TE Connectivity Q4 FY2026: sales up 12% to $5.31B as data-center connectors grew 34%; tax gain lifts EPS

TE Connectivity makes connectors (the plugs and sockets that carry power and data between parts of a machine) and sensors, sold into cars, trucks, factories, aircraft, power grids and data centers. In its fiscal fourth quarter, the three months to September 25, 2026, sales rose 11.9% to a record $5.31 billion (13.4% organically, meaning before currency moves, acquisitions and a one-off tariff-refund adjustment). The driver is the same as all year: connectors for AI data centers, where the "digital data networks" business grew 34.4% organically. GAAP diluted EPS rose 39% to $3.10, but a $59 million tax benefit did a large part of that. The company's adjusted EPS of $3.14 rose 21%, a better measure of the underlying business. The full 10-K is not filed yet. This analysis is based on the earnings release (Exhibit 99.1 of the October 28, 2026 Form 8-K).

Results

Takeaway: The underlying business grew profit about 20%, roughly twice as fast as sales, and orders rose 29%. That supports the 15% sales growth guided for next quarter. The 39% jump in GAAP EPS overstates the improvement, because of a tax benefit and the 2.3% fall in share count. The adjusted 21% is the fairer number.

Segments: data centers carry Industrial, trucks help Transportation

The release gives growth rates by business but not each business's sales.

• Industrial Solutions is now TE's larger segment, with $2.80 billion of sales against Transportation's $2.60 billion. Digital data networks added $242 million of sales year over year, more than half of the segment's $463 million increase. These are high-speed cable and connector systems used inside AI server racks and between them. The CEO linked the segment's 26% full-year growth to "our customers' AI investments, which create opportunities extending from inside the rack in the data center to the networking edge all the way to the energy grid." Adjusted margin rose only slightly, to 22.4% from 22.0%. GAAP margin rose more, from 19.3% to 20.3%, because last year's quarter carried more restructuring charges.
• Transportation Solutions grew 6.9% organically. Commercial transportation (trucks and off-road equipment) grew 17.8%, and automotive grew 5.9%. Sensors, the weak spot, fell 1.7%. Margin improved to 20.0% from 19.3%.

Full fiscal year 2026

• Sales were $19.89 billion, up 15.2% (11.9% organically). The extra few points came from currency and from acquisitions, mainly in Energy, where $271 million came from acquired businesses.
• GAAP EPS rose 80% to $11.07, a misleading jump. Fiscal 2025 was cut by a $574 million tax charge tied to a Swiss tax credit, which pushed that year's tax rate to 42.5%. Fiscal 2026 then gained a $114 million tax benefit from settling past tax matters. On an adjusted basis, EPS grew 24% to $11.52.
• Operating cash flow was $4.53 billion and free cash flow $3.41 billion. TE returned about $2.8 billion to shareholders: $1.89 billion in buybacks and $869 million in dividends.
• Interest expense rose to $124 million from $77 million, after the debt TE took on in fiscal 2025 to fund acquisitions ($2.63 billion spent that year).

What the headline numbers hide

• GAAP vs. adjusted. The $0.04 gap between GAAP EPS ($3.10) and adjusted EPS ($3.14) looks small, but it hides two items that pull in opposite directions:

  • TE's adjusted figure adds back $0.24 of costs: amortization of acquired intangibles, restructuring and acquisition charges.
  • It also removes a $0.20 tax gain, a $59 million benefit from lowering a valuation allowance. That is an accounting reserve against tax credits the company had doubted it could use.

  A year ago the tax item ran the other way, a $0.10 net charge. That swing is most of why GAAP EPS growth (39%) is nearly double adjusted growth (21%).

• Tax rate. The effective tax rate fell to 16.3% from 26.0%. On adjusted figures it was flat, 21.1% against 21.3%. Without the tax swing, pretax income from continuing operations rose 20.0% ($1,076 million against $897 million). That is the cleanest measure of how much better the business did.

• Buybacks. Diluted shares fell to 291 million from 298 million (−2.3%). TE spent $544 million on buybacks this quarter. Adjusted net income from continuing operations rose 18.2% ($914 million against $773 million), so the lower share count explains about 2.5 points of the 21% adjusted EPS growth.

• Tariff refunds. This quarter TE received refunds of tariffs collected under the IEEPA, a US emergency-powers law. It expects to pass them back to customers. It booked an $87 million reduction to net sales for that and a net $4 million gain in operating income. The effect on profit is negligible, but it reduces reported sales growth: before it, segment sales rose 13.7%. The fiscal Q1 2027 outlook includes more such refunds, received and passed back.

• Cash conversion is strong. Operating cash flow of $1.53 billion was 1.7 times net income in the quarter and 1.4 times for the year, helped by depreciation and amortization above $1 billion. Receivables grew 12.8% over the year, roughly in line with fourth-quarter sales (+11.9%). Inventory grew a slower 9.7%. There is no sign that sales were pulled forward.

• Guidance delivered. In July, management guided Q4 sales of about $5.25 billion and adjusted EPS of about $3.05. TE beat both, with $5.31 billion and $3.14.

On balance the quarter is flattered at the GAAP line: EPS rose 39%, but pretax income rose 20% once the tax swing is set aside. The adjusted 21% EPS growth is the number to use, and about 2.5 points of it came from buybacks.

Did last time's read hold up?

Our fiscal Q3 report said to watch three things:

1. Digital data networks. Growth was expected to keep slowing against tougher comparisons. It did not: organic growth held at 34.4%, against 34.0% in Q3.
2. Automotive. It was at risk from falling vehicle production. Instead it grew 5.9% organically, up from under 3% in Q3.
3. Restructuring charges. They were expected to taper off. They fell to $14 million in the quarter, against $117 million for the full year.

Orders of $5.7 billion in Q3 had pointed to higher sales, and Q4 delivered a record $5.31 billion with orders up again to $6.1 billion. The read held up, and all three items came in better than feared.

Outlook

For fiscal Q1 2027 (the quarter ending December 25, 2026), management expects:

• sales of about $5.35 billion, up 15% on both a reported and an organic basis;
• GAAP EPS of about $3.04 (+20%);
• adjusted EPS of about $3.30 (+21%).

For the full fiscal year 2027, it expects organic sales growth "similar to our strong performance in fiscal 2026," which was 11.9%.

The outlook table shows no contribution from acquisitions. During fiscal 2026, TE committed $1.6 billion to bolt-on acquisitions in Industrial, to widen its optics and power-filtering products. Those deals would add to growth once they close.

Our view: orders up 29% in the quarter and 27% for the year make the Q1 guide look reachable. The guide is also not demanding on margin, since adjusted EPS growth of 21% is only a few points above sales growth of 15%. The risk is concentration. Digital data networks has supplied a growing share of TE's growth. If AI data-center spending pauses, Industrial's 20% growth would fall back toward the high single digits of the other Industrial businesses. That would leave the automotive business, which is still growing in the single digits, to carry results.

What to watch in fiscal Q1 2027:

1. Book-to-bill. That is orders divided by sales, about 1.15 this quarter. A ratio that stays above 1 means demand is still running ahead of shipments.
2. Digital data networks growth against last year's comparisons, which are now much tougher.
3. Whether the $1.6 billion of acquisitions close. Once they do, reported and organic growth will start to separate.