TE Connectivity plc at BAIRD 2026 Global Industrial Conference - TE CONNECTIVITY PLC

Financial Performance:

• Fiscal 2026 delivered 12% organic growth and 15% total growth including M&A, outpacing prior investor day targets.
• Generated approximately $3.4 billion in free cash flow for the year.
• Current Return on Invested Capital (ROIC) exceeds 20%.
• Digital Data Networks (DDN) segment revenue stands at roughly $3 billion, with power connectivity representing ~30% of that mix.
• Energy segment grew 18% organically last year, driven by grid hardening and industrial power.
• Pricing power remains intact, with management successfully passing inflationary costs (materials, tariffs) to customers without evident pricing fatigue.

Guidance and Future Outlook:

• Organic growth guidance for the current fiscal year is maintained at approximately 12%.
• Management expects to sustain growth of over $1 billion annually in the AI/Digital Data Networks sector through fiscal 2027 and beyond.
• The Energy segment is projected to grow in the double digits, exceeding the 7-8% utility investment growth rates.
• Aerospace & Defense (A&D) and Automation & Connected Living (ACL) segments are forecast to deliver double-digit growth.
• Transmission Solutions (TS) segment expects automotive content to outgrow production by 5% (vs. 4-6% range), driven by EV and data connectivity.
• Anticipated revenue contribution from the Astrodine acquisition is approximately $200 million in the current calendar year, with closing expected by year-end.

Business Segments and Product Lines:

• Digital Data Networks (DDN): Focus on hyperscale customers; expanding TAM in copper, fiber, and new architectures (CPO, NPO, FAU); 800-volt adoption expected to increase power interconnect content by 1.5x.
• Optics: Recent acquisition of RAM Photonics strengthens capability in FAU and switch-level connectivity; currently in engineering/prototype/validation phases with hyperscale customers.
• Energy: 60% US-focused; 60% grid hardening, 20% industrial/data center power, 20% utility solar; strong order backlog reflecting grid modernization trends.
• Aerospace & Defense: Backlog expanding due to increased demand for compute, power, and autonomy in next-gen weapons; supply chain capacity constraints noted as a minor limiter.
• Industrial (ACL): Benefiting from secular trends in battery electric storage, factory automation, and robotics; cyclical recovery accelerating globally (China, India, Europe, North America).
• M&A Strategy: Disciplined approach targeting mid-teen returns by Year 5; Astrodine adds power filtering to the portfolio, primarily targeting semiconductor and industrial equipment markets.

Market and Competitive Landscape:

• AI infrastructure demand remains robust; hyperscalers are expanding designs for next-gen architectures, driving copper and power connectivity growth.
• Energy sector driven by grid hardening and the electrification of data centers.
• EV adoption continues to accelerate in Europe and China, supporting automotive connectivity content.
• Management notes that AI regulatory concerns have not yet slowed customer spending or altered architectural roadmaps ("full steam ahead").
• Competitive advantage leveraged through breadth across industrial markets, AI, aerospace, and energy.

Risks and Challenges:

• Supply Chain/Capacity: Rapid scaling requires significant capital investment (approx. $200M annually) in engineering and manufacturing capacity to meet customer ramp schedules.
• Inflation: Persistent cost pressures on commodities and metals, though effectively managed via price pass-throughs.
• Execution: Ramping new facilities and product launches into high-speed customer programs creates operational stress.
• Cyclicality: Industrial automation remains sensitive to broader economic conditions, though secular growth drivers are currently offsetting cyclical headwinds.

Management Commentary and Tone:

• Tone is highly confident, emphasizing breadth of growth vectors beyond just AI.
• CEO Terrence Curtin highlighted strong momentum, growing backlog, and successful execution of multi-billion dollar growth plans.
• Management expressed satisfaction with the "breadth" of the portfolio, noting that energy and defense are providing double-digit growth alongside AI.
• Reiteration of strong capital return capabilities and disciplined M&A strategy.

Analyst Questions and Answers:

• Q: Will AI M&A reflect a shift in strategy? A: No; acquisitions (Richards, Astrodine) are bolt-on to existing capabilities in energy and power quality, targeting specific industrial niches.
• Q: What drives the $1B+ AI growth visibility past FY27? A: Expansion of TAM in copper and fiber, new architectures (CPO/NPO), and increased power content requirements as racks become denser.
• Q: Is optical cannibalizing copper revenue? A: No, it is a hybrid story; power connectivity grows with optics, and copper remains the workhorse for rack-level connectivity with incremental FAU opportunities.
• Q: Are customers slowing due to AI regulation? A: No, customers are accelerating spend and seeking to secure supply chain capacity.
• Q: What is the single biggest constraint on DDN growth? A: Capacity ramping and engineering resource allocation to meet customer speed; no current bottleneck identified.
• Q: How does inference impact content vs. training? A: Inference clusters have lower GPU content than training but still drive incremental copper and power connectivity content.

Other Key Points:

• Copper innovation (ACC, AEC, co-packaged copper) continues to extend the lifecycle and relevance of copper interconnects.
• The Astrodine deal closes in Q4 of the current calendar year, adding to semiconductor equipment and power filtering capabilities.
• Management expects 800-volt adoption to begin this year but notes it will not be universal immediately, varying by customer architecture.
• China EV market production was flat/weak last year, but TE grew 6% due to strong penetration with local and multinational OEMs and export benefits.