TE Connectivity reported Q4 revenue of $4.1 billion, adjusted EPS of $1.95, and adjusted operating margin of 18.6%, all above guidance, while FY2024 free cash flow hit a record $2.8 billion, up 17%. Management said AI-related revenue was $300 million in fiscal 2024 and is targeted to double to $600 million in fiscal 2025, alongside a new $2.5 billion share repurchase authorization. Q1 2025 guidance calls for $3.9 billion in revenue and $1.88 adjusted EPS, with margin strength offset by a higher 23%–24% tax rate and ongoing weakness in industrial and commercial transportation.
TEL is quietly turning into a cleaner compounder: the market is still reading it as a cyclical connector/auto supplier, but the mix shift toward AI interconnect, data center, aerospace/defense, and energy is raising the floor on margins and capital returns. The key second-order effect is that AI is no longer just an upside callout — it is becoming a capacity-allocation problem, which should favor TEL over slower-moving peers because the company can reprice scarce engineering and manufacturing capacity faster than the broader passive components group.
The biggest misread in the tape is likely the tax step-up. The Pillar Two drag is a GAAP/EPS optics issue, not a cash-flow deterioration, so consensus that focuses on headline EPS may underappreciate the durability of mid-teens cash taxes and >100% FCF conversion. That creates room for the company to keep buying back stock aggressively while still funding AI capex; in other words, the balance sheet is being used as a lever to convert cyclical uncertainty into per-share compounding.
On the negative side, the industrial auto-supply narrative is not “fixed”; Europe and factory automation remain a months-long drag, and that can keep multiple expansion capped until late 2025. The transition to a two-segment structure also matters because it should make the AI/communications contribution more visible and force a cleaner re-rating once the recast numbers are published. If AI order lumpiness stays strong through the January update, the market may have to move TEL from low-teens industrial multiple toward a premium cash compounder multiple, but any disappointment on China/Europe or a slower-than-expected industrial recovery would compress that rerating quickly.
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