TE Connectivity Projects Strong Q4 Results on AI Demand

What happened

TE Connectivity reported third-quarter revenue of $5.16 billion, up 14% year-over-year, beating analyst estimates of $5 billion. Adjusted earnings per share came in at $2.94, above the consensus estimate of $2.84. The company forecast fourth-quarter adjusted profit of $3.05 per share and revenue of about $5.25 billion, both exceeding Wall Street expectations of $2.96 per share and $5.16 billion respectively. Orders in the quarter surged by more than $1 billion to $5.7 billion compared to the prior year, with CEO Terrence Curtin noting that orders are up 70% year-to-date, building strong backlog into the next fiscal year.

Why it matters

TE Connectivity produces electrical connector systems that are essential components in data centers and network equipment. The company is benefiting directly from the global boom in AI infrastructure investments, as hyperscalers and enterprises expand their data center capacity to support AI workloads. The substantial order growth and backlog build indicate sustained demand visibility, which should support revenue growth and operational leverage in coming quarters. Management's confidence in passing through higher raw material costs through pricing also suggests the company maintains strong pricing power in a supply-constrained environment.

Bigger picture

The results reflect the broader infrastructure build-out driven by generative AI adoption. Companies across the connectivity and data center equipment supply chain are experiencing elevated demand as cloud providers and enterprises invest heavily in AI-capable computing infrastructure. TE's strong performance in its industrial and transportation segments also indicates broader economic resilience beyond AI, though the AI-driven data center growth represents the most significant near-term catalyst. The company's strategy to maintain margins through pricing discipline amid elevated raw material costs-particularly oil-based products like resins affected by geopolitical tensions-demonstrates the pricing environment in critical infrastructure components.

What to watch

Investors should monitor TE Connectivity's ability to convert its growing backlog into revenue in fiscal 2025, particularly as data center customers may face their own capacity constraints or funding pressures. The trajectory of orders from AI-facing customers will signal whether the current demand surge is sustainable or beginning to normalize. Management's commentary on raw material cost trends and pricing dynamics will be important, especially given ongoing geopolitical tensions affecting oil-based input costs. Finally, any updates on tariff refund applications and the company's approach to customer rebates could impact near-term margin expectations.