Key Highlights

  • TE Connectivity reported fiscal Q3 adjusted EPS of $2.94, up 22% year-over-year, beating estimates.
  • Revenue of $5.16 billion topped forecasts, with record orders of $5.7 billion, up 27% year-over-year.
  • The company raised its full-year outlook and announced a $1.4 billion acquisition of Astrodyne TDI.
  • Shares tumbled despite the beat-and-raise quarter, in an apparent sell-the-news reaction.

TE Connectivity (NYSE: TEL) shares tumbled despite the company reporting record fiscal Q3 results, with adjusted EPS of $2.94, up 22% year-over-year, beating estimates, and revenue of $5.16 billion topping forecasts.

What Happened

Q3 FY2026 results showed sales of $5.2 billion, up 14% reported and 12% organically year-over-year; adjusted operating margins expanded 90 basis points to 21.9%. Record orders of $5.7 billion were up 27% year-over-year and 7% sequentially, with a book-to-bill ratio of 1.1.

Segment performance showed Industrial Solutions sales grew 22% reported and 21% organic, led by 30%-plus growth in Digital Data Networks (up 34%) and Energy (up 33%); industrial orders were up 36% year-over-year. Transportation Solutions grew 7% reported and 5% organic, with automotive up 5% reported and commercial transportation up 20% reported.

The company also announced an agreement to acquire Astrodyne TDI, a power and filter products maker for mission-critical applications, for approximately $1.4 billion, expected to generate more than $250 million in annual sales; the deal is expected to close by the end of the calendar year, funded through cash.

Market Reaction

The sharp decline appears to reflect a sell-the-news reaction and possible margin or organic growth concerns buried in the report, even as the broader semiconductor and tech sector rallied strongly, with the Philadelphia Semiconductor Index up 5.2% on strong earnings from peers like Amphenol, which stands in stark contrast to TE Connectivity's steep drop and suggests company-specific rather than sector-wide selling pressure.

Outlook

Full-year FY2026 outlook was raised, with sales expected to grow approximately 15%, more than $2.5 billion in incremental revenue, and adjusted EPS growth above 20%. Q4 guidance calls for sales of approximately $5.25 billion, up 11% year-over-year, and adjusted EPS of approximately $3.05, implying full-year EPS growth of 23%.

AI and data center demand remains a key growth driver: Digital Data Networks orders were up over 70% year-over-year year-to-date, and AI as a percentage of DDN revenue continues to increase from previously around 70%. The prior $3 billion AI cloud revenue target from the company's Investor Day, targeted for FY2027, is now expected to be exceeded, with the timeline shifting left. Year-to-date free cash flow was approximately $2.2 billion, with approximately $2 billion returned to shareholders via dividends and buybacks.

Why did TE Connectivity shares tumble despite beating estimates?

The decline appears to reflect a sell-the-news reaction and possible margin or organic growth concerns, even as the broader semiconductor sector rallied on peer earnings.

What acquisition did TE Connectivity announce?

An agreement to acquire Astrodyne TDI for approximately $1.4 billion, expected to generate more than $250 million in annual sales.

How is AI demand affecting TE Connectivity's business?

Digital Data Networks orders were up over 70% year-over-year year-to-date, and the company's prior $3 billion AI cloud revenue target is now expected to be exceeded ahead of schedule.