Al Root

Automotive, industrial, and AI data center supplier TE Connectivity reported better-than-expected earnings. What's more, guidance for the coming quarter shows a limited impact from tariffs.

Investors should be relieved, especially ones worried about spending tied to artificial intelligence.

TE announced fiscal second-quarter earnings per share of $2.10, a record, from sales of $4.1 billion on Wednesday.

Wall Street was looking for EPS of about $1.96 from sales of $4 billion, according to FactSet. A year ago, TE reported EPS of $1.86 from sales of just under $4 billion.

Comparable sales grew 5% year over year. Orders came in at $4.3 billion, up 6% year over year, and greater than quarterly sales. More orders than sales is typically something investors like.

Looking ahead, TE sees fiscal third-quarter EPS at $2.06 from sales of $4.3 billion, ahead of the $2.03 and $4.1 billion Wall Street was projecting.

Shares were up 0.8% in premarket trading. Coming into Wednesday, TE stock was down about 7% year to date, while the S&P 500 and Dow Jones Industrial Average were off 10% and 8%, respectively.

Shares are down partly on tariff fears which have weighed on many manufacturing stocks. Coming into Wednesday trading, the Vanguard Industrials ETF was down about 7% year to date.

Investors might assume TE could be particularly hard hit with about 75% of its business done outside the U.S. "We've invested heavily to be localized with region," says CEO Terrence Curtin. About 70% of its components are sold in the same region they are made.

Total tariff impacts amount to roughly $480 million annually. One-third can be mitigated by effectively managing costs. That leaves two thirds to be covered by price increase. Overall, that represents a price increase of roughly 2% -- manageable.

Amid tariff concerns, TE's AI business remains a standout. TE, simply put, sells things that data centers can plug Nvidia chips into.

TE generated about $300 million in fiscal year 2024 AI data center revenue. In January, TE thought that business would double in fiscal year 2025. Now it looks as if such sales will come in closer to $700 million.

That's about 4% of expected full year sales -- a small part, but a fast-growing part.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 23, 2025 06:14 ET (10:14 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.