APH's AI Connectivity Growth Accelerates: Can It Outpace TEL & MRVL?
Amphenol APH is benefiting from strong order momentum, improving operating leverage and robust profitability, strengthening its position across artificial intelligence (AI) data-center, communications and industrial connectivity markets. In the second quarter of 2026, orders grew 94% year over year and 14% sequentially to $10.7 billion, resulting in a book-to-bill ratio of 1.23:1. Every end market recorded a positive book-to-bill ratio, highlighting broad-based demand and improving revenue visibility. This momentum enhances APH’s competitive positioning against Marvell Technology MRVL and TE Connectivity TEL.
Higher sales are also driving meaningful operating leverage. The adjusted operating margin expanded 420 basis points year over year and 250 basis points sequentially to 29.8%. Even excluding tariff recoveries, the margin approached 29%. CommScope contributed more than $1.2 billion in second-quarter sales and operated at a margin above 20%, including acquisition-related amortization. Management attributed the improvement to better factory execution, vendor management, SG&A discipline and leverage from higher volumes. Amphenol also raised its expected 2026 CommScope revenues to $4.6 billion from $4.1 billion, and doubled expected adjusted EPS accretion to 30 cents from 15 cents.
AI infrastructure remains a key growth driver. IT datacom represented 43% of second-quarter sales, with revenues rising 89% year over year and 63% organically. Sequential sales increased 22%, with virtually all growth driven by AI-related products. Amphenol is benefiting from demand for high-speed copper, fiber-optic and power interconnects, while CommScope is expanding its advanced optical presence. Strong execution is translating into higher earnings and cash flow. Adjusted EPS rose 67% year over year to $1.35, while operating and free cash flows reached $1.6 billion and $1.2 billion, respectively. APH ended the quarter with $8.4 billion of liquidity and a net leverage ratio of 1.3 times, supporting capacity expansion, product development and acquisitions.
APH Faces Tough Competition
Marvell Technology is challenging APH through rapid AI data-center growth and improving operating leverage. MRVL’s second-quarter fiscal 2027 results raised the revenue outlook to roughly $12 billion, implying 45% growth, and lifted its fiscal 2028 revenue outlook to $18 billion, representing nearly 50% growth. Data-center revenues are expected to rise 60% in fiscal 2027 and more than 60% in fiscal 2028, driven by strength across interconnect, switching and custom businesses. In the second quarter of fiscal 2027, the non-GAAP operating margin was 36.6%, up 180 basis points year over year, demonstrating significant operating leverage in the business.
TE Connectivity is also pressuring APH through record orders and stronger profitability. In the third quarter of fiscal 2026, the company reported record orders of $5.7 billion, up 27% year over year, while Digital Data Networks orders increased more than 70% from the start of the fiscal year to the end of the third quarter. TEL maintained a 1.1 book-to-bill ratio and ended the quarter with a record backlog. The adjusted operating margin expanded 90 basis points year over year to 21.9%, while management indicated that its industrial businesses can generate more than 30% flow-through at the current volume levels.
APH Shares' Price Performance, Valuation & Estimates
Shares of Amphenol have risen 24.5% year to date compared with the broader Zacks Computer and Technology sector’s 22.6% growth.
APH Stock’s Price Performance
Image Source: Zacks Investment Research
The APH stock is trading at a premium, with forward 12-month price/earnings of 27.02X compared with the broader sector’s 21.27X. Amphenol has a Value Score of D.
APH’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Amphenol’s earnings is pegged at 72 cents per share, up by a cent over the past 30 days, suggesting 53.19% year-over-year growth.
Amphenol Corporation Price and Consensus
Amphenol Corporation price-consensus-chart | Amphenol Corporation Quote
Amphenol currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Amphenol Corporation (APH) : Free Stock Analysis Report
Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report
TE Connectivity Ltd. (TEL) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
