TE Connectivity Delivers Strong Q2 Results, Driven by AI and Industrial Growth

TE Connectivity (NYSE: TEL) has reported robust second-quarter 2025 results, exceeding expectations with adjusted earnings per share (EPS) of $2.10, a 13% year-over-year increase, and revenue of $4.143 billion, up 4.4% from the prior year. The outperformance was fueled by its Industrial Solutions segment, which grew 17.2% year-over-year, while its Transportation Solutions segment faced headwinds but maintained strong margins.

Segment Breakdown: Industrial Strength, Transportation Resilience

TE Connectivity’s two primary segments—Transportation Solutions and Industrial Solutions—showed divergent trends but collectively drove the company’s success.

Transportation Solutions: Navigating Challenges

• Net Sales: $2.314 billion (-3.9% year-over-year), impacted by declining demand in automotive and commercial transportation.
• Margins: Held steady at 19.2%, supported by operational efficiency and strong execution in Asia.
• Sub-Sectors:
• Automotive: Sales fell 2.1%, with currency headwinds contributing to the decline.
• Sensors: Dropped 11.6%, reflecting softer demand in certain markets.

Industrial Solutions: The Growth Engine

• Net Sales: $1.829 billion (+17.2% year-over-year), driven by surging demand in high-growth areas.
• Key Drivers:
• Digital Data Networks: Soared 76.6% due to AI and 5G investments, contributing to TE’s leadership in connectivity solutions.
• Energy: Grew 19.2%, benefiting from grid modernization and renewable energy projects.
• Aerospace & Defense: Expanded 9.4%, leveraging global defense spending.
• Margins: Improved to 17.9% (adjusted basis), reflecting both operational discipline and higher-margin product mix.

Strategic Moves and Acquisitions

The acquisition of Richards Manufacturing Co. in April 2025 bolstered TE’s Industrial segment, particularly in North American utility markets. Management emphasized its “near-customer” manufacturing strategy, which mitigates trade risks and supports faster delivery in key regions like Asia. Additionally, the company’s focus on sustainability—achieving an 80% reduction in Scope 1/2 emissions since 2018—aligns with global decarbonization trends, enhancing long-term competitiveness.

Guidance and Risks

• Third-Quarter Outlook:
• Revenue: $4.30 billion (+8% YoY), driven by Industrial growth and Richards integration.
• EPS: $2.06 (+8% YoY), excluding tax headwinds.
• Key Risks:
• Currency Fluctuations: Reduced sales by $110 million in Q2.
• Trade Environment: Geopolitical tensions could impact supply chains, though TE’s localized manufacturing mitigates some risks.

Conclusion: A Strong Foundation for Growth

TE Connectivity’s Q2 results underscore its ability to navigate macroeconomic challenges while capitalizing on secular trends like AI, renewable energy, and industrial automation. The Industrial Solutions segment’s 17.2% sales growth and margin expansion highlight its strategic focus on high-growth markets. Even as Transportation faces softness, its 19.2% operating margin reflects operational excellence.

With $1.1 billion in free cash flow year-to-date and a $4.30 billion Q3 revenue target, TE is positioned to capitalize on its $4.25 billion Q2 order backlog. Investors should note that while currency and trade risks persist, the company’s diversified end markets and innovation-driven product portfolio—evident in its 76.6% Digital Data Networks growth—provide a solid growth trajectory.

For income-focused investors, TE’s 1.2% dividend yield and strong cash flow offer stability, while growth investors can benefit from its exposure to AI and energy infrastructure. With shares trading at 18x forward P/E, below its 5-year average of 21x, TE Connectivity appears attractively valued amid its momentum.

In short, TE Connectivity’s Q2 performance reinforces its role as a leader in connectivity solutions for the next decade’s tech-driven economy.