TE Connectivity (TEL) Q4 2026: AI data center sales up 17% sequentially

TE Connectivity (TEL) fiscal Q4 2026 earnings, reported on October 28, 2026 in a press release and on the earnings call for the quarter ended September 25, 2026, beat the company's guidance on both sales and profit and confirmed growth in AI data center connectivity and automotive. Fourth-quarter sales were $5.312 billion, up 13.4% organically, and adjusted EPS was $3.14 [1], against guidance of about $5.25 billion and $3.05 [2]. Of the four questions going into the quarter, data center connectivity sales rose 17% sequentially and automotive grew 5.9% organically while vehicle production declined [3]. Energy growth slowed to 11.7%, below the roughly 15% management had described [4], and reported margins met the bar but look weaker once a one-time tariff refund is removed. Overall, growth is broader and the order backlog is still building, while profit conversion remains unproven.

TE Connectivity makes connectors, sensors and cables and reports two segments, Transportation and Industrial [5]. Its customers include automakers, data center operators, utilities, factory automation and aerospace and defense companies. About 75% of sales are direct [6].

Progress one: AI data center orders are turning into revenue

Digital Data Networks (DDN), which supplies high-speed and power connectivity for data centers, posted fourth-quarter sales of $949 million, up about 17% from $813 million in the third quarter [7] and up 34% year over year [3]. The business had been stuck near $700 million a quarter in the first half, and this quarter it supplied about 43% of the company's total sales increase.

Orders show the backlog is still building. Industrial orders were $3.322 billion in the fourth quarter, up 47% year over year and about 1.19 times the quarter's segment sales [3]. Management said DDN orders grew about 70% for the full year and the backlog is about $8 billion. It expects DDN revenue to rise by more than $1 billion in fiscal 2027, with over half of that in the second half and only a slight sequential increase in the first quarter [8].

Profit conversion is the weak spot in this progress. The Industrial adjusted operating margin was 22.4%, up 0.4 percentage points year over year [3] but below 22.8% in the third quarter [7], and management said it is increasing growth investments [3]. Net capital expenditures were $1.113 billion for the year, about 5.6% of sales [3], and the return on that capacity build still has to be tested in the second half.

Progress two: automotive returned to growth as production fell

Automotive organic growth was 5.9% in the fourth quarter, up from about 3% in the third quarter [9]. Management said global production declined in the period and growth came from content per vehicle: content growth was double digit in Asia, Europe moved above the target range as electric vehicles recovered, and North America stayed weak [8]. Transportation segment sales were $2.600 billion, up 6.9% organically [3].

Segment margin and orders both met prior expectations. The Transportation adjusted operating margin was 21.0%, up 0.8 percentage points, and orders were $2.733 billion, up 13% and slightly above the quarter's sales [3]. Full-year automotive organic growth was only 3.0% [3], however, and management acknowledged that this sits at the low end of its target range. Management expects automotive sales in fiscal 2027 to again outgrow production by 4 to 6 points [8].

Other points: slower Energy growth and a one-time profit item

Energy growth slowed markedly. Fourth-quarter organic growth was 11.7% [3], compared with about 33% in the third quarter [7]. Management now describes 2027 Energy growth as double digit [8] and did not explain the slowdown.

Reported margins include a one-time item. Fourth-quarter sales were reduced by $87 million of IEEPA tariff refunds that will be returned to customers, and the net effect on operating income was a $4 million gain [1]. On a combined-segment basis, the adjusted operating margin was about 21.7% and the incremental margin about 26%, below the company's commitment of at least 30% [1]. The adjusted tax rate was 21.1% [3], below guidance of 22% to 23% [4], and about half of the EPS beat came from the lower tax rate. Management said inflation in resins, metals and freight has not eased [8].

Conclusion

The quarter strengthens the case for growth, while evidence on profit conversion is weaker than the reported figures. DDN orders are converting into revenue, automotive has returned to growth, and orders and backlog support management's guidance that fiscal 2027 organic growth will be similar to the 12% achieved in 2026 [1]. Inflation and growth investment are still absorbing part of the profit from higher volume. Full-year free cash flow was $3.412 billion, roughly equal to adjusted net income [3].

Durability depends on the second-half ramp. The company guided first-quarter fiscal 2027 sales to about $5.35 billion and adjusted EPS to about $3.30 [1]. Whether DDN sales exceed $949 million, automotive organic growth stays above 3%, Energy holds double-digit growth and the incremental margin returns to 30% will determine whether this assessment strengthens.

Sources

[1] TEL 8-K filed 2026-10-28 · Ex99.1 Q4 FY2026 press release, 2026-10-28, TE Connectivity 8-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465926119326/tel-ex99d1.htm [2] TEL 8-K filed 2026-07-22 · 4Q26 outlook and Astrodyne TDI, 2026-07-22, TE Connectivity 8-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465926085589/tel-20260722xex99d1.htm [3] TEL 8-K filed 2026-10-28 · Ex99.2 Q4 FY2026 slides, 2026-10-28, TE Connectivity 8-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465926119326/tel-ex99d2.htm [4] TEL Q3 FY2026 earnings call 2026-07-22 · guidance, 2026-07-22, TE Connectivity earnings call, https://gateway.drillr.ai/mcp/private [5] TEL 10-K filed 2025-11-10 · two reportable segments and fiscal calendar, 2025-11-10, TE Connectivity 10-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465925109150/tel-20250926x10k.htm [6] TEL 10-K filed 2025-11-10 · customers, direct sales and distribution, 2025-11-10, TE Connectivity 10-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465925109150/tel-20250926x10k.htm [7] TEL 8-K filed 2026-07-22 · 3Q26 Industrial business performance, 2026-07-22, TE Connectivity 8-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465926085589/tel-20260722xex99d2.htm [8] TEL Q4 FY2026 earnings call 2026-10-28, 2026-10-28, TE Connectivity earnings call, https://investors.te.com/ [9] TEL 8-K filed 2026-07-22 · 3Q26 Transportation business performance, 2026-07-22, TE Connectivity 8-K, https://www.sec.gov/Archives/edgar/data/1385157/000110465926085589/tel-20260722xex99d2.htm