Everyone, thank you for standing by, and welcome to the TE Connectivity second quarter earnings call for fiscal year 2026. At this time, all lines are in listen-only mode. Later, we will conduct a question and answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Good morning, and thank you for joining our conference call to discuss TE Connectivity's second quarter results and outlook for our third quarter of fiscal 2026. With me today are Chief Executive Officer, Terrence Curtin, and Chief Financial Officer, Heath Mitts. During this call, we'll be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the investor relations portion of our website at te.com. Finally, during the Q&A portion of today's call, due to the number of participants, we're asking everyone to limit themselves to one question, and you may rejoin the queue if you have a second question. Now, let me turn the call over to Terrence for opening comments. Thank you, Sujal, and also, once again, thank you, everyone, for joining us today. As I normally do, before I jump into the slides, I do want to frame today's call around a few key messages. I want to go back to November when we did our investor day, where we outlined how our strategy and business model are driving a broadening of growth across our portfolio while positioning us to deliver sustained margin expansion and double-digit earnings growth. The strategy we laid out, we believe will drive ongoing value creation for our owners, and it's based upon the backbone of how we capitalize on the proliferation of data and power by providing leading interconnect products and technologies across our target markets to meet the evolving next-generation architectures of our customers. The results we're going to get into today and talk about are further evidence that our strategy's working. Last year, we delivered $1.4 billion of growth as a company, and this year we expect to deliver well over $2 billion of growth, with the majority of our businesses growing double digits year-over-year. As we look at our second quarter results, we delivered strong financial performance with sales growth of 15% year-over-year and continued outperformance versus our key end markets. We also delivered earnings growth of 24% in the quarter. When you underpin this performance, we continue to see strong order trends. In the second quarter, we had record orders of over $5 billion, which was growth of over $1 billion versus the prior year, with growth across both segments and in every business. As we expand sales, we continue to invest and scale the business to deliver consistent margin performance and earnings growth. The performance of our teams, combined with our global manufacturing strategy, are providing resiliency within a backdrop of an ongoing dynamic global environment. This is reflected in the performance of both segments. We expect our strong performance will continue, and Heath will talk more about that when he gets into his section. If you could, if you're looking at the slides, I'd ask you to turn to slide three, and I'll get into our second quarter results as well as our outlook for the third quarter. Our second quarter sales were over $4.7 billion with performance above guidance driven across our businesses. Sales grew 15% on a reported basis and 7% organically year-over-year. We saw orders increase to $5.3 billion, and I'll provide more color on the order momentum on the next slide. We delivered record-adjusted earnings per share of $2.73, which was above our guidance, and increased 24% versus the prior year. Our operating margins on an adjusted basis were 22%, and this was an increase of 130 basis points over last year due to the execution of our teams. We also continue to demonstrate our strong cash generation model with free cash flow of $1.3 billion for the first half of this year. Year to date, we returned nearly 100% of our free cash flow to shareholders while continuing to support investments for future growth. Also driven off of this strong free cash flow, in the quarter, we announced that our board approved a 10% increase to our quarterly cash dividend. As we look to the third quarter, we are expecting third quarter sales to be $5 billion, which reflect an increase of 10% versus the prior year with year-over-year and sequential growth in both of our segments. We expect adjusted earnings per share to be up 17% year-over-year to around $2.83. I'd ask if you could turn to slide four and let me get into more details on the order trend momentum that we're seeing. As I mentioned, orders were $5.3 billion with a book-to-bill of 1.12. We saw orders growth in every business and in all regions on a year-over-year basis, and our order trends support the broadening of growth that I've already talked about. For the second quarter, over 70% of the company's order growth was in the industrial segment versus the prior year. Industrial Segment orders grew 40%, and essentially every business in the segment posted double-digit orders growth. In addition to the ongoing momentum in Digital Data Networks, where our orders grew over 60% in the quarter, we also continue to see continued momentum in energy, aerospace, and defense, as well as Automation and Connected Living. Turning to our Transportation Segment orders, Our orders increased 13% versus the prior year, with year-over-year and sequential growth in all three of our businesses. Our order trends are supporting our growth and content outlook for the automotive business in the second half of the year. In commercial transportation, we're seeing continued recovery in the global market with organic orders that grew year-over-year in every region. With that as an overview of orders, let me now discuss quarterly segment results, and I'll start with the Industrial Segment on slide 5. Our sales in the Industrial Solutions segment grew 27% in the quarter and 17% on an organic basis year-over-year. We are benefiting from the secular growth trends that we see in our Digital Data Networks business, as well as our energy business, where we continue to see significant demand tied to AI and energy grid investments, along with continued growth in aerospace and defense, and factory automation applications. In our Digital Data Networks, we had another standout quarter where our business grew nearly 50% year-over-year and sales were as we expected. We continue to win new programs with customers, and the orders that we have received are building backlog into 2027. We now expect our AI revenues in fiscal 2026 to be about $150 million higher than our view 90 days ago, and this entire increase will be in the second half of the year and reflects the increased momentum that I talked about in orders. As we look out to the longer term, we are well-p ositioned to continue to generate strong growth from AI applications. With our broad portfolio of data and power connectivity solutions, as well as our engagements with the key architects of this space, we expect the addressable market for our AI products to continue to grow, both near-term and long-term. We are innovating with our customers on their roadmaps and architectures and are making both organic and inorganic investments to strengthen our roadmap for both copper and the inflection point for optical solutions. During the quarter, we acquired a leading technology for passive optical connectivity solutions, strengthening our roadmap to offer customer solutions for both copper and optical connectivity in the future. As you would expect, we will continue to support our customers' architectures as they evolve. Now let me turn to the other businesses in the segment, turning to Automation and Connected Living, we grew 8% organically year-over-year with growth in each region, and we continue to expect the momentum in the general industrial markets to improve as we move through the year. In Energy, our sales grew 60%, including the Richards acquisition, where we're capitalizing on growth opportunities in the U.S. utility market. Organically, sales increased 11%, driven by year-over-year growth across three key application areas. The first being energy grid hardening, second being data centers, and the third being clean energy applications. We continue to see increasing investment by our customers in grid hardening as utilities upgrade aging infrastructure and improve resiliency to support more distributed and reliable networks. In the data center, load growth is being driven by the significant build-out of power infrastructure to support AI, where our connectivity solutions enable higher power density as well as reliability. In clean energy applications, we continue to benefit from ongoing investment in utility scale solar, along with the supporting grid infrastructure required to integrate these energy sources. In our aerospace and defense business, our sales grew 5% organically, driven by growth across both commercial aerospace and defense applications. In these markets, we continue to see favorable demand trends coupled with ongoing supply chain improvements. These trends are supported by increased global defense spending and ongoing modernization efforts that require increased data connectivity and greater power requirements, along with ongoing production ramps in the commercial aerospace field. Lastly, in our medical business, sales grew sequentially as we expected, driven by the continued investment and growth in key therapy applications such as structural heart and electrophysiology. Excuse me. Turning to margins for this segment. Industrial segment adjusted operating margins expanded 260 basis points to nearly 22%, driven by the strong operational performance by our teams and the benefits of a higher volume. If you could, let me move over to slide six, and I'll get into the Transportation segment. Our sales in the Transportation segment grew 5% in the quarter and were down slightly organically. We are delivering growth over market in both automotive and commercial transportation, reflecting our leading global position and customer co-creation model. This is resulting in continued content growth across vehicle platforms. Our auto sales grew 2% on a reported basis and declined 4% organically in the second quarter. Our market outperformance against declining auto production was driven by content growth in Asia and Europe. Year-to-date, we're averaging growth over market at the low end of our 4-6-point range and continue to expect content growth to be in this range for fiscal 2026, driven by our strong position and content opportunities across data connectivity in the vehicle, the electrification of the powertrain, as well as electronification of the vehicles. Turning to commercial transportation, we saw a 21% growth on a reported basis and 17% organically. We are seeing continued improvement in demand trends across regions with growth in Europe and Asia and stabilization in North America. Against this backdrop, we are delivering growth that is significantly above the market, driven by continued share gains from new program wins and increase in content per vehicle. In our sensors business, sales increased 2% on a reported basis and declined 3% organically, which was in line with our expectations. For the Transportation segment, the team delivered adjusted operating margins of nearly 22%, demonstrating our team's operational resiliency. With that as an overview of our segment performance, let me hand it over to Heath, who'll give more financial details and expectations going forward. Thank you, Terrence, and good morning, everyone. Please turn to slide seven. For the quarter, we achieved adjusted operating income of over $1 billion and adjusted operating margins of 21.7%, driven by strong operational performance by our teams in both segments. GAAP operating income was $954 million and included $8 million of acquisition-related charges, $10 million of restructuring and other charges, and $57 million of amortization expense. I continue to expect restructuring charges in fiscal 2026 to be roughly $100 million. Adjusted EPS was $2.73, and GAAP EPS was $2.90 for the quarter and included a $0.39 tax benefit primarily related to a settlement of prior period tax matters, as well as restructuring, acquisition, and other charges of $0.06 and amortization expense of $0.15. The adjusted effective tax rate was approximately 21% in Q2. We expect Q3 to be around 23% and the full-year tax rate to be approximately 22%. Importantly, as always, we anticipate our cash tax rate to be well below our adjusted ETR. Now, if you turn to slide eight. This slide shows the growth and broadening that Terrence discussed, along with the strength of our operating model, with strong margin performance and double-digit earnings growth. Sales of $4.7 billion were up 15% on a reported basis and up 7% on an organic basis year-over-year. Adjusted operating margins were 21.7% in the second quarter, expanding 130 basis points year-over-year. Adjusted earnings per share were $2.73, up 24% year-over-year, driven by sales growth and margin expansion. We continue to operate in a dynamic environment. Versus 90 days ago, we are seeing increased inflationary pressures across certain input costs, such as oil-based resins and freight charges, driven by higher energy costs and broader geopolitical tensions. We are managing these impacts through our proven playbook, including optimization of our factory footprint, targeted pricing actions, and ongoing productivity initiatives. In addition, our localization strategy around supply chain enhances resiliency by positioning us to manufacture close to our customers and respond quickly to changing conditions. Turning to cash flow, cash from operations was $947 million, and free cash flow was $680 million. Through the first half of the fiscal year, free cash flow was a record $1.3 billion. We continue to expect our free cash flow conversion to be 100% this year. Before I turn it over to questions, let me reinforce that our performance reflects strong execution in both segments. The strength that we have in orders gives us confidence in the second half, and we expect to have over $2 billion of growth this year, which will be ahead of our through-cycle target. While we remain in a dynamic environment, we have established levers in place to expand operating margins and drive double-digit earnings growth per share. With that, let's now open it up to questions. Thank you, Heath. Ellie, can you please give the instructions for the Q&A session? I would like to remind everyone that to ask a question, please press star followed by one on your telephone keypad. In order to have time for all questions, each participant is limited to one question only. Your first question comes from the line of Scott Davis of Melius Research. Your line is now open. Hey, good morning, guys. Hey, Scott. Good morning. Hey, can you talk about. Excuse me. I'm having a serious allergy attack here, but the $150 million bump up, when does that get shipped out? Yeah, sure. Let me talk about that. I do hope you feel better from your allergies here, Scott. The 150, I think one thing, and you're talking about the AI, when we look at it, I think let's frame a little bit where our orders are in our DDN business, and we'll talk about that 150 because year to date in our DDN business, we have $2 billion of orders. As we talk past few quarters, some of these orders are being scheduled out, and like you're always going to have when you have these programs, there'll be some lumpiness to them as programs ramp up and ramp down. With the momentum that we see in orders, Scott, the 150 that I mentioned about on the statements are things that relate to the second half. Part of it is ramping of programs we have. Part of it is new ramps that are coming on. It continues to show the momentum that we have in the space. We do think with this additional $150 million of AI revenue in the second half, that'll put our DDN AI revenue, which runs about 70% of total DDN, approaching $2.4 billion, just a little bit below that. The momentum continues. It will ramp in the second half, and like we said about all the businesses, we do expect all of our businesses to grow from the second quarter to third quarter. Just the story continues there where we have good engagement, good program wins, and continue to have strong growth in the AI space. Okay. Thank you, Scott. Can we have the next question, please? The next question comes from the line of Mark Delaney of Goldman Sachs. Your line is now open. Yes, good morning. Thank you very much for taking my question. Orders were strong again this quarter, a record high. You cited strength across all businesses, but I'm hoping you could speak more on whether you think the momentum can be sustained and also what TE saw with business trends so far in April, especially in light of the geopolitical and supply chain volatility. Thanks, Mark, for the question. A couple things. Yeah, you're right. I think when you look at this year, remember, we did $5 billion of orders in the first quarter, $5.3 billion in the second quarter. We've stacked about $10 billion of orders. We built backlog. In the first month since quarter end, the order momentum continues to be very strong. We have not seen any demand negative impacts due to orders at all since the conflict broke out. Continue to see that strong momentum, and I think the broadening that I talked about in the script is really across the businesses. When you look at the growth that we put up, which is 25% in this quarter, DDN was very strong at 60% order growth year-over-year. If you look at the rest of the industrial segment, essentially every business unit put up double digits. We're continuing to have the strong momentum that we've had in energy that I mentioned. Aerospace and defense continues to build backlog, and the lead time on those products are typically further out. That's another one that's building backlog, similar to what I talked about with AI. The one that in the industrial segment is probably a little bit later of an uptick is what we're seeing in factory automation in our automation and control business. When you look at that business, and I mentioned it on the script, we had growth in every region, but when you're talking about growth in every region, you're really looking at growth at high double digits across every region. We continue to see momentum building up on that CapEx investment, and certainly what we see with ISM being constructive, I also think is a good supporting fact. Then the other thing, when you get to transportation, clearly our view of production hasn't changed. We've told you since the beginning of the year we expect auto production to be slightly down. We still have that same view, but our transportation segment orders being up double-digit, being led by commercial transportation, which is up a very strong double-digit. In automotive, our orders are up mid-single-digit. Showing the confidence we have around the growth and what is a production environment that I would say still isn't a positive production environment, but one that feels like it's just moving sideways and we benefit from our global position. The order trends are broad. They are across regions and some of the businesses that a year or so we would say might have been still cycling down have come back in and really driving some of the growth that you see, and we do expect it to continue and the orders in quarter three to date through today, and we're showing that. All right. Thank you, Mark. Can we have the next question, please? Next question comes from the line of Luke Junk of Baird. Your line is now open. Good morning. Thanks for taking the question. Terrence, maybe taking a little bigger picture, just hoping you could provide some updated perspective from your point of view on the copper versus optical debate in AI. Especially interested in just where you're leaning into any related investments. You made the comment in the script about evolving with customers, and also noticed you did an optical acquisition in March of RAM Photonics, if you could speak to that as well. Thank you. Okay. Thanks, Luke, for the question. We've had many discussions about this, but I do want to start just reiterating some things before I click down a little bit to where you asked to go. It's important to be, where we play, we're very fortunate to have a bird's eye view that we work with our customers on what's happening in both the data chain and the power chain when you look at what's going on on the AI architecture. We work closely with our customers, and we're aligned with their roadmaps. The other thing that we talked about at Investor Day, each customer has different architectures, and they have different opinions about when things will be introduced, whether it's in the power chain or in the signal data chain. Let's face it, we work very closely to make sure we're going to hit the inflection points that they are telling us. I think the other thing that you've all heard very consistently from the broad merchant silicon companies is that copper will continue to be the workhorse in the rack in as many applications as possible due to the cost benefit, the power benefit, the reliability, as well as where it's scaled to today to be able to meet their needs. Let's face it, we agree with that, and we hear it all the time, and we have a view that it's not copper or optical, it's copper and optical. How do they play together in different structures? When you sit there and you think about optics coming in, it's going to come in more into the scale-out first. Let's face it, we are bigger in the scale-up. What we do in the rack is the bigger driver of what we do and where we focus. You're going to see more in scale-out, and we do think that you're going to continue to have a hybrid solution between copper and optical over time. As I said on the call, we do view the TAM where we play and the product technology we have are going to grow as this occurs, both near term and long term. That means what happens in data as well as in power connectivity, and I know we get into that with some of you. You are right, and I mentioned it there. We did make a technology acquisition around leading-edge optical technology that will be used to strengthen our passive optical connectivity roadmap. What we acquired is complementary to what we do in our portfolio, and it enables advancements in high-density fiber array connections, and this really would connect an optical fiber to a CPO. It really helps round out our roadmap. The key we have to do is make sure we productionize and scale these technologies to really make sure we support our roadmap as well as our customer's roadmap. We really think with this technology, it's going to fit right in very nicely. This is something we do all the time organically via partnerships. Sometimes we make technology investments like this. We really feel like the trends are only up to the right, like we've always told you with what we have. Clearly, I think this is all goodness for us. What happens on that trade-off that our customers will make, that'll continue to drive TAM improvement. Hopefully that gives you some flavor, Luke. All right. Thank you, Luke. Can we have the next question, please? Next question comes from the line of Amit Daryanani of Evercore ISI. Your line is now open. Hey, Amit. Thanks, Bob. Good morning, everyone. Maybe I'll step away from the DDN discussion for a bit. You folks are seeing really robust growth in energy and even the commercial transport segment. I'm hoping, Terrence, if you could just talk a little bit about on energy, even ex Richards, organic growth is double digits. What are some of the big segments you're involved in, and how durable do you think this growth can be longer term? Maybe you can have a comparable discussion on the commercial transport side, because I think both those segments are growing much faster than most folks would expect. Thank you. Thanks, Amit, and I appreciate you calling out some of the other markets. First off on energy, the investments we've made and where we positioned, it is very important. It is focused around the majority of it is in the U.S. energy market. Anything we're talking about and benefiting from is things all of you are experiencing every day, increased utility investment related to capacity as well as hardening due to the load demand that you're going to get. Probably about 60% or two-thirds of what we do is around utility and grid hardening. It is around that infrastructure side of it, and let's face it, where we play in undergrounding with our technology and the intelligence we bring, that market is growing high single digits, and we're growing faster than that due to the efforts of our team. Another important area that we do, what we call industrial, is about 20% of the business. This is where we're actually doing where energy is getting hooked up. Could be a data center, could be into an industrial complex. Could be a semiconductor fab where you're bringing power in. That's another area with what we're seeing around the CapEx that many of you write about is very key. We're seeing very strong growth there as well. We're growing double digits there as well this year. The third area, the balance of it, is really where we positioned ourselves around clean energy and renewables. Up until a couple of years ago, that's what we talked to you a lot about. We're still growing high single digit in there. Certainly, there's been some policy elements that have come out that have slowed down some of that market. With all the leverage we have, we get really excited about the growth we have there to grow above market, and it's an area that we continue to get excited about. How do we continue to deepen our position there? Jumping over to commercial transportation, I do want to say this business is one that, unlike what I just talked about, it is truly a global business. We're pretty even between North America, Europe, and Asia. What we've seen this quarter, last year, we were seeing strength that was coming out of Asia. It was coming out of Europe, where you saw whether it was truck and bus, ag, construction, improving outside the United States. We're starting to see stabilization here, and we're seeing our orders pick up as people are reacting to the stabilization as well as looking forward to 2027. The sales growth says it by itself. You see the growth that was very strong in the quarter. The market probably grew globally in the quarter 4%. That outperformance was very strong with us growing well into the double digits. It really comes into our positioning on next gen vehicles, as well as the trends we talk to you about in automotive all the time. We talk to you about data in the vehicle. We talk to you about powertrain and emissions, that electronification piece, and we're seeing that. In places like Asia, where electrification of the powertrain is getting deeper and deeper into the various types of vehicles, we get a content uplift. In some cases, that content uplift, and I know Aaron talked about this back at Investor Day, we could have up to $2,000 on some vehicles when you get to next generation powertrains versus $400 today. We see that strength. It's good to see the market stabilizing, and certainly we saw it in the orders that were up very strong, as I mentioned. We just think they're going to be things that are getting it back to that broadening of growth that I talked about in the script. All right. Thank you, Amit. Can we have the next question, please? Next question comes from the line of Wamsi Mohan of Bank of America. Your line is now open. Yes. Thank you so much. Hey, Wamsi. Hey, Terrence. The content growth in the 4%-6% range for the year, that indicates a meaningful acceleration from this past quarter. Maybe you can share some color on what you're seeing that's going to drive that acceleration. If you could just clarify for us the quarter-on-quarter order trends in DDN, I think you noted 60% year-over-year increase in orders. Wondering if you can characterize the sequential change in orders there, too. Thank you so much. Sure. Let me get into auto a little bit. First off on auto, I do want to start with production because it's not lost. There's headlines out there, and when we think about production, how we saw it as we started the year, hasn't changed. We expect there to be 88-89 million units. When we started the year, we thought every market was going to be down slightly. Europe's up a little bit. Asia and China is exactly where we thought. North America is a little worse. When you look at it, the production environment is playing out as we want. Certainly, some of the regional pieces are a little bit different, mainly in North America being a little worse, Europe being a little bit stronger. When you look year to date, and we ask you not to look at quarters, we're running at the 4-point outperformance above production. Really, when you look at that, we were very strong in China right off the bat. We continue to show that strong presence that we have. Europe had nice growth over market. It isn't where we were with North America due to some of the cancellations you saw. Overall, we're still in the range, and our results and orders continue to say we're going to be at the range. As we look forward, those production assumptions and orders continue to be very strong, and it's around the drivers we talked about. In Asia, electric vehicle adoption continues. That's not changing, as well as it's strong in the data connectivity side. As you go into North America, we have some EV pressures that we've been dealing with, but net net, feel good about where we are in the 4%-6% at the lower end, and we expect to be there for the year and do expect on first half versus second half, while production's going to be fairly flattish if you compare halves, that our automotive business will be up. On DDN, I don't have all the quarters in front of me, but $2 billion is the first half orders that I mentioned. I also want to say we will have bumpiness. These are programs. It goes back to where we talked about. We're very excited that they're across a broad customer base. We're growing across all the customers that are key. We will have some lumpiness, and Wamsi, we can follow up later to your question. I just don't have it here in front of me. All right. Thank you, Wamsi. Can we have the next question, please? Your next question comes from the line of Christopher Glynn of Oppenheimer. Your line is now open. Thank you. Good morning. We've been around the portfolio pretty thoroughly, so just wanted to talk about capital and portfolio, did a little bolt-on. Hasn't been much on divestiture for quite a while. I'm not sure how you view sensors, but just that and the weighting of acquisition pipeline versus buyback acceleration potential. Sure. Let me talk a little bit, and then I'll also ask Heath to jump in. First off, similar, I think when you think about what we teed up in November at the Investor Day, nothing's changed. We really like the portfolio. I think what you're going to continue to see is the bolt-ons that we talked about. Like I mentioned with Richards in the energy space, certainly we did something in the DDN space around the technology acquisition. It's more about playing offense than defense and pruning right now to really make sure we capitalize on the growth trends where we position ourselves. Heath, do you want to flesh out a little bit. Yeah. Chris, I'd say the pipeline is actually for M&A. It's pretty active right now. There's a lot of things that we see either real time or that we anticipate coming to market here in the next few quarters. Some of those we're taking a very hard look at in terms of how they fit with us and where we can create value for our owners. There's other things that might be interesting, but there might be other people who are better owners for. There's a level of interest there from our side outside of some of just the technology investments that Terrence mentioned. I guess I'd just say stay tuned because that strategy is never linear. We have to see when things come to market and when they make sense for us. Yeah, it's a reasonable pipeline right now. Thank you, Chris. Can we have the next question, please? Your next question comes from the line of Joseph Spak of UBS. Your line is now open. Thank you. Good morning, everyone. Hey, Joe. Just wanted to touch on margins for a second. You mentioned some of the inflationary costs, and just given the velocity with how fast things moved, I wonder if that weighed at all in the quarter. More importantly for the next quarter outlook, you mentioned how in the past you always do a good job internally and passing stuff on. I think that protects EBIT, but should we expect a little bit of margin pressure just on the math next quarter? And could you quantify that at all? Well, Joe, we've been dealing with different types of inflationary pressures, whether those are tariff- related or certainly the metals that we've seen some pretty significant inflation on here for a while. Within the quarter that we just reported here in the second quarter, certainly we've seen the oil-based derivatives increase. For us, that means resins, and we do buy a lot of resins. We've seen those go up. We've seen freight and logistics costs go up as we move things around to our customers. We do have a playbook. The team is pretty well-conditioned right now that we don't get caught flat-footed when we see these things happening. We're able to largely pass that through in terms of price or maybe some other things we can do with our customers logistically in terms of where they take receipt of things. There is a little bit of noise in our absolute margins for sure on that. Now, as we talked about at the Investor Day, we're still committed to getting at least 30% flow-through on the operating income side year-over-year. We were able to do that in both segments. Obviously for the company, I think really if you think about what our guide implies, you'll still see that level of consistency as we work forward. When you're getting 30% flow-through and you're sitting at 22% margins, it does have that ability to move margins up. I'd say both segments are operating well in this environment. In terms of the headwind towards margins, there's a little bit of noise in there. Some of that's just the timing of when we feel those costs come in versus when the price is realized. again, in absolute terms, I think that we're managing through it. Okay. Thank you, Joe. Can we have the next question, please? Question comes from the line of Joseph Giordano of TD Cowen. Your line is now open. Hey, guys. How you guys doing? Hey, Joe. Hey, Joe. Just curious, I guess this is somewhat data center, but it could be more broad, and I think you just touched on it a little bit. When you see orders up as much as we're seeing, and price cost still kind of lagging, how do we think about the price inherent in the orders versus the price that's coming through in P&L? Is there a real lag there? Are you kind of covered already in the backlog? Heath, just if there's any update on CapEx expectations for the year in light of the orders. Thanks. Yeah. Joe, let me hit it. I'm not We haven't seen from an order perspective, we haven't seen people, in any real activity or motivation to get ahead or pull things in. We're pretty tied in with both where we sell direct as well as with our distributor base on that front. We haven't really seen any noise there or in terms of people trying to get in ahead of a price increase. The orders that we're seeing are really project-based and things that we've had in the pipeline that are coming, and then where we see it coming in from, it's a little bit more hand-to-mouth from distribution, it's pretty consistent. That has not been highlighted to us from our businesses as a major concern in terms of matching up when they're seeing the inflation versus when the price is going in. There is always a little bit of natural timing there. On CapEx, we have taken our CapEx up this year. We talked a little bit about it in prior calls, but you should expect CapEx this year to run about 6% of revenue. That increase that we've had over the past couple of years is almost entirely due to ramping the AI programs within our DDN business, and those are tied to very specific programs. When we make capital investments, we have been awarded programs at that pace, at those spots. We have some protection on that. We're not just out speculating where we need to make those big CapEx investments. In some ways, that's a good indicator, if I'm sitting in your shoes, of what's to come in that space. All right. Thank you, Joe. Can we have the next question, please? Your next question comes from the line of Guy Hardwick of Barclays. Your line is now open. Hi, good morning. Hey, Guy. Hi, good morning. I think you said the AI business will be running at $2.4 billion this year. I assume that includes the cloud business, which I think was running like a $500 million last year. My question is actually on the 30%, which isn't AI or cloud related, that's enterprise telecom, which potentially could be squeezed for or competing for dollars because of AI investments. Maybe you could talk about the trends in enterprise telecom and other IT. No, actually, thanks, Guy, for the question. What we've seen, and we talked a little about it last time, and what we're seeing is we're actually, not to the level of growth that we see in the AI side, but that spending is constructive. On the enterprise telecom and wireless space as a collective, we are seeing nice growth there. It's not at the rates like I talked about, 60%, but I would say how people are prioritizing that between those spends, I'm not sure I'm the best person to say for the broader market. But in our order trends, we are seeing nice growth, and it is growth in those other product categories or end market segments. All right. Thank you, Guy. Can we have the next question, please? Next question comes from the line of Asiya Merchant of Citigroup. Your line is now open. Oh, great. Thank you. My question was around just tightness in components, whether it's memory or CPUs and even GPU and allocation. Maybe you could help us understand hyperscalers, were they providing much better visibility as a result of this? Hyperscalers as well as your chip companies that you deal with, if they were just providing better visibility due to these supply chain issues, and if you're forecasting any more complexity as these programs ramp in the back half. Thank you. Sure. No, thanks for the question. First off, when you look at the product categories, you're talking about memory, GPUs, CPUs, we don't buy that. From our procurement, we don't buy that. Certainly, it's well-known that memory is tight, and when I think about our business, which is important, what we're seeing for our customers, and you've heard me talk about in the orders, they are going out in their orders a little bit to make sure capacity is reserved and on the ramps that they have coming. That's built more backlog for us as we've highlighted in the orders in DDN. Net- net, we're not seeing availability issues on what we procure to make our products. Certainly, our customers continue to ask us to ramp and ramp quicker. We're not seeing any slowdowns from our builds into our customer or hyperscaler customers at all. If anything, as we've talked about with the $150 million, some of that is they're increasing their ramps. Clearly, memory is tight. You can go to the memory calls and see that. Net net, we're not seeing any impact in any of our businesses yet. Some of our customers are trying to do planning, and they've built buffer stock to make sure their supply is secure on those components, but we're not the closest to it. All right. Thank you, Asiya. Can we have the next question, please? Your next question comes from the line of Steven Fox of Fox Advisors. Your line is now open. Hi, good morning. I just had one on the energy market. The organic growth has slowed, still double digits, but I was curious, Terrence, you've talked about how energy can sort of be hand in hand with the growth you see in some of the data center markets. Are you seeing conversations with customers that there's a lag effect that maybe we see an acceleration in growth, or is 10% type of the number we should think about? Can you just give us a- Sense for how energy looks maybe going out the next few quarters? Thanks. Yeah, no, Steve, I think what's important is please keep the framing of what I talked about, hey, 60%+ of this, our energy business is utility grid hardening. What is data center or industrial, and then what is renewable? I do think that the growth rate came down a little bit is due to the clean energy side, where you have had some pauses on what's happening in utility grid hardening and the industrial/data center space. It's full steam ahead. Now, there is elements that you come into regulatory elements of when things get built and staged. Feel very good about where we are and feel like we'll be staying around this double digit for a while now with this build that we're seeing, with probably the biggest lumpiness being in the clean energy space. All right. Thank you, Steve. Can we have the next question, please? Your next question comes from the line of Samik Chatterjee of J.P. Morgan. Your line is now open. Great. Thank you for taking my question. Terrence, if I can ask you to go back to the discussion around your capabilities that you're adding related to optical and copper in terms of scale up. At the Investor Day, you had given us this AI rack representation and copper content, or your content could be at as much as $870 per chip. When you're engaging with your customers now and as you think about optical and scale up, is that going to be additive to the content opportunity that you outlined at the Investor Day, or is it going to be part of that overall content that you presented at the Investor Day? Maybe sort of how are you thinking about it down the line in five years' time, how does the mix between copper and optical look in that content opportunity in a scale-up domain? Thank you. Yeah. No, thank you, Samik. First off, when you think about the technology acquisition we did, and even what I said, this will help us in the scale-out element where we're not as strong, because this is really where you get to where the fiber attached to the CPO for the scale-out. That would be increased content versus what happens in the rack. Over time, this is going to migrate, and what that migration rate is going to be very iterative with our customers as they make design constraints between the power chain and the data chain. We even see that as printing is coming in, how the architecture continues to move. When you sit there versus what we talked about, it's an increase of content that we have, and it's just the positioning that we're always going to be looking at to do in all of our businesses, not just EDN, to say, how do we get deeper with our customers in their architecture? This is a nice fill of a building block that, we feel with what we can do with it and integrate it with what we do already, we'll be able to hit the inflection points that they're working on. All right. Thank you, Samik. Can we have the next question, please? Your next question comes from the line of Colin Langan of Wells Fargo. Your line is now open. Oh, great. Thanks for taking my question. Hey, Colin. A follow-up, actually, on the co-packaged optics. If you don't sort of build out the fiber optics capability from where you are today, any way to frame the downside or the content lost if a customer switches from copper to a fiber optics solution? Colin, one thing I'm going to say, I'm going to go back to what I said in the script. It's very clear with the work we do with our customers, it's not going to be an or, it's going to be an and between copper and fiber. That word, while it's a simple word, copper and fiber sound like the more important words, the and is the most important. Even when we think about the copper TAM, even as optics gets introduced into scale-out and how it could be a mix in the rack, our TAM and copper's going to continue to grow due to the power elements that you need. Power connectivity goes up where they will continue to keep copper within the rack as the workhorse. Those types of things, we still see TAM growth in copper. We're also going to benefit from the inflection points when it does occur of optical. We're really nicely positioned for it. All right. Thank you, Colin. Can we have the next question, please? Next question comes from the line of William Stein of Truist Securities. Your line is now open. Great. Thanks for taking my question. In the industrial end market, I have sort of two related questions. The DDN piece, there's very clear growth in bookings, and I congratulate you on that. It's clear that you've got growth coming. It was a bit surprising to have huge sequential quarters of flattish revenue performance. I wonder if you can explain why the revenue hasn't been growing for the last couple of quarters meaningfully in that part of industrial, and perhaps related to that, this quarter, we saw segment revenue in industrial grow, but op margin decline, and I wonder if it's related to orders maybe ramping later in the year instead of now, or maybe it's the recent acquisition you did in energy. Any help there would be much appreciated. Thank you. First off, Will, on your first part of your question, the important thing is we're going to grow this year in DDN and AI by about $1 billion. I'm looking at things on quarters, and I know I say it in automotive a lot, and you're all probably rolling your eyes right now at me. If you look at a quarter, there's different programs that ramp supply chain impacts. I think the more important point is we've increased our revenue by another $150 million. We're going to be stepping up here in the second half, and even the number we shared at Investor Day, the $3 billion, it continues to shift towards the left due to the momentum that we have. Heath, do you want to cover the margins? Yeah. The year-over-year margins were up significantly, so I assume you're talking about the sequential margins. Listen, it's a similar answer to what Terrence just said. You're going to always have a little bit of noise in any quarter. Sometimes that works in your favor, sometimes it sequentially evens out. We tend to look at margins on a year-to-date or rolling basis. I'd say, if I think about anything that's specific to that, we have ramped, no different than I talked about FX earlier with Joe's question. We have ramped some investments in our DDN business to support these programs. There's different times over a 90-day period that you might feel some of that pinch point a little bit more. When I think about the full year or even where we are year to date, I feel good about both the margin performance as well as the flow-through on that organic revenue growth. There's nothing that I'm, I'll say, dwelling on relative to some kind of sequential move there. All right. Thank you, Will. Could we have the next question, please? Next question comes from the line of Shreyas Patil of Wolfe Research. Your line is now open. Hey, thanks a lot for taking my question. Hey, Shreyas. Maybe just coming back to the discussion on CPO and optical, I'm just curious how big your optical business for AI applications is today, and where you feel the need to further bolster via M&A, maybe on the transceiver side or DCI modules or things like that. Thanks a lot. Shreyas, I think that what's important is, and in the pre-remarks, and we're going to stay impassive. When you look at transceivers and things like that, I don't think that's where we add value in the supply chain. Really when you look at what we're doing here and what TE does is how do you get the signal chain that's moving off a CPO, would be the fiber attach, how do you get out to an optical back plane? Really the technology we did helps our base around the fiber attach. Also, we are stronger within the rack, so that's going to be further out. We do think this will get us into some scale-out options versus a scale-up, which is more limited. We will continue to look at via partnerships versus organic development, as well as what we just did to say, how do we build it out? We really like how we're positioned with this building block we got in, to really make sure we can help our customers as they evolve their architecture. Thanks for the question. All right. I want to thank everyone for joining us this morning, and if you have further questions, please contact investor relations at TE. Thank you and have a nice day. This conference call will be available for replay beginning at 11:30 A.M. Eastern Time today on the investor relations portion of TE Connectivity's website. That will conclude the conference today. Thank you and good day.