By Jacob Sonenshine

After a strong run, Amphenol suffered a setback when it reported earnings last week. Investors should hold on to the stock.

We recommended buying the now $179 billion maker of connectors and small electronic components in January 2025. After a rally of almost 80%, we told you to stay invested. Now, after more than doubling since our original recommendati0n, we're repeating this advice.

We were correct in anticipating that Amphenol would post consistent sales and profit growth on the back of strategic acquisitions, and that its data center business would boom. As companies from Alphabet to Oracle build out data centers to power AI programs, demand for connectors increases, to the direct benefit of suppliers like Amphenol.

As a result, the stock came into last week's fourth quarter earnings red hot. That meant anything short of stellar numbers and guidance was bound to pressure the stock. Sure enough, results beat expectations but not by enough to impress investors. Shares sank 15% after the earnings print.

That was "reflecting the fact the beat isn't 'big' enough," writes Evercore analyst Daryanani, who maintains an Outperform rating. "Amphenol continues to deliver above expectations with broad-based strength across all end markets and a disciplined and accretive M&A strategy," Daryanani's note says.

That's why the stock should continue to gain over the long-term. We still think the outlook looks bright.

Just look at the numbers. Fourth-quarter sales grew 49% to $6.44 billion, and 37% organically, or excluding the positive impact of currency fluctuations. That easily beat analysts' estimates of $6.19 billion. The company's communications solutions segment, which contains the data center business, grew 60% organically to $3.42 billion. It was the fastest-growing segment -- and has the largest profit margins -- helping lift the overall operating margin year over year.

This result pushed earnings per share up 58% year over year to 98 cents, better than the anticipated 93 cents.

Management guided for first quarter sales of $6.95 billion at the midpoint of the range, for 44% growth. That includes $900 million from its newly acquired connectivity and cable solutions assets from CommScope. Even without the new revenue from CommScope, guidance would have been $6.05 billion for 26% growth, ahead of analysts' pre-release first quarter projection of about $5.9 billion, according to FactSet.

The point is that the business is humming along just fine. Data center demand is helping, while the other segments are growing, even if at a slower pace. The company has executed its acquisition strategy thoughtfully. Daryanani sees the possibility of more earnings beats this year, driven by "cross-selling opportunities," which means Amphenol can provide customers an array of complementary products from all of the businesses it has acquired, helping it muscle out competitors in what is a total addressable connectors market well over $100 billion.

The acquisitions aren't particularly burdensome to finance either. They boost profits far faster than they add debt, as seen by the fact that free cash flow has grown 19% annually in the past decade, while net debt has advanced by 15% to roughly $4 billion today. The debt should be easy enough to pay down, given that analysts expect $6.4 billion in cash flow from operations this year.

Overall, there's plenty of reason to believe Amphenol can continue to grow profits rapidly. That's why it can command the current 33 times forward earnings multiple. That's almost smack in the middle of its range in the past three years, implying shares could always become more expensive.

Don't fear a little volatility. Just hang on to the shares.

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February 02, 2026 16:57 ET (21:57 GMT)

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