Key Takeaways Teradyne's Q4 revenues rose 44% to $1.08B, with AI customers driving over 60% of sales.Amphenol posted record $6.44B Q4 sales, up 49%, as IT datacom jumped 110% organically.TER's earnings estimates jumped 57.7% in 30 days as shares soared 177.4% in six months.Amphenol (APH) designs and manufactures electronic connectors, sensors and interconnect systems used across data centers, telecom, automotive and industrial markets. Teradyne (TER) provides semiconductor test equipment and industrial auto ...

Citi Research Global Technology, Communications, Real Estate, Energy, and Industrials February 23, 2026 Data Center GAINs (Gen AI Names) Multi-Asset Strong Absorption Supports Solid 2026 and LT Data Center Demand | Equities | | | | | ABS | | --- | --- | --- | --- | --- | --- | | Michael Rollins, CFAAC +1 212 816-3116 | Heath TerryAC +1 212 723-4624 | Caitlyn Walsh caitlyn.walsh@citi.com | | | | | michael.rollins@citi.com | heath.terry@citi.com | | | | | | Siraj Ahmed AC | AC Scott Gruber | Andrew KaplowitzA ...

Industry Overview - The artificial intelligence (AI) sector, bolstered by the rapid growth of cloud computing and data centers, is experiencing a robust demand scenario, particularly for AI-powered data center capacity to manage and store vast amounts of data [1] - The "magnificent 7" stocks are set to invest $650 billion in 2026 for AI infrastructure development, representing a significant 71.1% year-over-year increase in capital spending on the AI ecosystem [2] Company Insights Amphenol Corp. (APH) - Amphenol holds a Zacks Rank 2 and benefits from a diversified business model, commanding an estimated 33% market share in AI-powered data center interconnects [7] - The company is experiencing triple-digit organic growth in its IT datacom segment, driven by high-speed and power interconnect products [8] - Amphenol's expected revenue and earnings growth rates for the current year are 34.9% and 29.3%, respectively, with a 1.9% improvement in the earnings consensus estimate over the last 30 days [12] Western Digital Corp. (WDC) - Western Digital, with a Zacks Rank 1, is witnessing strong demand for high-capacity hard disk drives (HDD) amid intensified cloud and AI demand [13] - The company is collaborating closely with hyperscale customers to deliver reliable, high-capacity storage solutions, with an expected revenue growth rate of -6.3% and earnings growth rate of 81.7% for the current year [16] Vertiv Holdings Co. (VRT) - Vertiv, holding a Zacks Rank 2, benefits from a diverse product portfolio and is strategically expanding capacity to support AI-enabled pipelines [17] - The company has a partnership with NVIDIA to co-develop an 800-volt DC power architecture, ensuring its infrastructure solutions remain relevant as power requirements scale [19] - Vertiv's expected revenue and earnings growth rates for the current year are 34% and 46.9%, respectively, with a 15.3% improvement in the earnings consensus estimate over the last 30 days [20] Lumentum Holdings Inc. (LITE) - Lumentum, with a Zacks Rank 1, designs and manufactures optical technologies essential for AI and cloud computing, experiencing significant revenue growth driven by demand for AI infrastructure connectivity solutions [21][22] - The company has a strong collaboration with NVIDIA for developing silicon photonics, positioning it as a key supplier to hyperscale customers [23] - Lumentum's expected revenue and earnings growth rates for the current year are 76.7% and over 100%, respectively, with a 34.6% improvement in the earnings consensus estimate over the last 30 days [24] EMCOR Group Inc. (EME) - EMCOR, holding a Zacks Rank 2, is a leading provider of critical infrastructure to AI-powered data centers, focusing on electrical infrastructure and cooling systems [25] - The company is gaining traction in the data center construction market, which is contributing to its expanding remaining performance obligations (RPOs) [26] - EMCOR's expected revenue and earnings growth rates for the current year are 5.4% and 8.6%, respectively, with a slight improvement in the earnings consensus estimate over the last 30 days [28]

Core Insights - The Active Copper Cable Multi-Source Agreement (ACC-MSA) has been established to enhance interoperability and innovation in next-generation copper interconnect solutions [1][5] - The consortium aims to address key industry challenges by reducing power, cost, and latency while improving performance for high-speed copper interconnects [1][5] Group 1: Consortium Formation - Thirteen global leaders in networking, semiconductors, and cabling have formed the ACC-MSA, co-chaired by MACOM and Semtech [2] - Founding members include major companies such as AMD, Cisco, Dell Technologies, NVIDIA, and others [2] Group 2: Technical Focus - The initial focus of the ACC-MSA is on optimized copper interconnects featuring integrated linear equalizers [3] - Specifications will cover electrical, firmware, and testing requirements to ensure interoperability among various vendors [3] Group 3: Industry Impact - The integration of linear equalizers is expected to extend the reach of copper cabling, reduce thickness, and lower power consumption and latency compared to traditional DSP-based solutions [4] - AI hardware infrastructure spending is projected to exceed $1 trillion by 2029, with networking infrastructure nearing $200 billion, highlighting the importance of ACCs in future deployments [4]

Group 1 - The primary goal of the "High Income DIY Portfolios" service is to provide high income with low risk and capital preservation for DIY investors [1] - The service offers seven portfolios designed for income investors, including retirees, featuring three buy-and-hold portfolios, three rotational portfolios, and a conservative NPP strategy portfolio [1] - The portfolios include two high-income portfolios, two dividend growth investing (DGI) portfolios, and a conservative NPP strategy portfolio aimed at low drawdowns and high growth [1] Group 2 - The "High Income DIY Portfolios" service includes a total of 10 model portfolios with varying income targets and risk levels, along with buy and sell alerts and live chat support [2] - The investment approach focuses on dividend-growing stocks with a long-term horizon, aiming for 30% lower drawdowns and 6% current income [2] - The service is managed by a financial writer with 25 years of investment experience, emphasizing strategies for stable, long-term passive income [2]

Core Insights - Major U.S. stock market indices experienced a decline on February 12, 2026, due to concerns regarding AI disruption affecting various sectors, including real estate, transportation, and software [1] - A shift towards steady dividend-growth stocks is recommended for equity investors as they provide resilience and cash flow durability during a period of reevaluation of traditional growth narratives [2] Dividend Growth Stocks - Stocks with a strong history of year-over-year dividend growth are considered healthier for capital appreciation compared to simple dividend-paying stocks or those with high yields [3] - Five selected dividend growth stocks include Agnico Eagle Mines (AEM), Advanced Drainage Systems (WMS), Amphenol (APH), Tapestry (TPR), and TIM S.A. (TIMB), which are viewed as solid portfolio choices [3] Advantages of Dividend Growth - Companies with a strong history of dividend growth are typically mature and less vulnerable to market volatility, providing a hedge against economic and political uncertainties [4] - These stocks exhibit strong fundamentals, including sustainable business models, profitability, rising cash flows, solid liquidity, strong balance sheets, and attractive valuations [5] Performance Metrics - Dividend-growth stocks have historically outperformed the broader market and other dividend-paying stocks, making them a favorable investment strategy [6] - Criteria for selection include positive historical dividend, sales, and earnings growth, as well as projected earnings growth rates [7] Stock Highlights - Agnico Eagle Mines (AEM) projects a 28% revenue growth for 2026 and has a long-term EPS growth rate of 33.8%, with a dividend yield of 0.74% [9][11] - Advanced Drainage Systems (WMS) anticipates a 4% revenue growth for fiscal 2026, with a long-term earnings growth rate of 13.90% and a dividend yield of 0.42% [12] - Amphenol (APH) expects a 34.9% revenue growth for 2026, with a long-term earnings growth rate of 21.90% and a dividend yield of 0.69% [13] - Tapestry (TPR) forecasts a 9.6% revenue growth for fiscal 2026, with a long-term earnings growth rate of 12.9% and a dividend yield of 1.03% [14] - TIM S.A. (TIMB) projects a 10.3% revenue growth for 2026, with a long-term earnings growth rate of 18.7% and a dividend yield of 5.20% [15]

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Group 1 - The core point of the article is that Amphenol has completed its largest acquisition in history, acquiring CommScope's CCS business for $10.5 billion, which significantly enhances its capabilities in AI data center fiber interconnects and establishes a comprehensive "wireless + wired" communication layout [1] - The CEO, R. Adam Norwitt, emphasized that acquisitions are the core growth strategy for the company, with a highly fragmented market exceeding $250 billion providing ongoing opportunities for further acquisitions [2] - The initial financial and operational synergies from the acquisitions are beginning to manifest, with the acquisition of CommScope's CCS business filling gaps in Amphenol's capabilities in fiber and copper cabling, and the acquisition of Trexon strengthening its competitiveness in defense markets [3] Group 2 - The market will continue to monitor the integration effects of completed acquisitions, particularly CommScope's CCS, after its full consolidation in 2026, and its impact on the company's overall revenue and profitability [4] - There is also interest in whether the company will announce new acquisition deals in the future [4]

Core Insights - Amphenol's international operations are crucial for understanding its financial resilience and growth potential, with significant contributions from global markets [1][2][4] Group 1: Revenue Performance - Amphenol's total revenue for the quarter reached $6.44 billion, reflecting a 49.1% increase year-over-year [4] - Revenue from China was $1.05 billion, accounting for 16.3% of total revenue, which was a 2.9% miss against the consensus estimate of $1.08 billion [5] - Other foreign locations generated $3.19 billion, representing 49.6% of total revenue, exceeding projections by 10.35% compared to the expected $2.89 billion [6] Group 2: Future Projections - Analysts project Amphenol's revenues for the current fiscal quarter to be $7 billion, a 45.5% increase from the same quarter last year, with expected contributions of 14.4% from China and 43.4% from Other foreign locations [7] - For the full year, total revenue is anticipated to be $31.15 billion, marking a 34.9% increase from the previous year, with China and Other foreign locations expected to contribute $4.58 billion and $13.56 billion, respectively [8] Group 3: Market Dynamics - Amphenol's reliance on international markets presents both opportunities and challenges, making the monitoring of overseas revenue trends essential for predicting future performance [9][10] - The company's stock performance has shown a decline of 1.9% over the past month, while the broader market and its sector have also experienced slight decreases [13]

Financial Performance - Net sales for Amphenol in 2025 reached $23,094.7 million, a 52% increase from $15,222.7 million in 2024, with organic growth of 38%[148] - Net sales for 2024 were $15,222.7 million, a 21% increase from $12,554.7 million in 2023, with 13% organic growth[172] - Operating income as a percentage of net sales improved to 25.4% in 2025 from 20.7% in 2024[157] - Net income attributable to Amphenol Corporation was 18.5% of net sales in 2025, up from 15.9% in 2024[157] - Operating income increased to $5,868.6 million, or 25.4% of net sales in 2025, compared to $3,156.9 million, or 20.7% of net sales in 2024[158] - Adjusted Operating Income for 2025 was $6,049.8 million, with an Adjusted Operating Margin of 26.2%, compared to $3,302.5 million and 21.7% in 2024[160] - Net income attributable to Amphenol Corporation for 2025 was $4,270.3 million, or $3.34 per diluted share, up from $2,424.0 million, or $1.92 per diluted share in 2024[169] Segment Performance - The Communications Solutions segment accounted for approximately 52% of net sales, increasing by 91% in U.S. dollars and 71% organically in 2025 compared to 2024[149] - The Harsh Environment Solutions segment, representing about 26% of net sales, saw a 33% increase in U.S. dollars and 17% organically in 2025 compared to 2024[150] - The Interconnect and Sensor Systems segment, making up approximately 22% of net sales, experienced a 15% increase in U.S. dollars and 13% organically in 2025 compared to 2024[151] - The Communications Solutions segment accounted for approximately 42% of net sales in 2024, increasing by 29% in both U.S. dollars and constant currencies[175] - The Harsh Environment Solutions segment, representing approximately 29% of net sales, increased by 25% in 2024, primarily driven by acquisitions[176] Expenses and Income - Operating expenses for 2025 were $17,122.7 million, or 74.1% of net sales, down from $11,938.4 million, or 78.4% of net sales in 2024[158] - Interest expense rose to $367.8 million in 2025 from $217.0 million in 2024, mainly due to higher borrowing levels for acquisitions[164] - The effective tax rate for 2025 was 23.1%, compared to 18.9% in 2024, influenced by various tax benefits and discrete tax items[166] - Acquisition-related expenses in 2025 totaled $181.2 million, impacting net income by $148.8 million, or $0.12 per share[160] Cash Flow and Investments - Net cash provided by operating activities increased to $5,374.7 million in 2025, compared to $2,814.7 million in 2024[207] - Free Cash Flow rose to $4,392.9 million in 2025, up from $2,157.1 million in 2024, while it was $2,159.9 million in 2023[214] - Net cash used in investing activities was $5,082.1 million in 2025, primarily driven by $3,818.6 million for acquisitions and $981.8 million for capital expenditures[216] - Net cash provided by financing activities was $7,423.2 million in 2025, significantly up from $1,729.9 million in 2024, and compared to a net cash used of $1,012.4 million in 2023[218] Acquisitions and Growth Strategy - The company is focused on expanding its global presence and pursuing strategic acquisitions to enhance market position[145] - The Company completed five acquisitions in 2025 for approximately $3,818.6 million, funded through cash on hand and proceeds from senior notes[247] - The Company completed the acquisition of CommScope for approximately $10,500.0 million in cash on January 9, 2026[252] Debt and Financing - The Company entered into a $2,000.0 million unsecured delayed draw term loan credit agreement on August 22, 2025, scheduled to mature in three years[222] - The Company issued $750.0 million of unsecured 4.375% Senior Notes due June 12, 2028, on June 12, 2025[230] - The Company issued $1,600.0 million of unsecured 4.625% Senior Notes due February 15, 2036, and $1,650.0 million of unsecured 5.300% Senior Notes due November 15, 2055[232] - The Company borrowed $1,534.1 million under Delayed Draw Term Loans in January 2026 to fund part of the CommScope acquisition[195] Shareholder Returns - The quarterly dividend rate was increased from $0.165 per share to $0.25 per share, effective with dividends declared in the fourth quarter of 2025[243] - Total dividends declared in 2025 amounted to $909.3 million, compared to $662.9 million in 2024[245] - The Company repurchased 7.4 million shares of its Common Stock for $665.2 million under the 2024 Stock Repurchase Program during 2025[241] Risks and Challenges - The Company faces challenges in obtaining raw materials and components due to supply chain constraints and inflationary pressures, which may lead to increased costs and supply shortages[255] - The Company is exposed to foreign currency exchange rate risks, which can affect sales, operating margins, and equity, and it employs various strategies to mitigate this risk[256][272] Accounting and Financial Measures - The Company defines Free Cash Flow as net cash provided by operating activities less capital expenditures, which is crucial for assessing liquidity and cash generation capabilities[264] - Adjusted Diluted EPS is calculated by excluding income and expenses not directly related to operating performance, providing a clearer view of the Company's financial health[259] - Organic Net Sales Growth excludes the impact of foreign currency exchange rates and acquisitions, reflecting the underlying sales trends more accurately[264] - The Company utilizes non-GAAP financial measures to provide additional insights into its financial performance, which may differ from similar measures used by other companies[258]