TE Connectivity Ltd.

Step 8: Revenue Breakdown & Growth Drivers

TE Connectivity (TEL)

Date: February 23, 2026

---

8A. Segment Structure Overview

TE Connectivity reorganized from 3 reportable segments to 2 beginning FY2025:

• Transportation Solutions (~54% of FY2025 revenue): Automotive, Commercial Transportation, Sensors
• Industrial Solutions (~46% of FY2025 revenue): Digital Data Networks, Automation & Connected Living, Aerospace/Defense/Marine, Energy, Medical

The former Communications Solutions segment was folded into Industrial Solutions.

---

8B. Full Revenue Breakdown by Segment (FY2022–FY2026E)

Old 3-Segment Structure (FY2022–FY2024)

Segment	FY2022	FY2023	FY2024
Transportation Solutions	$9,219M	$9,588M	$9,398M
Industrial Solutions	$4,520M	$4,551M	$4,481M
Communications Solutions	$2,542M	$1,895M	$1,966M
Total	$16,281M	$16,034M	$15,845M

New 2-Segment Structure (FY2024 Recast–FY2026E)

Segment	FY2024 (recast)	FY2025	Q1 FY2026 (ann.)	FY2026E
Transportation Solutions	$9,481M	$9,388M	~$9,868M	~$10,000M
Industrial Solutions	$6,364M	$7,874M	~$8,808M	~$9,400M
Total	$15,845M	$17,262M	~$18,676M	$19,432M

Mix Shift: Industrial Solutions grew from 40% of revenue (FY2024) to 46% (FY2025) and is on pace for ~48% in FY2026. This is a significant portfolio rebalancing driven by AI/DDN and Energy growth.

---

8C. Sub-Segment Revenue and Organic Growth Detail

FY2025 Full-Year Sub-Segment Performance

Transportation Solutions ($9,388M, -1.0% organic):

Sub-Segment	FY2025 Revenue (est.)	YoY Organic Growth	Key Driver
Automotive	~$7,200M	+0.2%	Content gains offset flat production
Commercial Transportation	~$1,450M	-2.1%	Weakness in Class 8 trucks
Sensors	~$738M	-7.6%	Inventory correction in industrial sensors

Industrial Solutions ($7,874M, +17.6% organic):

Sub-Segment	FY2025 Revenue (est.)	YoY Organic Growth	Key Driver
Digital Data Networks	~$2,210M	+73.3%	AI/data center connector explosion
Automation & Connected Living	~$2,140M	+7.7%	Factory automation recovery
Aerospace, Defense & Marine	~$1,490M	+10.3%	Defense budgets + commercial aero
Energy	~$1,345M	+46.2%	Grid modernization + Richards
Medical	~$689M	-16.9%	Destocking in interventional devices

Q1 FY2026 Sub-Segment Performance (Most Recent)

Transportation Solutions ($2,467M, +7% organic):

Sub-Segment	Q1 FY2026	YoY Reported	YoY Organic
Automotive	~$1,880M	+9.5%	+6.5%
Commercial Transportation	~$370M	+18.6%	+16.3%
Sensors	~$217M	+1.4%	-2.3%

Industrial Solutions ($2,202M, +26% organic):

Sub-Segment	Q1 FY2026	YoY Reported	YoY Organic
Digital Data Networks	~$707M	+71.2%	+69.7%
Automation & Connected Living	~$549M	+14.6%	+11.6%
Aerospace, Defense & Marine	~$380M	+14.1%	+10.9%
Energy	~$406M	+88.0%	+14.6%
Medical	~$160M	+5.3%	+5.3%

Key observation: Energy's 88% reported vs. 14.6% organic gap = ~$160M+ of inorganic contribution from the Richards Manufacturing acquisition in the quarter.

---

8D. 4-Year Organic Growth History by Sub-Segment

Sub-Segment	FY2022	FY2023	FY2024	FY2025	Q1 FY2026	Trend
Automotive	+8.1%	+10.2%	+3.0%	+0.2%	+6.5%	Recovery after 2-yr slowdown
Commercial Transport	+12.1%	-1.1%	-4.1%	-2.1%	+16.3%	Strong inflection
Sensors	+3.0%	+1.8%	-10.8%	-7.6%	-2.3%	Persistent weakness
Ind. Equipment/Automation	+28.5%	-8.1%	-24.9%	+7.7%	+11.6%	Recovery underway
Aero/Defense/Marine	+8.7%	+12.8%	+15.4%	+10.3%	+10.9%	Sustained strength
Energy	+16.0%	+9.6%	+4.9%	+46.2%	+14.6%	Secular tailwind + Richards
Medical	+4.2%	+13.1%	+6.5%	-16.9%	+5.3%	Recovering from destocking
Data & Devices/DDN	+29.6%	-27.2%	+10.2%	+73.3%	+69.7%	AI explosion

---

8E. Geographic Revenue Breakdown

FY2025 Geographic Mix

Region	% of Revenue	Revenue ($M)	Key Markets
Asia-Pacific	38%	~$6,560M	China (~$3.0–3.5B), Japan, South Korea
EMEA	33%	~$5,696M	Germany, UK, France
Americas	29%	~$5,006M	US, Mexico, Brazil
Total	100%	$17,262M

Geographic Shift (FY2024→FY2025)

Region	FY2024 Mix	FY2025 Mix	Shift
Asia-Pacific	~36%	38%	+2 pts (China auto + AI supply chain)
EMEA	~33%	33%	Flat
Americas	~31%	29%	-2 pts (relative to faster APAC growth)

China Exposure Deep Dive:

• Estimated ~$3.0–3.5B or ~18–20% of total revenue
• Concentrated in automotive (BEV content growth) and electronics
• BYD content grew from $5/vehicle to $50/vehicle — a 10x increase
• Risk: China EV price wars compressing OEM margins
• Offset: 800V architecture complexity and ADAS content expansion

Manufacturing Localization

Metric	Value
In-region manufacturing	76%
In-region supply chain sourcing	90%
Automated factories globally	120
Countries of operation	~130

This high localization ratio is a critical competitive advantage and tariff mitigant.

---

8F. Customer Concentration Analysis

Metric	Value
Largest single customer	<10% of revenue (no customer exceeds 10%)
Sales channel: Direct	~75%
Sales channel: Distributors	~25%
Co-design product arrangements	5,000+ (adding ~1,000 in 2026)
Key auto OEM relationships	Toyota, VW, GM, Ford, BYD, Hyundai, BMW, etc.
Key hyperscaler relationships	NVIDIA supply chain, Microsoft, Google, Amazon, Meta (implied)

Customer diversification is excellent. No single customer exceeds 10%, and TEL serves virtually every major OEM globally across automotive, industrial, and data center end markets. The 5,000+ co-design arrangements create deep switching costs.

---

8G. Content-Per-Vehicle Analysis

Connector Content by Powertrain Type

Vehicle Type	TE Content/Vehicle	vs. ICE Baseline	Driver
ICE (traditional)	~$32	1.0x	Basic wiring, sensors
Hybrid Electric	~$75	2.3x	Dual drivetrain + HV connectors
Battery Electric (BEV)	~$75+	2.3x+	HV systems, battery mgmt, chargers
800V BEV Architecture	Higher (TBD)	>2.5x	Ultra-high-voltage connectors

BYD Case Study (from 2025 Investor Day)

• TEL content grew from $5/vehicle to $50/vehicle — a 10x increase
• Driven by electrification, high-voltage systems, and data connectivity
• BYD is now one of TEL's fastest-growing auto customers

Content Growth in Other End Markets

Product Category	Content Trend
Factory robots	$60 → $100/unit (+67%)
AI connectivity per chip	5x increase over 3 years
Power density per rack	50kW (H100) → 120kW (GB200) → 600kW (Rubin) → 1MW (2030)

Blended Content Impact on Revenue

At current global EV penetration of ~25%, the blended connector content per vehicle is:

• Blended = (75% × $32) + (25% × $75) = $42.75
• vs. pure ICE of $32 = +34% content uplift from mix alone

By 2030 at 50% EV penetration:

• Blended = (50% × $32) + (50% × $75) = $53.50
• = +67% content uplift — this growth occurs regardless of total vehicle production volume

Management targets 4–6% annual growth above market through content gains in electrification and data connectivity.

---

8H. Segment-Level Margin Analysis

Adjusted Operating Margin Trends

Segment	FY2022	FY2023	FY2024	FY2025	Q1 FY2026	3-Yr Δ
Transportation Solutions	17.6%	17.4%	20.4%	20.2%	21.2%	+360 bps
Industrial Solutions	15.9%	15.7%	15.2%	19.1%	23.3%	+740 bps
Total Company	18.2%	16.7%	18.9%	19.7%	22.2%	+400 bps

Margin Drivers by Segment

Transportation Solutions (21.2% adj. margin, Q1 FY2026):

• Mature, stable margin profile
• Operating leverage on content growth
• Incremental margins target: 30%+
• Risk: Auto cycle downturn compresses margins to 17–18%

Industrial Solutions (23.3% adj. margin, Q1 FY2026):

• Now the higher-margin segment — a major portfolio transformation
• DDN/AI revenue is very high-margin (estimated 28–32%)
• Richards Manufacturing adds mid-30% EBITDA margins
• A&D has traditionally strong margins (25%+)
• 520 bps YoY margin expansion in Q1 FY2026

Margin Accretive vs. Dilutive:

• Accretive: DDN/AI (est. 28–32%), A&D (25%+), Energy/Richards (mid-30s EBITDA)
• Neutral: Automotive (20–21%), Automation (18–20%)
• Dilutive: Sensors (15–17%), Medical (recovering)

---

8I. Revenue CAGR Analysis

10-Year Revenue CAGRs (FY2015→FY2025)

Metric	FY2015	FY2025	10-Year CAGR
Total Company Revenue	$12,233M	$17,262M	3.5%
Adjusted EPS	$3.66	$8.76	9.1%
Free Cash Flow	$1,347M	$3,214M	9.1%

5-Year Revenue CAGRs (FY2020→FY2025)

Metric	FY2020	FY2025	5-Year CAGR
Total Company Revenue	$12,174M	$17,262M	7.2%
Adjusted EPS	$4.03	$8.76	16.8%
Free Cash Flow	$1,600M	$3,214M	15.0%

Segment-Level CAGRs

Segment	3-Year CAGR (FY2022→FY2025)	Key Driver
Transportation Solutions	+0.6%	Auto cycle headwinds offset content growth
Industrial Solutions (combined)	+4.5% (estimated)	AI/DDN explosion + Energy
DDN/AI Specifically	~55% CAGR (FY2020→FY2025)	Revenue grew 9x from ~$160M to ~$1.4B

Forward Targets (November 2025 Investor Day)

Metric	Target	Basis
Total Revenue Growth	6–8% annually (through-cycle)	Secular tailwinds
AI/Cloud Revenue	$1.4B → $3.0B+ by FY2027	~45% CAGR
Adjusted EPS Growth	≥10% annually	Revenue + margin + buybacks
Incremental Operating Margins	30%+	Operating leverage

---

8J. Growth Drivers and Risks by Revenue Stream

Growth Drivers

Driver	Revenue Impact	Confidence	Time Horizon
AI/Data Center (DDN)	+$1.6B by FY2027 (from $1.4B to $3.0B)	HIGH	1–3 years
EV Content Growth	+$300–500M annually	HIGH	3–10 years
Grid Modernization (Richards)	+$600–800M annually	MEDIUM-HIGH	2–5 years
Defense Spending	+$100–200M annually	HIGH	3–5 years
Industrial Automation Recovery	+$200–400M	MEDIUM	1–2 years
800V Architecture Adoption	+$200–300M annually	MEDIUM	2–5 years
Medical Recovery	+$100M	MEDIUM	1 year

Revenue Risks

Risk	Revenue Impact	Probability	Monitor
Auto Production Downturn	-$500–1,000M	MEDIUM	Global auto production data
AI Spending Plateau	-$300–500M vs. target	LOW-MEDIUM	Hyperscaler CapEx announcements
China Trade Escalation	-$500–700M	LOW-MEDIUM	US-China tariff policy
Sensor Segment Decline	-$100–200M	MEDIUM	Industrial production data
Copper Tariff Impact	-$100–200M (margin)	MEDIUM-HIGH	Section 232 decisions
Richards Integration Risk	-$50–100M (synergy shortfall)	LOW	Quarterly Energy segment data
EV Credit Rollback (US)	-$100–200M	MEDIUM	US policy announcements

---

8K. Orders and Backlog Analysis

Record Orders Signal Forward Strength

Quarter	Orders ($M)	YoY Growth	Book-to-Bill
Q4 FY2024	~$4,100	—	~1.00x
Q1 FY2025	~$3,900	—	~0.95x
Q3 FY2025	~$4,500	—	~1.05x
Q4 FY2025	$4,700	+22%	~1.05x
Q1 FY2026	$5,100	+28%	1.10x

Backlog Composition (FY2025 Year-End)

Segment	Backlog ($M)	% of Total	Revenue Coverage
Industrial Solutions	$3,910M	63%	~6 months of segment revenue
Transportation Solutions	$2,278M	37%	~3 months of segment revenue
Total	$6,188M	100%	~4.3 months of total revenue

Key insight: Industrial backlog nearly doubled vs. prior year while Transportation normalized. The shift in backlog composition reflects the accelerating demand in AI/DDN and Energy, providing strong revenue visibility for Industrial Solutions through FY2026.

Book-to-Bill >1.0x — Forward Revenue Acceleration

A sustained book-to-bill ratio above 1.0x indicates forward revenue growth. At 1.10x in Q1 FY2026 with $5.1B in orders:

• Implied excess orders over shipments: ~$470M per quarter ($5.1B × 0.10)
• Annualized backlog build: ~$1.9B
• This supports the consensus FY2026 revenue estimate of $19.4B (+12.6% growth)

---

8L. Richards Manufacturing Deep Dive

Attribute	Detail
Acquisition Price	$2.3 billion (all cash)
Annual Revenue	~$400M
EBITDA Margin	Mid-30% range (~35%)
Implied EBITDA	~$140M
EV/EBITDA Multiple	~16.4x
Segment Classification	Industrial Solutions → Energy sub-segment
Close Date	April 1, 2025
Products	Underground distribution equipment, medium-voltage cold-shrink cable accessories, network protector products
Historical Growth	Double-digit revenue growth over recent years
Expected ROIC	Mid-teens (after synergies)
Q1 FY2026 Contribution	~$160M+ (estimated from organic/reported growth gap)
Annualized Revenue Run-Rate	~$640–700M (including organic growth)

Strategic Rationale: Positions TEL for the $100B+ US utility grid modernization cycle. Aging grid infrastructure, renewable energy integration, and grid hardening requirements create a multi-decade demand runway. Richards has leading market positions in niche, mission-critical products with high barriers to entry.

---

8M. AI / Digital Data Networks Revenue Trajectory

Period	AI/Cloud Revenue	YoY Growth	% of Total Revenue
FY2019	~$160M	—	~1.2%
FY2022	~$600M (est.)	—	~3.7%
FY2024	~$900M (est.)	—	~5.7%
FY2025	~$1,400M	+56%	~8.1%
Q1 FY2026 (ann.)	~$2,828M	+70%	~15.1%
FY2027 Target	$3,000M+	+45% CAGR	~14–16%

9x revenue increase from FY2019 to FY2025. AI/Cloud is transforming TEL's revenue profile from a traditional auto/industrial connector company into a high-growth technology infrastructure play.

TEL's AI Market Position:

• ~30% share in AI interconnect market
• Key products: 224G AdrenaLINE, 448G co-packaged copper, liquid-cooled busbars
• Power density driving massive content growth: 50kW/rack (H100) → 600kW (Rubin) → 1MW (2030)
• Content per AI chip has increased 5x over 3 years

---

Sources: TE Connectivity Q1 FY2026, Q4/FY2025, FY2024, FY2023, FY2022 earnings releases (PRNewswire); FY2025 10-K (SEC EDGAR); November 2025 Investor Day; MarketScreener consensus estimates; Manufacturing Dive (Richards acquisition); Fintool (orders analysis)

Step 15: Qualitative Moat Analysis

TE Connectivity (TEL)

Date: February 23, 2026

---

15A. Hamilton Helmer 7 Powers Framework

1. Switching Costs — STRONG (4.5/5) ⭐ Primary Moat Source

This is TEL's core competitive advantage. Evidence:

• Qualification cycles: Connector qualification in automotive takes 12–24 months. In aerospace/defense, 3–5+ years. Once designed-in, a connector family typically remains for the full product lifecycle (5–7 years in auto; 20+ years in aerospace).
• Mission-critical integration: TEL connectors are designed into safety-critical systems — airbag harnesses, EV battery management, aircraft engine controls, medical devices. Switching requires complete revalidation, retraining, and potentially retooling.
• Cost asymmetry: A connector may represent <1% of BOM cost but its failure can cause total system failure. The risk/reward calculus strongly favors the incumbent.
• Co-engineering depth: TEL employs ~9,000 engineers who work embedded with OEM design teams during multi-year development cycles. Over 5,000 co-design arrangements create deep institutional knowledge.
• Morningstar confirmation: Morningstar recently upgraded TEL to "Narrow Moat" rating, citing switching costs as the primary basis.

2. Process Power — STRONG (4.0/5)

• TEOA (TE Operating Advantage): Proprietary lean operating system implemented since 2008, encompassing value stream mapping, Hoshin Kanri, standard work, visual factory, and TPM. Star-rating assessment system for manufacturing sites.
• Precision manufacturing: TEL operates at micron-level tolerances for high-speed connectors. The 224G AdrenaLINE product line requires process capabilities that few competitors can match.
• Global quality systems: TEC-1000 global QMS covering 100+ facilities, simultaneously meeting IATF 16949 (auto), AS9100 (aerospace), and ISO 13485 (medical).
• Results validation: Record 22.2% adjusted operating margin in Q1 FY2026 demonstrates continuous operational improvement.
• Safety excellence: TRIR of 0.06 (world-class) — process discipline extends beyond manufacturing to all operations.

3. Scale Economies — MODERATE (3.5/5)

• Largest pure-play connector company globally with ~$17.3B revenue, ~93,000 employees, 120+ automated factories across ~130 countries.
• 500,000+ SKUs — unmatched product breadth allows cross-selling and one-stop-shop positioning.
• ~14.8% global market share (#1 position) provides procurement leverage on raw materials (copper, gold, plastics).
• 76% in-region manufacturing, 90% in-region sourcing — scale enables true global localization.
• Limitation: The connector market is fragmented (~$104B TAM). Amphenol has now surpassed TEL in total revenue ($23.1B via acquisitions). Scale alone does not confer an insurmountable advantage — it primarily manifests in overhead absorption and procurement leverage.

4. Cornered Resources — MODERATE (3.5/5)

• Patents: TEL holds 15,000+ patents globally — nearly 2x Amphenol's ~8,547 patents.
• R&D spending: ~$750M/year (4.5% of revenue) — significantly above peer average.
• Engineering talent: 9,000+ engineers with deep domain expertise took decades to build.
• Multi-decade customer relationships: With virtually every major automotive OEM, aerospace prime, and industrial conglomerate.
• Limitation: These resources are not truly "cornered" in the Helmer sense — Amphenol, Molex (Koch), and others have substantial (if smaller) versions of the same assets.

5. Branding — MODERATE (3.0/5)

• The TE brand is the most recognized in the connector industry, synonymous with reliability and engineering quality. In distributor catalogs (Digi-Key, Mouser, Arrow), TEL products are the reference standard.
• 5–15% estimated price premium over second-tier/Chinese suppliers on equivalent specifications.
• Limitation: Connectors are specified by engineers on performance requirements, not by end consumers on brand preference. Brand matters more in distribution channel selection than in commanding large price premiums.

6. Counter-Positioning — WEAK (1.5/5)

• TEL does not pursue a business model that incumbents cannot replicate. TEL is the incumbent.
• The EV content growth story (ICE $32 → BEV $75) is a rising-tide opportunity, not counter-positioning.
• Competitors (APH, Molex, Aptiv) are pursuing the same AI and EV opportunities.

7. Network Effects — ABSENT (1.0/5)

• Connectors are physical, discrete components with no platform dynamics.
• No multi-sided marketplace or ecosystem lock-in exists.

---

15B. Porter's Five Forces — Connector Industry

Force	Intensity	Assessment for TEL
Rivalry	Moderate-High	Fragmented but concentrated at top. Top 3 hold ~40-45% share. Intense on new designs, moderate on installed base due to switching costs.
Threat of New Entrants	Low-Moderate	High barriers: $5-10B invested base, 12-24 month qualification cycles, 15,000+ patent portfolio. Chinese entrants (Luxshare) are primary threat but sub-scale in mission-critical.
Supplier Power	Low	Key inputs are commodities (copper, gold, plastics) with multiple sources. TEL's scale gives procurement leverage.
Buyer Power	Moderate	Large auto OEMs negotiate on price, but switching costs limit their ability to actually change suppliers.
Threat of Substitutes	Low	Physical connections remain essential. Wireless cannot substitute for power delivery or high-speed data in harsh environments. Trend is toward MORE connectors per system.

Overall industry attractiveness: Structurally attractive with moderate-to-high profitability for scaled incumbents.

---

15C. Moat Durability Assessment

Moat Strengthening Factors

Factor	Direction	Evidence
EV content growth (ICE→BEV)	Strengthening	2.3x content multiplier deepens auto switching costs
AI/data center design-ins	Strengthening	New switching costs forming with hyperscalers
800V architecture complexity	Strengthening	Higher-value, more proprietary connectors
Grid modernization (Richards)	Strengthening	New market with high barriers
Rising data rates (224G→448G)	Strengthening	Process power advantage increases at higher speeds

Moat Erosion Risks

Risk	Severity	Timeline	Mitigation
Chinese competition (Luxshare)	MODERATE	3-5 years	Focused on commoditized segments; TEL's moat strongest in mission-critical
Connector commoditization	LOW-MODERATE	5-10 years	Industry trend toward higher complexity favors incumbents
Amphenol execution gap widening	MODERATE	Ongoing	APH's 27% ROIC vs. TEL's 17% is a concern
Technology shift (optical > copper)	LOW	5-10 years	TEL investing in both; 1.6T OSFP224 transceivers
Standardization reducing switching costs	LOW	Long-term	Overall trend is toward customization, not standardization

---

15D. Moat by Segment

Segment	Moat Width	Primary Moat Sources	Risk Level
Automotive (40% of rev)	Wide	Switching costs (5-7 yr design cycles), content growth, safety-critical	Low
AI/Digital Data Networks (15%)	Emerging → Wide	Process power, design-wins at hyperscalers, 224G capability	Medium
Aerospace/Defense (8%)	Wide	Switching costs (20+ year cycles), ITAR barriers, qualification	Very Low
Energy/Grid (8%)	Narrow → Wide	Richards market position, infrastructure cycle, mission-critical	Low
Automation/Industrial (12%)	Narrow	Scale, product breadth, but less differentiated	Medium
Commercial Transport (8%)	Narrow	Switching costs but more price-sensitive	Medium
Medical (4%)	Narrow	FDA qualification barriers	Low
Sensors (5%)	Narrow	Technology differentiation but competitive market	Medium-High

---

15E. Overall Moat Rating

NARROW MOAT, with potential to WIDEN

TEL possesses a durable narrow moat built primarily on switching costs (4.5/5) and reinforced by process power (4.0/5) and cornered resources (3.5/5). The moat is most resilient in automotive EV, aerospace/defense, and the emerging AI/data center segments.

The moat has potential to widen if:

1. AI/data center switching costs solidify (30% market share in AI interconnect)
2. EV content growth continues deepening automotive design-ins
3. Richards establishes TEL as a grid infrastructure leader
4. Margins continue expanding toward APH's 26% level

The moat could narrow if:

1. Chinese competitors (Luxshare) penetrate mission-critical segments
2. Amphenol continues gaining share faster than TEL in AI/data center
3. Auto cycle downturn exposes fixed-cost leverage negatively

---

Sources: Hamilton Helmer "7 Powers"; Porter's Five Forces; Morningstar moat upgrade; TE Connectivity Investor Day (Nov 2025); Patent portfolio data; TEL/APH/Luxshare company filings