Amphenol Aktie

Hello, and welcome to the First Quarter 2026 Earnings Conference Call for Amphenol Corporation. [Operator Instructions] At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Thank you very much. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our first quarter 2026 conference call. Our first quarter results were released this morning, and I will provide some financial commentary, and then Adam will give an overview of the business and current market trends, and then, of course, we'll take your questions.

As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements so please refer to the relevant disclosures in our press release for further information. The company closed the first quarter of 2026 with record sales of $7.6 billion and GAAP and adjusted diluted EPS of $0.72 and $1.06, respectively.

First quarter sales were up 58% in U.S. dollars, 57% in local currencies, and 33% organically compared to the first quarter of 2025. Sequentially, sales were up 18% in U.S. dollars and in local currencies and up 4% organically. Adam will comment further on trends by market in a few minutes.

Orders in the quarter were a record $9.435 billion, up a strong 78% compared to the first quarter of 2025 and up 12% sequentially, resulting in another very strong book-to-bill ratio of 1.24:1. This impressive book-to-bill was driven by robust bookings in all of our end markets with every end market having a positive book-to-bill this quarter. GAAP operating income was $1.8 billion in the quarter and GAAP operating margin was 24%. GAAP operating margin included $249 million of acquisition-related costs primarily related to the acquisition of CommScope, which closed at the beginning of January. These acquisition-related costs included $179 million of noncash amortization related to the value of acquired backlog and inventory step-up costs as well as a $70 million charge related to external transaction costs. Excluding acquisition-related costs, adjusted operating income and adjusted operating margin were $2.1 billion and 27.3%, respectively.

On an adjusted basis, operating margin increased by a strong 380 basis points from the prior year quarter and was down 20 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by robust operating leverage on the significantly higher sales volumes, which more than offset the dilutive impact of acquisitions.

On a sequential basis, the decrease in adjusted operating margin was primarily driven by the dilutive impact of acquisition, partially offset by robust operating leverage on the higher organic sales volumes. I'm very proud of the company's operating margin performance in the first quarter, which reflects continued strong execution by our team. Breaking down the first quarter results by segment compared to the first quarter of 2025, sales in the Communications Solutions segment were $4.5 billion and increased by 88% in U.S. dollars and 47% organically and segment operating margin was 30.6%. Sales in the Harsh Environment Solutions segment were $1.7 billion and increased by 34% in U.S. dollars and 23% organically and segment operating margin was 28%.

Sales in the Interconnect and Sensor Systems segment were $1.4 billion and increased by 23% in U.S. dollars and 17% organically as segment operating margin was 20.2%. The company's GAAP effective tax rate for the first quarter was 42.7%, and the adjusted effective tax rate was 27%, which compared to 22.7% and 24.5% in the first quarter of 2025, respectively. As the typical practice, our adjusted tax rate excludes the tax effect of acquisition-related costs and the excess tax benefit from stock option compensation as well as other discrete tax items.

Specifically, the first quarter includes $130 million tax accrual related to the previously disclosed tax matter in China. The company recently received unfavorable tax determinations from certain relevant tax authorities in China, and this accrual, together with the $100 million accrual, the company booked in the fourth quarter of 2025 covers the full amount of the tax payment notices received. In addition, as a result of this matter together with the continued shift in income to higher tax jurisdictions amidst the company's high levels of growth, the company increased its effective tax rate to 27% in the first quarter and expect that rate to remain for the remainder of 2026.

The recent developments with respect to the China tax matter also resulted in the company reassessing certain tax-related assumptions applied to prior period results, not subject to the China tax inquiries. This reassessment resulted in an adjustment to our tax provision of $160 million, which is recorded in the first quarter. The $130 million accrual together with the $160 million additional tax provision have been excluded from the company's first quarter 2026 adjusted tax rate and adjusted diluted EPS.

GAAP diluted EPS was $0.72 in the first quarter, up 24% compared to the prior year period. And on an adjusted basis, diluted EPS was a record $1.06 and increased by 68% compared to $0.63 in the first quarter of 2025. This was an outstanding result. Operating cash flow in the first quarter was $1.1 billion or 120% of net income and free cash flow was $831 million or 89% of net income. These were strong results for first quarter, which typically has somewhat softer cash generation. We continue to expect strong cash flow generation in 2026 with free cash flow conversion remaining within our typical range over time. From a working capital standpoint, inventory days, days sales outstanding and payable days were all within a normal range.

During the quarter, the company repurchased 1.3 million shares of common stock at an average price of approximately $140. And when combined with our normal quarterly dividend, total capital returned to shareholders in the first quarter of 2026 was approximately $485 million. Total debt at March 31 was $18.7 billion, and net debt was $14.2 billion. Total liquidity at the end of the quarter was $7.6 billion, which included cash and short-term investments on hand of $4.6 billion plus availability under our existing credit facilities.

As previously noted, we expect quarterly interest expense net of interest income to be approximately $200 million for the remainder of 2026. First quarter 2026 EBITDA was $2.3 billion and our net leverage ratio was 1.6x at the end of the first quarter. We are very pleased with the company's financial position.

I will now turn the call over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and I hope it's not too late to extend my welcome to all of you on the call today from a beautiful spring day here in Wallingford, Connecticut. As Craig mentioned, I'm going to highlight some of our achievements in the quarter with our very strong start here to the year in 2026. I'll talk about our trends across our served markets. Then I'll comment on our outlook for the second quarter. And of course, we'll have time for questions at the end.

Look, I just want to say that our organization, the Amphenol organization drove outstanding performance here in the first quarter. Our results were stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Our sales grew from prior year by 58% in U.S. dollars, 57% in local currency reaching a new record of $7.6 billion.

On an organic basis, our sales increased by a very strong 33% with growth across nearly all of our served markets, and I'll talk about those markets here in a few moments. The company booked a record $9.4 billion in orders in the first quarter and that represented a robust book-to-bill of 1.24:1. Orders grew by a very strong 78% from prior year and were up 12% sequentially. I'm very pleased that our order growth in the quarter was broad-based with all of our end markets realizing book-to-bill of at least one, and this was driven in particular by strength in IT datacom, defense, commercial air and industrial.

We're also pleased to have delivered adjusted operating margins of 27.3% in the quarter, an increase of 380 basis points from prior year and down just 20 basis points sequentially. These impressive results were achieved despite the margin dilutive impact of the CommScope acquisition in the quarter. I would just add, though, that we're very pleased with the CommScope acquisition, and we do expect the business' performance to continue to improve as part of the Amphenol family.

Adjusted diluted EPS grew 68% from prior year and reached a new record of $1.06. And finally, as Craig mentioned, the company generated operating cash flow of $1.1 billion and free cash flow of $831 million in the quarter, both clear reflections of the quality of the company's earnings. I can't express enough how proud I am of our team here in this very strong start to 2026. Our results this quarter once again reaffirm the value of the drive, discipline and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment.

Now turning to our served markets. I just want to comment that we're pleased that the company's end market exposure remains diversified, balanced and broad. And this diversification continues to create great value for Amphenol, enabling us to participate across all areas of the global electronics industry. All while not being disproportionately exposed to the volatility of any given application or market.

I will say that there's no doubt that with the extraordinary investments being made in artificial intelligence, or AI, coupled with our team's outstanding work and capturing a significant share of this unique interconnect opportunity that this has resulted in the IT datacom market in the quarter, representing just over 40% of our sales.

Nevertheless, we remain committed to continuing to broaden our portfolio across markets, customers, applications and products as we build on the company's momentum and we further strengthen Amphenol's position across all areas of the global electronics industry. The defense market in the quarter represented 8% of our sales, and sales grew from prior year by a strong 44% in U.S. dollars and 25% organically. I will say this is driven by really broad-based growth across virtually all segments of the defense market and all of our served geographies.

Sequentially, sales grew by 2%, which was in line with our expectations coming into the quarter. And as we look into the second quarter, we expect sales in the defense markets increased in the high single-digit range sequentially. We remain encouraged by the company's leading position in the defense interconnect market, where we continue to offer the industry's widest range of high-technology products. Amidst the current dynamic geopolitical environment, countries around the world are increasing their investments in both current and especially next-generation defense technologies.

With our expanded product offerings, both in discrete connectors as well as value-add interconnect, as well as the significant capacity expansions we've made in recent years, we're positioned better than ever to capitalize on this long-term demand trend. The commercial air market represented 4% of our sales in the quarter, and sales in this market increased by 22% in U.S. dollars and 20% organically from prior year and that was really driven by broad-based strength across commercial aircraft manufacturers.

Sequentially, our sales moderated by 3% from the fourth quarter, which was better than our expectations coming into the quarter. As we look to the second quarter, we expect a slight sequential -- a slight further sequential moderation in sales. I'm truly proud of our team working in the comm air market. With this ongoing growth in demand for next-generation aircraft, our efforts to expand our product offering, both organically and through our acquisition program continues to pay real dividends. And we look forward to further capitalizing on our expanded range of product solutions for the commercial air market long into the future.

The industrial market represented 20% of our sales in the quarter, and our sales to industrial increased by 52% in U.S. dollars and 16% organically as we continue to see accelerating demand across most segments of the diversified industrial market. In fact, virtually all of those areas of the industrial market that we service grew organically in the quarter, and we also saw organic growth in all three major geographies. On a sequential basis, our sales were up 29% from the fourth quarter as we benefited from the addition of CommScope's building connectivity business. Organically, sales were up a strong 6% from the fourth quarter, better than our expectations as we entered the quarter.

Looking into Q2, we expect sales in the industrial market to increase in the high single digits from these already strong first quarter levels. I would just comment that we remain encouraged by the company's strength across the many diversified segments of the important industrial market. And with the addition of CommScope, we're now seeing new opportunities for growth in the exciting building connectivity market.

Over the long term, I'm confident in our strategy to expand our high-technology interconnect antenna and sensor offerings, both organically and through continued complementary acquisitions. This strategy has enabled Amphenol to capitalize on the many electronic revolutions that continue to occur across the diversified industrial market thereby creating continued opportunities for our outstanding team working in this important space.

The automotive market represented 11% of our sales in the quarter. Sales in automotive grew by 7% in U.S. dollars and 2% organically, as organic growth in North America and Europe was somewhat offset or partially offset by somewhat softer sales in Asia. Sequentially, our sales declined by 7% from the fourth quarter, which was a bit better than our expectations coming into the quarter.

For Q2, we expect sales to increase modestly from these first quarter levels. I remain very proud of our team working in the global automotive market. While there are clearly some areas of demand uncertainty, our team continues to be focused on driving new design wins with customers who continue to increase the content of new electronics being integrated into their next-generation vehicles.

We look forward to benefiting from our strengthened position in the automotive market for many years to come. The communications networks market represented 12% of our sales in the quarter, and sales in this market grew from prior year by 91% in U.S. dollars and that was really driven by the additions of ANDREW and CommScope. On an organic basis, our sales were flat from prior year as growth in wireless applications was offset by some moderations in broadband demand.

Sequentially, our sales in the quarter grew by 57% from the fourth quarter, driven by the addition of CommScope. On an organic basis, sales were flat to prior year -- or to prior quarter, which was better than our expectations. As we look into the second quarter, we expect sales to remain at these first quarter levels. With our expanded range of technology offerings following the acquisitions of both CommScope and ANDREW, we are very well positioned with both service provider and OEM customers across the communications networks market. Our deep and broad range of products coupled with our global manufacturing footprint, have positioned us to support customers around the world.

As the accelerating volume of data traffic drives demand for expanded and upgraded networks in the future, we look forward to enabling these systems for many years to come. The mobile devices market represented 4% of our sales in the quarter, and sales in this market grew by 2% in U.S. dollars and 1% organically from prior year as growth in laptops and accessories was somewhat offset by moderating demand in handsets and wearables.

On a sequential basis, our sales actually -- while declining by 22% was a better-than-expected decline compared to the fourth quarter as we had expected. Looking into the second quarter, we expect a modest sales decline from these levels on typical seasonal patterns. I'm very proud of our team working in the always dynamic mobile devices market as their agility and reactivity has once again enabled us to outperform our expectations in the quarter.

I'm confident that with our leading array of antennas, interconnect products and mechanisms that are designed in across a broad range of next-generation mobile devices, we are well positioned for the long term.

And finally, the IT datacom market represented, as I mentioned earlier, 41% in the fourth (sic) [ first ] quarter. Sales in this market grew by a very strong 99% in U.S. dollars and 81% organically. And this was driven by the continued acceleration in demand for our products used in AI applications, together with continued strong growth in our base IT datacom business.

On a sequential basis, our sales increased by 27% from the fourth quarter, which was substantially better than our expectation for a low double-digit increase. On an organic basis, our sequential growth reached 16%, a very strong number. And virtually all of this organic sequential sales growth was driven by growth in AI-related products.

Looking ahead, we expect a further sequential sales increase in Q2 in the low teens level as investments in AI data centers accelerate and its enterprise and cloud customers continue to expand their demand for traditional IT datacom products. Just want to say that we're more encouraged than ever by the company's position in the global IT datacom market.

Our team has just done an outstanding job, both of securing future business on next-generation IT systems with a very broad array of customers but also in executing on these exciting programs. The revolution in AI continues to create a unique opportunity for Amphenol, given our leading high-speed and power interconnect products.

And now with the addition of CommScope, we have the industry's broadest range of high-speed copper, power and fiber optics interconnect products, all of which are critical components in these next-generation systems and in the next-generation architectures of our customers. This creates a continued long-term growth opportunity for Amphenol.

Turning to our outlook and assuming current market conditions as well as constant exchange rates, for the second quarter, we expect sales in the range of $8.1 billion to $8.2 billion and adjusted diluted EPS in the range of $1.14 to $1.16. This would represent strong sales and EPS growth of 43% to 45% and 41% to 43%, respectively, compared to the second quarter of prior year. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow Amphenol's market position all while driving sustainable and strong profitability for the long term.

Finally, I want to take this opportunity to thank our entire global team for their truly outstanding efforts here in this very special first quarter. And in particular, I just want to express my gratitude to the folks working in our factories around the world. This growth doesn't come easy. And the folks working on our factory, those amazing Amphenolians, they continue to amaze me and delight our customers with their extraordinary and hard work. And with that, operator, I'd be very happy to take any questions that there may be.

[Operator Instructions] We have a question from Mark Delaney with Goldman Sachs.

Congratulations on the strong results. I appreciate that Amphenol is able to address data center customer need, both for copper and optics, especially post the CommScope acquisition, and that's certainly apparent with the orders and revenue that you reported for the IT datacom segment.

However, I'm hoping, Adam, you can help investors better understand implications for Amphenol as CPO plays a bigger role over the next 2 to 4 years. And specifically, as Amphenol is engaged with customers on designs that will utilize CPO, what does that mean for Amphenol's revenue and profit potential on a directional basis relative to current designs, especially now that you have CCS.

Yes. Thanks so much, Mark. I appreciate the question, and thanks for your kind words here. Look, I mentioned earlier, and I'll just reiterate that we now have the broadest range of products for customers in the IT datacom market. And that starts with high-speed products. It continues on with power products, which are very, very important products for all architectures, current and next and the next after that generation.

And now with CommScope, together with previous and prior capabilities that we already had in optics, we now have a very, very broad suite of products in optics and capabilities, capacities. And so we now sit in a unique position with customers where we're really a leader across the board in all the technologies that they're thinking about for the future. And I can just tell you we're working with all the players here up and down the stack of the AI ecosystem from the folks who are spending the money and outfitting the data centers and also in many cases, designing their own architectures to the systems manufacturers, the equipment makers who are participating very strongly all the way down through to the chip makers who are also creating their own unique architectures.

And we worked very strongly across that entire ecosystem on current next and next generation thereafter. Very specifically, as you allude to CPO and the potential evolution of things towards higher speeds and towards optical solutions. And you can imagine, we're working with customers on a broad array of solutions, including CPO for the future that create great opportunities for Amphenol in the long term.

What are our customers trying to achieve? Our customers are trying to achieve higher bandwidth, lower latency, higher density, higher transfer speeds so that ultimately, these AI systems can operate much as a human brain can do. Comparing everything to everything else and doing that in extremely fast time periods. And when you see the evolution of how these AI systems are, we're really enabling those systems today, and we're working with our customers on future generations, years and years from now, kind of generations both on copper and on optical solutions.

And what does that mean in terms of the quantum of the business? I mean, that all, I think, remains to be seen, but what's very clear is as we talk to our customers and even as our customers speak publicly, our customers are not talking about these kind of either/or solutions. What they're talking about is more interconnect, no matter what.

And so as we approach them with now that broader suite of products, we also approach them with another advantage in our back pocket, and that is the proven ability to execute. I mean what you see this quarter, growing 81% organically. What you saw last year with us growing our IT datacom business by 124% year-over-year. And obviously, AI growing even faster than that. These have not been trivial initiatives to ramp up and meet the moment for our customers. And we have proved that time and time again with customers up and down the stack.

And so you can imagine that as our customers, think about the future, whatever that architecture may be, Amphenol is going to have a very strong seat at the table in all of those architectures, not just because we have the suite of products but also because we have the proven capability of executing and making sure that they can hit their incredible aspirations and that our products don't become a bottleneck in that.

And so that combination of the suite of products, the proven execution capability, we think puts Amphenol in a very strong position for the future. And look, who knows what the cadence of AI investments will be and when and whether it will be ups and downs, of course, there will be ups and downs. But I think the long-term prospects for this industry and for this market and for Amphenol's position are very strong.

We have a question from Andrew Buscaglia with BNP Paribas.

I just wanted to, along the lines of the discussion, hear a little bit more about what these customers, the hyperscalers are saying to you intra-quarter and as the year progresses, do you think you should see continued acceleration of growth in that segment as presumably you have increased share or content in future generations. And then maybe project out to '27 or so and talk about what you think the implications are of your fiber portfolio will be on the next generation.

Yes. Look, I mean I'm going to be careful not to give guidance beyond the quarter that we've talked about here in the second quarter. But you can imagine, I mean, we've had very strong orders, really strong across-the-board orders here in Q1, I mean, interestingly, you can imagine we had strong IT datacom orders, but they actually weren't much stronger than, for example, the orders we had in defense in terms of the book-to-bill.

But we have had strong IT datacom orders. We had strong orders also in the fourth quarter where we had a book-to-bill even higher than this very unique 124 that we had here this quarter, I think 131 in the fourth quarter. And so we have good momentum really across the board and including in IT datacom. And all I can tell you is when we talk to our customers across the board in the IT datacom market, in particular, those customers who are heavily focused on these next-generation AI build-outs, they want more product. And I think our team's ability to satisfy that has really been a fabulous asset to the company.

Look, in terms of 2027, I'm not going to try to give a prognosis for 2027, except what I will say is this. We look at the CommScope business today and its performance. And it's also performing as a company very, very strongly. I mean I would just tell you that obviously, we bought the company, not right on January 1. But on a like-for-like basis, in the first quarter, CommScope growth was largely similar to the organic growth that we had across Amphenol. And that's a business that is a diversified business across data center and communications networks and industrial.

So they have very, very strong performance here in the quarter, and we're really pleased and proud with their performance. And that's performance really in the here and now because they're opening up to us, a complementary part of the data center opportunity that we hadn't participated as strongly in before. And that's connecting from rack to rack and across the data center and even, of course, between data centers through the networks and that's really exciting for us.

And again, going back to sort of how I talked about the first question, that makes us again more important to our customers because as soon as the signal gets into the building, we're helping our customers move that signal around, across and within the racks and ultimately helping to create these unique AI architectures.

So I think CommScope puts us in a very strong position going forward. And I'll just reiterate, our customers make a lot of trade-offs as they think about their architecture, and we can sit with them at the table and help them make those trade-offs with expertise and a breadth of an expertise that's really unique in this industry.

We have a question from Amit Daryanani.

Really impressive set of numbers here. Adam, one of the things we're starting to see a lot in the AI ecosystem is hyperscalers are engaging in these long-term capacity expansion plans with the suppliers to really ensure they can get whatever capacity they need across the tech stack.

And I think you've seen this from a lot of companies, I think Corning talked about three such large deals on their call. As you look at this unprecedented growth you're seeing in IT datacom, I think you said 81% organic growth. How do you think about funding the capacity for these ramps as you go forward? And to the extent you can talk about it, are Amphenol, CommScope being approached for these multiyear capacity agreements, how do you view them? And would they ever make sense for Amphenol?

Yes. Thank you very much, Amit. I really appreciate the comments and the question. I mean, look, you know that in our company, you followed us for a very long time. We pride ourselves on agility and the ability to react quickly to our customers. And that generally means that our customers can rely upon us, whether or not they give us kind of a long-term agreement, so to speak.

Now all that being said, and we've talked about this in the past, we have talked about the fact that there are more meaningful investments, and you've seen that in our capital spending, which still is very reasonable as a percent of our sales. But our sales run rate has doubled here over a 2-year period from Q1 of '24 to Q1 of this year, we've more than doubled in our size. And so our CapEx has also increased substantially.

And so you can imagine that we work with customers when we make these kind of investments to make sure that we have security around those investments and that can mean participating in the investments, and we're very grateful to our customers for their willingness. To do that in certain cases, it can also mean opening the aperture of orders and the commitments that they make to us. So are those long-term supply agreements, I wouldn't call it that, but I would call it more commitments that our customers are making, which then give us the confidence to make the capacity increases that we have, the massive increase in automation for these ultra high-precision products for example, that we are making.

And so I would say that there's more of that going on today than there has been in the past. I mean you're probably not going to hear us talk about it very explicitly, but no doubt about it. We're working hand-in-hand in partnership with our customers as they do this incredible thing called enabling AI.

We have a question from Joe Spak with UBS.

Maybe I wanted to build on some of that prior commentary, Adam, because just as the entire value chain for data center expands and matures, I'm just wondering how you're sort of thinking about a desire from some, ultimately, customers to sort of really bring in new players, maybe diversify some of their risk.

So how are you thinking about that? How does your relationship change there? I know you're in there helping them sort of design that and maybe, in some cases, that leads to licensing opportunities for you. But does that meaningfully change your sort of profit opportunity here as that ecosystem expands?

Yes. Thanks very much, Joe, and I will correct your name, Joe Spak. We all know that very well. Sorry for the mispronunciation of your surname there.

Look, this is not a new phenomenon. I mean we have always worked in this market and many others in a world where our customers want to mitigate risk. And that's no different. That's -- we have been doing that all along here as we prosecute these unique opportunities that have arisen through AI. I mean we are not a sole source in any respect.

But what we are is we're very uniquely able to execute. We do have a lot of unique technology that creates value for our customers. And so we welcome actually other participants in the market. And again, there are plenty of participants in the market. We partner with those companies. And yes, sometimes we have licensing agreements with them. But the end of the day, that unique Amphenolian ability to execute is ultimately what our customers value equally to the technology that we offer them.

And so we don't see any meaningful change to that. This is no different from how we've always prosecuted our business. We've always gone out and had to win business. We've always had to go out and out-execute our competition and thereby satisfy and even delight our customers, and we can just continue to do that. You can imagine, we've also built extraordinary capabilities right now.

Over the course of these last 3 years, as we've been managing through these extraordinary ramp-ups and 81% organic growth here in this quarter, 124 last year, we have built an extraordinary capability around the world to support customers in these unique technologies. And fortunately, we're in that virtuous cycle where the company does generate strong profitability. We convert that profitability into cash, and we reinvest that cash into product development, number one, capability development, number two, and capacity, number three, that ultimately allows us to be more important and to meet the moment for our customers.

And so look, we welcome more participants. We also welcome that when you have more participants, that also mitigates in some ways, the risk of volatility for everybody, and that's a good thing. And that's how this industry has worked for a long time, and we've prospered in that environment for many, many, many years, decades really.

We have a question from Samik Chatterjee with JPMorgan.

Adam, if I can just ask you more specifically around CCS. Obviously, you sounded pretty positive in terms of what you're seeing for demand there. If you go back to the time when you announced the acquisition and gave some guidance around it, I think you were assuming more sort of mid-teens growth for this year.

How are you seeing sort of that demand progress relative to those early milestones that you gave us? And are you seeing any supply constraints when it comes to sort of bare fiber or preform in relation to your ability to sort of meet some of the customer demand that you see for the CCS business?

Well, thanks very much, No, you're absolutely correct. When we announced this deal, I think we did talk about it at the time as roughly a $3.5 billion, maybe $3.6 billion business with sort of mid-teens growth expectations. And as I mentioned, here at least here in the first quarter, they achieved a growth level, largely at the same pace of Amphenol's own organic growth, which is really impressive and really outperforms what we would have thought back when we signed the deal.

And we continue to expect the company to deliver this year, as we said, roughly $4.1 billion in sales and $0.15 of accretion. I can tell you the team, this is a team of fighters. I mean it's so amazing. I mean they came from a very different culture, obviously, a very different corporate background over the 50 years that CommScope has been around. But the thing they have in common is this just desire to win. I mean this is a team of extraordinary capable individuals who want to win.

And that means knocking down whatever impediments may come along, along the way. And look, you mentioned there's no doubt a lot of demand for fiber right now around the world. And I can tell you that our team is doing a fabulous job of supporting their customers' demand, meeting kind of the expectations that we had growing the company by a very significant extent. And they're doing that by being real entrepreneurs. And that's a phenomenal thing. And it's really satisfying to see that for a group of people who've only been part of Amphenol for now less than 5 months. And so I have really high expectations for them in the future.

There's no doubt that they will manage through whatever dynamics arise in the marketplace. And now I will just say this, they're now part of a company that has a very different balance sheet, a very different approach to growth than what they may have had in the past. And so we are very much willing to support their growth with investments as we always have in Amphenol, getting them on that same virtuous cycle that our organization has been on for so many years, what I described earlier and no doubt about it, the folks at CommScope are really excited to have such a supportive -- to be part of such a company that's so supportive of their growth aspirations and their growth aspirations are pretty significant.

We have a question from William Stein with Truist Securities.

Congrats on the great results and outlook, really excellent as we've grown accustomed to from you. But the question I have is that it's not just co-package optics we tend to hear about from some of the bigger customers in the AI data center supply chain. It's various trade-offs between passive copper, active copper.

And then within optical, we hear all the buzzwords about pluggables, near package optics, silicon photonics, co-package optics, even optical interposers and then some of these technologies being used in scale up, some in scale out. Should Amphenol have -- should we think about the company as having similar ability to succeed in all of those technologies? Or are there certain ones of those where your opportunity will be more limited or would potentially accelerate?

Thanks, Will. Well, look, let's -- we'll talk about this one more time, and I think you alluded to one aspect of it that we haven't talked about, which is the active aspect. We certainly have a broad array of active and passive product offerings in both copper and optics. And I think I didn't mention the active piece of that with the other several questions on this topic.

But there's no doubt. I mean, we have developed that active capability both on copper very strongly and also through our acquisition program on optics. And so when I talk about the breadth of products that we have to offer to our customers, it's not just that we offer high-speed copper, power and passive optics, but we also offer active copper.

We also offer active optics. Now do we have every single part number that exists in the universe? No, of course, not.

But we have a breadth of capabilities across those -- all of those categories, if you call them sort of the two categories of copper and optics in the subcategories of passive and active. And I would just say that there's really no company, at least that I can think of here on the spot who can say that, who can say that they have that breadth of offering to help the customers as they face this sort of amazing smorgasbord of different choices that they're facing.

Now is each sort of dish on the smorgasbord going to have the same impact to our company. Are we going to have the same part numbers, that's very hard to give a prognosis about that. But what I do know is what I said earlier. No matter what, there's going to be more interconnect. There's going to be more connections, more synaptic connections across these neural networks. And that's going to lead to a higher degree of interconnect products, which is going to be good for the whole industry. And then it's up to us to continue to execute with the breadth of our products to take more than our fair share of that.

And so far, we've been able to do that. And the building blocks of why we've been able to do that are still very strongly, if not more strongly than ever in place. And so that gives me a dose of confidence for however these architectures evolve. And then the last thing I'll say is, I think we should be very careful that there is not just going to be a single architecture, a single moment.

Customers are looking at lots of different things. They're looking at lots of different directions, and we'll have a lot of different customers doing a lot of different things architecturally in the future which is, again, why we believe it's very important to be with those customers with the full breadth of offerings for them as they approach these next generations.

We have a question from Asiya Merchant with Citigroup.

Great set of results here. If I can, there's been a lot of talk about component, energy, inflation. You guys delivered very strong margins here. If you could talk a little bit about prices -- pricing ability to pass through those costs. And if you saw, there was more ability to raise prices here relative to historical. And if I can squeeze one more on just the book-to-bill in orders and lead times here. Very strong book-to-bill again, similar to last quarter. Are we seeing like extended lead times here? Just help us understand on the book-to-bill, what's driving that.

Yes. Thanks, Asiya. I think I'll take the first part and maybe let Adam talk about the book-to-bill here. But I think in regard -- certainly, we're super happy with our margins here in the quarter, 27.3%, just slightly under kind of record margins we had in the second half of last year. And that's inclusive of CommScope, which had a great quarter, but ultimately, certainly still as a margin -- has some margin dilution. And as we would expect.

And over time, we certainly are very confident that we'll get them closer to the company average. But this 27.3% in the quarter was just an outstanding result, given some of that pressure. That resulted in a few things, and I'll talk about costs in a second. But I mean, certainly, we just executed really well in the quarter on that really strong growth we continue to have.

And that execution, combined with the cost discipline we have within the company, has just enabled us to leverage at a pretty impressive level from a margin perspective across our business, including places like that serve the defense market, industrial, otherwise, I mean you see this across our segments and the improvement in the margins we've had there. So it's really just been kind of, I would say, almost across the board margin improvement story here.

And certainly, the ones that are growing faster than some of these markets are certainly contributing strongly as well. The cost environment certainly hasn't been supportive. I mean, I wouldn't say -- I would say on the margin, that's been, I guess, forgive the term there. I mean kind of on the -- to a lesser degree, that's been some impact. But I think we've done a great job of offsetting most of that through things we do in the factory productivity, things with our vendors.

And certainly, as we kind of drive those other levers, the last lever is pricing. And pricing is just a function of ultimately the value you bring to your customers with the technology, with the execution with all these other things that Adam has talked about. And we've been able to offset some of the things around cost, tariffs and otherwise over time. With these things, our general managers have just done a fantastic job. Some businesses are more impacted than others in some ways.

And that we don't do this from the top level. We let their general managers kind of make the decision to make relative to each of the businesses. And that's the result of kind of what you see in our margin line. So super proud of that. And certainly, we expect going forward, as you can see in our guide, we certainly expect strong margins going forward.

And just real briefly on book-to-bill. I wouldn't tell you that we see anything categorically with the only kind of proviso being that as I talked about earlier, we do have some customers who, because of investments that we're making, have opened up their order apertures. And that's something we've talked about for a number of quarters. But I wouldn't say anything more broadly about extended lead times.

We have a question from Steven Fox with Fox Advisors.

Adam, I was wondering if you could talk a little bit about commercial buildings. You highlighted in your prepared remarks now with CommScope being there. You also mentioned antennas and sensors. So how do you think 1 plus 1 equals 3 between you and CommScope as you now include commercial buildings in your portfolio?

Yes. Thanks so much, Steve. No, we're -- actually, this building connectivity business, as we call it and as they call it, is something really exciting, and it is really complementary and new to Amphenol. There's no doubt that we're sitting in our old building here. And as many of you who have come to Wallingford, would not be surprised to hear.

I wouldn't say that we have a "smart building" here in Wallingford, but many companies who are less cheap than we are about their headquarters building are really making new investments and all the new functionalities that you can bring into a building. And when you say building, you're talking about residential, you're talking about commercial office. You're also talking about factories and smart factories and all of the like. And so what we're especially excited about is not only the leading position that CommScope has in that market but the channel that they have because it's a very unique channel with unique distributors.

They sell into nearly every country on earth. I think it is more than 150 countries at least. Any place where they're building buildings, they need the connectivity to enable all of these next-generation things that go in a next-generation smart building. And with CommScope's position, what we're very excited is that there are other interconnect products, and you mentioned specifically antennas and sensors where we have a very strong position and where we haven't necessarily had that open door into a market like this where I do think long term, that can create value creation for Amphenol, the kind of 1 plus 1 equals 3 that you alluded to.

So it's a really exciting area, and we look forward in the years to come to getting to know that market better getting to forge the strategic distribution relationships that they have on a broader basis across Amphenol and ultimately taking advantage of the revolutions that are happening in this area.

We have a question from Wamsi Mohan with Bank of America.

Amphenol work with the leading GPU player in the market on design for scale up connectivity and has earned that leading market share over there in copper-based scale up. So as you think about this transition to optical, there are many more players there. Maybe there's a later start date within underinvested CommScope portfolio, which I'm sure you will change. But how are you thinking about the share and competitive landscape and the potential to have perhaps similar share in scale-up solutions in optical over time?

Yes. Look, Wamsi, let me just say this. I mean we are not the only player in copper or high-speed copper interconnect. But we have executed in a way that has ultimately led to us taking more than our fair share of that opportunity. And you mentioned one company, and we obviously have done that with many companies.

And so to the extent that some of those architectures evolve into optics or some hybrid solutions, we will have also competition and maybe it will be the same or maybe it will be different, but we've always had competition, a very healthy competition, let me say, where we have to go earn that business every day of the week. And our team will go out there and work to earn it just as they have on the copper side.

We have a question from Scott Graham with Seaport Research Partners.

Congratulations on another great quarter. I really just wanted to talk about industrial, where your organic was plus 16%. And in the past, Adam, you've been kind enough to unbundle a couple of the pieces of that. I'm hoping you can do that again, maybe delineate for us which end markets within there may be led and perhaps the 1 or 2 markets where the organic was less than the 16%.

Well, thanks, Scott, and thanks for your kind words. Look, industrial has been really on a great momentum here in the recent quarters. And like I mentioned earlier, we're seeing that kind of accelerate with 16% organic growth. And one of the things that I find most encouraging is we look at a lot of different subsegments of the industrial market internally. And the vast majority of those subsegments actually have grown organically on a year-over-year basis.

I mean, where did we see the strongest performance? I mean, a lot of different places. We saw that in instrumentation. We saw that in electrification. We saw that in oil and gas, even areas like lighting, medical, we saw strong performance, heavy equipment, factory automation, I mean, those are all like strong double-digit organic growth. I mean where did we see a little bit less. I don't know we saw a little bit less performance in like an RMT, marine, but pretty modest.

And then there's this category which we call Other. And it's funny, Other is a big category inside industrial where it goes into just the vast universe of harsh environment applications from companies large, medium and small, and that grew very strongly in double digits as well. And so I think what we're seeing is a real broad-based reacceleration of the adoption of electronics in harsh environments in what we call the industrial market.

And that's what ties all of our industrial together is it's unique electronic applications in places that aren't very hospitable. Everything from an operating theater to a corn field to an offshore oil well to a train going 400 kilometers an hour and everything in between. And so it's very broad-based growth, in fact.

We have a question from Luke Junk with Baird.

Adam sitting in front of what seems really like a once-in-a-generation supply chain restocking event in both the U.S. and Israeli defense industry. Just hoping you can help us understand Amphenol's leverage within your defense electronics platform, especially thinking of interceptors, munitions, those sorts of things that are going to be exposed to the supply chain dynamic?

Yes. Thanks very much, Luke. I mean, look, let me just start by expressing my hope that the current ceasefire in the Middle East holds. We continue to monitor our employees who are in the Middle East, whether in Israel or in the Gulf region, and we've continued to support them and hold them in our thoughts because it's not easy being in a war zone for a couple of months here. And I know that's been stressful for many. But there's no doubt that the world is not a safer place today than it was 5, 10 years ago.

And there's a particular focus on things like missile defense on things like smart munitions. And we saw that during the Ukraine war, which tragically continues as we sit here today. And there's also a question that in the current very dynamic geopolitical environment that countries around the world are planning, are making but are also planning long term significant upgrades in their own military spending and also in the nature of what they're spending their money on. Spending it on next-generation technologies.

And by the way, not only from traditional defense contractors, but from a whole new generation of defense contractors who are really kind of the disruptors in this market, and if we look at our position as the world leader in defense interconnect, having expanded significantly the scope of that position with the acquisition of Trexon and others over the years expanding to more advanced RF interconnect active and passive and all of what we have done, we have just become more important to all of our customers in all those regions. Both existing customers as well as the next generation of customers with whom we're working very intensively.

And I think we've done a very smart thing along the way, which is we have invested not only in bringing new products, broadening our suite of products, but also in the capabilities to build those products and the capacity to meet the demands of our customers now and into the future. And when you see now the urgency with which many of these defense departments ramp up their own procurement budgets and that includes potentially here in the United States.

We sit in a relatively unique position as a company that has the breadth of products but also the capacities and the capabilities to meet that demand. And our team takes up very seriously, not just because it's a good thing for Amphenol's business, but we know that lives depend on it. And there is a mindset across our entire team of folks working in the defense interconnect market that this is more than just delivering numbers and revenues and profit, but we're also delivering critical things to our customers.

And I'm really proud of what they've done. I mean growing that business as we have done, 25% organically last year for the full year, 21% organically. It's not a trivial initiative because making these products requires an enormous amount of technology. There's regulations of how you open new things. There's qualifications and all of the like. It's not as simple as just adding some machines and off you go.

So look, we look -- we're very proud of our defense business. We're excited for the future. And to me, it feels like this is potentially a long-term structural shift in the demand dynamics in a market where we position ourselves very well to take advantage of that.

We have a question from Joe Giordano with TD Cowen.

I know we're not going to get into specific numbers here, but there's a lot of questions that people are trying to struggle with when you think about new architectures and data centers and on racks from -- as you move into higher voltages and what are the -- like the interplays between price -- like ASPs that you guys can charge versus like the pounds of wire or the lengths of wire.

And can you maybe just talk generally like as you get into these more complex, more streamlined types of architectures like the interplay between what the value of those products are versus like what might be going away in terms of, like I said, like pounds of copper or length of cabling in that sense. Like how do we get to a net of all that?

Yes. Look, Joe, I'm probably going to frustrate you here with my answer. I'm not going to -- because I couldn't give you kind of the fill in the spreadsheet so to speak, on pounds of this and length of that. But you mentioned one thing. And you mentioned that there's new architectures with new approaches.

You mentioned, for example, higher voltage. And there's no doubt about it that our team is working to enable these next-generation systems which will need new energy. And we talk a lot about the data part of AI data centers, but I think we should also talk a lot about the power part of them. And again, we come into that with the broadest array of power interconnect from discrete connectors to very complex power cable assemblies, bus bars, liquid cooled bus bars. And you can imagine that our team is doing an enormous amount of things, making sure that as our customers shift to higher and higher power capacities inside their racks, inside their data centers, that Amphenol is their core partner. And I'm really proud of what the team has done there. And we'll continue to see great opportunities across the board. But I'm not going to be able to give you a pound and length kind of metric here.

That concludes our Q&A session. So I will hand back to Mr. Norwitt for closing remarks.

Well, thank you all very much. We truly appreciate everybody's interest in the company today, and we look forward to talking to you all here in 90 days, and I hope you all have a wonderful spring and start to your summer. Thanks so much. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Hello, and welcome to the Fourth Quarter 2025 Earnings Conference Call for Amphenol Corporation. [Operator Instructions] At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Great. Thank you so much. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to wish everyone a happy New Year and welcome you to our fourth quarter of 2025 conference call. Our fourth quarter 2025 results were released this morning. I will provide some financial commentary, and then Adam will give an overview of the business and current market trends. Then we will take your questions. As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements. Please refer to the relevant disclosures in our press release for further information.

The company closed the fourth quarter of 2025 with record sales of $6.4 billion and GAAP and adjusted diluted EPS of $0.97 and $0.93, respectively. The fourth quarter sales were up 49% in U.S. dollars, 48% in local currencies and 37% organically compared to the fourth quarter of 2024. Sequentially, sales were up 4% in U.S. dollars and in local currencies and up 3% organically. Adam will comment further on trends by market in a few minutes.

For the full year 2025, sales were approximately $23.1 billion, up 52% in U.S. dollars, 51% in local currencies and 38% organically compared to 2024. We are very encouraged by our orders in the quarter, which were a record $8.431 billion, up a strong 68% compared to the fourth quarter of 2024 and up 38% sequentially, resulting in a very strong book-to-bill ratio of 1.31:1. This impressive book-to-bill in the quarter was primarily driven by robust bookings in the IT datacom market related to AI applications. We have seen customers open their order window a bit in certain cases, which helped to drive these strong bookings. For the full year, orders were $25.4 billion, up 51% compared to 2024, resulting in a book-to-bill ratio of 1.1:1.

GAAP operating income was $1.7 billion in the quarter, and GAAP operating margin was 26.8%. GAAP operating margin included $47 million of acquisition-related costs, primarily for external transaction costs and the amortization of acquired backlog. Excluding acquisition-related costs, adjusted operating margin and adjusted operating income was 27.5% and $1.8 billion, respectively. On an adjusted basis, operating margin increased by a strong 510 basis points from the prior year quarter and was flat sequentially. The year-over-year increase in adjusted operating margin was primarily driven by robust operating leverage on the significantly higher sales volumes, which was only modestly offset by the dilutive impact of acquisitions.

For the full year 2025, GAAP operating income was $5.9 billion and included $181 million of acquisition-related costs. Excluding these costs, adjusted operating income was $6.1 billion in 2025. For the full year, GAAP operating margin and adjusted operating margin reached annual records of 25.4% and 26.2%, respectively. On an adjusted basis, operating margin increased 450 basis points compared to 2024, primarily driven by strong operational performance on the significantly higher sales volumes, which again was only modestly offset by the dilutive impact of acquisitions. I'm extremely proud of the company's operating margin performance in the fourth quarter and for the full year 2025, both of which reflect continued strong execution by the team.

Breaking down fourth quarter results by segment compared to the fourth quarter of 2024. Sales in the Communications Solutions segment were $3.4 billion and increased by 78% in U.S. dollars and 60% organically. Segment operating margin was 32.5%. Sales in the Harsh Environment Solutions segment were $1.7 billion and increased by 31% in U.S. dollars and 21% organically and segment operating margin was 27.6%. Sales in Interconnect and Sensor Systems segment were $1.4 billion, increased by 21% in U.S. dollars and 16% organically and segment operating margin was 20.1% -- bringing down full year results by segment compared to 2024, Sales in the Communications Solutions segment were $12.1 billion and increased by 91% in U.S. dollars and 71% organically and segment operating margin was 31.1%. Sales in the Harsh Environment Solutions segment were $5.9 billion, increased by 33% in U.S. dollars and 17% organically and segment operating margin was 26.2%. And sales in the Interconnect and Sensor Systems segment were $5.2 billion and increased by 15% in U.S. dollars and 13% organically, and segment operating margin was 19.5%.

For the fourth quarter, the company's GAAP effective tax rate was 26.9%, which compared to 17.4% in the fourth quarter of '24 and full year '25 GAAP effective tax rate was 23.1%, which compared to 18.9% in 2024. On an adjusted basis, the effective tax rate of 25.5% both for the fourth quarter and full year, which compared to 24% in the prior year periods. As we discussed last quarter, the increase in our adjusted effective tax rate in '25 was due to some shift in income mix to higher tax jurisdictions. For modeling purposes, you should assume that this higher tax rate of 25.5% continues into 2026. As is our typical practice, our adjusted tax rate excludes the tax effect of any acquisition-related costs as well as excess tax benefit from stock option compensation as well as other discrete tax-related items. Specifically, in the fourth quarter and for the full year 2025, our adjusted tax rate excludes a $100 million discrete tax accrual related to notices received by certain subsidiaries in China from relevant tax authorities challenging certain taxes taken over the last -- over up to an 8-year period. We believe these tax positions are appropriate and remain engaged in ongoing discussions with the relevant tax authorities.

GAAP diluted EPS was $0.93 in the fourth quarter, up 58% compared to the prior year period. And on an adjusted basis, diluted EPS was a record $0.97, an increase by 76% compared to the $0.55 in the fourth quarter of 2024. This was an outstanding result. For the full year, GAAP and adjusted diluted EPS were both a record $3.34, an increase of 74% and 77%, respectively. Operating cash flow in the fourth quarter was $1.7 billion or 144% of net income and free cash flow was $1.5 billion or 123% of income. And for the full year of 2025, operating cash flow was a record $5.4 billion or 126% of net income and free cash flow was a record $4.4 billion or 103% of net income. Considering the high growth rates we experienced this year, this is a very strong result. From a working capital standpoint, inventory days, days sales outstanding and payable days were all within our normal range.

During the quarter, the company repurchased 1.3 million shares of common stock at an average price of approximately $134. When combined with our normal quarterly dividend, total capital returned to shareholders in the fourth quarter of 2025 was approximately $373 million and was nearly $1.5 billion for the full year of 2025. Total debt at December 31 was $15.5 billion, and net debt was $4.1 billion, which included $7.5 billion from the U.S. bond offering we completed in October in anticipation of the closing of the CCS acquisition. Total liquidity at the end of the fourth quarter was $17.5 billion, which included cash and short-term investments on hand of $11.4 billion plus availability under our existing credit facilities and $3.1 billion of term loan facilities put in place in anticipation of the CCS acquisition. In early January, the company closed the CCS acquisition, which was funded with cash on hand, primarily resulting from the October 2025 bond deal as well as the $3.1 billion of term loan facilities. As a result of the acquisition of CCS, we expect 2026 quarterly interest expense, net of interest income from cash on hand to be approximately $200 million, which is reflected in our first quarter 2026 guidance. Adjusting for the impact of the CCS acquisition, our net debt at year-end would have been $14.7 billion, and our liquidity would have been $6.9 billion, which includes pro forma cash and short-term investments on hand of $3.9 billion. Fourth quarter 2025 EBITDA was $2 billion, and our net leverage ratio was 0.6x at the end of the quarter. Pro forma net leverage at the end of 2025, including the CCS acquisition, would have been approximately 1.8x. As of December 31, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs. I will now turn the call over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and I also would like to offer my best New Year's wishes to all of you here. Craig and I are here in the Winter Wonderland of Wallingford, Connecticut, and it's a real pleasure to talk to you about our fourth quarter and full year achievements. I'll highlight some of those achievements. And then as Craig mentioned, I'm going to discuss the trends across our served markets. We'll make some comments on the outlook for the first quarter. And then, of course, we'll have time for questions.

Turning to the fourth quarter. There's no doubt that Amphenol had a strong finish to a very successful 2025 with sales and adjusted diluted earnings per share in the fourth quarter, both exceeding the high end of our guidance. Sales grew by 49% in U.S. dollars and 48% in local currencies, reaching a new record of $6.439 billion. And on an organic basis, our sales increased by 37% with robust growth across nearly all of our served markets. As Craig mentioned, we booked a record $8.4 billion of orders in the fourth quarter, which represented a very strong book-to-bill of 1.31:1. These orders grew by 68% from prior year and were up 38% sequentially -- and while orders were strong across the board, there's no doubt that these robust orders were driven primarily by data center demand related in particular to artificial intelligence investments being planned by a number of our large customers.

We're also pleased in the quarter to have delivered adjusted operating margins of 27.5% in the quarter, which matched our record-setting margins in the third quarter and which represented an increase of 510 basis points from prior year. This superior profitability is a direct result of the outstanding execution of the Amphenol team around the world. Our adjusted diluted EPS in the quarter grew by 76% from prior year, reaching a new record of $0.97. Finally, the company generated record operating and free cash flow in the fourth quarter of $1.7 billion and $1.5 billion, respectively, both clear reflections of the quality of the company's earnings. I just can't express enough my pride in our team here in the fourth quarter. These results once again reaffirm the value of the discipline and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment.

We're also very excited in the quarter that we closed on the previously announced acquisition of Trexon with operations in the U.S. and Europe and with annual sales of approximately $290 million. Trexon is a leading provider of high-reliability interconnect and cable assemblies primarily for the defense market. We're particularly excited that Trexon further expands our value-add interconnect offering for the defense market, enabling us to offer our customers in this important area, a complete solution of high-technology interconnect products, really the broadest in the industry. We look forward to the Trexon team flourishing as part of the Amphenol family.

In addition, just here in January, we were excited to have closed on the acquisition of the CCS business from CommScope, a bit earlier than we had anticipated. This business, which will be known going forward as CommScope and Amphenol company, represents a significant expansion of our interconnect capabilities across 3 of our important end markets. As we discussed last year, CommScope had significant fiber optic interconnect capabilities for the IT datacom and communications networks markets as well as a diverse range of industrial interconnect products for the building connectivity market, which will be included in our Industrial segment. We look forward to working closely with the CommScope team as they embrace the Amphenol operating culture and are really excited about the potential that this significant acquisition can bring to our company. As previously disclosed, we expect CommScope to generate full year 2026 sales of $4.1 billion and to add $0.15 to Amphenol's 2026 adjusted earnings per share.

As we welcome the outstanding CommScope and Trexon teams to the Amphenol family, we remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions and then to successfully bring these companies into Amphenol remains a core competitive advantage. And there's no doubt that as our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes.

Now turning to the full year 2025. Simply put, 2025 was a uniquely successful year for Amphenol. We expanded our position in the overall market, growing our sales by 52% in U.S. dollars, 51% in local currency and 38% organically, reaching a new sales record of $23 billion or $23.1 billion. As we cross $23 billion in sales in 2025, we're very proud to have more than doubled Amphenol's revenues in the past 4 years, a great reflection of our organization's ability to navigate market dynamics while capitalizing on the broad array of opportunities arising across the electronics industry.

Our full year 2025 adjusted operating margin reached a record 26.2%, and that was a robust increase of 450 basis points from prior year. And this strong level of profitability enabled us to achieve record adjusted diluted EPS of $3.34, an increase of 77% from the 2024 levels. As Craig mentioned, we generated record operating cash flow of $5.4 billion and free cash flow of $4.4 billion, clear confirmations of the company's superior execution and disciplined balance sheet management.

Very proud that our acquisition program again created great value this year. We completed 5 acquisitions in 2025, including Andrew, our largest acquisition at the time, together with the acquisitions of Trexon, Narda-MITEQ, LifeSync and Rochester Sensors. Collectively, these acquisitions have added to Amphenol annualized sales of nearly $2 billion. In addition, as I just mentioned and as we announced earlier this month, we also closed on our largest ever acquisition now, which is the CommScope acquisition. What is in common across all these acquisitions is that they enhance our position across a broad array of end markets and deep enabling technologies, all while bringing outstanding and talented individuals into the Amphenol family.

We also returned substantial cash to shareholders in 2025, buying back nearly 7.5 million shares under our share repurchase program and increasing our quarterly dividend by 52%. This represented a total return of capital to shareholders of nearly $1.5 billion. As we enter 2026, I remain excited about the opportunities ahead of us for Amphenol. Our agile entrepreneurial organization has created a new position of strength for the company from which we can continue to drive superior long-term performance.

Now turning to our served markets. Once again, I'm very pleased that the company's end market exposure remains diversified, balanced and broad. And there's no doubt that, that presence that we have across all these end markets creates great value for the company as we're allowed to participate across all areas of the global electronics industry wherever there may be new revolutions arising, all while not being disproportionately exposed to the volatility of any given application or market.

Turning first to the defense market. That market represented 10% of our sales in the fourth quarter and 9% of our sales for the full year 2025. Sales in the fourth quarter grew strongly from prior year, increasing by 44% in U.S. dollars and 43% in local currencies. On an organic basis, sales increased by 29% with broad-based growth across virtually all defense applications, including, in particular, radar, space, communications, avionics and unmanned aerial vehicles. Sequentially, sales increased by 16%, well ahead of our expectations for mid-single-digit growth. For the full year 2025, our sales grew by 30% in U.S. dollars and local currency and by 21% organically, reflecting our superior operational execution as well as growth across all segments of the defense market. In addition, we're very pleased that our growth in 2025 was really broad-based geographically, reflecting our leading position across the many countries who are increasing their defense spending. Looking ahead, we expect sales in the first quarter to increase slightly, largely driven by the benefit of the Trexon acquisition. And we remain encouraged by the company's leading position in the defense interconnect market, where we continue to offer the industry's widest range of high-technology products. Amidst the current dynamic geopolitical environment, countries around the world are further expanding their investments into both current and next-generation defense technologies. With our existing offerings as well as the exciting and complementary capabilities from Trexon, we are positioned better than ever to capitalize on this long-term demand trend.

The commercial air market represented 5% of our sales in the quarter and for the full year 2025. In the fourth quarter, our sales grew by 21% in U.S. dollars and 20% in local currencies. On an organic basis, sales increased by 19% from prior year, driven by broad-based strength with virtually all commercial aircraft manufacturers. Sequentially, our sales grew by 10% from the third quarter, well above our expectations coming in 90 days ago. For the full year 2025, sales in the commercial air market increased by 39% in U.S. dollars and 38% in local currency as we benefited from accelerating demand across aircraft platforms as well as from acquisitions. Organically, our sales increased by 13% from prior year, reflecting our robust design-in positions on a broad array of jetliners. Looking into the first quarter, we expect sales to moderate seasonally by approximately 10% on a sequential basis. I'm truly proud of our team working in the commercial air market. With the ongoing growth in demand for aircraft, our efforts to expand our product offering, both organically and through our successful acquisition program continue to pay real dividends. In particular, I just want to note that we're very pleased with the progress of the CIT team who have truly embraced being part of Amphenol and have driven outstanding results. We look forward to further capitalizing on our expanded range of product solutions for the commercial air market long into the future.

The industrial market represented 18% of our sales in the quarter and 19% of our sales for the full year 2025. Our sales grew by 20% in U.S. dollars and 18% in local currencies from prior year. And on an organic basis, we were pleased that sales grew by 10%, driven by relatively broad-based growth across the industrial end markets, in particular, medical, alternative energy, e-mobility, heavy equipment and industrial instrumentation applications. We also grew again in all of our major geographic regions. On a sequential basis, sales grew by 2%, better than our expectations. For the full year 2025, sales grew by 21% in U.S. dollars and 20% in local currency as we benefited from relatively broad-based growth as well as from acquisitions. Organically, sales grew by a strong 10% from prior year. Looking into the first quarter, we expect our sales to increase approximately 20% from these fourth quarter levels, driven by the addition of CommScope's building connectivity business. We remain encouraged by the company's strength across the many diversified segments of this important market. Over the long term, I'm confident in our strategy to expand our high-technology interconnect antenna and sensor offering, both organically and through complementary acquisitions. This strategy has enabled Amphenol to capitalize on the many electronic revolutions that continue to occur across the diversified industrial market and thereby create further opportunities for outstanding team working in this important market.

The automotive market represented 14% of our sales in the fourth quarter and 15% of our sales for the full year. Sales in the fourth quarter grew by 12% in U.S. dollars and 9% in local currencies and organic, and that was driven by relatively broad-based growth across automotive applications. In addition, we are pleased that once again, we realized growth in all 3 regions. Sequentially, our automotive sales were flat, but this was better than our expectations coming into the quarter. For the full year 2025, our sales increased by 8% in U.S. dollars and 7% in local currencies and organic, with growth in all 3 regions. As we look into the first quarter, we do expect a seasonal moderation in sales from this quarter's levels of approximately 10% I remain very proud of our team working in the important automotive market. And while there are always areas of uncertainty in the global automotive market, our organization continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. We look forward to benefiting from our strengthened position in the automotive market for many years to come.

The communications networks market represented 9% of our sales in the fourth quarter and 10% of our sales for the full year 2025. Sales in this market grew from prior year by 120% in U.S. dollars and 119% in local currency as we benefited from the Andrew acquisition completed earlier last year. Organically, our sales were flat from prior year. On a sequential basis, sales declined as expected by 13% from the third quarter. And for the full year 2025, our sales to Communications networks increased by 134% in U.S. dollars in local currency and by 13% organically as we benefited from the addition of Andrew as well as growth in our products sold into the mobile network operators and wireless equipment manufacturers. As we look towards the first quarter, we do expect a significant nearly 50% increase in sales as we benefit from the addition of the CommScope business, which more than offsets the typical seasonal sales declines that we would see here. With our expanded range of technology offerings following the acquisitions of both CommScope and Andrew, -- we are well positioned with service provider and OEM customers across the global communications networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint have positioned us to support these customers wherever they may be. And as customers in this market continue to drive their systems and networks to higher levels of performance, we look forward to enabling them for many years to come.

The mobile devices market represented 6% of our sales in the quarter and also for the full year. And in the fourth quarter, our sales moderated by 4% in U.S. dollar, local currency and organic as growth in tablets, wearables and accessories was more than offset by some moderation in sales related to smartphones. On a sequential basis, our sales increased by 6%, which was a bit better than our expectations coming into the quarter. And for the full year 2025, sales in the mobile devices market increased by 5% in U.S. dollar and organic, and that was really driven by growth across virtually all mobile device applications. As is typical in the first quarter, we do anticipate a seasonal decline of some magnitude, roughly in the 30% range as we look into the first quarter. But nevertheless, I'm very proud of our team working in the always dynamic mobile devices market as their agility and reactivity have once again enabled us to capture incremental sales in the quarter. I'm confident that with our leading array of antennas, interconnect products and mechanisms designed in across a broad range of next-generation mobile devices, we're well positioned for the long term.

Finally, the IT datacom market represented 38% of our sales in the fourth quarter and 36% of our sales for the full year. Sales in the fourth quarter grew by a very strong 110% in U.S. dollar and organic, driven by continued strong demand for our products used in AI applications, together with ongoing growth in our base IT datacom business. On a sequential basis, our sales increased by 8% from the third quarter, which was substantially better than our expectations 90 days ago. This sequential increase was essentially driven by growth in AI-related applications. For the full year 2025, our sales in the IT datacom market grew by a very strong 124% in U.S. dollars and organic as we benefited from strong demand for AI-related applications as well as accelerated growth in our non-AI IT datacom business. As we look ahead, we expect a low double-digit sequential sales increase in the first quarter, driven by the addition of CommScope. And on an organic basis, we're very pleased to anticipate that we will remain at these very elevated levels in the fourth quarter. We are more encouraged than ever by the company's position in the global IT datacom market. I just can't emphasize enough what an outstanding job our team has done, not only in securing future business on these next-generation IT systems with a really broad array of customers, but in executing upon that demand here in 2025. There's no doubt that the revolution in AI continues to create a unique opportunity for Amphenol, given our leading high-speed and power interconnect products. With now the addition of CommScope, we have the broadest range of high-speed power and fiber optic interconnect products, all of which are critical components in these next-generation systems. This creates a continued long-term growth opportunity for Amphenol.

Turning to our outlook and of course, assuming the continuation of current market conditions as well as constant exchange rates, for the first quarter, we expect sales in the range of $6.9 billion to $7 billion and adjusted diluted EPS in the range of $0.91 to $0.93. This would represent significant sales growth from prior year of 43% to 45% and adjusted diluted EPS growth of 44% to 48%. I would note that our Q1 guidance includes approximately $900 million in sales and $0.02 of adjusted EPS accretion from the CommScope acquisition. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges present in the current environment while continuing to grow Amphenol's market position, all while driving sustainable and strong profitability over the long term.

Finally, I'd like to take this opportunity to first thank our customers for the trust that they put in us and also to thank the entire global team of Amphenolians for their truly outstanding efforts here in the fourth quarter and in the full year 2025. And with that, operator, we'd be happy to take any questions.

[Operator Instructions] We have a question from William Stein from Truist Securities.

Congrats on the very strong results and outlook. First, I'd like to ask about the bookings, which was very strong. I think you highlighted a 1.31 book-to-bill. Adam, that -- I imagine must have in it some extended duration orders in the backlog. And I wonder whether that's entirely concentrated or mostly concentrated in IT datacom. And also, if you can talk about what gives rise to that level of orders. Is it based on sort of a need for them to place this in order to get in line from a sort of a lead time perspective? Or is this based perhaps on sort of minimum order requirement in order to meet CapEx requirements that you have? Any color on that would be really helpful.

Well, thank you very much, Will. Look, no doubt, we are very encouraged by the bookings as we came out of the year in 2025. And I'll say a couple of things. I mentioned earlier that, in fact, our bookings were really broadly strong across all of our end markets with maybe, I think, only one exception, our book-to-bill was at or above 1 and in a few cases, significantly above 1. And -- but there was certainly the IT datacom market and specifically related to AI investments was a primary driver of this 1.31 book-to-bill and record orders for the company to achieve orders of more than $8 billion in the quarter was certainly a milestone for all of us.

Look, I think that, as I mentioned, and I think Craig alluded to, that we have seen customers open up their order window for -- in particular, related to significant plans that they have of investments related to AI -- this is not because of kind of getting in line, so to speak. I mean I think our team has done a fabulous job of ramping up. I mean, as evidenced by the extraordinary growth that we achieved last year, 124% year-over-year growth for the full year in IT datacom. There's no doubt that our team has done an amazing job of ramping up to our customers' needs. But at the same time, and we've talked about this in the past, because of the technology involved in a lot of these next-generation products, really pushing the limits of these systems and pushing the limits of the products, these products do require, in certain cases, more automation, which fortunately, we do the vast majority of that in-house, which has been an amazing competitive advantage for Amphenol through this time period.

And so we've worked with customers because of these sometimes outsized investment requirements and their outsized plans that they provide to us to somehow share the risk of those investments. And we do that in a variety of ways. Those ways can include customers actually sharing some of the spending, contributing to the spending and otherwise, giving us commitments that are solid commitments that give us the comfort to make those investments and drive the ramp-ups that ultimately meet those customers' demands. And so I think it's more not -- and you used the word minimum order. I wouldn't call it minimum order, but rather it's giving us the comfort through their own commitments to Amphenol that we should then make the commitments in capital and using Amphenol's hard-earned cash and the time of our teams to make those investments. And I think it's a great sign. It's a sign, number one, of our customers' intentions and their plans, which are very robust. It's a sign number two of our customers' commitment and confidence in the Amphenol organization. And so no doubt about it. I think it's a positive, and we look forward to continuing to drive great success in that market in the future.

Our next question comes from Amit Daryanani from Evercore...

Adam, post the CCS deal, can you just talk about the breadth of your offerings when it comes to serving these AI infrastructure customers? You folks have done really well on a stand-alone basis, but there's this view, I think, out there that Amphenol is driven more by copper. And as we move more to optics and fiber, there's a risk here. So maybe hoping you can spend some time to help us appreciate the range of offerings you're going to have post CCS? And how do you see these offerings that you get from CCS really being complementary to what Amphenol has today?

Yes. Well, thank you very much, Amit. Look, there's no doubt about it that we have worked for a long time, and it's kind of ironic. We just celebrated the 20th anniversary of another foundational acquisition for Amphenol, which was the acquisition of the Teradyne Connection Systems business 20 years ago, which really catapulted Amphenol into a leadership position in high-speed copper interconnect products. I will tell you that at that time, high speed meant 5 gigabits, maybe 10 on the outside. And over those 20 years, we've continued to double down on the excellent capabilities that TCS brought us, the people, most of whom are still with our team today, there to celebrate that same 20th anniversary. And that has put us in a real leadership position as our customers drive their systems to higher and higher speeds.

Now we have always been a player in fiber optics. I mean, going all the way back to the early foundations of what a fiber optic connector was half a century ago or more. But there's no question that with CCS, just like at the time with TCS 20 years ago, CCS vaults us into a position of breadth and depth in the technology around fiber optic interconnect that is a real expansion of our capabilities. And so when we go to customers and we talk about data center applications or when we go to communications networks customers and talk about their next-generation network planning, we can now have that conversation across the entirety of the interconnect spectrum. As they think about the various trade-offs that a customer goes through every time they think about their specific system architecture, do they want to use a high-speed copper interconnect here? What's the power situation? How do they bring power into their system, into the rack, into a data center, into a network? And then how do they use fiber optics, which have, of course, fabulous traits, in particular, around high-bandwidth, long-distance communications.

And customers are making these trade-offs every day. And now with the CCS acquisition, what I'm so excited about is the unique position it puts Amphenol in as a company to be able to go in and talk to that entire spectrum of interconnect. Our customers just want to get a signal from a place to a place. And it's up to us to work with them to figure out the best way to do that, whether they're getting a signal from a GPU to a GPU or from a central office to a home somewhere or anything in between. And I think now we were able to come to them with a total solution of leading interconnect products that ultimately allow us to be -- have a seat at the table as a partner with those customers for many, many years and many generations to come.

Our next question comes from Luke Junk from Baird.

Adam, maybe to bridge on the comments you just made. I'm just wondering if you could maybe speak to integration first steps at CommScope. And like you mentioned, the deal got closed a little sooner than you had expected. Just how important is that in terms of bringing this new fuller, broader portfolio to bear in data center, especially given how quickly this market is moving right now?

Well, thanks very much, Luke. Look, I'll answer the second question. I mean, you get one of these deals done, you got to get a lot of approvals in a lot of different places. And I think our team did a great job of working with the various authorities to get those approvals a bit faster. And I'm really grateful also to the folks who sold us this company, and they've renamed our company now, and I wish them all the best. it was really a great experience, I think, for all sides. And we worked really well together to bring this deal to fruition quite a bit faster than we thought it was going to be at the time that we originally announced the deal.

I would say -- so the speed, I don't think the fact that we closed it early in the quarter versus the end of the quarter, that doesn't change our position in the marketplace. Obviously, as soon as we announced the deal, you can imagine that our customers around the world were -- wanted to talk to us about what that meant for the long term. And so we've been having those conversations for quite some time already. In terms of the integration, I mean, that word integration is not a word in the AmphenolLexicon. There are 2 words we don't use, integration and synergy. And -- but what we do talk about is letting them evolve into the Amphenol family, letting them be who they were because it's a fabulous organization. I mean the leadership of the company is still the same leadership. The people are still the same people. We're not parachuting people in. We're not merging and morphing things into one or another, synergizing and restructuring. We're actually working with the team on day 1 to say what are the opportunities that now that you're part of Amphenol, you could hope to achieve that you maybe couldn't have done as part of your former company.

I was so happy on the first day of the acquisition that right after we announced it, I went to really one of the nerve centers of the company. As you know, the CommScope, we've talked about this. In many ways, it is a collection of extraordinary iconic businesses in its own right, the CommScope business that was founded nearly 50 years ago by Frank Drendel as a supplier into the broadband networks market, the Systemax business, which is an amazing iconic business selling into building connectivity and the ADC Communications, which was a long legacy leader in fiber optic interconnect. And so I was really happy to go to Chakopee, Minnesota, where -- which is really the nerve center of the fiber optics capability of this company and meet with these engineers and the product managers and the folks leading that business. And I can tell you, they're so excited to be part of Amphenol. And we broadcast a welcome around the world and just a kind of almost a universal excitement to be part of this company called Amphenol to become Amphenolians, as they all now know that word. And so the first steps is meet the people, get excited, find opportunities to go accelerate the business, and that's all well underway today.

Our next question comes from Wamsi Mohan from Bank of America.

Adam, I was hoping you could maybe parse the first quarter IT datacom guide of flattish organically, excluding CCS. Within that, should we be expecting the traditional sort of enterprise-centric market, double-digit decline and the AI workloads to grow? Is that the right way to think about it? And within the AI context, -- is that more programs for you, more units in existing programs? Any color you can share around sort of what you're hearing from your larger AI customers in terms of just trajectory given especially your comments about very strong orders?

Yes. Well, thanks very much, Wamsi. Look, I mean, it's hard for me to give too much of a parse of what that flat organic means. I mean you're correct. Traditionally, the base IT datacom cycle would be down in the first quarter. So I think probably there's some of that here as well. But look, in terms of our ongoing growth in AI, I mean, I want to emphasize one thing, which is just the breadth of that business. we have an enormous position with a lot of different customers up and down the stack of AI from the folks who are making the investments, the big web-scale folks and otherwise, including like the cloud, the Neo cloud, whatever you guys all call these folks, the equipment manufacturers all the way down to, of course, the significant companies who are designing the chips and the architecture around those chips.

I mean I will say that as we come out of 2025, that breadth is reflected in the fact that we didn't have any 10% customers in 2025. We have significant customers, but we have also a lot of breadth around that business. And so as our customers think about the forward potential of AI, I mean, I think there's a few factors. Number one is their investment plans are all going up. There's no doubt that there continues to be a very robust plan of continuing to drive accelerated computing at a very strong level. And there's upgrades of the technology embedded in those data centers, which requires a higher technology, more complex, higher content degree of interconnect. We're also very excited that not only are we participating as we have traditionally bringing the power in, power to the racks and the like, the data communication within racks, within adjacent racks, but also now with CommScope participating in the broader fiber optic opportunity associated with those data centers. And there's no doubt that, that also creates a strong opportunity for the company going forward.

Our next question comes from Samik Chatterjee from JPMorgan.

Adam, I'm wondering when you mentioned the sort of customers opening up their order books a bit when it pertains to your IT datacom business, are you seeing anything similar for the CCS business? And the reason I ask is we saw one of the competitors in the space Corning announced agreement with Meta securing supply. So are you seeing hyperscalers or customers on that front come to you to sort of engage in those discussions to secure supply? And what that would mean for your investment sort of support for this business?

Yes. Well, thank you very much, Samik. Yes. Look, no doubt, we had very strong orders. And I would tell you that the CommScope business, as we call it now, we're not calling it anymore CCS has also had very strong orders. And for sure, I mean, there have been plenty of announcements by really wonderful companies out there, and we're really proud to be considered in the same breadth of some of these amazing companies that have also been in the public eye of late. And there's no doubt that the CCS is participating. I mean we've talked about the fact that their exposure into the data center, the strong growth that they've seen in that area. I would also just point out, at the time we acquired and we announced the acquisition then of CCS, we talked about acquiring a company of roughly $3.6 billion in sales at a 26% EBITDA margin, and that implied a price of just over 11x that we paid for it. By the time we closed, we're now talking about a business of more than $4 billion in annualized sales. That is a great momentum, strong orders, positive books-to-bill and all of that. And obviously implies as well that on -- at least on a current year basis here in 2026, we -- this is a great deal for Amphenol and really the high single digits in terms of an EBITDA multiple. So I think it's a great company with great prospects. And yes, does see those same trends.

In terms of investments, I mean, look, we don't see any significant abnormal kind of things vis-a-vis investments with CCS. But I will say this, and that's something we've talked about in the past, it's a different thing for CCS to be a part of a company that for very obvious reasons, was somewhat balance sheet constrained -- and now they're part of Amphenol, where we're more than willing to help them stimulate the virtuous cycle that so many of our companies are on by making prudent investments that allow great returns and allow them to capitalize upon the opportunities in the marketplace. And so it's not that we're just going to give them all blank checks here. But you can imagine that it's a different environment for CCS in terms of their ability to grow into the opportunities as part of Amphenol than maybe it would have been in the past.

Our next question comes from the line of Andrew Buscaglia from BNP Paribas...

Maybe shifting away from the AI and IT datacom story for a minute. I think another kind of underlying trend this quarter or a positive thing we're seeing is the momentum in a lot of other areas in your markets are pretty beat up. And I'm thinking like industrial, automotive, mobile devices, specifically, just seem to start -- the markets seem to be turning a corner. Where do you say that's most pronounced? Maybe what surprised you in the quarter, if anything? And where do you see some of these sort of battered end markets going in 2026?

Yes. Well, thanks very much, Andrew. I mean there's no doubt. I mean, we saw really broad-based strength as we -- through the year and as we finished the year. And I mentioned in my prepared remarks that we're especially encouraged in -- if you take automotive and industrial as 2 pretty broad global markets that we saw growth organically in both of those markets across all of the territories that they operate in. And I would highlight there, in particular, Europe. I mean the world has been so down on Europe for so long. And I think we've started to see in our company, especially in the second half of the year, that our teams in Europe who have held their heads high through this whole kind of malaise, if you will, and have continued to pursue opportunities to gain market share to enable our customers who are doing really amazing things, driving now robust organic growth in Europe, in automotive and in industrial for the full year. And I would even say that in the fourth quarter, amazingly, our strongest organic growth in automotive was in Europe. So that's definitely a different thing than we've been talking about and that the world has been talking about for some time. And I think we're excited about our continued position there.

And mobile devices, it's a different thing. I wouldn't call that as much of a regional market, but there's just a lot of innovation. Look, I always start the year at the Consumer Electronics Show in Las Vegas. And I think I even had the chance to run across a couple of you guys who are on the call here today in the lobbies of the Venetian or wherever. And I go to that show always because I find it so inspirational to see what folks are doing -- and what I find so interesting is everybody is talking about AI and the build-out of the networks of AI and the capability. But what I find long term, maybe even more exciting or at least equally exciting is what's going to come from that. What's it going to mean that we're going to have this ubiquitous accelerated compute capability all the way to the edge of technology. And when you walk around CES, you see it. Now look, I don't know what is that all going to mean. I personally am not going to be front of the line to buy like an AI-enabled toilet. But will one day as a former fan of Star Wars as we come to the almost 50-year anniversary, will we each have our own C3PO that will have great AI capabilities? Who knows? I mean these kind of things are possible. And I think the places like in automotive with autonomous driving, in industrial, where you see so many different things happening on the edge where things get smart, robotics and the like, and mobile devices, those 3 markets that you mentioned, I think each of those stand to have a fundamental step function in their capabilities and their potential because of what's happening today in the build-out of this AI network. And I think long term, that's something that I'm really excited about. And I think back on the other revolutions like the microprocessor, the Internet, the mobile Internet and the like. And each of those had later on a carry-on benefit to those markets, automotive, industrial, mobile devices and the like. And I'd be surprised if we don't see something like that in many years to come.

Our next question comes from Steven Fox from Fox Advisors.

I guess I just was curious, big picture, Adam, you've obviously just completed a really strong growth year and generate cash flows. But with the orders now that you're looking at, can you just sort of talk about sort of the management challenges? You mentioned adding more automation. And I'm wondering about like higher metals prices, supply chain constraints. How do you look at this in terms of new challenges, especially as your demand is broadening out?

Yes. Well, thanks very much, Steve. Sorry, I didn't save my Star Wars reference for you. Look, the -- this is not an easy thing to do to grow a company by 38% organically. Let alone those operations within the company who have grown by so much more than that. I mean you can imagine we've got folks who have more than doubled the size of their individual operations. But what sets us apart and what has always been the core of why we are able to do hard things is that unique operating culture of Amphenol. The fact that we rely on what is now 145 or so general managers, 16 operating groups. The CommScope, we talked earlier about the "integration." Well, there's not an integration. The CommScope team is -- the person who ran it is now a Group General Manager of Amphenol, and he's running his team as he ran it before. So the management challenges, and you list a couple of things, supply chain, the cost of metals, which are extraordinary, the geopolitics, whatever, shipping, I mean, there's so many things. And I think we don't fixate on one or an of those things. What I fixate on is making sure that if you're a general manager in Amphenol, you've got all the authority to deal with whatever comes your way. And that empowerment and enablement of people to go figure it out. And yes, if they need some help, we're here. We've got this amazing organization, driving collaboration, communication across the company. But at the end of the day, the buck stops on 145 desks. And if that means doubling the size of your business, figuring out how to set up factories in 4 different countries, doing things with technology that have never been done before, ramping up automation machines that we've never built before, but now can build extraordinarily, probably one of the world's best automation companies that exist, they make it happen. They make it happen. And so I think when I think about growing the company as we have, doubling the size of Amphenol really in the last 4 years, for me, the biggest singular focus is how do we do that while still preserving that entrepreneurial culture. And I'm so proud that we've done it. If you think about a big change in the company 4 years ago, which I'm not going to say is the thing that created that doubling, but it certainly enabled it. was when we moved to 3 divisions with 3 division presidents, when we expanded the number of operating groups in the company, all with the goal of securing, strengthening and scaling that unique entrepreneurial culture of Amphenol. And I don't think it's a coincidence that we took that step 4 years ago. And now here we are 4 years hence, celebrating doubling the size of Amphenol. And so I do believe that the management challenges, which are countless on every day, thousands of challenges that our people face, they're equipped to deal with them no matter what they are. And that gives me not only a confidence for the future, but enthusiasm for the future because whatever comes along, we know for sure the world is not predictable. But what I can predict is that Amphenolians will be there and will make it happen regardless.

Our next question comes from Mark Delaney from Goldman Sachs.

I was hoping you could speak a bit more on the margin outlook. The company sustained a record high EBIT margin again in the fourth quarter at 27.5%. But there's a number of factors as you go into 2026. You have some big deals like CommScope, you also alluded to, but metals are up quite a bit, but then the company is growing quite fast. So any color you can share on how to think about incremental margins this year and some of the key puts and takes?

Yes. Thanks, Mark. Appreciate the question. Yes, I mean, I'll start off by just really quickly addressing metals. I mean, Adam just mentioned kind of a bit about it. But from a margin perspective, I mean, certainly, we're we're working hard. I mean, metals are certainly something that we have as part of our cost of sales. It's not a significant cost when you kind of take into account the significant value we create within the facility. But certainly, it certainly has an impact. I mean it's like any other cost that we work through and the general managers do a great job of working through kind of offsets to those cost increases through anything from design of products to things in the factory to working with vendors to a whole host of different things. So I wouldn't say that, that, at least as of now, we see having any significant impact on kind of our margin outlook as we're moving into '26 and certainly hasn't had any evident impact certainly with these record operating margins that we've seen here in the fourth quarter and for the full year.

As we move into the first quarter, I mean, the main puts and takes here, I mean, organically, we have a slight sequential decrease in our sales, which is normal seasonality that we typically see during the first quarter. And we're converting kind of in the mid-30s, even the lower mid-30s in regards to that organic change. And that's typical given our profitability levels and kind of where I would expect. So the company is really doing a great job managing a seasonal sequential decrease. And the bigger impact on our margins in the first quarter really is just the impact of CCS. We talked about CCS being in the high teens for the full year and from an operating margin basis, kind of where we expect. I would tell you in the first quarter, just because of the seasonality of their sales and the lower sales in the first quarter that their operating margins are just a bit under kind of that high teens rate. So they're having a bit over 100 basis point impact on our margins in the first quarter. As we progress throughout the year, we're not guiding in '26, but certainly, we expect normal kind of operating margins. We expect that kind of 30% kind of targeted conversion margins that we target on incremental sales as we grow. And with CCS, again, we target that getting up to over time up to the company average. And certainly, that will be an adder over time to our operating margin potential. So I'm really happy with our operating margins that we've achieved in '25 and certainly very optimistic as to where we are in '26.

Our next question comes from Asiya Merchant from Citi.

Just given the strong order book momentum and the AI momentum that you guys also talked about, just -- Craig, if you could just talk about CapEx and how we should be thinking about investments into 2026 as a result of that? Sorry if I missed that earlier.

No, thanks for the question. No, we didn't talk about specifically earlier. No, from a capital perspective, and as we talked about in 2025, we were certainly spending at a bit higher level. But honestly, with the growth we have seen, we kind of ended the year just a bit over 4%, which is 3% to 4%, we say is our historic range. We ended the year just a bit over that 4%. And I would say, as we go into '26, and we continue to see certainly opportunities for growth. And certainly, we've had these strong orders here we talked about in the fourth quarter. We expect that capital spending to still be certainly at that upper end of that 4% range. And certainly, we have quarters that certainly exceed that 4% for capital spending into '26. So I think that the fact that we're still spending kind of in our historic range and roughly there is really just a testament to the -- just the discipline of the organization, the ability to spend wisely and really support the growth, the significant growth that we're seeing still with pretty reasonable spending, I think. So -- and I think I would expect more of the same in '26. And as we continue to grow, I think that 3% to 4% range will continue to be that. And I think as we -- these growth rates are a little higher, I would say that we'll be probably towards the upper end of that 4% range, give or take, in the quarter.

Our next question comes from Joe Spak from UBS.

Just a quick one for me relating to -- circling back to CommScope and that business. I know it's still early days in being the official owners, but any sense of how large their order book looks here going forward?

Yes. Thanks very much, Joe. I mean I think I mentioned earlier that CommScope's also had a nicely positive book-to-bill over the recent quarters. And so I think it has a positive order book from that perspective.

Our next question comes from Guy Hardwick from Barclays...

Just a quick one on the order book. Obviously, it's a fantastic result of $8.4 billion. Just how do we square that with the Q1 revenue guidance of $7 billion, which obviously, the Q4 order book didn't include CCS, but I assume assume Trexon. Is it the orders, the window that you talked about? And is that $8.4 billion really kind of a sustainable number over the next few quarters?

Thanks very much, Guy. I mean, look, I think I talked about the fact that we have seen customers extend their order window. Craig mentioned that as well. And in addition, as we continue to ramp up for our customers, new programs, particularly related to AI, there is that kind of confidence that we like to get before making investments. that our customers can give us in a variety of ways, including through orders. I'm not going to guide to what our orders are going to be in a given quarter. I mean you can imagine our sales folks are out there trying to pursue every order possible. But these are really outstanding orders, and they will carry through longer than just here in the first quarter.

Our next question comes from Scott Graham from Seaport Research Partners.

Congratulations on the print. My question is about defense. Obviously, the current administration's thinking is at some point, we need to push the budget up to $1.5 trillion. Is there any part of your defense sales that are maybe not subject to whether it's just an upgrade, next-gen technologies, the golden dome. I don't know how much -- how closely you've looked at some of the articles that have come out on this. But is there anything that you see that maybe doesn't give you maybe full dibs or most dibs on that? And then on the other side of it, are you concerned at all about the administration's sort of negative rhetoric around with NATO and what that might do to some of your international sales in defense?

Thanks very much, Scott. Look, I think as the leader in defense interconnect, I wouldn't tell you that we take that for granted. But do we have dibs on this market? We got dibs on this market. I mean -- and we have that because of a broad array of technologies and deep investments that we have made. I mean the one thing that I think sets us apart, in particular, related here to -- we'll talk about U.S. and then we'll talk global, is that we have continued to double down, number one, on technology innovation; and number two, on scaling our capacity to enable the defense industry to continue to meet the levels that they need to. And so whether that means today's budget or higher budgets in the future, I can tell you that the breadth of our offering, coupled with the depth of our capacity and capability is something that puts us in a really strong position across really all programs. And you mentioned a few programs. Our folks are deep into every program that is involved. I will also add to that. With the acquisition of Trexon, while only just under $300 million in sales, it really does expand the prominence of our value-add interconnect capabilities which is an enormous additional opportunity and additional growth potential for the company long term. We've always been a leader in the discrete connector solutions, a broad array of them. I mean you cannot imagine how broad that array is. But now being able to support the value-add products across programs, across applications, land, sea, air and everything in between, I think Trexon really rounds out our position and expands the potential of what we can do to support this growth.

Now relative to your question around NATO and international, our approach as a company has always been not to be a sort of U.S. flag in the front of our factory kind of an operation when we operate around the world. We operate 350 factories across more than 40 countries around the world. and we don't have expats period. We operate our company as a local company. So when we're in France, we're a local French company. When we're in the U.K., we're a local U.K. company in Denmark, in Germany, in Italy or wherever that may be. And that focus on being a local provider in the defense market. And our defense position in Europe is very, very strong. We've had really outperformance in Europe here for a number of years in terms of the strength of our business. I'm never going to say that you're insulated from anything -- but the way that we've structured our company, the culture around our company, how we interact with our customers is as a local partner in those places. And we do that in all of our businesses. That's just how we run the company. But I will tell you that in a geopolitically interesting world that we are in today, the way that we've always operated is a pretty good way to operate in today's world. And I think that will, in many ways, protect us from any politics that could inject themselves into this world. Our customers at the end of the day, want the best product, and they want it at the time that they need it. And if we can focus on continuing to do that and do it locally, I think our defense business has a great future.

Our last question comes from Joe Giordano from TD...

Adam, you mentioned CES, and I think one of the things coming out of there was an ultimate move at some point towards like 800-volt DC power for data centers, and there's major implications on what that means for copper and what that means for the ability to do things at different diameters. Just curious, as your portfolio broadens out and you have these fiber capabilities, what does like the -- if you think through the potential positives and negatives for such a dynamic, like how do you think that nets out for you guys?

Yes. Look, I think what we care about, Joe, is that there's more of everything. And so as folks make changes, they go to different voltages, they go to different speeds of transmission, they go to more nodes, they go to more tokens, they go to more density, whatever it is. The ultimate, what comes out of that is more complexity. And so for us, whether it's one type or another, I talked earlier about the fact that we today, especially with the CommScope acquisition, have the broadest offering in the industry and the broadest ability to enable our customers really as they face these really challenging technological trade-offs. And so I think we're in a really great position. to be able to do that and even stronger than we were before pre the CommScope acquisition. And whether it's different voltages or different speeds or different densities or all the various things that our customers are looking at, I think we're going to have a great seat at the table working with them to enable these exciting next-generation systems.

Thank you -- we currently have no further questions. So I'll hand it back to Mr. Norwitt for closing remarks.

Well, thank you very much. And again, I'd like to offer my gratitude to everybody here for taking the time with us today, and we look forward to seeing you in 90 days. And I hope you all, at least those of you who are not too far from us here in Connecticut, I hope you're able to stay warm.

Thanks. Thanks, everybody.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Hello, and welcome to the Third Quarter 2025 Earnings Conference Call for Amphenol Corporation. [Operator Instructions]. Today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Thank you very much. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our third quarter 2025 conference call. Our third quarter '25 results were released this morning. I will provide some financial commentary, then Adam will give an overview of the business and current market trends. Then of course, we will take your questions.

As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements. So please refer to the relevant disclosures in our press release for further information. The company closed the third quarter of 2025 with record sales of $6.194 billion, a record GAAP and adjusted diluted EPS of $0.97 and $0.93, respectively. Third quarter sales were up 53% in U.S. dollars, 52% in local currencies and 41% organically compared to the third quarter of 2024. Sequentially sales were up 10% in U.S. dollars and local currencies and up 9% organically. Adam will comment further on trends by market in a few minutes.

Orders in the quarter were a record $6.111 billion, up a strong 38% compared to the third quarter of 2024 and up 11% sequentially, resulting in a book-to-bill ratio of 0.99:1. GAAP and adjusted operating income were both $1.72 billion in the quarter and operating margin was a record 27.5%. On an adjusted basis, operating margin increased by a strong 560 basis points from the prior year quarter and 190 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on significantly higher sales volumes which was only modestly offset by the dilutive impact of acquisitions.

On a sequential basis, the increase in adjusted operating margin reflected strong conversion on the higher sales levels as well as further progress on profitability improvement on acquired businesses. I'm extremely proud of the company's record operating margin performance in the third quarter, which reflects continued strong execution by our team.

Breaking down third quarter results by segment compared to the third quarter of 2024. Sales in the Communications Solutions segment were $3.39 billion and increased by 96% in U.S. dollars and 75% organically. Segment operating margin was 32.7%. Sales in the Harsh Environment Solutions segment were $1.516 billion, an increase by 27% in U.S. dollars and 19% organically and segment operating margin was 27.1%.

Sales in the Interconnect and Sensor Systems segment were $1.369 billion and increased by 18% in U.S. dollars and 15% organically and segment operating margin was 20%. The company's GAAP effective tax rate for the third quarter was 23.5%, and the adjusted effective tax rate was 27%, which compared to 21.4% and 24% in the third quarter of '24, respectively. The increase in our adjusted effective tax rate this quarter is due to some shift in income mix to higher tax jurisdictions during 2025.

The third quarter includes an adjustment to bring the year-to-date taxes to 25.5% adjusted effective tax rate, which resulted in a $0.03 impact to our third quarter EPS. Our fourth quarter and full year guidance assumes this higher 25.5% tax rate, and we expect this higher tax rate to continue into 2026.

GAAP diluted EPS was a record $0.97 in the third quarter, up 102% compared to the prior year period. and on an adjusted basis, diluted EPS increased 86% to a record $0.93 compared to $0.50 in the third quarter of '24. This was an outstanding result. Operating cash flow in the third quarter was $1.471 million or 117% of net income and free cash flow was $1.215 billion or 97% of net income, also an excellent result. From a capital standpoint, inventory days, days sales outstanding and payable days were all within a normal range.

During the quarter, the company repurchased 1.4 million shares of common stock at an average price of approximately $109 and when combined with our normal quarterly dividend, total capital returned to shareholders in the third quarter of 2025 was approximately $354 million. As noted in the earnings release, the company has increased its quarterly dividend by 52% to $0.25 per share effective for payments beginning in January of 2026.

Total debt on September 30 was $8.1 billion, and net debt was $4.2 billion. Total liquidity at the end of the quarter was $10.9 billion, and this included cash and short-term investments on hand of $3.9 billion plus availability under our existing credit facilities, including the $4 billion term loan facility recently put in place in anticipation of the CCS acquisition.

Third quarter 2025 EBITDA was $2 billion, and our net leverage ratio was 0.7x at the end of the quarter. As of September 30, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs. I will now turn the call over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and thank you to everybody for taking the time to join our call today. And I hope that all of you are having an enjoyable fall, I can tell you it's a beautiful day here in Connecticut. I'm going to highlight our achievements in the third quarter. I'll discuss our trends and progress across our served markets. and then comment on our outlook for the fourth quarter and the full year. And then, of course, we'll have time for questions thereafter. There's no doubt that our results in the third quarter were much stronger than expected, exceeding the high end of our guidance in sales and adjusted diluted earnings per share.

Sales grew from prior year by a very strong 53% in U.S. dollars and 52% in local currencies, reaching a new record $6.94 billion or nearly $6.2 billion. On an organic basis, sales increased by a very strong 41%, the same level that we actually achieved in the second quarter, and this was driven by double-digit organic growth in all but one of our end markets.

We're very pleased that the company booked a record $6.1 billion in orders in the third quarter, and that represented a book-to-bill of 0.99:1. Orders grew by a very strong 38% from prior year and were also up 11% sequentially. I have to say that we're particularly pleased to have delivered record operating margins of 27.5% in the quarter an increase of 560 basis points from our prior year adjusted operating margin and 190 basis points sequentially.

This strong profitability is a direct result of the outstanding execution of the Amphenol team around the world, all of whom continue to manage extremely well in a very dynamic environment. As Craig mentioned, our adjusted diluted EPS also grew very strong 86% from prior year reaching a new record of $0.93.

And the company converted those earnings into record operating and free cash flow in the quarter of $1.47 billion and $1.215 billion, respectively, both clear demonstrations of the quality of the company's earnings. Finally, I'm very pleased that our Board has approved a 52% increase in the company's quarterly dividend to $0.25 per share. I just can't express enough my pride in the Amphenol team I would just say that our results this quarter once again reaffirmed the value of the passion, discipline and agility of our entrepreneurial organization as we continue to drive superior performance.

Now as we announced in mid-August, we're very excited that we signed a definitive agreement to acquire Trexon for approximately $1 billion in cash. Trexon is a leading provider of high-reliability, interconnect and cable lines primarily for the defense market and expect to generate 2025 sales and EBITDA of approximately $290 million and 26% respectively.

We're very excited about the incremental potential that Trexon's capabilities will bring to Amphenol and we look forward to welcoming the entire Trexon team to the Amphenol family. We continue to expect this acquisition to close by the end of the fourth quarter. We're pleased as well to announce that we closed on the acquisition of Rochester Sensors earlier in the third quarter. Based in the Dallas, Texas area and with annual sales of approximately $100 million Rochester is a leading manufacturer of highly engineered application-specific liquid-level sensors for the industrial market with a particular focus on propane, heavy vehicle and refrigeration.

The company has a strong and long respected brand in the sensor industry and no doubt will be a great complement to our already broad sensor offering. In addition, we remain excited about the pending acquisition of the CCS business from CommScope, -- given our good progress on the path towards closing, we now expect to close CCS by the end of the first quarter of 2026, about a quarter sooner than originally anticipated.

We remain confident that our acquisition program will continue to create great value for Amphenol. In fact, it is our ability to identify and execute upon acquisitions and then to successfully bring these new companies into the Amphenol family that remains a core competitive advantage for the company. Now turning to our trends across our served end markets. I would just note that we continue to be very pleased that the company's end market exposure remains diversified, balanced and broad.

This diversification continues to create great value for the company, enabling us to participate across all areas of the global electronics industry while not being disproportionately exposed to the volatility of any given market or application. The defense market represented 9% of our sales in the quarter, and sales grew from prior year by a strong 29% in U.S. dollars and 23% organically.

And this is really driven by robust growth across virtually all segments of the defense market with the contributions in particular, related to space, naval, communications and ground vehicle applications. Sequentially, our sales grew by 8%, which was higher than our expectations coming into the corner. And looking into the fourth quarter, we expect a mid-single-digit increase in sales from these already lofty third quarter levels.

And for the full year 2025, we expect sales to increase by more than 25%. I would just note that this outlook does not include any impact from the Trexon acquisition. We remain encouraged by the company's leading position in the defense interconnect market where we offer the industry's widest range of high-technology products. Amidst the current dynamic geopolitical environment, countries around the world continue to expand their investments into both current and next-generation defense technologies.

With our existing offerings as well as the complementary capabilities that Trexon will bring, we're positioned better than ever to capitalize on this long-term demand trend. The commercial aerospace market represented 5% of our sales in the quarter.

Sales increased by 17% from prior year and 16% organically as we benefited from increasing production levels of our customers, together with our continued progress in expanding our content on next-generation commercial aircraft. Sequentially, our sales grew by 7% from the second quarter, which was better than our expectations coming into the quarter. Now looking to the fourth quarter, we expect a mid-single-digit sales increase from these third quarter levels.

And for the full year 2025, we expect sales to increase in the high 30% range from last year, helped by the acquisition of CIT back in 2024. I'm truly proud of our team working in the commercial air market. With the ongoing growth in demand for jetliners, our efforts to expand our product offering -- expand our product offering, both organically and through our acquisition program continue to pay real dividends.

In particular, I just want to mention that we're very pleased with the progress of the CIT team who has now completed more than a full year as part of the Amphenol family. We look forward to further capitalizing on our expanded brand of product solutions for the commercial air market long into the future.

The industrial market represented 18% of our sales in the quarter and sales in this market grew by 21% in U.S. dollars and 11% organically, and that was really driven by organic growth in all 3 geographies. In particular, our organic growth was driven by strong performance in factory automation, medical, instrumentation, industrial electric vehicles and our heavy equipment segments. On a sequential basis, sales grew by 5% from the second quarter, which was better than our expectations coming into the quarter.

As we look into the fourth quarter, we expect sales to moderate slightly from these third quarter levels and for the full year of 2025, we expect our sales to grow by approximately 20%, reflecting both strong organic growth as well as the benefit of acquisitions. We remain encouraged by the company's strength across the many diversified segments of this important market. As demand continues to recover, I am confident in our long-term strategy to expand our high-technology interconnect antenna and sensor offering, both organically as well as through complementary acquisitions.

Indeed, with the acquisition of Rochester sensors, we have further broadened our sensor offering for the industrial market. And that strategy has really enabled Amphenol to capitalize on the many electronic revolutions that are taking place across the diversified industrial markets thereby creating continued opportunities for our outstanding team working in this important area.

The automotive market represented 14% of our sales in the quarter, and sales in the third quarter grew by 13% in U.S. dollars and 12% organically as we once again drove growth in all regions. Sequentially, our sales grew by 8% from the second quarter, which was actually much better than our expectations coming into the quarter. And that really reflected the ability of our team to quickly execute on a wide range of opportunities around the world. For the fourth quarter, we expect a moderate sales decline from these third quarter levels. And for the full year of 2025, we expect sales to increase in the mid- to high single-digit range from 2024.

I remain very proud of our team working in this important market. And while there are no doubt many areas of uncertainty in the global automotive market, our team continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. We look forward to benefiting from our strength and position in the automotive market for many years to come.

The communications networks market represented 11% of our sales in the quarter. Sales grew from prior year by 165% in U.S. dollars and a strong 25% organically as we benefited from the ANDREW acquisition that we completed earlier this year as well as from increased spending by both communications network operators and equipment manufacturers.

Sequentially, our sales grew by 8% from the second quarter, which was better than our expectation for sales to remain flat. As we look into the fourth quarter, we do expect sales to decline in the low teens range on normal seasonality. And for the full year we expect more than 130% growth driven by the acquisition of ANDREW together with robust organic growth. With our expanded range of technology offerings following the acquisition of ANDREW earlier this year, we are well positioned with both service provider and OEM customers across the global communications networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint, have positioned us to better support customers around the world. And as those customers continue to drive their systems to higher levels of performance, we look forward to enabling these important networks for many years to come.

The mobile device market represented 6% of our sales in the quarter, and sales moderated by 3% in U.S. dollars and organically as growth in wearables as well as basically flat sales enhanced set year-over-year was more than offset by moderations in sales related to laptops and tablets. Sequentially, our sales did grow by 18% from the second quarter, which was much better than our expectations coming into the third quarter.

As we look into the fourth quarter, we expect sales to increase modestly from these levels. And for the full year 2025, we expect sales to grow in the low single-digit range compared to 2024. I remain very proud of our team working in the always dynamic mobile devices market as their agility and reactivity have once again enabled us to capture incremental sales in the quarter.

I'm confident that with our leading array of antennas, interconnect products and mechanisms designed in across a broad range of next-generation mobile devices, we're well positioned for the long term. And finally, the IT datacom market represented 37% of our sales in the quarter. Sales in the quarter grew by a very strong 128% in U.S. dollars and organically and that was driven by the continued acceleration in demand for our products used in artificial intelligence applications, together with continued robust growth in our base IT datacom business. I'm really proud of our team's outstanding execution here in the third quarter as we were once again able to significantly outperform our expectations in this very exciting market.

On a sequential basis, sales increased by 13% from the second quarter, and that was substantially better than our expectation for mid- to high single-digit decline. This outperformance is actually driven both by sales of AI-related products as well as by growth in our base IT datacom business. As we look towards the fourth quarter, we expect sales to increase slightly from these very strong third quarter levels.

And for the full year of 2025, we expect our IT datacom sales to more than double compared to prior year. We are more than ever encouraged by the company's position in the global IT datacom market. There's no doubt that our team has done an outstanding job securing future business on next-generation systems with a broad array of customers.

The revolution in AI continues to create a unique opportunity for Amphenol, given our leading high-speed and power interconnect products. Whether high-speed power or fiber optic interconnects. Our products are critical components in these next-generation systems, and that creates a continued long-term growth opportunity for the company. Turning to our outlook. And obviously, assuming the continuation of current market conditions as well as constant exchange rates, for the fourth quarter, we now expect sales in the range of $6 billion to $6.1 billion, and adjusted diluted EPS in the range of $0.89 to $0.91. This would represent a sales increase of 39% to 41% and an adjusted diluted EPS increase of 62% to 65% and compared to prior year fourth quarter.

Our fourth quarter guidance also represents an expectation for full year sales of $22.660 billion to $22.76 billion and full year adjusted diluted EPS of $3.26 to $3.28. This outlook represents full year sales and adjusted EPS increases of 49% to 50% and 72% to 74%, respectively. There's no doubt that 2025 has been a very strong year for Amphenol thus far.

I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to thereby continue to grow our market position, all while driving sustainable and strong profitability through this year and into the long term.

Finally, I'd like to take this opportunity once again to thank our entire global team for what were truly incredible efforts here in the third quarter. They worked unbelievably hard to deliver this level of growth and performance, and I'm truly grateful to each and every one of them. And with that, operator, we'd be very happy to take any questions that there may be.

[Operator Instructions]. We have a question from Steve Fox from Fox Advisors.

As you guys mentioned, your margins are quite impressive, another record. I was wondering if you could zero in on the incrementals a little bit from 2 aspects. One is the Harsh Environment and Communications incrementals were 40%.

Obviously, volumes is helping, but what else is helping produce that? And then secondly, like you mentioned, Adam, there's a lot of product complexity. We just saw a lot of your products at OCP last week. How does that either help or make it harder to deliver like these types of incrementals as you get into next-generation data centers, aerospace, things like that?

Thanks, Steve. Yes. No, listen, we're super proud, obviously, of our results this quarter and specifically the profitability we were able to achieve here in the third quarter after coming off of a really strong quarter actually in the second quarter at 25.6%. So the 27.5% profitability for the company is something that certainly will -- it took a lot of work, and I think really is driven by certainly a few factors.

Number one, obviously, we're growing quickly. We had a really great quarter from a growth perspective, and we're continuing to execute in order to leverage that into strong profitability. And I think that's what you saw in the quarter. And the other part of it is our acquisitions also are doing really well. I mean you mentioned the HES segment. I mean that's kind of where the CIT business sits. And I would tell you that business is performing very well and certainly has contributed to the margins and the conversion margin that you just mentioned in your question.

So I think the overall profitability of the company is kind of hitting on all cylinders. It's the execution related to the growth of the company in addition to acquisitions that we're starting to see real progress on from a profitability perspective. So these are things that certainly proud of. I think that certainly the value we're adding to our customers, the technology that we're bringing to the table here is being reflected in these margins, and that's kind of the results you're seeing here in these really great results.

Yes. Well, thank you, Craig. And Steve, thank you for the question, and thanks for stopping by the booth at OCP. We really appreciate that. Look, you saw the slice of our products there, which certainly reflect an increasing complexity primarily related to the IT datacom market. And there's no doubt that as interconnect products have become more fundamental to the performance of the systems, the networks into which they incorporated, there is more being demanded of those products.

They become more complex, whether those are higher speed products, whether those are high-power products and to make those products, to design those products, to innovate around those products, to develop the manufacturing processes to make these and to ramp those products up at scale and at the speed that our customers in the market would like to have. This is not a trivial task whatsoever.

And I'm just so proud of our team for really working over many, many years to build the fundamental building blocks that have ultimately allowed us to be so successful. But I would also say this, it's not confined to that market. We see interconnect products across all of our end markets becoming increasingly high technology, having increasing complexity around them. Whether you're talking about in the defense market, in commercial air, where we can now offer a broader suite of value-add interconnect products to our customers in part because of the CIT acquisition and what that brought.

If you look at the Trexon acquisition that we announced this quarter, which brings us into even more advanced complex interconnect assemblies for customers in the defense market. We see that across the industrial market as well, the automotive market. And certainly in the communications networks with the complexity of the products, the antenna products, the interconnect products that came along with the ANDREW acquisition, I would tell you that today, more than ever before, customers recognize the importance.

They rely upon the technology value of interconnect products. and they represent a bigger hurdle for many of our customers, one that we can solve. You asked interestingly that question around margin out of the same breath as that question around product complexity. And I don't think the two are unrelated. Yes, it's hard to do that.

But if you are creating more value for your customers through the technology of your product by creating that value, then maybe those customers will be willing to share some small part of that value also with you that's embedded in that complex technology of the products. And I think that's something that Amphenol is that we certainly as a company are seeing more of today than ever before.

Our next question goes from the line of Amit Daryanani with Evercore.

Adam, last quarter, I think we talked about $150 million of AI performance in the June quarter was driven by out execution and that resulted in, I think you folks initially guiding IT datacom revenues down mid-single digits or so. As you think of the better performance you just had in that segment, I think you folks said it's up 13%.

How much of that do you think was driven by the traditional IT datacom markets doing well versus AI? If there's a way to parse that out, it would be really helpful. And then how do you feel about the broader inventory levels in the AI ecosystem as you wrap this year, get into calendar '26?

Well, thank you very much, Amit. I appreciate the question. And look, I think if you think about our performance in the third quarter, I'd say it's pretty balanced. I mean I can't get super granular about this. You never know on the exactly the margins of what product does it exactly go into. But I would say our impression is that it's pretty balanced, our upside in the quarter between AI related and then more traditional datacom.

And look, relative to inventory, we don't see any signs of anything abnormal. And there's no doubt, in the third quarter, we obviously beat our expectations, and there was clearly more demand from our customers, and we were able to satisfy that demand. And so even though we came out of the second quarter with, as you talked about, maybe shipping a little bit ahead to what our customer demand was anticipated, the demand got better here in the third quarter and our team was able to flex to really react to that, both on the AI as well as the more traditional IT datacom side.

Our next question is from the line of Guy Hardwick from Barclays Capital.

Obviously, with so much of the incremental growth coming from IT datacom, it's natural for investors to kind of threat on about major architectures in AI. Can you kind of allay any concerns about Amphenol content on, say, the Kyber architecture due to come in 2027 versus the Oberon architecture?

Yes. Thanks very much. Look, I'm not going to talk about specific customers and specific architectures. There's a lot of different design activity going on. And what I can tell you is this, why we have been so successful in establishing ourselves as a leader in this unique and high-value architecture of interconnect products in accelerated compute, AI, machine learning, however you want to term it, is a very long-term multi-decade buildup of our capabilities on high speed and also power products and then also commensurate with that, building up the capabilities to make these advanced products and to ramp those products up when our customers need them.

And those capabilities have enabled us to continue to win with customers up and down the stack of the AI ecosystem. And people want to talk about one or another platform, but you know that there are lots of things going on in AI. We treasure our relationships with each of those customers, and we work directly with customers up and down the stack from the folks who are really the service providers all the way down through the equipment manufacturers, the data center builders and down through to the folks who are designing and specifying the chip-based architecture. And I can tell you that we have a strong position today, and we have a strong position in future platforms really up and down that stack.

Our next question comes from the line of Luke Junk from Baird.

Maybe a simple question but a more complex answer. Adam, just wondering how you think about book-to-bill at this level of growth. I mean it just seems like at these levels, maybe that becomes a less meaningful metric to look at. And also, I think some of your sales are shorter term in nature, especially in IT datacom. Just how that's impacting the book-to-bill measure as well.

Well, thanks, Luke. Actually, it's a very good question. And I think you're kind of spot on, like with these growth levels, the fact that our bookings grew also in the quarter on a year-over-year basis by 38% and that we had so much upside in the quarter in terms of our revenues to what our expectation, and yet we still managed to have a book-to-bill that was really just under 1.

I think it rounds to 0.99. But I mean, more than $6.1 billion in orders in the quarter. I would say that when we were in the earlier part of the ramp-up of, in particular, this ramp-up related to IT datacom and specifically related to AI, there's no doubt that our book-to-bill was a very strong book-to-bill, in particular, because we were making a lot of significant investments, and it was very much on the come and our customers wanted to give us the confidence that we would make those various investments.

Now look, I can't tell you what the cadence of bookings will be here in the fourth quarter. We don't give guidance for bookings for that reason. It's very hard to tell. Maybe it will be above 1 or below 1, and we shall see. Is it a shorter cycle? What I would say about this, IT datacom specifically, is there's no question that as we've gone through this cycle of the build-out and the ramp-up, our lead times have certainly come down relative to what they were early on as we were building out the capacity. And as your lead times come down, that naturally has an impact on your book-to-bill and creates a slightly shorter cycle. And so I think that's not also totally far off base either Luke.

Our next question comes from the line of Samik Chatterjee from JPMorgan.

Maybe just putting IT datacom aside, the recovery and the strong organic growth you had in the other end markets as well, like industrial, communication networks, like really strong growth in all of them. Maybe, one, how are you sort of overall looking at the landscape relative to 90 days ago? Have things in those underlying end markets improve? And then what is the visibility?

I get that maybe book-to-bill isn't the best metric to look at for IT datacom, but what is the visibility that the book-to-bill in those end markets giving you in relation to future demand? Is the visibility improving with the book-to-bill numbers as well there?

Yes. No, thank you very much, Samik. I mean, look, it's hard to say that we don't have a more positive view today than we would have had 90 days ago really broadly across the company with the performance that we had here in the quarter. I mean, growing sequentially as we did by 10% is really an outstanding performance, especially compared to what our expectations were coming into the quarter.

And if you look at our performance across really all of our end markets with the small exception of mobile devices, which was slightly down year-over-year, all of our end markets were up in double digits organically. And honestly, if you even took IT datacom totally out of our performance in the quarter, we would have organic growth in kind of the mid-teens levels, which to me sounds like pretty good performance.

And so there's no doubt that we feel incrementally positive on the overall landscape -- in terms of book-to-bills in the other markets, I mean, I would say that we had some favorable book-to-bills in particular, I would say, like defense, we have pretty strong book-to-bill in that market. I'd say others are plus or minus, but certainly not negative.

And so I think we feel incrementally encouraged and that ultimately goes into our expectations where we look next quarter, for example, in the defense market, commercial air market, those 2 in particular, to be up kind of in the mid-single digits on a sequential basis, which is a very strong finish for each of those areas.

Our next question comes from the line of Mark Delaney from Goldman Sachs.

Adam, you mentioned the company saw better-than-expected strength in the auto market in the third quarter, and you spoke to some of that being a function of Amphenol executing well against opportunities that came up in the quarter. Could you speak a bit more on what some of those opportunities were and what was supporting that strength that the company saw in 3Q? And then maybe just give a bit more color on what you're seeing in the auto market for the fourth quarter, please?

Well, thanks very much, Mark. I mean, look, I think our team did well on a global basis in automotive in the third quarter. I mean, growing really sequentially in all regions, growing pretty strongly in all regions on a year-over-year basis, including, by the way, we saw double-digit organic growth in Europe. which is maybe not what one reads in the papers every day.

And so we feel really good about the performance, and I'm really pleased with our team there. And look, there's a lot of moving pieces in automotive right now. You hear about lots of different things, different government policies impacting certain automotive demand. You hear about different supply chain things going on, plus or minus in that area.

And so as we look into the fourth quarter, taking all of that into account, we expect sort of modest sequential reduction here in the fourth quarter, which is not totally abnormal. Sometimes we'll see that in the fourth quarter for automotive. But our position is really strong. And in addition, I would tell you that we're really pleased to see a kind of growth in that market in new kind of platforms, EVs, where we've had strong performance in our automotive last quarter, but also in traditional and hybrid vehicles around the world.

And so I think it's a pretty broad-based positive view that we had, which I think does contrast with maybe some of the more cloudy things you read about every day in the paper, but I tried not to read all these cloudy things too often.

Our next question goes to the line of Andrew Buscaglia with BNP Paribas.

Yes, I wanted to check on -- so your margins have been great and you're talking about this kind of higher incremental margin shift. But yet your guidance to get to the midpoint of your guidance, it does imply margins would step down. If you look historically, usually, they're flat or up from Q3. I was wondering, are there some dynamics in there that are causing that or anything you want to call out ahead of that?

Yes. Thanks a lot, Andrew. Yes. No, listen, our fourth quarter kind of guidance here, certainly, I think, is actually very strong, both from a top line and the bottom line perspective. I mean we're guiding down slightly. Our margins in the fourth quarter kind of implied are slightly down, but also revenue is slightly down, and we're talking about not a significant, I think, a 2%, I think, on the high end sequential decline.

So I guess I wouldn't call out anything too specific. I mean the reality is at these revenue levels, at these growth levels, I mean, there will be some variability in margins, and we're going to -- I think we talked about our 30% kind of conversion or approaching 30% on the growth. And I would think on -- when we have some declines, you're going to see a little bit higher conversion on the decline than you would typically see at these margin levels that we're at.

But -- so I wouldn't call anything out too specifically. I mean we are as I've mentioned before, adding some level of cost kind of given the significant growth we've seen and the inability to necessarily add some costs as quick as you can when you're growing kind of 40% organically or 41% in this quarter. So I would say maybe that's having a slight impact, but maybe I would say modest.

But I mean, this implied margins, I think, still would be close to 27%. So I mean, this is not a significant drop in margin. And I think this is still a very good overall profitability for the company and certainly, we believe, sustainable as we continue to grow. But there will be some level of variability for sure.

Our next question comes from the line of Wamsi Mohan from Bank of America.

Adam, can you talk a little bit about the opportunity that you see on the power side as these AI data centers are now standing up racks that are consuming maybe 2 to 3x of 100-kilowatt rack, which itself used to be a lot lower just a year ago. And maybe you can just address some of the products that are driving that opportunity for you. And if I could, Craig, could you just talk about the CapEx trajectory? It was slightly down quarter-on-quarter. I think you had expected it to be flat. How should we think about the trajectory from here?

Thanks, Wamsi. I'll let Craig talk about CapEx first, and then I'll talk about the power products.

Sure. Thanks, Wamsi. Yes, capital we spent, I would say we spent in the range of what we expected to spend in the quarter. I mean there's no precision around exactly what you're going to spend in the quarter. We expected kind of in the ballpark of what we had in the second quarter, and we were slightly under that, but I think still kind of roughly where we expect it to be. I think we hadn't really -- I haven't mentioned the fourth quarter.

I mean, I guess I would expect kind of to be in a similar range, maybe slightly higher than we were in the third quarter and the fourth. But I mean, this is -- these are -- given the level of growth we've had, given the revenue that we've had, we're kind of growing into our capital spending right now, which we would expect to do.

And that's certainly -- so we're closer to kind of, again, the higher upper end of that kind of 4% kind of target that we would typically have, and that's what we did here in the third quarter. And I kind of would expect roughly in that range kind of as we move forward certainly into the fourth quarter here.

And look, relative to power, I mean, look, power is a big story here. I'm not saying anything none of any of you don't know. But there's no doubt that power in these next-generation architectures is a really fundamental part of the operating of the systems. And we've been involved in power connectors essentially since the birth of the company.

If you think about our legacy back into military and industrial, high power, high voltage, I mean, we've been making interconnect products related to really high power consumption systems for most of the modern history of Amphenol, which means that we have dialed in the knowledge of what it means to be handling so much power, the safety, the efficiency, the throughput of the power, this concept of mill-volt drop and all of that, that goes along with it.

And so we're involved in a very complex way across a lot of different interconnect products, complex interconnect assemblies, bus bars, board level, circular interconnect, bringing power as soon as the power gets to the side of a building, we're helping it get all the way around there all the way until it gets to the board of the chip. I mean, as you mentioned, AI is only going to increase in the needs of power.

And I have to say, I use these tools probably more than most. I am just dived in head and shoulders into using AI. And I will admit that once in a while, when I'm doing something pretty complex and it's waiting a little bit, I get a little pang of guilt that I might be using a little more power. I mean I was making immunology models for my daughter who's setting for a test last night.

And I see the little thing thinking and know that, that's probably burning a few light bulbs of power while doing that. And I think our job at Amphenol our job at Amphenol to do this is to make sure that as little as possible of that energy that comes in the building is lost through the interconnect products, that ultimately, our products are the most efficient and the safest so that the maximum amount of electrons can make their way to where they need to go, which is to the GPUs and to the associated things that go on these systems.

And if we can do a good job at doing that, and we're pretty good at doing that. We've been developing that skill for many decades. Our customers are going to keep relying on us to support them. And I'm really proud of what our team has done here, and I look forward to more opportunities related to power in the future.

Our next question comes from the line of Asiya Merchant from Citigroup. You may proceed.

Great results here. If I may, Adam, I know you talked a lot about how the interconnects are now creating more value. And I think it's pretty well understood on the AI side. But I do get questions from investors on the other end markets, where is that extra value that is being created that can sustain the incremental margins that you're talking about? And sort of related to that, how do you think about the competitive dynamics now, whether it's within the IT datacom or outside within the other end markets that you participate in?

Well, thank you very much, Asiya, and hopefully, I pronounced your name correctly there. Sorry about that. Look, there's no doubt that, as I mentioned earlier, we see interconnect becoming increasingly embedded with more technology, increasingly complex and thereby increasingly creating value for our customers across the entire gamut of this wonderful array of markets that we serve.

And how is that happening? And why is that happening? It gets to just the intensity of electronics that our customers are embedding in their products to create more functionality, more value for the end customers. Everything from a combine that is cutting down soybeans or corn in the Midwest now operating as an autonomous vehicle where driver can drive 5 of these massive farming machines as opposed to having to have 5 drivers to do that.

Mining equipment, the same with autonomy, with hybridization of the drivetrains across the defense industry, I mean, we just see so much more complex adoption of electronics that thereby then requires a more complex interconnect system, the density, the number of different nodes, the sensors and the processes that are being associated there with, all of this adds up together to create a complexity and a need and ultimately an opportunity for us to create value for our customers.

Now look, we have a lot of competition to your second question, in everywhere that we operate. And it's up to us to create a sustainable advantage for our company through our technology, number one, through our capability and capacity to build that technology, number two, and then ultimately, through our agility, reactivity and speed.

And that last piece of it, that last piece of it comes from that unique Amphenolian culture that I talked until I'm blue in the face about because it ultimately is the nucleus of what makes this company successful. And so we will always have competition, and we respect those competitors. And there are some wonderful companies, large, medium and small around the world with whom we have really wonderful competition.

But at the end of the day, if we can develop a better product, -- if we can build that product at scale and if we can do that in an agile, fast and flexible fashion, I believe that we'll continue to be able to win more than our fair share and thereby be able to outperform the market. We've done that for more than a quarter century, and I have a lot of confidence that we'll be able to do that for many years to come.

Our next question comes from the line of Joe Spak from UBS.

I just want to go back to some of the incremental margin commentary from before, particularly by segments because I understand growth is really the largest driver here. But is there anything structural between the segments that we think can impact incremental margins? Like if you look at com services and harsh environments, similar incrementals this quarter, but com services grew 3x as fast as harsh. So is there some more investment that's needed there? And then if we think about the Interconnect and Sensor segment, is there anything that's ultimately preventing that segment from also hitting 30% plus incrementals if they achieve faster growth?

Yes. Thanks for the question, Andrew. I mean I think the short answer is I don't think there's anything structural in any of the segments that's limiting them from -- or enhancing their profitability. I mean there's no doubt that the ACS segment has had a significant amount of growth. And when we talk about kind of adding costs to support kind of 40% plus organic growth, we're talking about also adding costs to support, I think, the 74% organic growth or whatever they had in the quarter.

So certainly, there's some of that kind of in that segment that maybe is more than in some other segments in terms of adding some of those costs that will catch up a little bit over time, but these are modest amounts. These aren't things that are going to have a super meaningful impact on the overall profitability of the segment or on the company. I mean I think all of the segments have the ability to grow -- continue to grow their margins and continue to expand over time.

I mean AIS actually, I say I would say I'm particularly proud of this quarter, achieving 20% profitability, operating margins in the quarter. I mean, just outstanding performance by that segment. And actually, they did achieve, I believe, sequentially about 30% conversion margin in that segment. So they absolutely have the capability and the opportunity to continue to do that, I think, in the future.

So I would say all 3 of our segments have the opportunity to continue to expand margins. And certainly, the level of growth that each of those have will have some impact on the margin expansion. But overall, I think this 30% kind of targeted long-term target we have here as we kind of come down to normal levels of growth over time. I think we're doing much better than that right now is something that all of them will contribute to.

Thank you. Our next question comes from the line of William Stein from Truist Securities.

Congrats on the great quarter and outlook. Adam, in the last couple of meetings we had, you discussed incremental automation that you're doing in the IT datacom business. I think you noted that it helps you meet high product performance requirements, high quality standards.

I think you talked also about time to market and time to volume. Maybe that even helps your print position with customers overall. But I'd love to hear any further clarification on that effort, especially if there's anything afoot to extend what you're doing there beyond the IT datacom end market, which is where it came up?

Well, thanks very much, Will, and thanks for your kind comments. Yes, we did talk about this, and I think I mentioned this in the past in our quarterly calls that when I think about the building blocks of our success, I mentioned, it's about having a great product and building the fundamental engineering elements, the technology elements that go into those products.

But then it's about how do you make those products at volume, at quality and ramp those in a time that's expeditious and especially in this kind of hyper speed, speed of light kind of world that we are in right now. And over the last, I don't know, 10, 15 years plus, we've been kind of around in our sort of typical Amphenol decentralized way, developing an enormous amount of in-house capabilities related to automation.

And I wouldn't even say that those capabilities started out necessarily related to IT datacom. I mean we were doing a lot of automation in our mobile business and others. But no question that as we design these next-generation products, as the product life cycle shortened, it became imperative that we have our own capabilities to automate so that we could do that automation in lockstep with the product design and validation as opposed to design and validate a product and go outside and ask someone to make an automation machine for you, which could take another year plus.

And then at the end of the day, it comes back and it's not what you wanted. And so working hand-in-hand between our design engineers, our automation engineers has allowed us to really shorten that cycle, and it has allowed us to make sure that when you have these products that are operating at the highest levels of performance, high speed, for example, that those products are so sensitive there's such a delicacy and a precision to those products that really they need to be automated in order to ensure the good performance of the product.

Now in terms of going beyond IT, I mean we've been doing this for a long time as well. I mean, as entrepreneurial and decentralized as we are, we also talk about the company as being collaborative entrepreneurship. And there's been an enormous amount of collaboration, unstructured, not incented in any funny way. It's not like some matrix structure of an automation corporate team or anything like that. But there's a really organic kind of efforts around the company to work with each other to see where automation really makes sense.

And I would tell you that in every one of our end markets, as products get more complex, as the sort of cost environment changes, as the trade environment changes, whatever, I mean, we are adopting automation in places where it really makes sense. Now are we just saying from above, thou shalt automate everything? Absolutely not.

I mean this is a decision left to our general managers who know their products, who know what their customers need, who know where they make the products, who know the life cycles and who ultimately own the financial assets that they are creating when they make these automation. Having that push down to 140 general managers, but enabling that through the collaboration across the company has been a really good recipe.

And so we see a lot of automation around the company, but it's reasonable automation. It's homegrown automation. It's lower cost automation and thereby allows us kind of to have our cake and needed too in terms of the flexibility and the low cost of the company.

Our next question comes from the line of Joseph Giordano from TD Cowen. You may proceed.

This is Michael on for Joe. You mentioned earlier strong year-over-year and sequential performance on the commercial aero side. And then mentioned some potential for like content or share gains in that area. Do you mind just diving through the different parts of Aero or the applications that are related to some of those content gains or share gains?

Well, thank you very much. Look, we're really pleased with our commercial air business and in particular, the really quantum increase in the breadth of our products that came from the CIT acquisition a year ago. And so as we have conversations with customers around the global commercial air market, you can imagine we're having conversations at every part of the plane where there's electronics.

And today, there's very few parts of a big airplane that don't have some degree of electronics from the engines to the avionics, to the entertainment systems, cabin management systems, safety systems, all the way to something as mundane as like a coffee maker or a lavatory, these things all have now electronics on them.

And with CIT joining Amphenol, together with our interconnect, our wonderful value-add business that we already had, the connector products, the cable and wire products that CIT brings and very complex interconnect assemblies as well that we can now do together with them, we really have the broadest product offering of interconnect products for the commercial air market at a time when that technology and the push of electronics into planes continues to grow.

And so I think that just puts us in a very strong position. And in addition, I would tell you that our global footprint has been also a great asset because customers are very sensitive to making sure that you can support them around the world. And so now having even a broader footprint, again, with CIT and other steps that we've taken internally, we have not only the right product, not only the right breadth of product, but also the right capability to make those products where our customers need them to be made.

Our last question will go to line of Scott Graham from Seaport Research.

Great quarter. So really, you've answered a lot of the questions I had around incremental margins and their movement. I was just wondering if we can just maybe flip the script a little bit and talk about acquisitions. You guys have obviously been very active the last couple of years.

To the extent, Adam, that you're able to comment on perhaps what you're missing, your wish list? And does that wish list perhaps include some of the end markets that you have kind of imported with new acquisitions sort of either newer end markets that we've talked about with the deal flow or markets where you're already in, but you've really increased your critical mass in them with the deals. So could acquisitions be more tuned toward some of these newer verticals going forward?

Yes. Well, thanks very much, Scott. Look, M&A is something near and dear to our heart. And there's no doubt that over the last 3 years, the company has made more acquisitions and also more fundamentally large acquisitions. And I don't want to use the word transformative because none of these are at that level that you would say that's a merger of equals or anything like that.

But we've clearly accelerated the expansion of our offering for our customers across our end markets. At the same time, even with the growth that we have had and the great array of wonderful new companies that we have brought into the Amphenol family or we will soon bring into the Amphenol family in terms of those that haven't closed yet like CCS and Trexon, there's a lot of opportunity in this industry.

This is a highly fragmented industry. The interconnect industry is just such a wonderful place when you think about the fact that interconnect products go into every place where you have electronics. I mean we estimate it's a market of more than $0.25 trillion in size. And even with our superlative growth this year, we still see a lot of room to grow both organically as well as through our M&A program. And do I have a wish list of companies?

I'm certainly not going to articulate names of companies here. But I can tell you this, we look at great companies across all of our end markets. We never put all our eggs in one basket. We don't chase a thing of the moment in M&A. We take a very, very long-term view of our acquisition program. We look for companies. We develop relationships with them for many, many years.

I mean, I have been developing certain relationships with companies since I was an intern in the company. 27 years ago, and we'll continue to do that, and my team will continue to do that. And we take a very, very long view on M&A because at the end of the day, when we make an acquisition, it's for life. And we are not a trader. We're not buying and selling things all the time.

If it doesn't work out, we develop long-term relationships and then we're not chasing what's the right thing in the market at that moment. And I think that's been a great recipe for us for a long time. It's been a great return on the wonderful cash that we have generated, and it's one where we continue to see great potential for many years to come.

Thank you. We currently have no further questions. So I'll hand back to Mr. Norwitt for closing remarks.

Great. Well, thank you very much, and thanks to all of you for spending a small part of your beautiful fall day with us. And we appreciate your interest in the company, and we look forward to getting back together with you. Amazing to say it in 2026 in just 90 days from now. Thanks, everybody, and we'll talk to you soon.

Thank you. Bye-bye.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

My name is Asiya Merchant. I cover tech hardware, tech supply chain here at Citi Research. Really happy to have the Amphenol management with us. Adam and Craig, CEO, CFO; Sherri, Head of IR is also here somewhere in the audience. And so Adam, Craig, thank you again for coming to the conference. I'm going to kick it off with a few comments. These questions are open. It's a fireside. I don't believe there's anything prepared here, but there's fireside questions. If you do have questions, please raise your hand. We'll allow some time for investor Q&A, but we would like to bring the mic to you. So please bear with us as we do that.

Adam, Amphenol has had a very busy summer. You guys have been acquisitive, buying back good assets at extremely attractive multiples relative to where Amphenol shares are trading. We'll get into the details of the acquisition, but you've had really strong organic growth as well. This quarter, if I remember 41% organic that you guys just reported. When we sit back here and now in calendar 3Q and just reflect on how demand has evolved, let's say from, let's say from the start of the year, about 6 months ago. How would you look at end demand and think about how it's evolved relative to the kind of growth rates that you've posted for the first half of this year guided to the third quarter?

Well, thanks very much, Asiya, and thanks again for hosting us here today. It's always a great mark of the end of the summer that we come to the Hilton here with you at Citi. Look, there's no doubt about it that as we came into this year, compared to where we've come out of the first half of the year, we've certainly exceeded all of our expectations in really every respect. And when I think about Q2 in particular, yes, our IT datacom business, I'm sure we'll have 1 or 2 questions about that. We had fabulous performance. But even if you take that away, the overall performance of the company in the second quarter and really in the first half has been spectacular. I mean we would have been saying if we didn't even have any of this IT business, we would have been saying this was a fantastic quarter.

And I think it gets to the broad trends across really all of our end markets. These are not new trends, the proliferation of electronics, the expansion of the interconnect content across those electronics. But I think we saw here in the second quarter with essentially all of our end markets growing nearly in double digits. We had 2 end markets that grew by just 8% organically, and the rest of them grew in double digits on an organic basis. It's a real acceleration of all of those interesting pockets that we talked about for so many years across the electronics industry. And I think it's, in many ways, a reflection of as we've grown the company, we've been able to preserve what is so special about us, which is that entrepreneurial culture that allows us to capitalize on these opportunities with the level of speed and agility that has served the company well through so many cycles.

And so I think the overall demand environment is robust. The proliferation of electronics and the expansion of the content of interconnect products continues at pace. And our ability to get a little bit more than our fair share of all those opportunities has, if anything, strengthened in time.

Since you brought the topic of IT datacom, we'll jump just right in because that's been like a great driver for Amphenol. But there are lots of moving pieces in that AI demand story, right? I mean there is GPUs, there's ASICs, there is copper, there is fiber, there's different cooling technologies and there's a lot.

So as you think about connectivity and the demand for that connectivity to grow and the fact that you have copper, you've also made a sizable acquisition announcement. Just help us understand the demand outlook for connectivity for your core offerings, and then we can jump into the acquisition that you've just announced as well.

Yes. So I mean, look, the beauty of this revolution of AI that we're now a couple of years into is that because of the nature of how these systems work, they're doing massive amounts of computation. The more you want the system to perform effectively, the number of computations goes up exponentially as you try to narrow these models into real accurate portrayals of whatever the users are trying to achieve. And because of that, you require more interconnect because as you have faster and faster speeds, more and more computations, lower and lower latency requirements, higher density of chips, GPUs and otherwise in racks, across racks, you just have a multiplicity of interconnect that's required for that.

And I think without even getting into the topic of what format of interconnect, this immense rising tide of interconnect requirements, which is really part and parcel of the exponential growth of computation required in accelerated compute. I think that's something that's been a fabulous development for the industry, but in particular, it's been a great development for us because as the leader in high-speed technology, as the proven execution leader in the industry, the one who's able to pivot quickly, who's able to ramp up when customers need us in a way that is truly unique for a company of our scale that has put us in a disproportionately favorable position across this market.

And then I'll sort of take your lead and talk a little bit about the acquisition. The beauty of the CCS acquisition is in addition to exposing us really on a balanced fashion across data center, broadband and building connectivity. It significantly expands both our capabilities, our capacities and our competency in fiber optics. And while we've been in fiber optics for a long time, this is a real quantum leap for us in terms of the depth and the breadth of our fiber-optic Internet capabilities, which allows us to support customers in the here and now who are today using a wide array of optical solutions across the data centers, at the same time, as they use a wide array of our copper solutions closer in, in the rack, rack to rack and the like.

So now we'll be able to go to customers, and we've already started to see the reactions very positively from our customers and offer them the total suite of interconnect solutions that they need inside a building for a data center. And I think that's a very unique position that we'll really be the only one who can offer that kind of A to Z interconnect solution across this really exciting area with the increasing density of the requirements that we...

Okay. And sort of when we talk AI, we also see a lot of lumpiness, right? I see that from some of the AI server OEMs that support or that sell to neocloud providers, hyperscalers, there's a lot of lumpiness in that market. How has Amphenol worked through that lumpiness? And how are you navigating that as it relates to your own factories and managing the utilization levels in those factories just given the lumpiness?

I mean look, our organizational approach is uniquely tailored for lumpiness, let's put it that way. I mean, just think about the lumpiest of all markets that we've been successful in for a long time, which is the mobile devices market, I mean, how are we one of the only companies of our scale who's kind of stayed in that market is because of the agility that is so second nature to how we operate that allows us to flex up and down when necessary.

Now look, I would say, for us, the kind of "lumpiness" of this market, I mean we grew 133% year-over-year in IT datacom in the second quarter. That is an extraordinary effort by our teams around the world at doing like really hard things, like ramping up new automation machines, getting supply chains in order, getting materials in order, setting up new facilities, hiring thousands and thousands of people in a variety of countries and regions around the world. And I think it's maybe lost on the outside like how nontrivial that is like to more than double the business. It was already not such a small business in its own right. And I think the testament to that is really just the fortitude of our people being able to sort of break through barriers and make it happen.

And so when we think about lumpiness to the extent there is -- and look, one day, there will be -- there's always going to be volatility in all these markets. We've always demonstrated as a company for my entire career in Amphenol which is now I'm in my, whatever, 27th year in the company or now I'm in my 28th year, I guess, that our ability to react quickly, both to the upside and if there is a downside has been what's really distinguished us in the marketplace. And you see that in the crisis times of back in 2001, 2009, 2020, where we not only reacted faster, preserved our position better than our peers, but also preserved the financial performance of the company. And having like peak to trough margins down by just 300 basis points in each of those crises. And not that we see a crisis or anything happening, we never predicted one of these crises.

But what made us able to manage through that is still the very same organizational culture that we operate today, even though we're a much bigger company. And that gets to kind of my sort of primary role in this job that I've been so fortunate to have for nearly 17 years is to protect that culture of Amphenol, to make sure that we can scale the company amidst that culture. And I think we've done a great job of that so far.

Yes. I'm going to switch to Craig a little bit, ask about margins. Craig, Adam can have a drink of water here. Again, record operating margins just in the past quarter that you just reported. Maybe help investors understand what's driving that very strong margins. And you've talked about incremental margins now approaching 30% on a combined company basis, which obviously includes acquisitions that you've been doing. Even last year, you had a couple of big acquisitions that you just absorbed this year as well. So what are drivers that are enabling that higher incremental operating margins to come through? And how sustainable is this going forward?

Yes. No, thanks. No doubt, 25.6% in the latest quarter is certainly something that we're really proud of. Coming off of a quarter that wasn't so bad at 23.5%. I mean we're really executing well as a company. I think the first thing I'd start with is I think that the expansion of margin that we've seen over not just the last couple of quarters but over the last even year or so has really been -- is driven by one thing, which is really that our products as a whole are really just adding more value to our customers and into the architectures that they're building. I mean, interconnect products broadly speaking, are becoming a more and more important part of the functioning of the systems that were architected into. And our ability to be able to deliver these high-technology products and then on the execution of being able to ramp up across all of our markets is giving us the opportunity to share some of that continued added value in the form of margin and margin expansion.

So we're certainly that's -- I think that's part of the story of this increased margin that we been seeing. In addition to that, we've been growing quite quickly. I mean, growing 40% organically as a company is quite significant, and we're able to -- we're executing strong actually on that growth. And that execution, combined with that strong organic growth is really converting into strong margins for the company in the place we should be.

Now I have mentioned before that there's certain -- maybe certain costs that we're not adding quite as quick as our revenue growth. When you're growing 40%, sometimes there's a few people that you can't hire fast enough. This is , I would say moderate impact, not so significant. So we're really converting at well over 30% organically right now. And certainly, we continue to expect good margins and conversion this year. But I'd say as we kind of think about medium to longer term, we should think about that 30% conversion margin under a more normal growth pattern under a more normal cost pattern.

So I think this 25.6% is where we should be at these revenue levels. And I think as we continue to grow, we'll be able to expand those margins kind of at that 30% conversion margin. We talked about 25% for a very long time. And I think given the reasons I mentioned before, I think 30% is the right way to think about margin expansion at this point in time. And super proud of the execution of the business in terms of being able to reach these really industry-leading profitability levels and continue to improve them from here.

And just remind us for the asset that you obviously made Trexon as an acquisition. You've announced CCS. CCS is the bigger one, right? And it will take probably a little bit longer to close as well just because it's bigger. Like how should we think about the impact of such a big sizable acquisition on those margins?

No, that's certainly a good question. I mean, certainly, when I say 30%, that's going to be impacted by some acquisitions. I mean CCS will come in, in the high teens level after some amortization from the acquisition. So that's going to have some dilutive impact on the margin expansion. Certainly still be very accretive from an EPS perspective. And over time, and Trexon is probably actually in that same range actually. So over time, both of those businesses, I would expect to be able to improve profitability and closer to the company average profitability actually because these are 2 great businesses, great technology. There's no reason why they should be below the company average profitability and certainly they deserve to be at a higher profitability level and that will happen over time as we've already seen progress on CIT, we've already seen good progress on Andrew in the short period of time that we've owned them.

And just, Adam, when you think about the AI data center versus data centers that were just built for cloud. When you think about the attach rate to these high-performance GPUs or ASICs that are enabling these workloads, do you have like a -- do you think about a TAM attached for connectors? Like what's that ratio relative to a cloud data center?

We don't put like a specific number. But the atom number is it's a lot more. And I mean, what does a lot more mean? Is it 2x, 3x, 4x? I don't know, I mean, it's hard to sort of pin that down. But there's no question there's a lot more, and that just has to do with the nature of the architecture. The fact that in an accelerated compute environment, the chips all have to talk to each other. Whereas in a traditional sort of trunk branch and leaf architecture, it's all about just finding the information on one place and then processing that and moving it out into the Internet again. I go on my phone and like Google a video of a funny Corgi skiing or something like that, and it finds it somewhere. Whereas if I go on and I make a video of a Corgi skiing, that's a very different endeavor that things have to talk to each other and create that thing.

And so that creating and talking to each other has to happen over something, and it happens over the interconnect. And that -- and being able to enable that at ultra-high speeds at ultra-low latency with a very reliable solution. It's something where we're creating real value for the customers. But is that content 2x, 3x, 4x, 5x, I'm sure there are great experts hired by many in the room to figure that out. We haven't sort of wasted the time to figure out what that is. We know it's a lot, and we know that it's really a great opportunity for Amphenol.

And then maybe just shifting on that to Craig a little bit. How do you manage that against the need to invest, right? Because you're growing at these phenomenal growth rates organically. How do you then balance that with how much should I invest? What's the right amount to invest? I don't overinvest because if there's going to be lumpiness it's going to affect utilization rates. How do you look at that? And how do you project the CapEx intensity of the business?

Well, it doesn't start with me actually. It starts with our general managers and our general managers determine kind of what they need based on talking to their customers on a very detailed level about their forecast, and they certainly risk weight that based on what they expect that actually they'll need. We certainly have a lot of conversations with our customers around that. And even in some cases, especially with certainly some of these IT datacom and AI applications, where we're asking our customers to share and some of that investment with them and to have some skin in the game, so that's being core or to give us purchase orders that go out a little bit longer. We talked about that last year a little bit more as we were really ramping.

So it's all done in the context of the programs we're on and the customer relationships we have and understanding kind of what's needed. There's no doubt there's a little bit more investment needed because of the automation that's needed for these types of really high-technology products and certainly capacity expansion. So we are a little bit higher than typical, slightly higher, I mean, not meaningfully higher, but slightly higher than typical from a CapEx perspective. But we're doing it in a very thoughtful way with the conversations with our customers, having them ensure that they're actually also investing with us. And certainly, it's really proven out to be a I think, a good formula and driven good growth for the company, and we think it's going to ultimately have a great payback as we've already started to see.

Outside of AI, you guys obviously also participate in other markets. There's consumer electronics, there is industrial, there's autos and there's mobile broadband and network infrastructure. Can we touch a little bit on each of those end markets and what you're seeing? We could start with mobile consumer electronics because that's always hot in the back-to-school and Christmas shopping season.

Yes. I mean, look, as I mentioned earlier, we were really pleased with the performance of all of our end markets and mobile devices for sure. I mean we came into the quarter with an expectation that, that business would be down in the kind of high teens on a sequential basis. And in fact, it was up, I think, 4% sequentially and 14% on a year-over-year basis. And that's just, again, we've done this so many times in my recollection where we go in with a certain expectation, either customer demand is a bit more and our team flexes quickly for that or maybe a competitor falls down a little bit, and we have to -- we get a little more than our original share expectations. But it all comes down to just execution of our team on that.

And the mobile devices market is an exciting market. It's not for the faint of heart. It never has been. It's always been our most volatile markets. And it's always been one where that unique Amphenol approach has been a real tailor-made way for success. Our team is working on a lot of exciting things because the beauty of mobile devices is these things are proliferating. It's not just a phone in our pocket or a tablet on our table. It's so many other things that are sort of becoming interwoven and interlinked. And I'm excited about the long term as we push kind of accelerated computing out to the edge. What does that mean for devices? And what does that mean for form factors? What does that mean for the type of things that are going to be enabled? And I think mobile devices is going to be one of those places where we'll see some of the manifestations of that over the long term.

And we're -- as long as -- I've always said this, as long as the hardware has value to the end customers, I believe that, that can be a good business for us and one where we can participate and we can help our customers to create that value. Over the years, there have always been questions about, well, is it just software? And is it not? And every time those questions have come, there's then been a new innovation in hardware which we've helped to drive. And I think we continue to see that in the long term, there will continue to be great places for our team to really push our products deeper and deeper into these exciting array of products. We're only, what, 4 months away from CES. That's always a fun time to start the year, and maybe I'll see some of you folks walking around the halls as I usually do. But I always find it so fascinating. The 90% of schlock and 10% of amazing new things that come about every year, things you never thought you needed and all of a sudden now, they're all over my couch at home.

Okay. Shifting to maybe the next end market. We could talk about the industrial end market. I know it's a little -- it's fragmented. I mean you have defense in there as well and aero.

Not, just in the...

Industrial and then there is defense. Maybe we can talk a little bit first about industrial. That's a pretty sizable market.

Yes. So industrial is a great market for us. It always has been, and it's really our most diverse of markets. And it's a market where you have one thing in common which is it's applications which have a uniquely harsh environment. That can mean a really dirty offshore oil well, it can mean down in a mine, it can mean in an operating room, it can mean in the semiconductor fab, Class 1000 clean room. All of those are very hostile environments into which our customers want to put more and more electronic content.

The industrial market had a rough kind of, I don't know, 7, 8 quarters leading into the middle of last year, and it was only really in Q3 of last year where we started to see that market leveling out. We actually -- I think Q3 of last year, if my memory serves me, was the first quarter where we were sort of flat organically after 7 quarters of declines. And then in the fourth quarter, we actually saw 6% organic growth. And again, in the first quarter 6% organic growth, but still with weakness in particular in Europe. And in the second quarter, what we're really excited by is, first of all, our organic growth, we reached organic growth of 12%. So it doubled what it was in the quarter before. And we saw growth in Europe. And so I've been talking about green shoots of growth, maybe seeing some green shoots early in the year. And I think we certainly saw more than green shoots here in the second quarter.

And in addition to the regional breadth of the growth, we really saw that across a lot of the subsegments of the industrial market. Places like medical and factory automation, places like alternative energy and heavy equipment among the many, many segments that we track. And so look, we'll see how that looks in the second half. But at least the first half is a bit better than we would have anticipated coming into the year. And at the same time, we'll continue to look for unique acquisitions. We've made some great acquisitions, the CIT acquisition while it was the majority of that business was aerospace and defense. It also had this fabulous industrial business, in particular, around medical. And then we layered on to that the acquisition of LifeSync earlier in the year, which is another wonderful company that has really positioned us as a leader in medical interconnect, which is part of that industrial segment.

And just to remind investors, so there is inventory normalization as well happening in some of that -- in that industrial market where you talked about some of your distributors maybe coming back to replenish some of the inventory, and then you have end demand as well improving in that.

Yes. I mean I think there was definitely an inventory correction over those 7 quarters in industrial. And I would say that traditionally, our industrial business is more heavily distributed. I would say that over time, it's become a little more balanced because as we've made new acquisitions, especially around value-add interconnect products, those don't tend to go through distribution. So a little bit less than historical of that industrial business is through distribution, albeit it's still meaningful for the folks working there.

I wouldn't say that today, what we're seeing is a replenishment, meaning that distributors are buying stuff from us and just raising their inventories. I think it feels a little bit more end demand. And we see that in particular, because a lot of our value-add businesses which just sell direct to customers, they're also seeing that same strength.

Fair enough. And then the military, which has -- military and defense, aerospace and defense has been a pretty strong market for you guys. Obviously, there is spending dollars that are there. Unfortunately, there's warfare in the world that's affecting that. But in general, and then this recent acquisition that you made should help to bolster your offerings in there. So just help investors understand what's -- aside from increased dollar spending there, what's the higher value-added content, connector content that's going on in the military and aerospace?

Yes. So look, starting first with defense. I mean, defense is our birthright. We've been the leader in defense interconnect, in particular, defense connectors through the history of Amphenol. And it's an area where we're on every major program and we're constantly trying to expand the range of our products. And we've been very thoughtful about that but also very aggressive in doing that. So if you look this year or last year with the CIT acquisition, CIT brought us the cable and wire offering that's coupled with our connector offering, enhanced our value-add products on the defense and as well doing that in aerospace. Earlier this year, and we announced last quarter, we acquired a company called Narda-MITEQ, coupled with a couple of other really unique RF acquisitions, now brings us into the active RF interconnect. And then very recently, we announced the acquisition of Trexon, which is a fabulous company, a really wonderful business. A very diversified business in terms of its programs, its exposure. But with one thing in common, which is a very high-technology value-add interconnect offering.

And we really see that especially in defense, where you have more and more products being put into these systems, whether it's a military vehicle, a rocket, an airplane or the like communication systems, that getting all those things to operate with each other requires just a higher intensity and a higher reliability and a higher technology, complex interconnect assembly. And that's what Trexon does best. So we've known this company for a long time. In fact, we acquired from the same shareholder, the TPC business, which was our industrial cable and this was the defense business, kind of in many ways as a sister company, and they weren't at the time ready to sell this business and now they were. And it's a fabulous business. And we're really excited about how that will bring us to an even more important position with customers across the defense market.

And another piece of that is what we -- it's not necessarily defense per se, but space. And I think we've made a concerted effort in the last call it, half a decade to broaden our position on the nontraditional space players. And I think this, again, takes us another step forward in having a much stronger breadth of products, deeper relationship on these next-generation space applications. And those aren't necessarily defense, even if we put that in our defense -- that's how we classify it. But it's a really interesting space as well.

And then the third piece is on the new defense contractors. There's this whole world of kind of high-velocity, more techy defense players and as we broaden our product offering we now have very strategic relationships with those companies as well. And those companies want to work with a nimble supply base. They don't want to work with the sort of a traditional approach to the military because a lot of the folks who are there, they are like black T-shirt, wearing Birkenstocks and dogs in the office kind of folks, as opposed to the traditional military primes who you got to wear a tie like I do at an investor conference to go there. That's a big difference.

A little bit on your guide, maybe for calendar 3Q. Investors were wondering why is it -- given just the growth that we're seeing in AI now, why is it a sub-seasonal guide for calendar 3Q? Maybe you can just highlight like a couple of things that were factored into your guide and why you don't think that AI will -- why the sub-seasonal guide is unlikely perhaps to continue as we look beyond 3Q?

Well, I mean, look, I'm not going to try to give guidance for beyond 3Q. It's hard enough to give guidance in the next 90 days. And I think we talked a lot on the call about the fact that in particular in IT datacom, our team just out-executed our original expectations as we went into the quarter. And that resulted in, call it, a week of extra shipments that our customers hadn't expected and we hadn't expected, frankly, going into the quarter.

And so when you think about the IT datacom market from Q2 to Q3, you kind of have to factor in this kind of, call it, 3% of sales or a week of production that we've overperformed on. And that overperformance is, in many ways, a reflection of just so many folks in Amphenol just doing their job a little bit better in the quarter. Getting machines ramped up in a faster time than we expected, getting the cable to be run at a faster rate than we thought that we could do, having our yields go up, efficiencies go up. All these little building blocks that ultimately meant that we ship more than everybody expected. And so that, I think, was the main thing that we obviously talked about on the call.

Look, I think we feel good about the overall environment. I think we've given a strong guidance overall for the company. And as always, we're going to try to fight as hard as we can to capitalize on any opportunities that there may be to perform incrementally with that.

We have a few more minutes here. I wanted to ask, see if there is a question. There's actually 2. If we can just get the mic to them very quickly so that they can...

I know your regional manufacturing is a really big advantage for you from a support perspective and from being in country, you're treated as a local supplier. There's been some recent press maybe not as applicable to you guys about some import tariffs as regard to optical fiber and a couple of U.S. companies were named for that. But there was some specificity in there about talking about U.S. imports as opposed to things that were made domestically.

So can you speak to your potential regulatory exposure where it comes to when you manufacture something in country? Like do you guys have a not only an advantage from being in country to support customers, but are you guys somewhat insulated from potential regulatory impacts of things that would be technically imported, but you guys actually manufacture in country?

Yes. Look, I mean, very broadly speaking, one of the reasons we operate across 45 countries irregardless of trade wars and the like without debating the merits of those trade wars is that we try to be close to our customers, and we try to have a flexible and nimble approach to manufacturing which has served us well for a very long time through a lot of cycles. And you go back to the tariff environment of kind of 2017, 2018, 2019, I think we demonstrated a really excellent ability to navigate that just as we've done again this year. And we're paying tariffs right now in a variety of things. But you can tell that we're still realizing the margins that Asiya and Craig talked about earlier.

In terms of supporting our customers with local production, there's no doubt that we have an advantage because of our very fragmented global footprint to be able to navigate this for customers. And whether that's dealing with tariffs here, by having manufacturing here, whether that's dealing with conflicts that various countries have, again, for a variety of reasons. I think being able to navigate geopolitics is a real excellent advantage that we have.

Specific to fiber, it's not been something that's been as big of an issue for us, but you can imagine that the CommScope CCS team navigates that. And they're really well positioned with their footprint, and I'll say that. They have fabulous domestic capabilities here. They also have capabilities offshore where necessary. They're capitalized on some of the regulatory requirements that go with some of the funding programs associated with that. That's not trade as much as it is the sort of infrastructure funding and the regulations around that infrastructure funding. I mean, they talked about that publicly in the past. I'm not saying anything they haven't ever said. And I think their footprint and their competencies and capabilities position them well for however that evolves in the future.

You mentioned GPU interconnectivity on networking. I was wondering if you could comment about the copper versus the optical debate. Do you think copper is going to be here to stay? And in fact, when the bandwidth gets wider, do you think that copper might become even more relevant or irrelevant? Any insights there or potential further upside monetization opportunity?

Well, look, yes, let me say this, and I know I only have a short amount of time for a longer topic. Today, in an AI data center there's a lot of optics and there's a lot of copper and they all serve different purposes. But the one thing that is for certain is customers want the lowest latency, lowest power, highest reliability solution, and that's given a length. And so if the customers can use copper, which is lower latency, which is lower power and which is higher reliability, they're going to use it. And then it's up to us to make sure that we can continue to push the performance of copper to the levels that they need.

I actually view this more as an opportunity than threat because for Amphenol to the extent that we can solve that problem for our customers, which we've demonstrated, the wherewithal to do so far, and we have a great road map in the future, that actually allows us to create even more incremental value for our customers and in my experience over these 27 or so years, if you can create value for your customers, they're willing to share 1 or 2 crumbs with you and that's good business.

Great.

Thanks so much. Thanks, everybody. Appreciate it. Thank you.

Hello, and welcome to the Amphenol Corporation's Call. [Operator Instructions] At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Great. Thank you very much. Good morning, everyone. I'm Craig Lampo, Amphenol's Chief Financial Officer. We are very excited to welcome you to all to join us to the special conference call to discuss the acquisition that we announced this morning. As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements, so please refer to relevant disclosures in our press release for further information.

I trust that you have all read the press release we issued today announcing the transaction, which is posted on the IR section of our website. This morning, we would like to share with you why we see CCS as a strategic, highly complementary fit within our existing product portfolio. And then we look forward to taking your questions.

I would now like to turn the call over to Adam Norwitt, our CEO.

Well, Craig, thank you very much, and I'd like to wish everybody good morning to those of you joining us on these most exciting updates for Amphenol. We really appreciate your time today, especially as it comes less than 2 weeks after our second quarter earnings call. I'm very pleased that we announced this morning that Amphenol has signed a definitive agreement to acquire the Connectivity and Cable Solutions segment, or CCS, from CommScope for $10.5 billion, subject to customary post-closing adjustments. We're very excited by this important acquisition as CCS is an iconic business with innovative technology and product capabilities as well as a broad IP portfolio that's supported by the business' robust R&D capabilities.

In particular, we look forward to adding CCS' high technology and highly complementary fiber optic interconnect products to Amphenol's existing product range. Following the closing of this acquisition, we will be able to offer our customers a broad array of copper and fiber optic interconnect solutions for data center and communications networks markets. In addition, CCS' building connectivity offering opens up a largely unpenetrated market to Amphenol, and that is advanced interconnect products used in next-generation factories and commercial buildings around the world.

The CCS acquisition is very complementary to Amphenol's current product offerings with the business operating in 3 unique end markets as 3 distinct businesses and that includes a Data Center Connectivity Solutions business, a Broadband Connectivity business and a Building Connectivity Infrastructure business. The Data Center Connectivity Solutions business represents approximately 40% of CCS sales and is currently seeing very robust growth driven by applications that support customers in the IT Datacom market, in particular, for AI.

CCS' Data Center Solutions are highly complementary to Amphenol's already-strong offerings in the IT Datacom market and that includes fiber optic cables and cable assemblies, optical distribution equipment, fiber panels, passive optical devices and fiber cable raceways. This business, in particular, has a rich legacy of innovation, stretching back to its origins as ADC Communications.

The Broadband Connectivity business represents approximately 35% of CCS sales and helps us to expand both our product offering as well as our customer reach into a broad array of traditional and next-generation broadband service providers. CCS offers a wide array of fiber optic interconnect solutions as well as other related cable and interconnect products that are highly complementary to Amphenol's existing capabilities in the communications networks market. This business was essentially the core of the original CommScope and has a storied history dating back to its founding by Frank Drendel in 1976.

Finally, the Building Connectivity Infrastructure business represents approximately 25% of CCS sales and offers new capabilities to Amphenol for the growing building infrastructure market. Products in this business support connectivity for new factory and commercial building construction as well as technology upgrades for existing facilities that are adopting smart manufacturing and smart building solutions. This is largely a new area of the industrial market for Amphenol and we look forward to the opportunity to sell additional existing Amphenol products into this important and exciting market segment. The Building Connectivity business also has a rich legacy of innovation stretching back to its origins as Systemax.

Based on CommScope's current outlook, the CCS business is expected to generate 2025 sales of approximately $3.6 billion with EBITDA margins of 26%. As part of Amphenol, we would expect CCS to have operating margins in the high teens, which is similar to the ANDREW business when we acquired it earlier this year. The deal is expected to be accretive to Amphenol's earnings in the first year post closing and to deliver further growth in the future, driven by strong growth in the Data Center business as well as healthy growth in the Broadband and Building Connectivity business.

As far as transaction terms, we intend to finance this acquisition through a combination of debt and cash on hand. And we have obtained committed financing to fund the transaction and at close, we expect to continue to have a very healthy net leverage ratio at or slightly below 2x EBITDA. We expect no change to our credit rating as a result of this transaction. And we expect the transaction to close in the first half of 2026, subject to the approval of CommScope's shareholders as well as customary regulatory approvals and closing conditions.

As you all know, we closed on the acquisition of the ANDREW business from CommScope earlier this year. Simply put, ANDREW has given us the opportunity to become deeply acquainted with the outstanding technology and deep bench of talent within CommScope. And we are simply thrilled to now be acquiring CommScope's remaining interconnect businesses. Collectively, with ANDREW, these businesses will add nearly $5 billion in annual sales to Amphenol with attractive margins. And as previously mentioned, we expect the CCS acquisition to be nicely accretive in the first year post closing, and we are confident that both CCS and ANDREW will make significant long-term contributions to our future growth and performance.

I'd like to take this opportunity to really thank the leadership team at CommScope as well as the team within CCS for just extraordinary integrity and hard work as we worked with them on executing on this transaction. And in particular, I look forward to welcoming CCS' more than 15,000 talented employees to the Amphenol family. And finally, I'd like to thank all the Amphenolians around the world for their continued hard work, focus on execution and service to our customers. Without our entire team's diligence and commitment, we would not be in the position that we are today to execute on this exciting and highly complementary acquisition.

And with that, Craig and I would be very happy to take any questions that you may have.

[Operator Instructions] We have a question from Asiya Merchant with Citi.

Adam, Craig, if I may, like is there any revenue overlap between the companies? I know you talked about the incremental on the building connectivity, but just so we can address if there is any revenue overlap? And how you're thinking about handling if there is one? And if I may also, if there's any cost synergies that you expect to realize both the acquisitions?

Well, thank you very much, Asiya. Look, we're really excited about this acquisition, in particular, because of the complementary technologies that CCS offers to Amphenol. And there's a very, very minimal amount of products where we kind of sell similar products to each other. So that's a very, very minimal aspect of this deal. And when you think about cost synergies, we always value companies on what we are getting, on the state of the company before. And we don't make valuations using the word synergy. In fact, inside Amphenol, it's a running joke that, that word synergy is not something that any of us use inside of Amphenol.

Do we expect the business to perform long term in a way that is maybe even better than they have in the past as part of Amphenol? Well, for sure. And I think when we think about that, it's not a question of cost synergies but rather every time a new company comes into Amphenol, we open up opportunities for them to both grow faster and oftentimes to make more money. And we've seen that with the recent acquisitions that we've made. Some of the really foundational recent large acquisitions like CIT and ANDREW, and we've talked about how those companies are performing even better than they were at the time and that we're really pleased with their performance.

But there's one thing about our approach to acquisitions that has always been a little bit different. We don't go into an acquisition saying, well, we're going to parachute a bunch of people in, we're going to hire a bunch of consultants, we're going to go restructure, reorganize, change how those companies operate. Rather, we work with existing management, the fabulous people. And I got to tell you, I mean, CCS has extraordinary talent inside that. We learned about how talented some of the folks are with the ANDREW acquisition and then getting to know the CCS team in the recent months has given us even more confidence that this is a team of people who is heart of Amphenol can really drive outstanding performance. And so, do we anticipate "cost synergies?" That's not how we think about it. Do we anticipate this company to perform at higher levels in the future as part of the Amphenol family? There's no question about that.

Our next question comes from the line of Andrew Buscaglia with BNP Paribas.

I just wanted to touch on what this brings to your portfolio in terms of fiber optics? Clearly, there's been somewhat of a debate with the transition from copper to fiber coming at some point with AI data centers. So can you talk about how you see that transition playing out? And maybe how CommScope's CCS assets give you somewhat of an advantage as that occurs?

Yes. Thanks very much, Andrew. Look, we're really excited about this part of CCS. This is a very broad business. And as I said in my prepared remarks, it gives us great exposure across IT datacom, communication networks and the industrial market. But really, the fundamental thing that excites us here is the strength in fiber optics. Amphenol has had a fiber optic offering, there's no doubt about it. But about CommScope, I mean, this is really just a real shift for us in terms of our competency and capabilities once we bring them into the Amphenol family.

They're long legacy, and I mentioned it stretches back all the way to early days with ADC Communications, which was a real innovation leader in fiber optic interconnect back decades and decades ago. And CommScope has just done a fabulous job harnessing that technology, adapting it, innovating, continuing to drive those technologies forward, having everything from the cable to the interconnect, the connectors, cable assemblies, complex cable assemblies, fiber management systems and the like, which has positioned them to take advantage of what's happening in data centers, in particular, but also in communication networks.

And so when we think and we fast-forward to once we bring this company into Amphenol, we'll be able to go to customers who are outfitting their next-generation data centers, whether those be for AI or in general, accelerated computing and being able to offer them a total solution from the highest-speed copper interconnect solutions where we are really today organically having built up an exceptional position there, taking more than our fair share of the investments that are happening to the power interconnect where Amphenol has a fabulous position, a long legacy of innovation, going all the way back to our industrial and military products in power technology.

And now with the broadest possible offering of fiber optic interconnect and that really allows us to support customers in every aspect of their architecture. And I think those are all going to be strong components of that architecture going forward. And the fact that a customer can come to us with the sort of proverbial one throat to choke, and say, be there with us, however our system evolves, however we decided to outfit our architecture, whether it's scale up or scale out or whatever people talk about, we'll be there with our customers in a very fundamental way with leading technologies.

And that's what's so exciting for us with this transaction. I just really want to commend the team at CCS, who through thick and thin, has never ceased investing in technology. And that was ultimately the thing for us, which was so important about this acquisition and so attractive to us. And we're really excited to be able to proceed with that, and we're very excited for the future with this broad product offering.

Our next question comes from the line of Samik Chatterjee with JPMorgan.

I'll keep it simple. I mean, in terms of the debt leverage position that this leaves you with, I haven't covered Amphenol that long, but my model says this will probably be the highest that you've been. So any thoughts in terms of the priority going forward in terms of capital allocation, what levels of debt leverage are you more comfortable with on an ongoing basis? And what would that sort of road map to getting in that range look like?

Yes. Thanks, Samik. Appreciate the question. And actually, this is not certainly the highest level we will have been at. There's certainly times in the history of the company we've been higher, especially back after the CCS acquisition and otherwise where we've even been a little bit higher than this. But there's no doubt, in the recent past, we've certainly been slightly below 1%, slightly above 1% kind of range. We were in the mid-1s on a net leverage basis, I think 1.6% or so when we did the FCI acquisition.

And now we'll be just slightly higher than that, slightly under 2%, maybe 2% at the most which is still a very healthy leverage level. It certainly doesn't do anything in terms of the health of the company's balance sheet. We generate a significant amount of cash flow, $1.1 billion in the most recent quarter, and we continue to expect to generate significant cash flow as certainly we move forward here as we continue to grow.

So this certainly doesn't do anything in terms of how we think about our capital allocation strategy. We're very comfortable being at a little higher level. We're not going to do anything to harm our current credit rating. I would expect that as we move forward, we'll bring that down over time, even continuing to do M&A as we've continued to do it in the past. Certainly, nothing maybe of this scale in the near term. But certainly, we have plenty of capacity to still do more as we continue to generate cash flow as we will bring the leverage levels maybe back down over time into the kind of range that we've been historically at.

So I don't really think this is going to really do much or capital -- really anything from a capital deployment strategy perspective. And I think just based on the cash flow we generate, that you'll see some deleveraging relatively quickly over the future after we close the deal.

Our next question comes from Wamsi Mohan with Bank of America.

It's Ruplu filling in for Wamsi today. Adam, can you talk about the relative growth rates of the Data Center, Broadband and Building Infrastructure parts of the business? And how do you plan to invest in each? And how will Amphenol help grow the business in each segment?

Yes. Thank you very much, Ruplu. And look, there's no doubt that right now, the Data Center business is growing faster than the other 2 businesses, but all the businesses are growing at this stage. And we see great long-term growth opportunities for all of them. And look, our investment approach, as you know well, and certainly Wamsi knows well, has not been to sort of pick and choose winning markets, but rather to invest everywhere where we see opportunities across the electronics industry. And the beauty of, I think CommScope is a steward of this business has been that they have continued to invest in new technology consistently across all of these businesses.

And we look forward to continuing to do the same and maybe even ramping that up a little bit over time as we see further opportunities to take this technology portfolio really across the customers, across all of our end markets to the extent that those technologies find a home there. So we see great opportunities in each of these businesses for growth, we see great opportunities to continue to help them to find new technologies, innovate as they always have been. I mean, this is a company with a truly rich history of innovation, and we intend to accelerate that, not to decelerate it. So we're very excited really about all the businesses here.

Our next question comes from Steven Fox with Fox Advisors.

A couple of questions, if I could, Adam. I guess just on the traditional Systemax business, it's probably a leading brand even versus what you guys are doing in the data center. Can you talk about how you maybe go to market now with Systemax and how that helps sales synergies? And then I had a follow-up, if I could.

Yes. Thanks so much, Steve. Look, we're really excited. You pointed out and you know this business well. I mean, Systemax is a leading brand in Building Connectivity, whether that goes into data centers, whether that goes into factory automation, whether that goes into next-generation smart buildings and the like, I mean, it's a fabulous, fabulous brand and a fabulous reputation and one that the company has continued to invest in, as I just talked about. So how they go to market? They go to market in a very wide variety of ways, including with some distributors that we haven't worked as much with in the past.

This whole world of building construction, factory automation, we have a great business, as you know, in factory automation, interconnect, but it has nothing to do with the products that they're selling that really go into the infrastructure of those buildings as opposed to in the equipment that operates in those buildings. And if you think about our factory automation business going into robotics, automation machines and the like, which require a wide array of interconnect solutions, all of those products ultimately have to be connected to the Internet. And that's the beauty. That's how a smart factory operates.

And what the folks at CCS do and that it does stretch back to that Systemax heritage is they connect all of those connected devices to the Internet through the infrastructure of the building. And that's an exciting, exciting place for us. And we look forward to having that more comprehensive offering to customers who are really outfitting next-generation factories and next-generation buildings with all the things, I mean, I just think about -- we're in this old building, as you know, in Wallingford, Connecticut. And despite the scale of our company, we don't intend to change our beautiful old, I think I'd call it, shabby chic at our last earnings call.

But we are putting a few things in here. HVAC so that we can have a little more efficient and not waste as much money, WiFi hotspots and the like. And when you look around, even in our old shabby building, and you start putting up a new device here, a camera there, a temperature sensor there, a WiFi hotspot there, there's one thing in common with all of those, which is that the backbone of that, which has to continually to be upgraded is really these products that come out of the building connectivity solutions business of a company like CCS.

And they're working through channels we haven't had as much access to into end customers who are not making the equipment but rather really figuring out how to configure these buildings. And that's a really exciting place for us because I also believe that somewhere across Amphenol, we have products in the company that could find also an incremental home across that market channel, and that's something that we're excited for.

Our next question comes from Mark Delaney with Goldman Sachs.

I'm hoping to better understand how Amphenol plans to integrate the CCS acquisition. You've historically had the companies you acquire run pretty independently, gives them a lot of autonomy. And I realize this worked quite well for Amphenol. I'm curious since this one is a bit larger than what you've done, I think, 15,000 or so employees per the press release, do you envision doing this one at all differently? And maybe talk about how integrating it may fit with some of the go-to-market solutions potential that you mentioned, Adam?

Yes. Thanks very much, Mark. I mean look, you put your finger on something that's really critical to why we've been very successful as an acquirer for so many years. And this is, I think, our 16th acquisition over the last 3 years, which have also included to date, our 2 largest, which was CIT and ANDREW. And our playbook here is very simple, and it's the same whether it's a small family-run company, a medium-sized business, a larger business like CIT or ANDREW or an even larger businesses as the case with CCS, which is we bring them into Amphenol, and we don't "integrate them," especially because these companies that we acquire our first criteria.

Our very first criteria for any company that we look to acquire is the people. Is this a company run by people who can be true Amphenolians, who can continue to lead their business within our organizational culture, within that very unique decentralized autonomous accountable Amphenolian culture and I tell you, I've spent a lot of time with the leaders of CCS, fabulous, fabulous individuals who are going to be extraordinary Amphenolians in the future. I have no doubt about that.

So look, our plan with CCS is they will come into Amphenol, probably as a group initially. We've built this organization for scalability so that they can be a standalone group and then they will, for sure, interact with their colleagues and will help them to sort of find areas of collaboration in due course where we can ultimately help each other to find new areas, new markets, new product technology collaboration, new places to do manufacturing. And when I look at CIT and ANDREW, we're obviously a little bit farther down the path. We already see just fabulous things happening there, where the same team that was running those companies with the same organization is still running those companies.

Yes, I mean inside of both CIT and ANDREW, as we've done in the past with FCI, as we've done in the past with MTS and other larger deals, all the way back to TCS 20 years ago, we look to push the accountability down to maybe make sure that there are general managers inside the business who have parts of that business as a full accountability. And that's an ongoing evolution that we're already making great progress in with CIT and ANDREW, and I'm sure we'll do the same here with CCS in due course.

But the fact that it's larger doesn't change our mindset and our approach which is to rely on the amazing people that come with the deal to give them the accountability and the authority to work within a business of this size and maybe identify areas where -- here you have really 3 businesses and who knows, maybe in the future, we'll identify that there's more than 3 businesses within this to be run by general managers. And then kind of let them go out there and make it happen as Amphenolians with the high standards that we hold ourselves to.

So there's really nothing different about either the criteria that we applied to this, people, product, market position or the plans that we have for the company once they become part of the Amphenol family. The only difference here is that it's a bit bigger. I mean, yes, it is certainly the largest acquisition that we've announced today, which is why we thought it would be helpful to have this call here today. But our playbook doesn't change. And as we've scaled the organization, I mean, that's, I think, a very important piece of this.

I've talked before about my job as CEO being really to protect the culture of Amphenol and also to ensure that we can scale the company while preserving that very unique Amphenolian culture. And we've done that over the years in a very methodical fashion, originally creating the group's that -- sort of group together some of our general managers. And then as the company passed $10 billion in size more than 3 years ago, creating our first divisions where we have our 3 global divisions today. And what I said at the time and what I say still today is not only does that allow us to preserve the culture, the general manager-driven culture of Amphenol, but it has allowed us to scale and it creates amazing flexibility for us.

When we make a new acquisition, that acquisition can be a new GM reporting to a group or a new group reporting to a president, who knows, one day, it can be just a new division of Amphenol. And I think that flexibility organizationally, all still with a singular focus of preserving and strengthening the Amphenol culture is really what has allowed us to be prepared to do this fantastic deal today.

Our next question comes from Joe Spak with UBS.

Adam, I was wondering if you could talk about any co-package optic capabilities you might be acquiring in this deal. And you touched on this a little bit, but like is some of this just proactiveness on your end or like the deal rationale here? Or were your customers also coming to you asking for a broader package of solutions?

Yes. Thanks very much, Joe. I mean, look, we're buying here a company that has the broadest of fiber optic Internet capabilities. They're not a chip company. But as you can imagine, once you generate a photon from wherever it generates, it immediately has to start going through interconnect products. And I think their strong position and strong track record of innovation around fiber optic interconnect, fiber optic cable, complex fiberoptic cable assemblies, fiber management, and all of that, no doubt about it, that puts us in an ever better position with our customers who are integrating fiber optics into lots of different things, including in the data center.

I mean, look, proactive, I have admired and we have admired this business for many, many years. There's no doubt about it. It's an iconic company. It's a company that has really iconic technologies that we have always admired. There's no doubt. And you can never sort of time when something is available to acquire, but we've always made a point of getting to know companies for a long, long time period. And then as we get to know them, sometimes you have that intersection of an opportunity. And we started with CommScope to talk about the ANDREW company, which was at the time they're wireless assets, that certainly led to the development of even further familiarity that we had with the products and the technologies of CCS. And when the time was appropriate for them to consider a transaction around these products, we were well prepared.

I mean, does this come from our customers pushing us? I mean, look, our customers want Amphenol to be as broad as possible to support them in every way. So do I think our customers are going to applaud this transaction? Yes, I think they will. I have every reason to believe that they are happy to have Amphenol have as broad as possible product offering because they know that Amphenol executes. And when we look at why we have taken more than our fair share, but a variety of opportunities over the years, it comes down to the intersection of having the best products with being able to execute on behalf of our customers in an agile, flexible and, my word, Amphenolian fashion. And so I think that going forward, there's no doubt that our customers will continue to enjoy that Amphenolian flexibility and reactivity and now with an even broader set of product technologies that we can support them in every way, however they evolve and whatever architecture they choose to adopt.

Our next question comes from Luke Junk with Baird.

Adam, maybe if we could spend a little time on the Broadband business. As you mentioned, it's 35% of sales. It was really the core of the original CommScope an IP standpoint. It seems like that's a really big TAM that you're selling into there and maybe some infrastructure dollars behind it as well. Can you talk about -- you've got existing broadband assets in the company just how this fits in incrementally in the opportunities that you see?

Yes. Thanks very much, Luke. I mean, look, we're really excited about this. And as you point out, it's just over 1/3 of the business. I mean, it was the core. I mean, if you go back to the history of CommScope, it was a really fabulous entrepreneur, Frank Drendel who took some assets out of a cable company in 1976 actually. So next year, will be the 50th anniversary of the founding of that company. And there is a big market there with a lot of investments that are happening.

And what CommScope or CCS brings to us is really that incremental presence in fiber optic technology, which is a really fundamental part of the future of these high-speed networks. I mean, no question about it. The data that folks are consuming at homes, in businesses and institutions and governments continues to accelerate. And whether it is the extraordinary amount of video that -- by the way, I watch my kids consuming every day on TikTok and YouTube and all these other things, I mean, I just see lots of high-speed connectivity needed just to power my own house, let alone what so many others are doing here. And with the CCS coming to be part of Amphenol, it's a great complement to what we offer.

I mean, we have always been present in that market in a more modest way and essentially with copper products, that is the long legacy of broadband. But today, broadband is far beyond just the traditional broadband operators. You have new players who goes straight into fiber, who never were with the kind of traditional coaxial products. You have existing players who are expanding into that. And what we're especially excited about here beyond just the technology offering of CCS is the access and the presence with those next-generation customers around the world. And that's a really exciting and incremental thing for our company.

Our final question today comes from Joe Giordano with TD Cowen.

Just curious like elsewhere like you've done in the past deals [indiscernible] like you've taken a larger -- like bought an entire company and then kind of divested the pieces that weren't applicable to you. So just curious if there was -- like now you've essentially bought like the majority through 2 transactions, the majority of this company. Just curious if there was an opportunity to go that route, like from a financial standpoint?

Yes. No. I mean, look, you only buy what's available. And so this was the thing that we always coveted inside of CommScope. We knew this company for a long, long time. And I think how this has evolved is a fabulous win-win for both our company and for CommScope. And it's been a real pleasure working with them. They have some remaining businesses which are great businesses, but which have nothing to do with our focus as a company. And so through this kind of process of first working with them on ANDREW, getting to know them, getting to know their technology, developing a wonderful rapport with the leadership of CommScope, who I have just the highest in regards for. Now continuing with the CCS transaction, I mean, I think it's a perfect outcome for both companies.

Thank you. We currently have no further questions. So I'll hand back to Mr. Norwitt for closing remarks.

Well, thank you very much. And again, thank you to everybody for -- with relatively short notice this time coming together here early in the morning on Monday, and we wish you all the best and hope everybody has a wonderful August and that you get a little bit of time off to enjoy with your family and friends. We look forward to speaking to you at our next earnings call. Thanks so much.

Thanks, everybody.

This concludes today's call.

Hello, and welcome to the Second Quarter 2025 Earnings Conference Call for Amphenol Corporation. [Operator Instructions] At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I'd now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Thank you. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our second quarter of 2025 conference call. Our second quarter '25 results were released this morning. I will provide some financial commentary, and then Adam will give an overview of the business and current market trends, and then we'll, of course, take questions.

As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements. So please refer to the relevant disclosures in our press release for further information.

The company closed the second quarter of 2025 with record sales of $5.650 billion and record GAAP and adjusted diluted EPS of $0.86 and $0.81, respectively. Second quarter sales were up 57% in U.S. dollars, 56% in local currencies and 41% organically compared to the second quarter of 2024.

Sequentially, sales were up 17% in U.S. dollars, 16% in local currencies and 14% organically. Adam will comment further on trends by market in a few minutes. Orders in the quarter were a record $5.523 billion, up a strong 36% compared to the second quarter of 2024 and up 4% sequentially, resulting in a book-to-bill ratio of 0.98:1.

GAAP operating income was $1.419 billion in the quarter, and GAAP operating margin was a record 25.1%. GAAP operating margin included $29 million of acquisition-related costs. Excluding these acquisition-related costs, adjusted operating income in the second quarter of 2025 was $1.448 billion, resulting in a record adjusted operating margin of 25.6%. On an adjusted basis, operating margin increased by a strong 430 basis points from the prior year -- sorry, from the prior quarter and 210 basis points sequentially.

The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on the significantly higher sales volumes, which was only modestly offset by the dilutive impact of acquisitions. On a sequential basis, the increase in adjusted operating margin reflected strong conversion on the higher sales levels as well as further progress on the profitability improvement initiatives on acquisitions.

I'm extremely proud of the company's record operating margin performance in the second quarter, which reflects continued strong execution by our team. Breaking down second quarter results by segment compared to the second quarter of 2024. Sales in the Communications Solutions segment were $2.910 billion and increased by 101% in U.S. dollars and 78% organically. Segment operating margin was 30.6%. Sales in the Harsh Environment Solutions segment were $1.445 billion and increased by 38% in U.S. dollars and 18% organically. Segment operating margin was 25.2%.

Sales in the Interconnect Sensors & Systems segment were $1.295 billion and increased by 16% in U.S. dollars and 14% organically and segment operating margin was 19.5%. The company's GAAP effective tax rate for the second quarter was 18.3% and adjusted effective tax rate was 24.5%, which compared to 20.4% and 24% in the second quarter of 2024, respectively.

GAAP diluted EPS was a record $0.86 in the second quarter, up 110% compared to the prior year period. And on an adjusted basis, diluted EPS increased 84% to a record $0.81 compared to $0.44 in the second quarter of 2024. This was an outstanding result.

Operating cash flow in the second quarter was a record $1.417 billion or 130% of net income and free cash flow was a record $1.122 billion or 103% of net income, an excellent result, especially considering the growth we have experienced. In the third quarter, we expect capital spending to again be somewhat elevated versus our typical 3% to 4% of sales levels as we continue to invest to support the significant growth we are seeing in the IT datacom market.

From a working capital standpoint, inventory days, days sales outstanding and payable days were all within our normal range. During the quarter, the company repurchased 2 million shares of common stock at an average price of approximately $78. And when combined with our normal quarterly dividend, total capital returned to shareholders in the second quarter of 2025 was approximately $360 million.

Total debt on June 30 was $8.1 billion and net debt was $4.8 billion. Total liquidity at the end of the quarter was $6.2 billion, which included cash and short-term investments on hand of $3.2 billion plus availability under our existing credit facilities. Excluding acquisition-related costs, second quarter 2025 EBITDA was $1.7 billion. And at the end of the second quarter of 2025, our net leverage ratio was 0.9x.

During the quarter, the company completed a successful $750 million U.S. bond offering and a EUR 600 million bond offering. As of June 30, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs, and we expect quarterly interest expense, net of interest income earned on cash on hand to be approximately $70 million, which is reflected in our third quarter guidance.

I will now turn the call over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and I'd like to extend my welcome to all of you from sunny Wallingford, Connecticut. And I hope that all of you on the call here today, together with your family and friends and colleagues are enjoying a wonderful summer so far.

As Craig alluded to, I'm going to highlight our achievements in the second quarter. I'll talk about our trends and progress across our served markets. We'll make some comments on our outlook for the third quarter, and then, of course, we'll have time for questions at the end.

Let me just say that we drove outstanding performance in the second quarter of 2025. In fact, our results were much stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Our sales grew from prior year by a very strong 57% in U.S. dollars and 56% in local currencies, reaching a new record $5.650 billion. And on an organic basis, our sales increased by 41%, with all of our end markets experiencing robust organic growth. And I'll talk about those markets specifically here in a few moments.

The company booked a record $5.523 billion in orders in the second quarter, and that represented a book-to-bill of 0.98:1. And these orders grew by 36%, very strong compared to prior year and were also up sequentially from our previous record orders in the first quarter.

I want to say that we're particularly pleased to have delivered record adjusted operating margins of 25.6% in the quarter. This is an increase of 430 basis points from prior year and 210 basis points sequentially. This strong profitability is a direct result of the outstanding execution of the Amphenol team around the world who continue to manage well in what continues to be a challenging cost environment.

Adjusted diluted EPS grew 84% from prior year and reached a new record of $0.81. And finally, the company generated record operating and free cash flow in the second quarter of $1.4 billion and $1.1 billion, respectively, both clear reflections of the quality of the company's earnings. I cannot express enough my pride in our team. Amphenol's results this quarter once again reaffirm the value of the drive, discipline and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment.

We are very pleased in May to have closed on the acquisition of Narda-MITEQ and based in Hauppauge, New York, with annual sales of approximately $120 million, Narda-MITEQ is a leading provider of active RF and microwave components primarily for the defense market. Together with our previously announced acquisitions of XMA and Q Microwave and now with Narda, we're building a strengthened presence in RF interconnect and active RF components, which is a great complement to our leading position across RF connector, cable, cable assembly and antenna products for this important market.

We remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions and then to successfully bring these companies into the Amphenol family remains a core competitive advantage for the company.

Now turning to our served markets. We're very pleased that the company's end market exposure remains highly diversified, balanced and broad. This diversification continues to create great value for the company, enabling us to participate across all areas of the global electronics industry while not being overly exposed to the volatility of any given market or application.

The defense market represented 9% of our sales in the quarter. Sales grew from prior year by a very strong 25% in U.S. dollars and 18% organically. And this was driven by broad-based growth across most segments within the defense market. Sequentially, our sales increased by 13%, which was better than our expectations coming into the quarter for a high single-digit increase.

Looking into the third quarter, we expect sales to increase modestly from these second quarter levels, including the benefit of our acquisition. We remain encouraged by the company's leading position in the defense interconnect market, where we continue to offer the industry's widest range of high-technology products.

With the addition of Narda-MITEQ, we continue to diversify our already broad product offering to capitalize on the increasing adoption of electronics in defense equipment. Amidst the current dynamic geopolitical environment, countries around the world are expanding their spending on both current and next-generation defense technologies, and we're positioned better than ever to capitalize on this long-term demand trend.

The commercial aerospace market represented 5% of our sales in the quarter, and sales increased by 50% in U.S. dollars and 8% organically from prior year as we benefited from the addition of CIT last year as well as our continued progress in expanding content on next-generation commercial aircraft.

Sequentially, our sales grew by 6% in U.S. dollars from the first quarter, which was better than our expectations coming into the quarter. Looking to the third quarter, we expect our sales to be up in the low single digits from these second quarter levels. I'm truly proud of our team working in the commercial air market. With the ongoing growth in demand for jetliners, our efforts to expand our product offering, both organically and through our acquisition program are paying real dividends.

In particular, we continue to be very encouraged by the progress of the CIT team as part of Amphenol, and we look forward to further capitalizing on our expanded range of product solutions for the commercial air market long into the future. The industrial market represented 19% of our sales in the quarter, and our sales in this market grew 25% in U.S. dollars and 12% organically as we continue to see improvements across our diversified industrial market.

In particular, our organic growth was driven by expansions in alternative energy, instrumentation, medical, industrial EV and factory automation. And I'm especially pleased that we grew organically in all of our served geographic regions during the quarter, including in Europe.

On a sequential basis, our sales grew by a much better-than-expected 11% from the first quarter. Looking into the third quarter, we do expect sales to moderate slightly from these second quarter levels on typical seasonality. But we remain encouraged by the company's strength across the many diversified segments of this important market.

As demand has continued to recover, I'm confident that our long-term strategy to expand our high-technology interconnect, antenna and sensor offering, both organically and through complementary acquisitions, has positioned us to capitalize on the many electronic revolutions that continue to occur across the industrial market. This creates exciting opportunities for our outstanding team working in this important area.

The automotive market represented 14% of our sales in the second quarter, and sales in this market grew 10% in U.S. dollars and 8% organically as we experienced growth really in all regions. Sequentially, our sales in automotive grew by 7% from the first quarter, which was also much better than our expectations coming into the quarter and really reflected strong execution by our team.

For the third quarter, we expect sales to be slightly lower than the second quarter levels as customers plan for their traditional summer shutdowns. I remain proud of our team working in the automotive market. While there are still areas of uncertainty in this market, our team continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles.

We look forward to benefiting from our strong position in the automotive market for many years to come. The communications networks represented 11% of our sales in the second quarter. Sales grew from prior year by 143% in U.S. dollars, which was driven primarily by the addition of ANDREW. On an organic basis, our sales increased by a robust 16% from prior year as we benefited from increased spending by communications networks operators as well as wireless equipment manufacturers.

Sequentially, sales in the second quarter grew by 30% from the first quarter, driven in part by the ANDREW acquisition, which was completed in the first quarter. Organically, our sales grew by a better-than-expected 7%. Looking into the third quarter, we expect sales to remain at these very strong Q2 levels.

With our expanded range of technology offering, especially following the acquisition of ANDREW, we are well positioned with both service provider and OEM customers across the global communications networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint have positioned us to support customers around the world.

As those customers continue to drive their systems to higher levels of performance, we look forward to supporting them for many years to come. The mobile devices market represented 6% of our sales in the quarter, and our sales grew by 14% in U.S. dollars and organically in the second quarter as strength in smartphones and laptops was only partially offset by declines in products sold into tablets.

Sequentially, our sales increased by 4%, which was actually much better than our expectations coming into the quarter for a high teens decline. As we look into the third quarter, we anticipate sales to increase in the high single digits compared to the strong second quarter levels.

I'm very proud of our team working in the always dynamic mobile devices market as their agility and reactivity have once enabled us to capture -- once again enabled us to capture incremental sales in the quarter. I'm confident that with our leading array of antennas, interconnect products and mechanisms designed in across a broad range of next-generation mobile devices, we're well positioned for the long term.

And finally, the IT datacom market represented 36% of our sales in the quarter. Sales in the second quarter grew by a very strong 133% in U.S. dollars and organic, and this was driven by continued acceleration in demand for our products used in artificial intelligence applications, together with continued robust growth in our base IT datacom business. I'm very proud of our team's outstanding execution in the second quarter as we were actually able to outperform even our customers' very high expectations for deliveries of AI-related products.

As a result, we shipped substantially more than expected, including some modest portion of third quarter demand. In fact, without this additional output, our IT datacom sales would have represented roughly a similar percentage of overall company sales as we saw in the first quarter or approximately 33%.

On a sequential basis, our sales increased by a very strong 29% from the first quarter, substantially better than our expectation for a high single-digit increase, again, reflecting that outperformance of our team executing beyond what anybody expected. And this growth was driven by sales of AI-related products as well as growth in our base IT datacom business.

As we look into the third quarter and due to the stronger-than-expected execution of our team in the second quarter, we expect our sales to moderate in the high -- in the mid- to high single digits from these very strong second quarter levels. But I got to tell you, we're more encouraged than ever by the company's position in the global IT datacom market.

Our team has done an outstanding job securing future business on next-generation IT systems with a broad array of customers. And the revolution in AI continues to create unique opportunity for Amphenol, given our leading high-speed and power interconnect products. In fact, whether high-speed power or fiber optic interconnect, our products are critical components in these next-generation networks, and this creates a continued long-term growth opportunity for Amphenol.

Turning to our outlook and assuming current market conditions as well as constant currency exchange rates, for the third quarter, we expect sales in the range of $5.4 billion to $5.5 billion and adjusted diluted EPS in the range of $0.77 to $0.79. This would represent sales growth from prior year of 34% to 36% and adjusted diluted EPS growth of 54% to 58% compared to the third quarter of last year.

I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow our market position while driving sustainable and strong profitability over the long term.

Finally, I'd like to take this opportunity to thank our entire global team for their truly outstanding performance here in the second quarter. And with that, operator, we'd be very happy to take any questions.

[Operator Instructions]

The first question is from the line of William Stein with Truist.

Congrats on the fantastic quarter. And what really sticks out to me is the operating margin, which is now -- I believe it's above even your drop-through target. And so I wonder if this might be a time to revisit that bogey. I think historically, you've talked about 25% fall-through. You're now above that on an aggregate basis. What should we think about going forward?

Yes. Thanks, Will. Really appreciate the question. Yes, listen, I would agree. I mean the team really has just done an exceptional job really driving operating margin. I mean, 25.6% in the quarter is really an amazing achievement that the team is should be really proud of, and we certainly are.

I mean Q3 also reflects our guidance, really reflects another strong quarter of profitability kind of essentially at the same levels on slightly lower revenue guidance. So we certainly expect this operating margin to continue. As you know, and as you just mentioned, we've long targeted the 25% conversion margin in the last couple of years, we've really meaningfully exceeded that benchmark.

So it's partially due to just the exceptional organic growth, but also the bottom line is we're really just selling higher technology products, and we continue to do a really good job of controlling our costs in our traditional kind of Amphenolian fashion.

Now listen, we do expect some normalization of conversion margins as we continue to kind of scale our cost structure in line with these higher sales volumes as we move into kind of maybe 2026. But we really believe that the overall impact of that will be modest and our conversion margins will continue to remain higher and meaningfully higher than kind of that 25% conversion target that we've historically had.

So as you say, it's not lost on us that we just did close the quarter here well above 25%. And going forward, as we continue to grow, we do believe there's still room for really further margin expansion. This reflects the increased level of technology we've had that's embedded in our products, differentiated value that we consistently deliver and certainly the innovation and execution that we've had.

So I think looking ahead, we do expect to convert incremental sales on operating income, maybe I would say, approaching 30%. I think close to 30% would be our target kind of moving forward. And I think it's appropriate given where we're at and kind of where we're heading. Of course, there are going to be periods due to M&A and other factors, we'll be above or below that.

But I think 30% is kind of, I think, the targeted conversion that you should think about kind of as we continue to move forward and we continue to grow. And I think we should certainly be able to continue to increase those margins as the company continues to increase our revenue in the future.

The next question is from the line of Steven Fox with Fox Advisors.

Just to follow up on that margin question. Adam, can you talk a little bit about how that sales mix is sort of becoming richer? I would imagine a good portion is due to the mix of sales from Gen AI data centers. But can you sort of describe to us what's changing in sort of the tech road map for Amphenol that's driving the margins?

Yes. Thanks very much, Steve. I mean, look, we -- I think Craig just alluded to the fact that for sure, when you grow really fast, and we did grow by 133% in IT datacom, you really would expect conversion margins to be a little bit higher in that high-growth area. And that's true in whichever market where we would grow at that speed.

But relative to Craig's comment about technology, I would tell you this is really across the company. When we think about the importance of our products, to our customers and ultimately, the value that we create for our customers with these next-generation high-technology products, whether that is in the defense market, the industrial market, the automotive market, the communications networks and of course, in IT datacom, by creating more value for our customers and by continuing to instill that Amphenolian cost mindset into everything we do, we are not because we're selling higher technology products, all of a sudden moving out of our kind of shabby chic headquarters here in Wallingford, quite the contrary.

We continue to watch every penny of the company's money as if it were coming out of our own pockets. And by selling that high-technology product across the board, that allows us to have the confidence that Craig just talked about where we can think about a conversion margin target of closer to 30% instead of our traditional 25%, so yes, for sure, we are enabling more in IT datacom and growing very significantly, and that's contributed. But that's not, by definition, the only area where we're selling high-technology products.

The next question is from the line of Amit Daryanani with Evercore..

Adam, I guess there's always this worry around peak revenues, peak margins when we have strong prints like this one. And so perhaps you can touch on it. I realize it was about $150 million of shipment in June versus September that you talked about. But really away from that, can you spend some time talking about how do you think about the durability of growth on the AI infrastructure side as you go out over the next few quarters? And then any way to size or favor how much of the growth in IT datacom that you folks had came from AI versus the traditional kind of IT datacom markets?

Yes. Thanks very much, Amit. And certainly, I can understand the question. I mean, look, we talked about the fact that we overperformed. I mean this was a very, very strong outperformance. If you think about our second quarter, we originally guided the quarter to be at the high end, $5 billion in sales, and we ultimately achieved $650 million more than that. And on the IT datacom side, we outperformed very, very significantly. And you gave a size to that, and that's, I think, a good rough estimate of how much we kind of shipped of what would be Q3 demand.

And if you factor that in, you certainly don't see a peakiness to the performance. I mean there is continued momentum in that space. And when we think about the durability, are we always going to grow IT datacom by 133% No, of course, we're not going to. I think that wouldn't be reasonable to expect it. But do we see future growth opportunities in this revolution of AI? No doubt about it. No doubt about it.

I mean when I look at what we have already secured, what we are already shipping to support across up and down the stack, of the folks who are investing from the web scale providers all the way down to the chip makers and everything in between, including the OEMs, including the data center configures, all of that, there's no doubt that there remains great opportunities for us. And I can tell you that our team continues to win.

I mean when you have not only the best product portfolio, the broadest, the deepest set of technologies that help to enable these next-generation systems, but also the proven capability to ramp up and to build those around the world in multiple locations as our customers navigate the same geopolitics that everybody else is with tariffs and trade and the like and to satisfy their demand and actually in the second quarter to more than satisfy their demand, I can tell you that our reputation perceives us.

And as we look at new customers, looking at new configurations, new architectures, we are really the first phone call on all of these, and our team continues to do an excellent job of prosecuting these next-generation opportunities.

So I think that, that is a very durable continuation. And I would consider that we're kind of in the early innings of the adoption of AI on a broad basis across the economy. And so we're very excited about that. In terms of AI and its contribution to our growth, I would say roughly 2/3 of our growth on a year-over-year basis and actually roughly 2/3 of our growth sequentially in the quarter were coming from AI. So it's a significant contributor to the overall performance of our IT datacom business, and we look forward to it continuing to be so going forward many years in the future.

The next question is from Joe Giordano with TD Cowen.

Sticking with AI, just curious if your business there is getting more concentrated or less concentrated from a customer standpoint as you've moved along here? And if you were to just like average out your 2Q and your 3Q there to smooth for the pull forward here. I know you're not going to give guidance further than next quarter, but like is what you've secured sets you up to have further kind of sequential increases into the future off of that like smooth base?

Yes. So first, thanks very much, Joe. I mean, number one, I'll tell you, we have a very broad business here. So there are some big folks who are spending on this, and we have a broad representation across all of those big folks. And again, I've mentioned that includes at the ultimate consumer, the people who are spending the money putting in place these massive capabilities, down through the builders of those data centers, the OEMs and then all the way to the chip companies. And I wouldn't say that, that is overly concentrated, quite the contrary. And as you ask about, for sure, if you look at Q2 and Q3 and if you sort of factor out the kind of ship ahead that we had because of our execution, that's a relatively stable performance.

Do we see future growth opportunities? We do. Is every quarter going to be sequentially more than the quarter before it in a space like this? I wouldn't necessarily say that. We'll see. I'm sure there will be quarters that will be up and there will be quarters that will be down. But over the long term and over the medium term, we see continued progress and ability to continue to grow this business.

The next question is from Mark Delaney with Goldman Sachs.

Let me add my congratulations for the strong results. I also had a question on AI and some of the dynamics there. You spoke to seeing some degree of pull-in from 3Q and 2Q. Maybe you can elaborate on what you think contributed to that and why you shipped early.

And as you think about your expectation for sales to be down somewhat next quarter, granted off of a high base. What's giving you the confidence to still invest at higher levels of CapEx? I think maybe perhaps speaks to your longer-term view tied to AI that Adam you spoke to, but are there commitments or visibility you're getting from customers that supports the higher levels of CapEx that you spoke to?

Yes. Thanks very much, Mark. And again, I mean, this I wouldn't necessarily call it a pull-in, but rather that we were able to out-execute our customers' original demand plans, and they'll take whatever we can ship them. And so it was just us outperforming what really anybody expected, either us internally or what our customers with their already lofty expectations.

As it relates to CapEx, I mean, Craig did mention that capital was a little bit elevated. I mean I talked just a few moments ago about the fact that we do have an expectation and a confidence that we are continuing to gain momentum in this space, winning programs, getting visibility from customers for their future plans, which create incremental opportunities for us. And so when we talk about CapEx, sometimes that's not only CapEx for just one quarter ahead, but rather a little bit to come. And that is really where we would make those investments with that confidence for the future.

I already said it, but I'll just reiterate it. Our team continues to win very broadly in this market in current and next-generation systems and architectures. And that kind of winning, the visibility that you get from the customers, the commitments you get from those customers, those all collect to give you the confidence to invest in these very high technology products, which do sometimes require a little bit more capital.

The next question is from Samik Chatterjee with JPMorgan.

Adam, I know last quarter, you had mentioned some of the pull ahead that you thought was happening in mobile devices, which is why you had guided a bit for a sequential moderation, which didn't seem to have played out this quarter as much.

I'm just curious, like, obviously, with the book-to-bill at 0.98: 1, if I take AI aside, is there anything to call out in terms of areas that you might be seeing some level of pull ahead from customers where maybe that's driving some of the book-to-bill to be closer to 1 than what we had been generally seeing as above 1 book-to-bill in the past few quarters. Just curious more outside of AI, if you're seeing anything that would be from an order trend more sort of indicating a sequential moderation as such?

Thanks very much, Samik. I mean, first, you mentioned mobile devices. And in mobile devices, our bookings always equal our shipments because they're pretty quick call-offs. And yes, in the first quarter, we did talk about -- there was a pretty well-publicized pull ahead of some volumes in the first quarter, which we certainly helped to enable for our customer, and that was at the time related to the anticipation of some tariffs.

I wouldn't say that, that happened here in the quarter. In fact, I would say that our team in Mobile Devices just did a really outstanding job of capitalizing on opportunities to support our customers better, whether that's taking a little bit of market share, shipping a little bit more than maybe customers expected or customers needing a little bit more because of the volatility of that market.

In terms of the rest of the company, I wouldn't say that there's anything really notable around the book-to-bill. I'd say that the book-to-bills were fairly clustered pretty close to that level, maybe a little bit stronger in the defense market, and we've talked about the ongoing strength in defense previously, and we continue to see that here, and you can imagine with IT datacom with us having shipped ahead as we did that there was a modestly a little bit lower book-to-bill, but nothing that gives us any concern about the visibility that we have. We continue to have still a very positive outlook for that market.

The next question is from Luke Junk with Baird.

I want to circle back to operating margin dynamics. Of course, we've talked a lot about the higher technology underpinning that margin dynamic. Adam, hoping maybe you could talk about some of the pure operating pieces here in terms of blocking and tackling.

I'm just trying to wrap my head around 41 points of organic growth. I mean we're talking billions of billions of incremental sales. Maybe you could just give some life to some of the more practical considerations in terms of bringing that amount of incremental volume online, plus to the extent that it might be supporting what you're saying about the incremental margin moving up over time as well.

Well, look, Luke, I'm glad you asked that question because growing 41% organically is certainly not a trivial task. Let alone 14% organic on a sequential basis, which is just 90 days of time. And I mentioned it in my prepared remarks, how grateful I am and how proud I am of our team around the world for really moving mountains here. I mean they have truly moved mountains.

And when you think about what does that mean, I mean, it's hiring the people. It's putting in place the automation machines, the testing, the validation. It's setting up new facilities. I mean we have set up a lot of new facilities over this time period, including diversifying our geographic footprint to insulate us and our customers from the dynamics that are going around related to trade and other areas.

I mean it's really every step of the way, every function in the company, which has to focus on exercising themselves, the organization, reacting in real time to grow the company by a 41% organic basis and yes, there is a strong growth that happened in IT datacom.

But even if you took out IT datacom, this was double-digit organic growth across the board in the company and all of our end markets with the exception of 2 grew in double digits, and those 2 that didn't grew by 8% organically, which is also very, very strong. And so no doubt about it that kind of, as you say, blocking and tackling across the company was really impressive.

And look, in maybe other enterprises, one would think about just throwing money at the problem. How much money can I throw to get the growth, but that's not the Amphenol style. That's not our entrepreneurial culture, that Amphenolian culture that we talk about for so many years. It's rather how do you get the most out of your resources, your facilities, your capabilities and thereby ultimately convert that to the bottom line, as Craig talked about already.

And it's just a very, very impressive performance by the organization. And it is those little movements by the thousands of people around the world, nearly 150,000 Amphenolian's globally today that ultimately allowed us to satisfy our customers to take advantage of the growth opportunity that was there and then to convert that opportunity into the margins and ultimately, the cash that creates the virtuous cycle that the company has been on for a long time.

The next question is from Joe Spak with UBS.

Adam, I guess I just want to -- not to beat the horse on this, but you mentioned it as sort of, I guess, not pull forward, but overperformance in the AI side, and you're saying that's because your customers will take their hands on whatever they can get.

But then you did sort of -- it did seem like part of the reason you're sort of talking about a little bit of maybe sequential softness just to sort of account for that. So can you just sort of help us square that circle? Like I know you said this was always going to be a little bit lumpy even if there's great long-term growth. So is that what you're sort of seeing maybe a little bit of just digestion before we see some further gains?

Yes. I mean, look, I've always said, Joe, that it's going to be -- there can be lumpiness. And look, I would not call Q3 kind of like an air pocket. The demand from our customers remains very strong. There's no doubt about it. It's just that when they think of their demand plans, and what ultimately they're delivering out into the field, and they want to match all the various parts of to do that, we've gotten a little bit ahead in certain areas, and that was just this outperformance that we had in the second quarter. But the overall demand, the investments that are being made by our customers and their customers remains very, very robust.

The next question is from Asiya Merchant with Citigroup.

If I can just double-click a little bit on the industrial market as well. That did really well for you guys, better than expected, I think, even on an organic and sequential basis, definitely. So I think you mentioned Europe is growing too organically. Just if you could talk about the improvement that you're seeing there. And my impression is that, that market should also help to improve incremental margins if this momentum sustains. If you could just talk about that as well.

Yes. Thanks very much, Asiya. Well, look, let me just address the margin. I mean, I certainly wouldn't assume that there'd be any disproportionate contributions from industrial. We make good money across all of our markets. I think we've addressed that already. But relative to industrial, I mean, we are very encouraged by the performance. It's now been -- it's our third quarter in a row of year-over-year organic growth, which we've now seen in industrial. And that included this quarter, strong sequential growth on an organic basis, growing 7% sequentially.

You'll recall, we had something like 7 quarters in a row of industrial moderation. We finally, in the third quarter of last year, saw a flat industrial market organically and then 6% up and 6% up in Q4 and Q1. And now we've doubled that rate with a 12% growth. And so I think for sure, I think last quarter, I talked about not just green shoots, but maybe even a daffodil or two in the industrial market.

And I think we've now seen that certainly. And that includes not just in North America and Asia, which the last 2 quarters were drivers of, but also in Europe, where we actually saw double-digit organic growth in Europe in industrial in the second quarter.

The other thing that I'm encouraged by in industrial is that if I look at all the subsegments of our industrial market, and there's a lot of them from medical to alternative energy, instrumentation, rail mass transit, factory automation, and we saw good growth in most of our end markets, strong growth in medical, strong growth in alternative energy, strong growth in instrumentation, strong growth in areas like factory automation with only a couple of the markets being a little more modest, and so the breadth of that, together with the regional growth that we've seen in industrial, I think, was very encouraging for us.

The next question is from Andrew Buscaglia with BNP Paribas.

Yes, I wanted to ask on the acquisition of Narda. Can you comment on what you paid for it, either valuation or dollar amount-wise? And then you're generating a ton of cash, double I was expecting just in the quarter. What do you plan to do with it in the second half? Is it -- are more deals on the horizon? Are they more Narda-like deals? Or are we going to see kind of a CommScope deal in size? Have you comment on that?

Yes. Thanks, Andrew, very much. I mean, look, Narda is a great company. And as I said, it's a very exciting new growth area for us in these RF components, which are really a very close complement with our RF interconnect, which is an industry-leading offering that we have. And if you think about RF across the company from antennas all the way to connectors and active components now, Narda really complements that very well.

We paid roughly $300 million for this, which is a reasonable multiple as we always do look to pay. In terms of our acquisition pipeline, we have a great pipeline today. We continue to have companies large, medium and small across all of our end markets, and we continue to hunt for companies that have great people with great products and a great market position. And I would tell you that today, looking at our pipeline, we're very encouraged by the potential going forward.

And ultimately, we remain not very skilled at predicting when we'll sign and announce those acquisitions. But the beauty of our acquisition program, if you look over the last 2.5, 3 years, we brought into Amphenol into our family, I think, roughly 15, 16 companies.

They were across almost all of our end markets, geographically diverse and also companies large, medium and small, which included our 2 largest ever acquisitions of CIT and the ANDREW business from CommScope. We're very encouraged by the performance of CIT and ANDREW, which are certainly helping those great conversion margins that Craig talked about earlier as well as the other acquisitions that we've made.

And so there's no doubt that we believe that acquisitions still represent one of the best returns on the capital that we're generating, and we're generating a lot of cash, and we have a lot of capital to go put to work, both in our own organic investments, but also through our M&A program.

The next question is from Saree Boroditsky with Jefferies.

Just maybe something high level. There were a number of end markets in the quarter that came in better than your expectations. I know you kind of talked about the pull forward in AI, but maybe just talk about what surprised you in the quarter? Or was it just conservative given some of the high level of uncertainty we're seeing? And then how does that apply to how you're thinking about the guidance for 3Q? And is there some conservatism there as well?

Well, thanks so much, Saree. Look, we always try to guide as best as we can. We have a bottoms-up approach to this. Have we outperformed that in many quarters? We have. But I'm not going to label our guidance conservative or aggressive or otherwise. I think we take a similar approach as we always have.

What surprised us to the upside here, I will say that just broadly, we saw strong performance across nearly all of our end markets or stronger-than-expected performance across nearly all of our end markets. And they each had their own dynamic.

But I think the one common thread is the ability of our organization to execute when there is demand available for us. And we showed that in IT datacom. We demonstrated that in mobile devices. We're consistently demonstrating that in our defense market and in fact, across the board and that ability to pivot quickly when the opportunities are there in this very exciting electronics industry, I think that's something that Amphenolian's the world over, never miss a chance to take advantage of.

And so that real sort of execution across our team, I think if anything, it's not surprising to me, but I'd say that's the common theme across all of these end markets. I will say it's encouraging on another side, which is that the demand that we see across our markets appears to be strengthening. A few markets which were maybe in the last few quarters, more questionable, industrial, automotive, for example, it's nice to see those markets growing organically.

It's really nice to see that in communications networks, where we had strong growth, 16% organic growth. And com air, again, growing 8% organically. So there is robust demand, I would say, almost across the board in all the areas that we serve. And then it's just up to our team to out-execute even that level of demand. And I think we've demonstrated the ability to do that pretty consistently.

The next question is from Wamsi Mohan with Bank of America.

Adam, I just want to go back to AI and ask about what you said about shipping ahead because of superior execution. Would you say that, that was something that happened just in 2Q? Or was there some of that in 1Q as well and then orders came back intra-quarter?

I guess the question is really how far out do you have visibility in the order book? And over the past few quarters, how much volatility have you seen in the order patterns in IT datacom, especially relative to AI, which might uptick mid-quarter?

Thanks, Wamsi. I mean, look, I would say that our out execution to our customers demand was really more clear here in the second quarter. But relative to orders, I mean, we've talked about -- we've had very, very strong orders over the last almost full year in AI. And some of those orders were really maybe a little bit longer visibility because of the capital that we're spending on behalf of our customers to do these very significant ramp-ups for them around the world. And so there can be always a little bit of lumpiness in those orders.

But given that how well we're executing, I would say it's kind of a net of this kind of shipping ahead that we had in the quarter, I would say it's pretty close to 1:1 in the quarter. But we've had much stronger orders as we've worked on investments and been awarded new programs, and we will continue to be awarded new programs based on everything that we see with our customers. And there will be some quarters where the orders are a little lumpier. But overall, we see a positive trend for quite some time into the future.

The last question is from Scott Graham with Seaport Research.

Congratulations on the quarter. I'm hoping you could answer this, either of you. Another question on the incremental margin, which for rounding purposes, let's just say it's up 500-plus basis points over the last couple of years, which also coincides with 2 years of your 3 most acquisitive years in the company's history. So I'm wondering if -- of that 500 basis points, how much of that would you say is organic versus how much is from the acquisitions with good assimilation, integration, that sort of thing?

Yes. Thanks, Scott. Listen, I would say that certainly, there are pieces of this. And one -- a big piece, the meaningful piece of it is certainly the things that we talked about earlier, which is just increased technology of our products, the more meaningful way that we are serving our customers in terms of our execution, in terms of our ability to really service them with great quality products, the things they need in their architectures. Those types of things are really, I think, have a big part of our margin expansion and really just creating value for our customers and then sharing in that value.

But there's no doubt about it. I mean our acquisition program and our ability to improve the profitability of the acquisitions that we've been doing over time has certainly added to the profitability of the business, especially when you look sequentially over kind of a number of quarters, we have seen meaningful profitability improvements in some of the larger acquisitions that we've more recently done as well as some of the smaller ones. And that certainly has had some impact on our profitability improvement over time.

So it's not just one thing. It's a lot of things that go into improving profitability, both organically and through the acquisitions and working with even some of the businesses that are within the company that are at lower profitability levels that may not be acquisitions and certainly working with them on profitability improvement initiatives that we've seen kind of come along over the past year.

So I think there's a variety of things, but there's no doubt that our success and our -- the team's ability at the acquisitions that have come into the family to be able to improve on their margins has certainly been one of the things that have been helpful in improving our profitability.

There are no further questions. I'll hand the call back to Mr. Norwitt for closing remarks.

Well, thank you very much. And I'd like to once again thank everybody for joining our call this quarter. And I wish everybody a great continuation of your summer, and we look forward to talking to you all again just in a short 90 days. Thanks very much, and have a great summer. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.