Technology · Technology Hardware
Amphenol (APH)
Amphenol makes connectors and sensors across end markets, with a narrow gross-margin band, strong FY2025 organic growth and a positive cash cycle.
Selborne Research · · Company Profile
Educational analysis. This profile is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
Snapshot
- FY2025 Revenue
- $23.1B (+52%)
- Organic Growth
- +38% (FY2025)
- Gross Margin
- 36.9% (FY2025)
- Operating Margin
- 25.4% (FY2025)
- Gross Margin Range FY2016-25
- 31.0-36.9%
- Cash Conversion Cycle
- 94 days (FY2025)
- Backlog
- ~$8.9B (FY2025)
- Free Cash Flow
- $4.4B (FY2025)
Business Overview
Amphenol makes connectors and sensors whose gross margin stays in a narrow band while end markets rotate. FY2025 revenue was $23.1B, up 52%, of which organic growth was 38%. Gross margin was 36.9% and operating margin 25.4%. R&D was 2.8% of revenue. Stock-based compensation was 0.6%. Free cash flow was $4.4B.
Gross margin ranged from 30.98% to 36.88% over FY2016-FY2025. Cash conversion cycle was 94 days (DIO 86, DSO 75, DPO 67). Backlog was about $8.9B, up from about $6.1B. Segment sales were about $12.1B, $5.9B and $5.2B across the three reported segments.
How the Numbers Read
A 52% revenue rise with 38% organic growth means acquisitions contributed, but most of the year was underlying demand. Gross margin at 36.9% sits at the top of a decade-long 31% to 37% band: unlike Seagate, Amphenol does not swing from the high teens to mid-forties. That stability is what "engineered component" looks like in the filings.
A 94-day cash conversion cycle means the company funds its own inventory and receivables; suppliers do not carry the working capital the way they do for Apple or Dell. Backlog at about $8.9B is the order book, not ASC 606 RPO. The gross-margin ranges guide puts Amphenol's narrow band beside wider cyclical names.
How the Model Values This Kind of Company
Engineered components use the same units-times-price build as other storage and component names, but on a lower-amplitude cycle. Acquired growth enters only as higher unit growth; the primer shows why, using Amphenol's filed figures (38% organic growth against 52% reported).
Working-capital days and backlog cover matter. Terminal value uses mid-cycle free cash flow even when the margin band is tight, so a single peak year inside the band is not locked in forever. Stock pay is charged (here 0.6%).
What to Watch in the Financials
Organic versus total growth. +38% organic inside +52% total in FY2025. The gap is acquisitions and currency.
Gross margin versus the FY2016-FY2025 band. 36.9% at the top of 31.0% to 36.9%. A break below the band would be new information.
Backlog. About $8.9B from about $6.1B. Cover of forward shipments is the demand check.
Cash conversion cycle. 94 days. Inventory and receivables intensity is the capital claim beside the 25.4% operating margin.
Key Risks
End-market concentration in a strong year. High organic growth can reverse if a few end markets that drove FY2025 cool together.
Acquisition integration. The non-organic slice of the 52% rise has to earn its keep inside the same margin band.
Working-capital intensity. A 94-day CCC means growth consumes cash even when operating margins are mid-twenties.
Backlog conversion. About $8.9B of backlog is not revenue until shipped; push-outs would show here first.
Technology Hardware Sector Primer
A hardware DCF carries the product cycle through ten explicit years, then strikes the terminal value on what the business earns in a normal year rather than at the peak.
- 17 sections, from units, price and the product cycle to working capital in days, mid-cycle margins and a reverse DCF
- 43 pages
- a device brand, a networking maker, a contract manufacturer and a storage maker, all fictional
- 4 worked valuations
- listed hardware makers on filed margins, working-capital days and purchase commitments, each with its fiscal year
- 7-company screen
The Excel model is the primer's product-cycle DCF live across 13 sheets: a device brand, a networking maker, a contract manufacturer and a storage maker, all fictional, plus a column for a company of your own in any of five business-model modes. Revenue is built from trend units, a yearly cycle index and price, with a recurring line on the installed base and an order book for networking; gross margin carries a fixed share of cost of goods, so it rises and falls with the cycle; working capital runs in days; capex funds growth; and the terminal value is struck on mid-cycle cash flow. A reverse DCF reads the margin and the unit growth a price requires, and the sensitivity grids re-run the model in every cell. Change the cycle, the days or the margin and the value moves.
See what's in the Technology Hardware Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Technology industries
Learn the Concepts
Understand the valuation frameworks and metrics used in this analysis.
Gross Margin Ranges in Hardware Since FY2016
Hardware filers ranked by the width of their annual gross margin range since FY2016, an operating read of cyclicality with windows labelled where they differ.
Mid-Cycle Margins for Hardware Companies
A single year misleads for a cyclical hardware maker. How to average gross margin across a full cycle, with Seagate FY2016-FY2026 as the worked case.
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