TE Connectivity Fourth Quarter and Final Year Earnings Webcast - TE CONNECTIVITY PLC

Explicit Guidance:

• FY2027 Q1 Revenue: $5.35 billion, representing 15% year-over-year growth (reported and organic).
• FY2027 Q1 EPS: Approximately $3.30, representing 21% year-over-year growth.
• FY2027 Revenue Growth: Expectation of double-digit organic growth (approx. 12%), similar to FY2026 performance.
• FY2027 Tax Rate: Adjusted effective tax rate expected at 22% (vs. 21% in FY2026 Q4).
• FY2027 Restructuring Charges: Projected below $100 million (FY2026 full year was $110 million).
• Tariff Impact: $50 million reduction in Q1 FY2027 sales expected from tariff refunds.

Business-Segment Outlook:

• Digital Data Networks (DDN): Expects revenue growth exceeding $1 billion in FY2027, with the vast majority driven by AI applications. More than 50% of this $1B+ growth is expected in the second half of the fiscal year.
• DDN Long-Term Trajectory: Business expected to double again in the next few years, growing well over $1 billion annually over an extended horizon; power connectivity within DDN expected to grow faster than overall DDN.
• Industrial Segment: Driven by DDN and Aerospace & Defense (combined ~60% of backlog growth); backlogged at $8 billion (up ~30% YoY).
• Transportation Segment:
  • Automotive: Expects global vehicle production to decline slightly in FY2027; targets 4–6% organic sales growth driven by data connectivity, powertrain electrification, and "electronification." Asia expected to be the primary growth driver; North America facing challenges.
  • Commercial Transportation: Continued strength expected with improving North American trends.
• Emerging Applications: Positioned to capture up to $500 of content per humanoid robot as the market scales; leveraging automotive and industrial capabilities for charging, data, and actuation.
• Aerospace & Defense: Backlog growth remains strong with longer lead times; trends in Energy and Automation & Connected Living (ACL) expected to sustain double-digit growth.

Market and Competitive Outlook:

• AI Architecture Trends: Expect continued demand for both copper and fiber; copper TAM expected to grow over 100% as AI moves to inference, edge computing, and agentic AI.
• Power Connectivity: Architecture-agnostic growth expected as data centers transition to 800V DC and liquid cooling; power connectivity identified as a faster-growing segment within DDN.
• Optics Evolution: Expansion into CPO (Co-Packaged Optics) and fiber-attached density (via RAM Photonics technology) expected to add significant addressable market.
• Competitive Positioning: Strong engagement with hyperscalers and leading OEMs; hybrid solutions (copper + optical) emerging as industry standard for next-gen interconnects.

Macro / Industry Outlook:

• Currency: Anticipates a slight year-over-year headwind in FY2027 due to current exchange rates (vs. tailwind in FY2026).
• Inflation: No relief expected in Q1 FY2027 regarding inflationary pressures on resins, metals, and freight; productivity and selective pricing actions are the primary mitigation tools.
• Automotive Macro: Global vehicle production expected to be slightly down in FY2027 across all regions; however, specific regional improvements expected in Europe (EV traction) to drive content growth.
• Data/Power Infrastructure: Continued investment in grid hardening and data center build-outs globally.

Strategic Initiatives:

• Acquisitions: Pending acquisition of Astrodyn TDI expected to close by the end of FY2027 Q1; focus on expanding addressable markets in optics and power filtering.
• Capacity & Engineering: Continued investment in manufacturing capacity and engineering resources to support DDN growth and design wins.
• Product Development: Validation ongoing for fiber-attached density solutions (RAM Photonics) and next-gen high-speed optical transceivers (e.g., 12.8 Tbps hybrid solutions).
• Humanoid Robotics: Active engagement with leading manufacturers to integrate power (charging inlets) and data connectivity solutions.

Risks and Headwinds to Outlook:

• Input Cost Inflation: Elevated costs for resins, metals, and freight may pressure margins if productivity gains or pricing actions are insufficient.
• Global Production Softness: Slight expected decline in global vehicle production volumes in FY2027, though offset by content growth.
• North American Automotive: Continued challenges in the North American automotive environment expected in FY2027.
• Customer Adoption Timelines: Growth in DDN depends on the timing of customer program ramps; backlog conversion may exhibit seasonality with a heavier weight in the second half.
• Technology Shift Uncertainty: Evolution of copper vs. fiber architecture may vary by customer roadmap, though TE maintains a balanced portfolio.

Management Tone on the Future:

• Confidence: High confidence in sustaining double-digit organic growth in FY2027, mirroring FY2026 performance.
• Backlog Strength: Record backlog levels ($8 billion) viewed as a strong indicator of future growth momentum, particularly in DDN and Aerospace/Defense.
• Growth Narrative: Explicitly frames the current period as the "early stages of the AI infrastructure build-out" with expectations for the DDN business to double again in the next few years.
• Execution: Expresses confidence in the team's ability to deliver "through-cycle" results despite inflationary headwinds.

Miscellaneous:

• Backlog Composition: Industrial segment orders grew 47% YoY in Q4 FY2026; DDN orders grew ~70% for the full year FY2026.
• Order-to-Revenue Ratio: Book-to-bill at 1.14 in Q4 FY2026.
• Shareholder Returns: FY2026 saw $2.8 billion returned via buybacks and dividends; FY2026 FCF conversion at 100% of adjusted net income.