TE Connectivity Q4 FY2026 Earnings & FY2026 Form 10-K — Does the Backlog Convert Before Copper Bites the Margin
The Call
TE Connectivity's Q4 FY2026 print is less a question of whether the AI-connectivity and backlog-conversion story is real (order visibility — $5.7B in Q3, book-to-bill 1.10x, DDN orders up more than 70% year-to-date — makes a top-line miss unlikely) than of whether a genuinely new, unbudgeted cost shock erodes the margin line the guide could not have priced in. Copper — TE's primary connector input, hedged only near-term via commodity swaps — spiked into an LME supply squeeze severe enough to trigger emergency exchange measures in mid-August, squarely inside the fiscal quarter being forecast and after the July 22 guide was set. The company's own thesis file already names >20% copper appreciation without offsetting price increases as an explicit bear trigger; that threshold is now cleared by a wide margin. The call this report makes is therefore two-sided by design: revenue beats the guide on backlog strength (a genuine, independently corroborated variable), while margin holds roughly flat rather than extending Q3's improving trend (a genuine, unresolved cost-pass-through variable) — a narrower and more contested beat than the four-for-four pattern this fiscal year would naively extrapolate.
| Metric | Our Estimate | Company Guidance | Consensus |
|---|---|---|---|
| RevenueGAAP +2.9% QoQ vs Q3 FY2026's $5,160M actual, +11.8% YoY vs Q4 FY2025's $4,749M. Consensus figure is the pre-Q3-print Street estimate reported alongside the 2026-07-22 guide; it has likely since moved up toward the guide and is quoted here as the last independently-sourced figure available, not a live number. | 5310 USD M | 5250 USD M | 5200 USD M |
| Gross profitGAAP Revenue x 35.2% gross margin estimate. | 1869 USD M | — | — |
| Gross marginGAAP Extends the Q1->Q3 declining trend (37.24% -> 36.78% -> 35.56%) on the copper-cost-shock judgment above. | 35.2% | — | — |
| Operating profitGAAP Revenue x 18.9% GAAP operating margin (21.9% adjusted-margin estimate less the anchored 300bps GAAP-adjusted spread). | 1004 USD M | — | — |
| Operating marginGAAP Versus Q3 FY2026's 19.01% actual — essentially flat, not the improving trajectory the base-case thesis needs by FY2027 (21-22% adjusted). A print below 18% would trip the company's own thesis-invalidation bear trigger if it persists a second consecutive quarter. | 18.9% | — | — |
| Net incomeGAAP Operating profit x 81.2% anchored 9-month FY2026 net-income/operating-income conversion ratio. | 815 USD M | — | — |
| Diluted EPSGAAP Net income / 291M estimated diluted shares. Versus Q3 FY2026's $2.55 GAAP actual and Q4 FY2025's ~$2.23 GAAP actual (+25.6% YoY at this estimate). The market prices TEL primarily off the adjusted (non-GAAP) EPS line — see that figure under businessMetrics. | 2.80 USD | — | — |
- → Revenue misses the $5,250M guide floor — breaks the beat streak that has held in every quarter of FY2026 so far.
- → Adjusted operating margin falls materially below 21% — would confirm copper cost inflation is outrunning TE's hedge book and price pass-through, the company's own explicit bear-trigger threshold.
- → GAAP operating margin falls below 18% for a second consecutive quarter (Q3 was 19.01%) — the company's own thesisInvalidation bear trigger, sitting directly below this forecast's 18.9% GAAP-margin estimate.
- → DDN revenue growth decelerates below 20% YoY — breaks the base-case AI-connectivity gate the current Buy conviction and FY2027 EPS bridge both depend on.
- → Automotive organic growth turns materially negative alongside the August 2026 global LVP downgrades (Europe, Greater China, India, and North America production forecasts all trimmed) — would mean the EV/ADAS content-growth offset is failing to compensate for production softness, not merely that production is soft.
- → The Astrodyne TDI acquisition is delayed, restructured, or adds unbudgeted GAAP-only transaction costs beyond the anchored 300bps GAAP-adjusted spread this forecast assumes.
Behaviour model, not arithmetic, and deliberately low confidence. TEL has not yet issued a formal FY2027 annual framework (the FY2027 bull/base/bear EPS path in the current thesis — $13.50/$12.75/$11.00 — is an internally re-underwritten estimate, not a company guide), so there is no direct FY2027 guide-vs-actual precedent to anchor to; this call instead extrapolates the historical Q4-to-Q1 seasonal step. Two directional priors both argue this pipeline should treat any initial guide as a likely floor rather than a center: this pipeline's guidance calls have already come in low twice this cycle on other issuers (STX FQ1 FY2027 -9.3%, AMD Q3 2026 -3.1%), both understating management in an up-cycle; and TEL's own quarterly guides have been beaten in every quarter of FY2026 so far. Neither prior resolves the copper-cost risk specific to this call, which is genuinely two-sided.
Evidence (5)
Positioning Suggestions
→ This print is genuinely two-sided rather than a likely clean beat-and-raise: backlog and order visibility argue for a top-line beat, but the copper shock is a real, recently-emerged, unhedged-length margin risk the July guide could not have priced in. Size any pre-print exposure with that asymmetry in mind rather than extrapolating the four-for-four FY2026 beat pattern forward unchanged.
→ Watch the adjusted operating margin line specifically, independent of the revenue and EPS headlines — a margin print at or above 22% despite the copper spike would be the more informative bullish signal than a revenue beat alone, since it would show real-time pricing power against a raw-material shock.
→ The stock has already de-rated about 5% from the thesis's last anchor into the print (unrelated to any TEL-specific news found this cycle beyond the copper/LVP macro backdrop) — the entry point is more favorable than it was at the last thesis update, independent of how the print itself lands.
→ Track F and GM commentary and any auto-sector data between now and the print for confirmation or contradiction of the August LVP downgrades' magnitude on TEL's automotive segment specifically.
Predictions
13TEL Q4 FY2026 revenue meets or exceeds the $5,250M guide midpoint
TEL Q4 FY2026 revenue exceeds $5,310M (this report's point estimate, a ~1.1% guide beat)
Adjusted (non-GAAP) diluted EPS meets or exceeds the $3.05 guide midpoint
Adjusted diluted EPS exceeds $3.11 (this report's point estimate)
Adjusted operating margin holds at or above 21.5%, i.e. does not meaningfully decelerate from Q3's 22.0% actual despite the mid-August copper spike
This is the genuinely open question this forecast is built around. If margin holds or expands despite the copper shock, it is a stronger bullish signal than the headline beat and argues for holding through any sell-the-news reaction; if it breaks meaningfully below 21%, treat it as the first real crack in the compounder thesis rather than noise.
GAAP operating margin exceeds 19.01% (Q3's actual), i.e. the margin trajectory continues improving rather than plateauing or reversing
DDN segment revenue growth is at or above 20% YoY for a fourth consecutive quarter
Book-to-bill ratio (orders / revenue) remains at or above 1.05x
Management explicitly quantifies a copper or broader commodity cost headwind on the earnings call, beyond generic hedging language
Management reiterates or raises the FY2027 double-digit adjusted-EPS-growth framework on the call without qualification
The Astrodyne TDI acquisition is confirmed on track to close by end of calendar 2026
Q1 FY2027 revenue guidance comes in below the Q4 FY2026 actual print (the typical seasonal step-down pattern)
TEL stock moves more than 6% in either direction within 2 trading sessions of the print
Key Questions
- Does adjusted operating margin hold near Q3's 22.0%, or does the mid-August copper spike visibly compress it despite TE's commodity-swap hedging program?
- Does management quantify a copper or broader commodity cost headwind explicitly on the call, or only address it in generic hedging language?
- Does DDN revenue growth stay above the 20% base-case gate, and does management give any dollar-denominated DDN figure against the $800M/quarter bull threshold?
- Does GAAP operating margin hold at or above 19%, or does it slip toward the 18% two-consecutive-quarter bear trigger?
- What automotive-segment commentary does management give against the August 2026 global LVP downgrades — is content growth still offsetting production softness?
- Is the Astrodyne TDI acquisition confirmed on track to close by end of calendar 2026, and does management update the >$250M sales / mid-30s EBITDA-margin accretion framing?
- What does the initial Q1 FY2027 (and any qualitative FY2027 framework) guide say, and does it read as a conservative floor consistent with TEL's FY2026 beat pattern?