TE Connectivity plc (TEL) Presents at Jefferies Global Industrials Conference 2026 Transcript

TE Connectivity said AI-related sales remain its largest growth driver, with the company having raised its AI sales guidance multiple times during the year. The year-over-year AI growth rate has moderated from roughly 70% to about 33%, reflecting capacity ramping and program-timing effects rather than a change in underlying market conditions. TE emphasized its exposure to the intersection of high-speed data connectivity and power connectivity.

Analysis

TEL’s AI exposure should be valued less on the headline growth rate than on whether new capacity converts into mix-driven margin expansion. A decelerating percentage growth rate can still support earnings upside if the absolute revenue dollar contribution rises and factory utilization improves; the key risk is that capacity comes on ahead of customer qualification or hyperscaler deployment schedules, turning a supply constraint into pricing competition. APH is the most relevant read-through competitor: sustained lead-time normalization or connector ASP pressure would imply the AI interconnect pool is becoming less scarce than investors expect.

Over the next 1-3 months, the investable catalyst is evidence that program timing shifts are temporary rather than a reduction in AI build intensity—specifically, order growth, backlog conversion, and incremental operating margin in TEL’s communications-facing businesses. The 6-18 month issue is architectural: higher-power racks increase demand for power connectivity alongside data interconnects, potentially making TEL’s content-per-rack opportunity more durable than a pure networking-cycle trade. The contrarian risk is that investors extrapolate AI demand while underweighting automotive and industrial cyclicality; a weaker global manufacturing or EV production backdrop could offset connectivity upside and cap multiple expansion.

Key Decisions for Investors

• Maintain a 1-3 month constructive watch on TEL, but do not chase conference commentary alone. Upgrade to a long only if the next earnings release shows AI-related backlog/order conversion and incremental margin expansion rather than merely reaffirmed revenue targets.
• Use a relative-value framework: long TEL versus short APH only if TEL demonstrates superior AI revenue conversion or margin increment while APH shows lead-time or pricing normalization. Target a 6-12 month horizon; exit if TEL’s AI growth misses management’s trajectory or APH’s growth reaccelerates materially.
• Treat TEL as a barbell exposure rather than a standalone AI proxy: hedge a new TEL long with partial industrial-cycle risk reduction through XLI or a more cyclical auto-supplier short if global PMI data weaken. The thesis is falsified by a broad communications demand slowdown combined with industrial/auto guide-downs.
• No actionable position in JEF from this event; the conference-host role does not create a fundamental earnings catalyst.