Why did TE change its non-GAAP definitions, and how does it affect comparability?

Starting in Q1 FY26, TE excludes amortization of acquired intangible assets from adjusted operating income, adjusted EPS, and related measures. Management says this makes results more comparable across periods with different acquisition activity and against non-acquisitive peers. Prior periods were recast: FY25 adjusted EPS moves from $8.76 to $9.27, and FY24 moves from $7.56 to $8.00. GAAP results are unchanged. Investors should use the recast figures when comparing across years and avoid mixing recast and previously reported adjusted numbers.

How strong was the Q4 earnings quality, given the large gap between GAAP and adjusted EPS?

GAAP EPS of $2.23 was well above its historical base, mainly because of a 26.0% effective tax rate and a much smaller restructuring charge than last year. The adjustments that lift GAAP EPS to $2.44 were small: $0.03 acquisition-related, $0.08 restructuring, and $0.10 tax items. The full-year GAAP tax rate was 42.5%, driven by a $574 million valuation allowance charge tied to a Swiss tax credit, so FY25 GAAP EPS of $6.16 is not a clean run-rate. Adjusted operating margin of 20.8% on the recast basis is a better measure of underlying performance.

What is driving TE's growth, and how sustainable is it?

Industrial Solutions drove most of the growth. Digital data networks, tied to AI infrastructure, rose 79% organically in Q4, and Energy rose 24% organically on grid hardening and renewables. Transportation grew only 2% organically in Q4, with Automotive gains in Asia offset by weakness in the West and Sensors down 6%. Orders of $4.7B and a book-to-bill of 0.99 indicate continued momentum, but Industrial growth is concentrated in AI and energy, so it may be more cyclical than the Transportation base.

What is the outlook, and what are the main risks?

For Q1 FY26, TE expects sales of about $4.5B (up 17% reported, 11% organic) and GAAP EPS of about $2.33, with adjusted EPS of about $2.53 that excludes amortization. Risks include weak Western auto and sensors demand, FX translation (a roughly 2.9-point headwind to growth in Q1), acquisition integration after $2.6B of FY25 deals, and tax volatility from valuation allowances and Swiss and Irish tax matters. The company is also changing its domicile from Switzerland to Ireland, which adds governance and regulatory uncertainty.

How is TE using its cash, and how strong is its balance sheet?

In FY25, TE generated $4.1B of operating cash flow and $3.2B of free cash flow. It returned $2.2B to shareholders through dividends ($803M) and buybacks ($1.35B), and spent $2.6B on acquisitions. Total debt rose to $5.7B from $4.2B, which, together with lower cash of $1.26B, reflects acquisition funding. Goodwill and intangibles increased sharply, to $7.1B and $2.2B. Leverage is moderate given EBITDA of about $4.5B. Investors should watch whether buybacks continue at the FY25 pace given higher debt.

TEL 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed October 29, 2025. Cited figures are marked; the original filing is the authoritative source.

TE Connectivity closed fiscal 2025 with record fourth-quarter and full-year results.

Q4 net sales were a record $4.75 billion^a, up 17% reported and 11% organically, with growth in both Industrial (up 34% reported) and Transportation (up 4% reported). GAAP diluted EPS from continuing operations was $2.23 (up 148%), and adjusted EPS was a record $2.44 (up 25%). Adjusted operating margin reached 19.9% for the quarter, and free cash flow hit a record $1.15 billion.

Orders rose 22% year over year to $4.7 billion^b, a book-to-bill of 0.99, which supports the outlook. For the full year, net sales were a record $17.3 billion (up 9% reported, 6% organic), adjusted operating margin was a record 19.7%, and adjusted EPS was $8.76. Free cash flow was $3.2 billion with conversion above 100%.

The company returned $2.2 billion^c to shareholders and spent $2.6 billion on bolt-on acquisitions, while Industrial sales grew 24% on AI data center and energy demand. Management guided Q1 FY26 sales to about $4.5 billion (up 17% reported, 11% organic) and GAAP EPS to about $2.33, with adjusted EPS of about $2.53 (up 23%). Investors should note the accounting change effective fiscal 2026.

TE now excludes amortization of acquired intangibles from its non-GAAP measures. Prior periods were recast, which lowers reported adjusted EPS for FY24 to $8.00^d from $7.56 and raises FY25 to $9.27 from $8.76.

This is a presentation change only and does not affect GAAP results, so the recast figures should not be compared directly with previously reported adjusted metrics. Adjusted EPS now also looks structurally higher because it excludes roughly $0.50 per year of amortization, which rose with the increase in intangible assets following acquisitions.

02—Key points

Key Highlights

Q4 FY25 net sales were a record $4.75B, up 17% reported and 11% organic, beating prior guidance.
Q4 adjusted EPS was a record $2.44 (up 25%), while GAAP diluted EPS from continuing operations was $2.23, boosted by a lower tax rate and a restructuring benefit.
FY25 net sales reached a record $17.3B (up 9% reported, 6% organic), with Industrial sales up 24% on AI data center and energy demand.
Free cash flow was a record $3.2B for FY25 (122.7% conversion), and the company returned $2.2B to shareholders and deployed $2.6B on bolt-on acquisitions.
Q4 orders rose 22% year over year to $4.7B, with a book-to-bill of 0.99, supporting the strong Q1 FY26 outlook.
Q1 FY26 guidance calls for sales of about $4.5B (up 17% reported, 11% organic) and adjusted EPS of about $2.53 (up 23%).
Starting in FY26, non-GAAP measures exclude intangible amortization. FY25 adjusted EPS is recast to $9.27 from $8.76, which is a presentation change and not a GAAP restatement.

03—Questions

Frequently Asked Questions

Why did TE change its non-GAAP definitions, and how does it affect comparability?
Starting in Q1 FY26, TE excludes amortization of acquired intangible assets from adjusted operating income, adjusted EPS, and related measures. Management says this makes results more comparable across periods with different acquisition activity and against non-acquisitive peers. Prior periods were recast: FY25 adjusted EPS moves from $8.76 to $9.27, and FY24 moves from $7.56 to $8.00. GAAP results are unchanged. Investors should use the recast figures when comparing across years and avoid mixing recast and previously reported adjusted numbers.
How strong was the Q4 earnings quality, given the large gap between GAAP and adjusted EPS?
GAAP EPS of $2.23 was well above its historical base, mainly because of a 26.0% effective tax rate and a much smaller restructuring charge than last year. The adjustments that lift GAAP EPS to $2.44 were small: $0.03 acquisition-related, $0.08 restructuring, and $0.10 tax items. The full-year GAAP tax rate was 42.5%, driven by a $574 million valuation allowance charge tied to a Swiss tax credit, so FY25 GAAP EPS of $6.16 is not a clean run-rate. Adjusted operating margin of 20.8% on the recast basis is a better measure of underlying performance.
What is driving TE's growth, and how sustainable is it?
Industrial Solutions drove most of the growth. Digital data networks, tied to AI infrastructure, rose 79% organically in Q4, and Energy rose 24% organically on grid hardening and renewables. Transportation grew only 2% organically in Q4, with Automotive gains in Asia offset by weakness in the West and Sensors down 6%. Orders of $4.7B and a book-to-bill of 0.99 indicate continued momentum, but Industrial growth is concentrated in AI and energy, so it may be more cyclical than the Transportation base.
What is the outlook, and what are the main risks?
For Q1 FY26, TE expects sales of about $4.5B (up 17% reported, 11% organic) and GAAP EPS of about $2.33, with adjusted EPS of about $2.53 that excludes amortization. Risks include weak Western auto and sensors demand, FX translation (a roughly 2.9-point headwind to growth in Q1), acquisition integration after $2.6B of FY25 deals, and tax volatility from valuation allowances and Swiss and Irish tax matters. The company is also changing its domicile from Switzerland to Ireland, which adds governance and regulatory uncertainty.
How is TE using its cash, and how strong is its balance sheet?
In FY25, TE generated $4.1B of operating cash flow and $3.2B of free cash flow. It returned $2.2B to shareholders through dividends ($803M) and buybacks ($1.35B), and spent $2.6B on acquisitions. Total debt rose to $5.7B from $4.2B, which, together with lower cash of $1.26B, reflects acquisition funding. Goodwill and intangibles increased sharply, to $7.1B and $2.2B. Leverage is moderate given EBITDA of about $4.5B. Investors should watch whether buybacks continue at the FY25 pace given higher debt.

04—Continue

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