Why is GAAP EPS so much lower than adjusted EPS this quarter?

GAAP diluted EPS from continuing operations was $0.04 because the company recorded a one-time, non-cash income tax charge of about $574 million, related to a net increase in the valuation allowance on deferred tax assets from a ten-year Swiss tax credit, plus a $13 million charge from a non-U.S. tax rate change. Excluding these tax items and restructuring and acquisition-related charges, adjusted EPS was $2.10.

What is driving growth at TE Connectivity right now?

Industrial Solutions is the main growth engine, with reported sales up 17% to $1.83 billion. Digital Data Networks surged roughly 77% on AI-related demand, and Energy and Aerospace, Defense and Marine also grew. Transportation Solutions sales declined 4%, reflecting weakness in Europe and North America, although Asia grew.

What should investors expect for the third quarter?

Management guided to net sales of about $4.30 billion, up 8% reported and about 5% organic, and adjusted EPS of about $2.06, up 8%. Guidance includes the contribution from the Richards Manufacturing acquisition, roughly 2 points of price tied to tariff recovery, and a sequential tax rate headwind of about $0.06.

How is the company managing its balance sheet and capital returns after the acquisition?

Total debt rose to about $5.6 billion from about $4.2 billion a year ago, largely to fund the roughly $2.3 billion Richards acquisition, with cash rising to $2.55 billion at quarter end. Despite this, the company returned about $1 billion to shareholders in the first half and announced a 9% dividend increase, and first-half free cash flow of about $1.1 billion covered those distributions.

How is TE addressing tariffs and trade risk?

Management says its localized manufacturing footprint, with plants located near customers, minimizes tariff exposure. Guidance includes about 2 points of price tied to tariff recovery, and management expects to navigate the current trade environment effectively, though the company still flags trade and macroeconomic uncertainty as risks.

TEL 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed April 23, 2025. Cited figures are marked; the original filing is the authoritative source.

TE Connectivity (TEL) reported fiscal Q2 2025 results (quarter ended March 28, 2025) that beat its own guidance on both sales and earnings.

Net sales were $4.14 billion^a, up 4% reported and 5% organic, with growth driven by the Industrial Solutions segment (up 17% reported, 16% organic) while Transportation Solutions declined 4% reported (2% organic). Orders were $4.25 billion, up 6% year over year and sequentially, with the Digital Data Networks (AI-related) business up roughly 77% and Industrial book-to-bill strong at 1.02 for the company overall. Profitability was strong on an adjusted basis: adjusted operating margin expanded 90 basis points to 19.4%, and adjusted EPS hit a company record of $2.10, up about 13% year over year.

GAAP diluted EPS from continuing operations was only $0.04^b, however, because of a one-time non-cash tax charge of roughly $574 million tied to a valuation allowance on a Swiss ten-year tax credit, plus a $13 million charge from a non-U.S. tax rate change. Investors should treat GAAP results as distorted for this quarter and focus on the adjusted figures, while noting that the adjusted numbers are non-GAAP measures that exclude these tax items. Looking ahead, management guided fiscal Q3 2025 net sales to about $4.30 billion (up 8% reported, about 5% organic) and adjusted EPS to about $2.06 (up 8%).

The outlook includes the contribution from the Richards Manufacturing acquisition, which closed in April 2025 with roughly $2.3 billion^c of capital deployed, and about 2 points of price tied to tariff recovery. Free cash flow was about $1.1 billion in the first half, and the company returned roughly $1 billion to shareholders and raised its dividend 9%. Total debt rose to about $5.6 billion after new issuance and commercial paper usage to fund the acquisition, so leverage and cash deployment are key items to watch.

02—Key points

Key Highlights

Adjusted EPS of $2.10 was a company record, up about 13% year over year and above guidance; GAAP EPS from continuing operations was only $0.04 due to a one-time non-cash tax charge.
Net sales of $4.14 billion rose 4% reported and 5% organic, led by Industrial Solutions (+17% reported) on strength in Digital Data Networks (+77%) tied to AI applications.
Transportation Solutions sales fell 4% reported (2% organic), with declines in Europe and North America partly offset by growth in Asia; segment adjusted operating margin held at 20.7%.
Orders of $4.25 billion were up 6% both year over year and sequentially, with Industrial orders showing continued momentum in AI, energy and aerospace applications.
Adjusted operating margin expanded 90 basis points to 19.4%, and free cash flow for the first half was about $1.1 billion.
Fiscal Q3 2025 guidance calls for net sales of about $4.30 billion (+8%) and adjusted EPS of about $2.06 (+8%), including the Richards Manufacturing acquisition and tariff-related assumptions.
Total debt increased to $5.6 billion from about $4.2 billion a year earlier, and the company returned about $1 billion to shareholders while announcing a 9% dividend increase.

03—Questions

Frequently Asked Questions

Why is GAAP EPS so much lower than adjusted EPS this quarter?
GAAP diluted EPS from continuing operations was $0.04 because the company recorded a one-time, non-cash income tax charge of about $574 million, related to a net increase in the valuation allowance on deferred tax assets from a ten-year Swiss tax credit, plus a $13 million charge from a non-U.S. tax rate change. Excluding these tax items and restructuring and acquisition-related charges, adjusted EPS was $2.10.
What is driving growth at TE Connectivity right now?
Industrial Solutions is the main growth engine, with reported sales up 17% to $1.83 billion. Digital Data Networks surged roughly 77% on AI-related demand, and Energy and Aerospace, Defense and Marine also grew. Transportation Solutions sales declined 4%, reflecting weakness in Europe and North America, although Asia grew.
What should investors expect for the third quarter?
Management guided to net sales of about $4.30 billion, up 8% reported and about 5% organic, and adjusted EPS of about $2.06, up 8%. Guidance includes the contribution from the Richards Manufacturing acquisition, roughly 2 points of price tied to tariff recovery, and a sequential tax rate headwind of about $0.06.
How is the company managing its balance sheet and capital returns after the acquisition?
Total debt rose to about $5.6 billion from about $4.2 billion a year ago, largely to fund the roughly $2.3 billion Richards acquisition, with cash rising to $2.55 billion at quarter end. Despite this, the company returned about $1 billion to shareholders in the first half and announced a 9% dividend increase, and first-half free cash flow of about $1.1 billion covered those distributions.
How is TE addressing tariffs and trade risk?
Management says its localized manufacturing footprint, with plants located near customers, minimizes tariff exposure. Guidance includes about 2 points of price tied to tariff recovery, and management expects to navigate the current trade environment effectively, though the company still flags trade and macroeconomic uncertainty as risks.

04—Continue

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