Q2 FY2026 net sales were $4.744B, GAAP operating margin was 20.1%, adjusted operating margin was 21.7%, orders were $5.324B, and book-to-bill was 1.12.
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Security report / TEL
TEL Operating Console
TE Connectivity is working operationally: sales, orders, adjusted margins, Digital Data Networks growth, guidance, and cash conversion are all supportive. The proof window is whether Industrial and DDN demand are durable enough to offset Automotive cyclicality while preserving 21%+ segment margins and high free-cash-flow conversion.
Ticker
TEL
Knowledge reviewed
2026-07-04
Market data
2026-07-02
Chart source
Local API
Module 01 / Price
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Selected-Security Chart
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Module 02 / Proof window
Proof watch
Current Company View
Next read
Q3 FY2026 results must land near the $5.0B sales and $2.83 adjusted EPS guide while orders, DDN growth, segment margin, and cash conversion stay strong.
Industrial and DDN growth must be broad and repeatable, not a concentrated data-center order surge that normalizes before Transportation improves.
The 2026-07-02 close was $197.44, or roughly 20.2x estimated TTM GAAP EPS and 18.9x recast adjusted EPS, with TEL down 13.2% year to date.
DDN customer breadth, Industrial order conversion, Transportation margin, Automotive organic growth, H2 free cash flow, and repurchase or acquisition discipline.
Q2 sales
$4.744B
+15% reported, +7% organic
Orders
$5.324B
1.12 book-to-bill
DDN sales
$714M
+48% reported, +46% organic
Adjusted margin
21.7%
Both segments above 21%
H1 FCF
$1.3B
$1.812B OCF, $528M capex
Automotive
-4% organic
$1.762B Q2 sales
Trade Plan
Selected Security Trade Plan
Exposure Map
Business Profile, Segments, And Exposure
TE sells engineered connectors, sensors, relays, tooling, cable, wire, and related components. The current operating mix is balanced between a still-profitable Transportation base and an Industrial growth engine tied to data centers, energy, grid, and automation.
Business model
Design-in component economics
Scale, product breadth, direct customer access, and long-lived programs matter. The company reports in USD, is listed on the NYSE, and operates through Transportation Solutions and Industrial Solutions.
Disclosure map
Two segments, narrow DDN detail
Segment sales and margins are visible, but DDN customer concentration, contract duration, and order breadth are not disclosed enough to settle the durability question.
Transportation Solutions
Large, profitable, but cyclically exposed.
Transportation was 54% of FY2025 sales. Q2 adjusted margin remained 21.6%, but Automotive sales were $1.762B and down 4% organically.
More useful evidence
Auto production, OEM pricing, Transportation orders, and whether margin stays above the high-teens if organic auto sales remain weak.
Industrial Solutions
The current growth engine.
Q2 Industrial sales were $2.322B, up 27% reported and 17% organically, with 21.8% adjusted operating margin.
More useful evidence
Industrial orders, backlog conversion, Energy contribution, and whether margin stays above 21% as growth scales.
Digital Data Networks
The cleanest AI/data-center bridge.
Q2 DDN sales were $714M, up 48% reported and 46% organically. This is the central positive proof point.
More useful evidence
Customer breadth, repeat orders, contract duration, and commentary separating demand strength from supply timing.
Energy, grid, and geography
Supportive, but less transparent.
Energy benefits from grid hardening, data centers, clean energy, and acquisitions. China customers were about 25% of FY2025 sales, and about 60% of sales were invoiced in non-USD currencies.
More useful evidence
Organic Energy contribution, tariff or FX effects, and whether policy friction alters cross-border infrastructure demand.
Value Drivers
Relative Value And Drivers
The setup is not a low-expectation recovery. TEL needs repeated evidence that Industrial and DDN growth can lift the blended growth profile while Automotive, policy, FX, and capital-allocation risk stay contained.
Driver
AI and data-center connectivity
DDN is the highest-sensitivity channel from AI infrastructure spend into TEL revenue. Confirmation requires growth well above the company average and broad order commentary.
Driver
Energy and grid infrastructure
Energy and grid hardening can reinforce Industrial growth, but the lane treats this as less transparent than DDN and potentially mixed with acquisition contribution.
Offset
Automotive cyclicality
Higher content per vehicle can help, but Automotive organic sales declined 4% in Q2 and automotive customers were about 41% of FY2025 sales.
Per share
Cash conversion and deployment
H1 free cash flow supports dividends, buybacks, and acquisitions. The quality test is repurchase price discipline and acquisition returns at a non-distressed multiple.
Guidance
Guidance Path And Tests
Guidance has moved higher through FY2026, but the next step is about quality: order conversion, DDN durability, Transportation margin, and cash conversion matter as much as the headline beat.
Can Q3 land against the raised bar?
Management guided Q3 FY2026 to about $5.0B of sales, up 10% reported and 9% organically, and about $2.83 of adjusted EPS, up 17% year over year.
Is the revision path still positive?
Q4 FY2025 guided Q1 to about $4.5B sales and $2.53 adjusted EPS. Q1 produced $4.669B and $2.72, then Q2 produced $4.744B and $2.73.
Will orders convert into shipments?
Record Q2 orders and 1.12 book-to-bill are constructive. A book-to-bill drop below 1.0, weak Industrial orders, or DDN digestion language would undercut the setup.
Does Automotive stay contained?
Transportation can remain valuable if margins hold. The warning sign is high-teens or lower Transportation margin while Automotive stays organically negative.
Operating Evidence
KPIs And Catalysts
Near-term evidence is concentrated in Q3 FY2026 results, DDN order quality, Industrial organic growth, Transportation margin, Automotive organic growth, and free-cash-flow conversion.
Shows whether AI, Energy, and content growth are lifting the blended company rather than only one product lane.
The cleanest near-term signal that FY2026 growth and Industrial momentum can persist.
The main company-specific proof point for AI and data-center connectivity exposure.
Margin durability separates real operating leverage from revenue growth that depends on mix, price, or supply timing.
Cash generation funds dividends, buybacks, acquisitions, and balance-sheet flexibility.
The largest cyclical offset to Industrial and DDN growth.
Capital
Financial Quality And Capital Allocation
The balance sheet is not the primary risk. The main capital question is whether buybacks and bolt-on acquisitions compound per-share cash economics if the stock keeps trading at a quality multiple.
Liquidity and leverage
$1.110B at March 27, 2026.
$5.655B, with the new $3.0B five-year unsecured revolver undrawn and covenant compliance disclosed.
Q2 included $750M of new senior notes and repayment of $850M due February 2026.
Cash use
$1.812B of operating cash flow and $528M of capex, with management reporting $1.3B of free cash flow.
$819M of H1 share repurchases and $417M of dividends.
$3.6B remained under the share-repurchase authorization at March 27, 2026.
Position
Competitive Position
TE has a credible edge in scale, breadth, engineering support, and customer access. The edge is most investable when it appears in Industrial growth, DDN orders, stable margins, and cash-backed growth.
What is proven
Broad product families, global manufacturing, roughly 130-country sales reach, and long-standing customer relationships.
Filings describe roughly 75% direct sales, which supports design-in economics and customer proximity.
FY2025 backlog was $6.188B, a useful but not definitive signal of future conversion.
What is not proven
Customer concentration and contract duration are not disclosed enough to prove the current ramp is durable.
TE has strong margins, but Automotive production and OEM pricing pressure can still dilute Industrial acceleration.
Repurchase price discipline and acquisition returns matter because valuation is not distressed.
Street View
Ownership, Flows, Valuation, And Tape
The tape is skeptical relative to fundamentals. TEL is down year to date despite strong operating evidence, which puts the burden on DDN durability and Transportation containment.
Skeptical tape
At the 2026-07-02 local close of $197.44, TEL was down 6.5% over one month, down 6.7% over roughly three months, down 13.2% year to date, and up 13.9% over one year.
Quality multiple
The lane estimates market cap near $57.6B, enterprise value near $62.2B, roughly 20.2x TTM GAAP EPS, and roughly 18.9x recast adjusted EPS.
Institutional base
The 2026 proxy listed Vanguard at 12.8%, T. Rowe Price at 6.3%, BlackRock at 6.2%, and directors, nominees, and executives at about 0.6% as a group.
Not short-led
Short interest was 8.144M shares on 2026-06-15, about 2.8% of shares outstanding. A June Industrial Solutions president sale is worth monitoring but appears linked to option exercise and sale mechanics.
Scenarios
Scenario Assessment
The base case is constructive but proof-dependent. Upside needs durable DDN and Energy growth plus Automotive stabilization. Downside comes from DDN normalization, Automotive pressure, policy friction, or weaker cash conversion.
Base
Industrial, DDN, Energy, orders, margin, and cash flow remain strong enough to offset Automotive weakness, but the market keeps demanding evidence that AI/data-center growth is broad and durable.
Upside
DDN and Energy stay durable, AI/data-center demand monetizes without abrupt digestion, supply supports shipments, Automotive stabilizes, and cash generation funds disciplined capital returns.
Downside
AI capex digestion or policy friction weakens DDN order visibility while Automotive remains organically negative and Transportation margins compress.
Triggers
Monitoring Trigger Board
These are operating evidence checks, not chart levels. They should be refreshed after the next TEL source occurrence.
Confirm the raised guide
Confirm if Q3 sales and adjusted EPS meet or exceed the $5.0B and $2.83 guide while orders stay above book-to-bill of 1.0.
Check breadth, not just growth
Confirm if DDN organic growth remains well above company average and management describes broad AI/data-center demand without near-term digestion language.
Watch for order normalization
Invalidate if DDN growth falls sharply, Industrial orders weaken, book-to-bill drops below 1.0, or AI/data-center growth language is removed.
Margin pressure test
Invalidate if Transportation margin falls below the high-teens while Automotive remains organically negative.
Confirm conversion
Confirm if operating margins hold near current levels and free cash flow remains strong without material working-capital or capex drag.
Watch repurchases and M&A
Track buyback pace, acquisition spend, integration disclosure, debt levels, and whether adjusted items remain tied to visible cash contribution.
Risks
Risks, Invalidations, And Quality Flags
The current view is balanced because operating evidence is strong but the setup depends on repeat proof across DDN, Automotive, policy, FX, tax, and capital allocation.
High severity
DDN and AI normalization
Basis: DDN growth could normalize faster than expected, leaving TEL with quality industrial economics but less multiple support.
Warning: DDN growth falls sharply or management signals data-center order digestion.
Reduce concern: Broad orders and DDN growth stay strong through the next several quarters.
High severity
Auto-cycle pressure
Basis: Automotive customers were about 41% of FY2025 sales, and Q2 Automotive organic sales declined 4%.
Warning: Transportation margins compress while Automotive remains weak.
Reduce concern: Content growth and Industrial mix offset production pressure.
High severity
AI capex, policy, and supply
Basis: AI capex digestion, supply normalization, export controls, or cross-border restrictions can reduce data-center and component demand visibility.
Warning: Data-center orders slow or tariff and policy language worsens.
Reduce concern: Order conversion and margins hold despite policy and supply noise.
Medium severity
Competition and pricing
Basis: Connector and component markets are highly competitive, and large customers can pressure price, quality, delivery, and innovation.
Warning: Segment margins fall even as revenue grows.
Reduce concern: TE keeps 21%+ segment margins while orders broaden.
Medium severity
Currency, China, and tax
Basis: China customers were about 25% of FY2025 sales, about 60% of sales were invoiced in non-USD currencies, and deferred-tax-asset realizability is complex.
Warning: FX, tariffs, tax-rate changes, or policy controls cut through reported growth.
Reduce concern: Organic growth, margins, and cash conversion remain resilient.
Medium severity
Capital allocation
Basis: Buybacks, dividends, and acquisitions can compound value, but the hurdle rises when valuation is not distressed.
Warning: Repurchases or acquisitions absorb cash without visible EPS and FCF contribution.
Reduce concern: Per-share cash economics improve while leverage stays manageable.
Diagnostics
Freshness And Known Unknowns
The latest filed TEL source pair was generated on 2026-07-04 and exported on 2026-07-05. The lane reported 12 source references, no stale source warning, and no contradictory claim pairs.
Freshness
Reviewed as of 2026-07-04T22:42:34Z and exported 2026-07-05T04:33:43Z.
Local price context is current to 2026-07-02; short interest is current to 2026-06-15.
The FY2025 debt maturity ladder is supplemented, but not fully re-laddered, for the Q2 FY2026 refinancing.
Known unknowns
The last four earnings-call transcripts were not collected, so Q&A-level AI/DDN caveats and analyst pushback are incomplete.
Customer concentration, contract duration, and repeatability are not disclosed enough to settle durability.
Rating-agency commentary, fresh 13F flow, full consensus estimates, and broad peer valuation work were not collected in the latest pass.
Sources
Links And Filings
Use the knowledge lane for canonical research. The report metadata keeps machine provenance, hashes, and source routing.
Knowledge lane
Canonical TEL company view, proof burden, source map, and next-evidence list.
Report metadataProjection contract, freshness, route registry target, and source trail.
Fallback chartSecurity chart route when the detailed article route is unavailable.
Q2 FY2026 10-QQuarterly filing source for cash, debt, operations, and capital allocation.
Q2 FY2026 slidesEarnings slide source for guidance, DDN, orders, and segment performance.
FY2025 10-KBusiness mix, competitive context, backlog, China, FX, and risk disclosures.
2026 proxyBeneficial ownership, governance, and executive ownership context.
SEC submissionsCompany filing discovery route for CIK 0001385157.
Visible source labels are human-readable; detailed projection mechanics stay in metadata.