Amphenol plunges 16% after beating earnings targets
Investor valuation concerns trigger sell-off despite record quarterly performance
Amphenol shares tumbled 16% on Wednesday, extending their decline from a record high, despite the electronic connector manufacturer reporting record fourth-quarter earnings that comfortably beat analyst expectations and delivering stronger-than-expected first-quarter guidance.
The Connecticut-based company reported adjusted earnings per share of 97 cents for the quarter ended December 31, surpassing the 94-cent analyst consensus, according to analyst research data. Revenue surged 49% to $6.44 billion, outpacing expectations of approximately $6.25 billion. Operating margin reached an impressive 27.5%, underpinned by 37% organic growth across nearly all end markets.
For the full year 2025, Amphenol delivered sales of $23.1 billion, up 52% from the prior year, with adjusted earnings per share reaching $3.34. The performance was driven by robust demand for data center infrastructure, artificial intelligence applications, and industrial automation, alongside contributions from the company's aggressive acquisition program.
"We achieved record sales and outstanding profitability in the fourth quarter, capping off an exceptional year of operational execution and strategic growth," the company stated in its earnings announcement. "Our decentralized business model and focus on high-growth end markets position us well for continued expansion."
Looking ahead, Amphenol projected first-quarter sales between $6.90 billion and $7.00 billion, with adjusted earnings per share of 91 to 93 cents. Both figures exceed current analyst estimates, suggesting momentum continues into 2026. The company expects to maintain its double-digit growth trajectory, fueled by increasing demand for high-speed connectivity solutions in hyperscale data centers and AI infrastructure.
Despite the positive fundamentals, investors punished the stock, pushing it down to around $142 in afternoon trading from Tuesday's close of $167. The sell-off extends a recent pullback from the company's 52-week high of $157.54, though shares remain up more than 140% over the past 12 months.
Analysts pointed to elevated valuation as the primary culprit behind the market's reaction. With a trailing price-to-earnings ratio of 51.85 times—well above historical averages—investors appear to be reassessing whether the rapid share-price advance has fully priced in the company's growth prospects. Seeking Alpha's Quant Rating maintained a "Hold" stance, citing elevated valuation as a constraint on further upside.
"The market appears to be taking a pause after an extraordinary run," analysts noted. "While the fundamentals remain strong, the valuation had become stretched, leaving little room for any disappointment."
The market reaction comes just weeks after Amphenol completed its $10.5 billion acquisition of CommScope's Connectivity and Cable Solutions business, a strategic move that significantly expands the company's capabilities in high-density fiber solutions and liquid cooling systems critical for AI data centers. The CCS unit is expected to add approximately $4.1 billion in annual revenue and contribute 15 cents per share to earnings, according to transaction analysis.
Amphenol's competitive position has strengthened through its disciplined acquisition strategy, which has helped the company capture approximately 33% market share in the AI datacom segment. The company faces stiff competition from rivals including TE Connectivity and Molex, though analysts suggest Amphenol's aggressive approach to market consolidation could propel it to the number one position in the global connector market by 2025.
The company remains focused on the rapidly growing $50 billion AI infrastructure market, targeting a 25% compound annual growth rate through investments in dedicated R&D centers and automated manufacturing capabilities. This strategic positioning has made Amphenol a key supplier to hyperscale data center operators, semiconductor companies, and automotive manufacturers developing next-generation autonomous vehicles.
Despite Wednesday's steep decline, analyst sentiment remains largely positive. The consensus target price stands at $159.10, representing approximately 12% upside from current levels. Among covering analysts, 12 rate the stock a buy or strong buy, while six maintain a hold rating. None recommend selling.
"The long-term thesis remains intact," analysts at Zacks Equity Research wrote, noting that when adjusted for growth, Amphenol's valuation appears reasonable with a PEG ratio below 1. "The company's exposure to secular growth trends in AI, data centers, and electric vehicles supports sustainable double-digit expansion."
However, some market observers caution that the stock may face continued volatility as investors digest the implications of the recent acquisition and weigh the growth opportunity against current valuation levels. The Motley Fool recently characterized the company's valuation at 35 times forward earnings as "rich," suggesting that further share price appreciation may require even stronger execution than the company has already demonstrated.
Amphenol's ability to integrate the CCS acquisition effectively and maintain its historical operating margins will be critical factors in determining whether the stock can reclaim its upward trajectory. The company's history of successful integrations and disciplined capital allocation provides some comfort to long-term investors, though near-term sentiment may remain sensitive to broader market conditions and valuation concerns across the technology hardware sector.