of precision force centers specialty fiber optic sensing products and micro machining solutions for the commercial air defense and industrial markets the company has a approximately 350 employees and expects full-year 2026 sales of approximately $70 million. This company will be included in our interconnect and sensor system segment post-closing. I just have to say our team was very busy this quarter, but we remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute acquisitions, and then, very importantly, to successfully bring these new companies into Amphenol remains a core competitive advantage for the company. Now, turning to our serve markets, I just want to reiterate how proud we are of Amphenols' broad and balanced end-market exposure. Our diverse exposure across the electronics industry enables us to continue to participate across all areas of the global electronics industry, industry, each of which represents significant future opportunities for expansion. We also remain committed to continuing to broaden our portfolio across markets, geographies, customers, applications, and products as we build on the company's momentum to further strengthen Amphenol's position long into the future. So with that said, the defense market represented 8% of our sales in the quarter. grew from prior year by a strong 42% in U.S. dollars and 30% organically. And this was driven by robust growth across virtually all segments of the defense market. Sequentially, our sales grew by 12%, which was largely in line with our expectations coming into the quarter. As we head into the fourth quarter, we expect a mid-single digit increase in sales from these third quarter levels. And for the full year of 2026, we anticipate sales to increase by more than 35%, primarily driven by strong organic growth, as well as the benefit of acquisitions. We remain very encouraged by the company's leading position in the defense interconnect market, where we offer the industry's widest range of high technology products to both traditional and new defense equipment manufacturers. Amidst the current dynamic geopolitical environment, countries around the world are increasing their investments into both current and next-generation defense technologies. With our expanded product offering, as well as the significant capacity expansions we have made in recent years, we are positioned better than ever to capitalize upon this long-term demand trend. The commercial air market represented 3% of our sales in the quarter, sales increased by 23% from prior year and 22% organically, as we benefited from increasing aircraft production volumes coupled with continued progress in expanding our content on next-generation commercial aircraft. Sequentially, our sales grew by 9% from the second quarter, which was much better than our expectations coming into the quarter. Looking into the fourth quarter, we expect sales to remain at these strong third-quarter levels, and for the full year, 2026, we anticipate sales to increase by approximately 20%. I am truly proud of our team working in the commercial air market. With the ongoing growth in demand for next-generation aircraft, our efforts to expand our product offering both organically and through our acquisition program continue to pay real dividends. We look forward to further capitalizing on our expanded range of product solutions for the commercial market long into the future. The industrial market represented 18% of our sales in the quarter. Our sales in this market grew by 60% in U.S. dollars and 25% organically, as we saw continued strong demand across the diversified industrial market and as we benefited from the addition of CommScope's building connectivity business. On an organic basis, virtually all of our industrial submarkets grew in the quarter, with all three geographies also showing strong growth. On a sequential basis, sales grew by 7% from the second quarter, which was much better than our expectations. As we look into the fourth quarter, we do expect sales to moderate somewhat from these robust third quarter levels. For the full year of 2026, we now expect sales growth of more than 50%, reflecting both strong organic growth as well as the benefit of acquisitions. We're very excited by the company's strength across the many diversified segments of this important market. I remain confident in our strategy to expand our high-technology interconnect, antenna, and sensor offerings, both organically and through complementary acquisitions. This strategy has enabled Amphenol to capitalize on the many electronic revolutions that continue to occur across the diversified industrial market, thereby creating further opportunities for our outstanding team. The automotive market represented 10% of our sales in the quarter and grew 13% in US dollars and 9% organically. This was driven really by strength in electric vehicles as we once again drove growth in all regions. Sequentially, our sales grew by 12% from the second quarter, which was much better than our expectations, reflecting the ability of our team to quickly execute on a range of opportunities, together with some impact from the addition of Empire late in the quarter. For the fourth quarter, we do expect a slight sales moderation from these third quarter levels. And for the full year 2026, we anticipate that sales will increase in the 10% range from prior year. I remain very proud of our Team working in the global automotive market. With the acquisition now of Empire, we have broadened our portfolio once again, in particular around value-add interconnect products to this important market. While there are no doubt pockets of demand uncertainty across the automotive market, our team continues to be focused on driving new design wins with customers who are increasing the content of new electronics being integrated into their next-generation vehicles. We look forward to benefiting from our strength and position in the automotive market for many years to come. The communications networks market represented 8% of our sales in the quarter. Sales grew from prior year by 25% in U.S. dollars, driven by the addition of CommScope. On an organic basis, though, sales did decline by 28% from prior years, due in particular to moderations in demand from the broadband market, as well as from other communication network operators. On a sequential basis, our sales declined by 13%, which was in line with our expectations. Looking to the fourth quarter, we expect a further decline in sales from these third quarter levels on continued softness in spending, particularly in broadband. For the full year of 2026, we expect sales growth of more than 40% driven by the CommScope acquisition, partially offset by some organic decline. With our expanded range of technology offerings following the acquisitions of both CommScape and Andrew, there's no doubt that we're well positioned with both service provider and OEM customers across the communications networks market. Our deep and broad range of products, coupled with our global manufacturing footprint, have positioned us well to support customers around the world whenever they choose to expand their networks. The mobile devices market represented 5% of our sales in the quarter, and we were very pleased that our sales grew by a strong 31% in U.S. dollars and 29% organically. This was really driven by growth in wearables, handsets, laptops, and accessories, which more than offset some modest decline in sales related to tablets. Sequentially, our sales grew by 32%, which was much better than our expectations coming into the quarter, as we were able to react quickly to support incremental demand from a number of customers. Looking to the fourth quarter, we now expect our sales to increase by approximately 35% from these third quarter levels. And for the full year, 2026, we anticipate robust sales growth of more than 30% compared to prior year. I'm extremely proud of our team working in the always dynamic mobile devices market as their agility and reactivity has once again enabled us to outperform expectations in the corridor and to capitalize on the opportunity of increased demand from our customers. I'm confident that with our leading array of antennas, interconnect products, and advanced mechanisms, including hinges, designed in across a broad range of next-generation mobile devices, we're well-positioned for the long term. The IT Datacom market represented 48% of our sales in the third quarter. Sales in this important market grew by a very strong 117% in U.S. dollars and 77% organically. This was driven by continued acceleration in demand for our products used in artificial intelligence applications, together with continued strong demand in our base IT Datacon business. On a sequential basis, sales increased by 30% from the second quarter, which was substantially better than our expectation for a mid-teens increase. I would say that the vast majority of our sequential growth was related to AI, which now does represent approximately three quarters of our IT Datacom sales. As we look towards the fourth quarter, we expect sales to increase again in the mid-single digits from these very strong third quarter levels. For the full year of 2026, we expect our sales to more than double compared to prior year, driven primarily by strong organic growth as well as the benefit of acquisitions, including Comscope. We're more encouraged than ever by the company's position in the global IT datacom market. Our team has done an outstanding job of both securing future business on next-generation systems with a broad array of customers, but also on executing on these exciting programs. In addition, I just want to note that the team at Comscope continues to make great progress in further penetrating the IT datacom market with their advanced optical interconnect solutions. Accordingly, we now expect Comscore sales in the IT data com market to more than double for the full year 2026 and we expect that those sales should represent roughly half of their sales for the full year, and that compares to around a third of their sale last year. The revolution in AI has created a unique opportunity for Amphenol, given our leading high-speed fiber optic and power interconnect solutions. All of these high-technology products are critical components in our customers' next-generation systems. This creates a continued long-term growth opportunity for our companies. Turning to our outlook, and obviously assuming the continuation of current market conditions as well as constant exchange rates, for the fourth quarter, we expect sales in the range of 10.3 to 10.5 billion, and adjusted diluted EPS in the ranges of 81 to 83 cents. This would represent a year-over-year sales increase of 60 to 63 percent, and an adjusted diluted EPS increase of 65% to 69% compared to prior year quarter. I would just note that this guidance does not reflect any acquisitions that have not yet closed and therefore does not include advanced PCB, deck screen, or humanetic sensors. Our fourth quarter guidance represents also an expectation for full year sales of $36.9 billion to $37.1 billion and full year adjusted diluted EPS of $2.82 to $2 and 84 cents this outlook represents a full year sales increase of approximately 60% and an adjusted EPS increase of approximately 70% very strong performance I would also note that we have upgraded our outlook for comm scope which is included in this full year guidance we now expect comm scope to achieve 5.1 billion dollars in sales and and to contribute 18 cents to our 2026 adjusted earnings per share. I just can't express enough how grateful I am to the entire CommScope team for their amazing work as part of the Amphenol family. There's no doubt that 2026 has been a very special year for Amphenols thus far. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to thereby continue to grow our market position while driving sustainable and strong profitability through this year and into the long term. Finally, I'd just like to take this opportunity to express my gratitude and thanks to our entire global team for their truly outstanding efforts here in the third quarter. You should know that they worked unbelievably hard to deliver this level of growth and profitability, and I am grateful to each and every one of them around the world. With that, operator, we'd be very happy to take any questions that there may be. Thank you, Mr. Norwood. The question and answer period will now begin. Please limit to one question per caller. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please click on the button. Please press star one again. When preparing to ask your question, please ensure your device is unmuted locally. We have a question from Luke Junk with Baird. Your line is open. Please go ahead. Oh, great. Thanks for taking the question. I wanted to start with CompScope. Adam, maybe if you could just give some insight into the guidance raised this quarter and then bigger picture, be really interested in your thinking on the virtues of their business model and the current tight supply chain environment. And maybe within that, if you could also just comment on the work you're doing to secure fiber supply and your flexibility in that respect. Thank you. Yeah, thanks very much, Luke. Well, again, I just want to commend the team at Comscope. Obviously, when we announced the deal, we talked about this company, you know, at signing as a $3.6 billion company. And here we are now $1.5 billion more than that this year. And I think when we closed, we said we thought it would be $4.1 billion, so a billion more than at the beginning of this year, and that is just a direct reflection of the team's ability to execute in the face of the demand opportunity that is there. And that demand opportunity for sure is very strong in the data center market, AI and related. They also see strength in their industrial market. And even if the communications network, as I mentioned, we've seen a little bit of softness in the demand there, I think the CommScope team is executing extremely, extremely well. And when I say executing, I really mean not just doing the things in the factory to make it happen, but also facing up to whatever challenges they may see in the marketplace, challenges around getting enough people in the right places, challenging around getting materials of all sorts, including glass and other things. I mean, there are lots of constraints that are there in the world. And I think the team has done a fabulous job to diversify their supply base, to secure supply of everything that they need, including gas, and to make sure that the company is positioned to support their customers, not just here in the third quarter and the fourth quarter of 2026, but for the long term. And as part of the Amphenol family, they have the wherewithal to do that. Because rather than being in a company that was naturally constrained from a capital perspective and a scale, but in particular, given the financial condition of their prior parent, I would tell you that CommScope is taking full advantage of being part of AmphenOL, investing in new technology development, developing a multiplicity of options for all the things that they need across the board as a manufacturer. And I think that long-term positions them very, very well for the future. Your next question comes from the line of Varun Govindaraj with Bernstein. Your line is open. Please go ahead. Good afternoon, Adam, Craig. Congratulations in the strong quarter and thanks for the question uh i had a question related to nvidia architectures so as we shift from oberon to kyber theoretically in 2028 we lose the back plane and then move into that pcb mid-plane structure how do you think about that from an anthony content standpoint and have you been having any conversations around this would love to get any qualitative colors you can share it i know it's still early yeah well veron first of all let me welcome you to our call And second of all, I think you will learn in the years to come that I don't discuss specific customers and I'm not going to delve into specific customers, specific architectures. But what I will say is this. I mean, I personally meet with customers all the time. I was meeting with a lot of customers even just in the last few days who are involved in lots of future architectures and what we hear from all of our customers across the board. who are designing these next generation architectures for AI, for whatever you call it, AI or SI or accelerated compute, you name however you want to call it. They need more interconnect period. And that more interconnect means more copper high-speed interconnect. It means more optical interconnect.It means more power interconnect. And it is really our ability to bring to them the breadth of those opportunities, the breadth of those products, the depth and the new developments that we're offering, the capacity, the capability to scale with them, that regardless of what individual one programmer in another designs or doesn't design, we hear from all of our customers a continuity of the intensity of the interconnect architecture that we can bring to that. your next question comes from the line of amit daryani with evercore your line is open please go ahead yep um thanks a lot and good afternoon everyone um adam if i think about the it data com segment growing 30 percent sequentially i think it's 2x which you had initially expected um and i think he said most of this came from ai on the on the prepared comments um i'm just I'm just wondering, the upside and strength that you see over here, is that coming from customers essentially increasing their demand to you, or was it more driven by your ability to fulfill existing demand faster than you had expected? And maybe you could just connect that upside to the fact that you're guiding December quarter up mid-single digits for IT DataCon broadly. Is that, again, the underlying deployment cadence, or is that more a function of what you think you could deliver? Thank you. Well, thanks so much, Amit. Look, 30% sequential demand on a market this size is an enormous, enormous achievement for our team. So I want to say that first and foremost. I think also, you know, there is traditionally a little bit of seasonality that comes in certain markets. You know, it's hard to say what the seasonality of AI will be. We are still guiding to a growth in the fourth quarter from these very high levels. So I think it's very substantial. You know, I don't think that it's gated to say that it is gated by demand or abilities. I mean, we've been executing really, really well for our customers on their demand. And I think, you know, the strength in the third quarter, it wasn't that anything was pulled in. It was just we satisfied our customer demand and we were able to execute upon it. And right now what we see in the fourth quarter is this kind of mid single digit increase from already very, very high level. So I don't think there's any sign of anything there except that, you know, the fact that they're still procuring at these high levels and that we're able to meet the moment of the demand from the customers is a really positive thing from my perspective. Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open. Please go ahead. Good afternoon. Thank you very much for taking my question. Congratulations on the strong results. I want to talk about EBIT margins, if we could, please. Overall, NAGAP EBIT margin are nearly 30%, and that's actually the incremental conversion margin the company has historically targeted. I'm sure you'd like to drive profitability higher going forward, but maybe talk a little bit about the ability for the company to take up its view around incremental margins north of the historical 30% target, especially in light of some of the input cost dynamics that are at work in the industry. Thanks. Yeah, thanks for the question, Mark. Yeah, no, first off, you commented on the 29.7% operating margins we had in the quarter, and certainly we're extremely proud of achieving kind of those high levels of operating margins that we certainly think is deserved given the technology and the value we're bringing to our customers, not just in IT Datacom, but honestly in all of our markets. But, you know, that's being driven by a few things. You know, number one is obviously we have significant technology, which I just mentioned, and the value being added to our customers, I think, is just driving kind of those margins higher. We're able to share some of those margin with our customers. But you can't do that, you Know, without, you Now, strong execution, strong cost discipline, you Know by our general managers. And they've just done an outstanding job of, You know leveraging kind of the obviously the volumes that they have, and these really complex products that are really hard to make, but do it in a way that ultimately is able to drive margin for the business. We talked about this 30% conversion margin. We increased this a little over a year ago now, and clearly we've already started to approach those levels. So I don't think we would really change our per se long-term target yet. I'm not saying that won't happen in the future here. But there's no doubt, I think, as we continue to grow, certainly organically and certainly the acquisitions will have some compression on margins as we go forward because typically those aren't at the levels of profitability that the company is at. But certainly our organic growth as we grow forward, I would expect to continue to increase our margins to some degree. And I certainly don't think this 29.7% is kind of the bottom in terms of where we are today. I think that ultimately as we grow, as our revenue continues to grow, we should be able to expand those margins. So, and we'll talk about longer-term targets in terms of conversion from there, but I get, you know, essentially, you know we'd certainly expect to continue to be able to expand those margins Your next question comes from the line of Shreyas Patel with Wolf Research. Your line is open. Please go ahead. hey thanks so much for for taking my question uh and congratulations on the strong quarter uh maybe wanted to maybe hone in on the power portion of the datacom business you know the broad trends that are driving up iraq power needs uh towards 800 volt architectures with higher bandwidth and lower latency uh demands but curious how sizable power is now relative to your overall ai business and how fast are you are you seeing that transition to higher voltage designs yeah well thank you very much and i'd like to also extend my welcome to you for the first time uh on our call um look we've talked for a long time about this sort of triumvirate of technologies in data center for us high speed optics and power and how those are all very very important to to the data center to the people who are constructing these data centers who are architecting them, but also very important to Amphenol. And they each represent real pillar technologies inside our company. And we continue to double down on those pillar technologies. And if you drill down into power, we've been involved in power interconnect for nearly the entire modern history of Amphenrol, going all the way back to our defense business, high voltage industrial business. So we've Been working with extremely high power interconnect, knowing how you package that interconnect for efficiency and safety, which are really the two greatest considerations that you have in a power connector. You know, at the end of the day, and I think I've said this before, like these data centers are basically trying to do a simple thing, which is turn electrons into tokens. And if we can help our customers use less of those electrons through the efficiency of the power interconnect while keeping everything safe and secure, which you need to do, especially as you reach to these very high voltage and power levels, that creates an enormous amount of value for our customer. In terms of the scale of our power business, and we have a very significant offering in power, I would tell you that across our AI business, without giving specific decimal level numbers, I mean, it's a very meaningful portion of the business that we sell, even if I would say high speed and optics is certainly more in that order. But we have a very, very strong leadership position in ensuring that our customers get the right power into their data center. And we see this as a high-growth opportunity as the chip architectures consume more power and as our customers drive into new power formats like 800-volt and beyond. your next question comes from the line of will stein with truest securities your line is open please go ahead great thanks for taking my question pardon me congrats on the great results and outlook um i wonder if you could uh talk to us a bit about capital intensity um with companies i think historical target was three to four percent the last couple quarters have been a little bit higher. I'm surprised you've been able to keep it this low, frankly, given the growth. I know a lot of the growth comes from M&A, but still, I wonder if it's time to rethink how we model CapEx over the next few quarters or a couple years. Should we expect above that 3% to 4% historical range? Yeah, thanks, Will. I appreciate the question. You know, I think this 3% or 4% historic range, honestly, probably isn't so different as we move forward. I mean, And clearly, as we're growing at this level, you know, we'll have certain quarters where we'll exceed kind of that 4% range and maybe even slightly exceed it, you know, for the year, certainly, you know, with the growth we have seen, which obviously has been extraordinary. But, you know, but long term, certainly as we kind of come down to, you know, more normal growth levels over the future, I wouldn't expect certainly, you know much more than that 3-4% range. I think at the end of the day, I think that we, you know, the general capital structure in terms of the capital intensity of our business, you know, certainly has grown a little bit. Certainly we have more automation, I would say, that we have. We've talked about the value that automation provides to the company, which has, I guess, increased, has increased modestly, you know, kind of towards the upper 4%. but I would say the overall range of 3% to 4% is still probably what I would think about with maybe slightly higher than 4% and certainly times where we're growing pretty quickly. Your next question comes from the line of Andrew Buscaglia with BNP Paribas. Your line is open. Please go ahead. Hey, good afternoon, everyone. Good afternoon, Andrew. um maybe wanted to switch gears and then just talk about industrial for a second which uh the growth surprised me how strong it was and you made the comment it's broad-based but i'm wondering if you could talk about are there like two or three underlying sub-verticals i know i know it's a kind of a hodgepodge but maybe you can talk to specifically what's driving it and why it's starting to pick up um just this year and just now yeah well thanks thanks very much I mean, hodgepodge sounds a little, you know, that doesn't sound as positive. I think it's a very diverse set of applications across the industrial market. And I would just tell you, I mean we track a bunch of these segments, I don't know, a dozen and a half of them or more. And the vast majority of those are growing in double digits organically right now. You know, everything from building automation, where obviously we have the addition of Comscope, but we have also strong growth before that. Industrial instrumentation, very, very strong. Things like oil and gas, where we see great strength. Alternative energy, where мы видим большую мощность. Anything related to electrification, factor automation, heavy equipment. I mean, I'm going down my list here, as you can see, Andrew. So I wouldn't point to one or another of those segments. I mean, is there some piece of industrial growth that is somehow related to the massive boom in construction related to data center? I think there's some piece, but it's certainly not the predominance or it's not dominating the growth. I think we're seeing some benefit from that. But we're saying also markets that you would have a hard time to say are correlated to things like data centers also having strong growth. And I think it's just a testament to a couple of things. Number one is we continue to develop new products, enabling technologies at a time when customers across the industrial market are increasing the electronic content in their products. You know, whether it's an earth moving machine or next generation factory automation or something involved in public safety or whatever, I mean, we just see a lot of increase in electronic content. And the second piece is that we continue and have continued to expand our product offering and our manufacturing support for customers with the acquisition program of the company. You know, and so we just obviously announced these four acquisitions here today. And a couple of those will also expand our product offering for the industrial market. We made earlier this year Elcom, which expanded our offering for the industrial market. And so we've been very thoughtful about continuing to bring in interconnect, value-add interconnect, sensor antenna technology that enable our customers across the industrial market. So I feel really good about where that market is. It wasn't always easy, as we had a year or two with more tough demand, but we continue to now put together organic growth in the industrial market, which is very robust. I think 25% organic growth on a year-over-year basis is probably the strongest quarter we've had in quite some time. Your next question comes from the line of Joe Spack with UBS. Your line is open. Please go ahead. thank you so much um it'd be a quick housekeeping then and then a question adam on orders the 1.19 book to bill on not a much larger revenue base you know in the past you sort of talked about that the timeline on there is going out a little bit are we seeing customers again sort of extend visibility or any changes there and then just bigger picture like i'm wondering how you're thinking about this like over time is data center helps scale optical demand and you know i think eventually maybe you see some price compression. Do you see further optical gains in any of these other end markets? Yeah. Well, thanks, Joe. I mean, look, relative to the question on orders, I mean I think we've talked about the fact that we've seen customers over the course of the last year kind of opening up their order aperture. Part of that is just the overall environment. It's the certainty of their plans. Part of that is, in certain cases, when we make investments, we try to make sure that our customers are sharing the risk with us. And sometimes that risk sharing has to do with giving us orders that have a certain extension. But look, I don't think there's anything in this quarter changing from maybe what we would have said a quarter ago. So relative to your question on optics, I mean, right now, we see optics really significantly in, let's say, three of our end markets. Obviously, IT datacom, of course, communications networks, and then one which may not always be on the top of people's tongue, which is defense. And I would tell you that our defense-related optics business is a very strong business. And we're, again, just as we've talked about having active and passive copper and active and passive optics as part of the sort of four quadrants of data transmission offering for data centers, we have the same offering into the defense market, albeit with very different products because of the packaging, the environment that those products go into. You know, the speeds that you talk about in defense are not quite at the level of the speeds that we talk about, you know, in a super cluster of accelerated computers. But nonetheless, these are very high technology products, actually. And it's an area that we've been involved in for an extremely long time. And we continue to double down on that area in terms of high technology optics. Now we have a new thing. And that new thing is the acquisition of humanetic sensors. And, you know, while not a huge company, 70 million in sales, and certainly it's not closed yet, humanetics, in addition to having a very nice offering of force sensors, has an offering of fiber optic based sensing. And what that means is using optical technology as a mechanism to measure certain things, pressure, force, disruptions, things like that. It turns out that using the refraction of light is actually a very interesting modality for sensing that expands for us the breadth of our sensing opportunities and also allows us to double down on our capability vis-a-vis optical technology. So that's another area maybe, Joe, where we're seeing some expansion opportunities, and that's probably more in the industrial defense kind of sensing application. And we'll see what else, but we're really excited as one of the world's largest optical interconnect companies to see this breadth of opportunity. Your next question comes from the line of Wamsi Mohan with Bank of America. Your line is open. Please go ahead. uh yes thank you um first congrats on the first 10 billion quarter i remember when you guys hit a billion dollars so it's quite the milestone um so maybe adam just the growth in id data com that we're seeing now uh we are seeing the backlog extended maybe a little bit more than historical um how concerned should we be on this further dated backlog on the potential that perhaps new cloud build-outs might suffer from funding concerns and and would you say that there was any lumpiness or timing and demand in q3 at the expense of q4 given some very material project ramps that are taking place thank you so much thanks very much onesie well thank you first and foremost for acknowledging I mean the ten billion dollar quarter I do remember when we had our first billion dollar corridor I also remember when we had our first billion dollar year. So that is a long memory. And it wasn't so long ago, let me just say, it was in 2021 that we crossed 10 billion for the year. And as a slight diversion, if you'll indulge me, that was the year at the end of that 10 billion is when you'll recall that we created our three operating divisions and promoted three exceptional individuals to become president of those divisions. And I've always talked about how in Amphenol we're so singularly focused on protecting and scaling the culture of Amphenol. And I think it's not a coincidence to me that, you know, we crossed 10 billion in quarterly sales just five years after we crossed $10 billion in annual sales. And the real inflection of doing that was the creation of those divisions, which allows us to preserve, secure, and thrive with the Amphenole culture. Thank you for the diversion and the opportunity, Wamsi. But relative to your question on the backlog. I mean, look, I think it's normal to have these longer dated orders. I talked about some of the basis for that earlier, so I won't repeat myself. I wouldn't say that we have, that there's an enormous exposure to, you know, as you say, neocloud. I means, the vast majority of the demand that I think we're seeing, that our customers are seeing, are from some of the world's most highly capitalized companies who are doubling down on creating new functionalities, new capabilities, and new capacity of compute for their customers. So I don't know that whether there's one or another neocloud who on a given day people are a little nervous about. To me, it's more about you have these extraordinary organizations who are making historical historical investments in a technology that by all means, at least to me, appears to also be historical in nature. And I wouldn't point to any lumpiness last quarter, project-based lumpiness. I mean, we're not really saying project- based lumpiness in our IT Datacom business right now. Your next question comes from the line of ASEA Merchant with Citigroup. Your line is open. please go ahead. Great. Thank you. Great to hear from you guys. And again, my congrats on the quarter as well. Adam, at our conference, you sounded very excited about defense and clearly, you know, the end market has performed really well. Just if you could think about, you know what are some of the key drivers here, how we should think about long term at any given point. There's always like, you political reasons why budgets could be constrained or not in defense. But just how are you thinking about this, not just for the next quarter, because you've guided for that, but just longer term or even medium term, how are You thinking about This Defense Opportunity Year? Thank you. Well, thank you very much, Asia. And I do recall our conversation. And thanks again for hosting us at the time. Look, we remain very excited about our defense business. In many ways, the defense market is for Amphenol kind of our birthright. Let me say it that way. I mean, we've been involved in innovating defense electronics since the early 1940s. And since then, we have been on the vanguard of developing next generation technologies to meet whatever the moment was at the time. Today, it's a confluence of moments. You have geopolitics, which are at best to say dynamic, let me say that. But you also have a technology inflection happening in the defense market where our customers and the governments who rely upon those customers for their military hardware are accelerating the adoption of next generation technologies, which have an intensity of electronics and thereby an intensity of the kind of products that we can sell to them. And then there's a third thing happening, Which is not only are we doing that with our traditional customers who we support night and day and adore them and will do everything for them day and night, but we also have an enormous growth and collection of new defense customers who require something even more innovative sometimes, who sometimes require a faster turn, a more creativity in the types of products. And with our breadth and depth of technologies coupled with our entrepreneurial agility across Amphenol, it puts us in a very, very strong position. And then the last piece is really geographical. You know, there's no doubt that, you know, our country, the U.S., remains the world's largest defense, at least in those countries that we can service as an American company. But we also see a rapid growth of other countries, NATO countries, for example, countries in South Asia, Middle East, and otherwise, who are accelerating their investments in their own native military technologies. And because of our global presence, because we've always had engineers, local support with all of them, you know, we sit in also a uniquely advantageous position vis-a-vis that own dynamic. So you have a lot of stuff going on at once, and I think our company is really purpose-built to take advantage of all of it. Your next question comes from the line of Joseph Cardoso with J.P. Morgan. Your line is open. Please go ahead. Hey, good afternoon, and congrats on the results as well from my end. Maybe for my question, Adam, you know, I just wanted to touch on your comments on CommScope taking advantage of being part of Anser, which I think was pretty evident in the results today and kind of disclosures, particularly as we look at the upside for the earnings contribution relative to sales. So maybe can we just double click there on the drivers you're seeing across the business, whether that be scale, mix, synergies, et cetera. And as we take a step back, how should we think about the path for Comscope margins to reach the corporate average? You know, what are the main moving pieces now? And how are you thinking about the timeline there, just given the execution we've seen today? Thank you. Yeah, well, thanks very much, Joe. Look, again, we are so proud of the team at Comscope. And, you know, taking advantage of being part of Amphenol, you Know, I kind of like how you say that. Because in most companies, when you talk about an acquisition, it's what are we doing to them to make them better? But in this case, the way you phrase it is very much how I would phrase it, which is what are they doing as the owners of that business? You know, owner in quote marks, but in Amphenol, it barely has those quote marks. That concept of ownership. What are theydoing now that they are part of the Amphenols family to take advantage of being part of Amphenoll and thereby drive their company to higher levels? We are not creating that success. they are, but they're doing it as part of Amphenol. So what are the things that they're doing? Well, obviously, we have the availability of capital. Craig is here right next to me and has crafted a fortress of a balance sheet where we have to wear with all to make smart investments in things that have great returns. That's something that they'RE taking advantage of. And getting them not to be shy about asking for that is something that we're helping them through a little bit. Helping them globally, you know, how do you expand in places where, you know, with the rapid growth that the company has had, I mean, very, very strong growth on a year-over-year basis, you Know, what resources do they need to expand in those countries beyond maybe what they would have had before? And, you know, we can give them every once in a while a helping hand. And, you know look, relative to, you said one word which I don't use, I won't even repeat it, but it started with an S and ended with an energies. And, you know, that's not a word we use in Amphenol. And it's not word we use because we don't believe we know their business better than they know their businesses. They know their busines best. They what to do. It's not, you know, well, how do we take one and one and make that, you, know, 1.5 because you have two people and they can, that can be done with the work of one. It' not that whatsoever. It more that now that you're a part of our company, now that we are pushing down through their organization that concept of ownership, of entrepreneurship, let's go unleash the power of the people and make it happen. And that's really what's happened. Andthat's what's helped their margins, because ultimately margin is just price minus cost. And if you put all the control of those factors under one person, they tend to go higher. And in terms of the long term, I'm sure Craig would agree with me. We think there's great potential for the company long-term to reach the corporate average of Amphenol, even if the corporate leverage has gone up by as much as it has. Yeah, I mean, I would say actually, you know, right now they're already kind of in the, you know, low 20s on an operating margin basis. So they're all ready at what the corporate average was, you now, as of, you kno, a couple years ago or less than a couple of years ago. So I believe that there's certainly tremendous opportunity to, in short, to get their profitability up to the company average, you know, over time. And they're already doing just a tremendous job this year. And I would say, you Know, from now, you Now, versus the beginning of the year, I would say have more confidence that that will happen in the long term here. Your next question comes from the line of Joe Giordano with TD Cohen. Your line is open. Please go ahead. Hey, guys. Appreciate you squeezing me in here. Thanks, Jeff. You know, I know you're all focused, as you should be, on capitalizing on this enormous opportunity in front of you, but I remember not terribly long ago when a lot of these calls started with you guys, you know, talking about the diverse nature of the firm and nothing's really over 20 percent of sales, and you can weather kind of storms in any one area because of that diversity. You know, this has been all organic, so this change in the splits is happening for the best possible reasons. But with IT Datacom poised to be like 50% plus of the company going into next year, does it force you to reexamine balance sheet usage? Do you need to scale up in other places to kind of ward off potential as cycles ultimately happen in these businesses? Well, thank you very much, John. There's no doubt about it. the diversity of the company is a very important thing to Amphenol. And if we reflect back on why that importance, it's really always been two things. One is insulating us from the risk of exposure to a given market. And the second is ensuring that we have the position and the visibility so that we're present when every one of these electronics revolutions happens. So, there's no doubt about that second piece that that still continues very strongly. We have a very substantial and broad position across all nooks and crannies of the electronics industry worldwide. No question. Now, relative to the fact that this quarter, for example, IT Datacom represented 48% of our sales, as you say, it's happened for a good reason. This has been an area where the world has devoted unprecedented amounts of resources to build upon this exciting new revolutionary technology, that technology in turn has required a higher intensity of interconnect products because of the architecture, the nature of the thing. It's a neural network. It needs connections. And we, I think, have done a pretty decent job in Amphenol of capitalizing upon that and taking a bit more than our fair share of that opportunity. So the stack up of those has resulted in us having tremendous growth in that business, really quadrupling the size of our business over a less than four-year period. And that then results in the 48%. So then the real question is, what are we doing about that? Well, certainly we will continue to invest heavily in new technologies, making sure that we can meet the moment inside the IT Datacom market. It's really a historical opportunity and one that I'm very proud of how our team has reacted to, capitalized upon, and has supported customers up and down the stack. And we will drive that success in the most diverse way possible, across customers, up and down the Stack, from chip makers all the way up to the web scale hyperscalers who are spending the money and everything in between. And we'll drive that across every party, everybody who's working on this. And we'll do that with a multitude of our own technologies on all of those programs. So that diversification within IT Datacom is something that we're heavily, heavily focused on. And I'm very proud of what we've achieved there so far. But at the same time, we will continue to double down on the other markets in Amphenol, those other markets as evidence this quarter alone. I mean, it's not lost on me that we generated this quarter $1.6 billion in free cash for the company. And we have devoted that $1,6 billion in free cache to four acquisitions that roughly cost about $1.,6 billion. And if you take out, by the way, AI and the growth in AI, we're driving organic growth in the high teens percentage for the country. So that is a very, very strong performance. and is, again, evidence of the fact that we continue to double down across the electronics industry. We have another thing in Amphenol as well. And that's this concept of what we say, driving with one foot on the gas and one on the brake. Many companies, when you're in such a robust time period, forget about the factthat when youre driving the car, there's two pedals. We never forget about that second pedal. And how does that manifest in our company? Well, it means regardless of how good things are, we will continually seek to embed the company with the flexibility, the agility to react in the event that there is a problem in any of our markets. That means doing smart investments. That means making sure that that agility of our culture is pushed down throughout the organization at every single lever. that our local teams who are connected deeply to the market, you know, we have a way we say it with our team, you know if you see something, do something, then say something, you know just react immediately to the moment whether that's a good moment or a bad moment. And so building in that agility, reinforcing that agility amidst this high growth is another thing that we're making sure and doubling down upon at a time when yes, we do have a market that's grown organically to a much more significant level than we've had in the past. But, you know, if you look at AI as a percent of the world's global spending on electronics, my guess is that is also not an insignificant number. Your final question comes from the line of Scott Graham with Seaport Research Partners. Your line is open. Please go ahead. Thank you all for squeezing me in here as well. I wanted to ask the same question or a similar question that was asked earlier about defense and just hoping that there's any type of unbundling you can do on that would be helpful. You know, air, land, sea, where are you strongest? Where are you seeing the growth strongest? And importantly, do you think you're getting an additional benefit from the conflicts that are taking place that a year from today, if they're all done with, that that impacts the sales that we saw versus what we saw this year. Yeah. Well, thanks very much, Scott. It's never difficult for me to talk about defense. We just have such a fabulous business there, and it's something that we're so focused on and continuing to double down on. And look, I look at a bunch of different segments within the defense market. We do. I mean, maybe not quite as many as that diversified industrial, but let's say there's like a dozen different applications that we look at. I mean last quarter alone, like nearly every one of those grew double digits, nearly every one of them. So, you know, we are seeing in, in, In areas like space in land, unmanned vehicles, communications, avionics, vehicles, munitions related, you name it, naval, strong, strong growth across the board. And I think there's another piece, which is, you know, with the various conflicts that are happening, and this is not only specific to the U.S. military, I think we are entering a phase where regardless of the resolution of the conflicts, and I will tell you, I sincerely hope that all these conflicts come quickly to a conclusion. There is nothing, I mean, we call it a defense business, not an offense business. I mean we certainly want these conflicts to come to an end. At the same time, there's no doubt that we are entering into a phase where there will be a significant replenishment requirement and that is a multi-year, if not multi-decade initiative in multiple countries around the world. And that's happening at the same time as you see militaries around the World doubling down on next-generation technology across all of those segments that we talked about. So I think, you know, I don't know if I've done a good job to unbundle it for you, but in terms of like where we are and what the impact is from various spending, look, obviously if military spending were to drop precipitously around the world, we would not be immune to that. But there is an offset, which is this replenishment. There is an onset, which are these new technologies. And obviously, we have a company-specific offset, which is our ability to take more than our fair share of that because of the breadth and the depth of our products. There are no further questions at this time, so I will hand back to Mr. Norwood for closing remarks. well thank you guys so much it's really a pleasure i appreciate you uh taking time out of your busy day here on such a beautiful fall day and hard to say it but we look forward to seeing everybody in the new year and i i wish you i maybe i'm the first to wish you a happy holidays and we'll see you in 2027 thanks so much thank you bye-bye this concludes today's call thank Thank you for joining. You may now disconnect your lines.