TE Connectivity delivered a solid QQ1 2025 operating performance amid a bifurcated macro environment. Revenue was flat year over year at $3.836 billion, while adjusted operating margins reached a record 19.4% and free cash flow rose to $674 million, underscoring the company’s ability to translate volume into earnings power in a low-growth backdrop. Management emphasized AI-driven content growth, a robust industrial pipeline, and ongoing cost discipline as the core drivers of earnings quality. However, stronger U.S. dollar headwinds and currency effects materially affect FY25 profitability, with anticipated headwinds exceeding $300 million on a year-over-year basis, of which roughly $100 million are expected each quarter. The company remains focused on AI-enabled data connectivity in vehicles and Digital Data Networks (DDN) as key secular growth vectors, supported by a favorable ramp in the Asia auto ecosystem and continued optimization of the regional manufacturing footprint to sustain margins and cash generation.
Management provided a constructive near-term outlook with Q2 sales guided to about $3.95 billion and adjusted EPS around $1.96, alongside continued dividend and bolt-on M&A optionality. The AI revenue target of over $600 million for 2025 was reaffirmed, underscoring TE’s position as a leading supplier of high-complexity connectivity and sensing solutions for data-centric architectures. In aggregate, the QQ1 results validate TE’s strategy to monetize AI-enabled infrastructure, while signaling that investors should monitor FX dynamics, tariff developments, and regional auto and industrial cycles as key near-term catalysts and risks.