TE Connectivity plc (TEL) Income Statement

The sequential acceleration from 12.5% to 13.8% suggests that the company is benefiting from a favorable mix shift toward higher-value EV and high-speed connectivity products, which may be offsetting any softness in global vehicle production volumes. The 21.7% growth in 2026Q1 indicates a strong start to the fiscal year, but the moderation to 13.8% in Q3 implies that growth is normalizing from peak levels. Investors should monitor whether this trajectory can be sustained as the company laps tougher comparisons and faces potential cyclical headwinds in the transportation sector.

The 360 basis point improvement in gross margin over the past two quarters indicates that the company is successfully shifting toward higher-margin products, particularly in the industrial and communications segments. However, the gross margin remains below Amphenol's 36.9%, suggesting that TEL may have less pricing power in its core automotive business. The cyclicality of copper and gold prices remains a key swing factor, and any sustained spike could compress margins if price-escalation clauses are not triggered.

SG&A expenses grew only 7.7% year-over-year in 2026Q3, while revenue grew 13.8%, demonstrating that the company is scaling its overhead efficiently. This operating leverage is a key driver of the margin expansion, and it suggests that management is maintaining disciplined cost control. However, the operating margin of 19.0% still trails Amphenol's 25.9%, indicating that there may be room for further efficiency gains, but also reflecting the structural differences in their business models.

The reduction in COGS ratio suggests that the company is benefiting from favorable commodity costs or better manufacturing utilization. SG&A expenses have remained relatively stable as a percentage of revenue, indicating that management is not overspending on overhead. R&D expenses have also been well-controlled, growing only 9.0% year-over-year in 2026Q3, which supports the company's focus on maintaining profitability while investing in future growth areas.

This dramatic decline in net income appears to be an anomaly, likely due to a large one-time charge, possibly related to legal settlements or restructuring. The subsequent recovery in 2025Q3 and 2025Q4, with net income returning to $638 million and $663 million, suggests that the underlying business remained healthy. This inflection highlights the importance of distinguishing between recurring operational performance and non-recurring items when evaluating TEL's earnings power.