Slides for today's call, as well as a copy of the earnings press release, are available on the Investor Relations section at flex.com. Please note, all growth metrics will be on a year-over-year basis unless stated otherwise. Starting on slide four, Flex just wrapped up an exceptional quarter delivering positive results against our guidance. Our adjusted operating margin was 6%, and we delivered adjusted EPS of $0.72, a record Q1 number for Flex.

Our great start to fiscal year 2026 gives us improved confidence in our ability to hit our fiscal year commitments, which has been reflected in our improved FY26 guidance. What makes this business truly compelling isn't just the size or the growth; it's the architecture and integration behind it. They need to cool it, and they need to deploy it quickly. These capabilities are critical not only in data center, but also across our other end markets, including automotive, healthcare, industrials, and more, which account for 75% of total Flex revenue.

America's revenue for us rose to 49% in fiscal year 2025, up from 38% in fiscal year 2020, while Asia declined to 30%, down from 41% over the same period. First quarter revenue came in at $6.6 billion, up 4%, driven by strong data center growth across both cloud and power end markets. Gross profit totaled $596 million, and gross margin improved to 9.1%, up 130 basis points. Operating profit was $395 million, with operating margins at 6%, up 120 basis points.

What went well
  • First quarter revenue was $6.6 billion, up 4% year over year, driven by strong data center growth across both cloud and power.
  • Adjusted EPS rose more than 40% to $0.72, a record Q1 number for Flex.
  • Gross margin improved 130 basis points to 9.1% and adjusted operating margin expanded 120 basis points to 6%.
  • Agility Solutions revenue grew a strong 10% to $3.7 billion on robust cloud and AI demand, with operating margin expanding 120 basis points to 6.5%.
  • Free cash flow was $268 million, representing 98% conversion, and the company raised its full-year FY2026 guidance, increasing the revenue midpoint by approximately $600 million.
  • Flex acquired a new manufacturing site in Poland that doubles its power capacity in Europe to meet rising data center power demand.
What went wrong
  • Reliability Solutions revenue was $2.9 billion, down 2% year over year, reflecting continued macro-related pressure in automotive and renewables.
  • Agility Solutions continued to see softness in traditional telecom and consumer-facing end markets.
  • Incorporating tariffs into guidance adds largely low-calorie pass-through revenue that is a headwind to margin performance in the back half of the year.

Guidance Changes

MetricPeriodCurrent guidance
RevenueFY2026$25.9 billion to $27.1 billion (midpoint raised by approximately $600 million)
Adjusted operating marginFY20266% to 6.1% (held)
Adjusted EPSFY2026$2.86 to $3.06 (midpoint raised by approximately $0.05)
RevenueQ2 FY2026$6.5 billion to $6.8 billion
Adjusted operating incomeQ2 FY2026$375 million to $415 million
Adjusted EPSQ2 FY2026$0.70 to $0.78
Data center revenueFY2026approximately $6.5 billion, growing at least 35% and representing 25% of total revenue

Performance Breakdown

MetricYoYNote
Total revenue up 4% Strong data center growth across both cloud and power end markets.
Reliability Solutions revenue down 2% Continued macro-related pressure in automotive and renewables, partially offset by strength in power.
Agility Solutions revenue up 10% Robust cloud and AI demand more than offset continued softness in traditional telecom and consumer-facing end markets.
Adjusted EPS up more than 40% Margin expansion and strong execution; a record Q1 for Flex.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Data center businessno full-year fiscal forecast previously givenfirst full-year data center forecast: at least 35% growth, ~$6.5 billion, 25% of revenueIncreasing strategic contribution
Tariffs in guidancedirect tariff impact not incorporated into revenue guidancetariff impact incorporated into revenue guidanceNewly incorporated as pass-through
Regionalization of footprintAmericas revenue 38% in FY2020, Asia 41%Americas revenue 49% in FY2025, Asia 30%Shifting toward the americas

Q&A Summary

Why isn't the full-year margin outlook improving along with the higher revenue guide?
Flex held its prior 6% to 6.1% margin range while improving operating profit dollars through pass-through. The added tariff revenue is largely low-calorie and a margin headwind, and the company is making some back-half investments. Management noted it is the first quarter and they are generally conservative.
What were data center trends in Q1, and is power still expected to be stronger than cloud this year?
Flex feels very good about its at-least 35% full-year growth forecast and is in line with it, declining to give quarterly numbers. Power is still expected to be stronger because it had a softer prior year, but both cloud and power are expected to be significantly strong and margin accretive.
With Amazon designing some cooling products in-house, will hyperscalers do more power and cooling in-house, and how does Flex fit?
Flex views the Amazon announcement as positive and validating, since it has built both manufacturing and technology capability in power and cooling. Hyperscalers investing in their own capability is seen as positive, with Flex providing fully integrated compute, power, and cooling solutions.
Why did full-year EPS midpoint rise only about $0.05 when Q1 beat the midpoint by $0.10?
Q1 was above expectations but one quarter does not make the year. Revenue and operating profit dollars were raised, but EPS did not fully pass through due to a higher interest and other expense line. The first half benefits from a weak prior-year comparison, and Flex will continue making back-half investments to support data center growth.
Where do capacity constraints stand versus 90 days ago, and are there green shoots in automotive and industrial?
Flex is investing in capacity (Dallas ramping well, new Poland facility) and aims for just enough capacity to reduce lead times. Automotive was given a conservative guide that is tracking in line; industrial is performing as expected with green shoots in renewables; networking has strong share gains; and healthcare devices are extremely strong.
What tariff impact is factored into the full-year guide, and what drives the interest expense headwind?
Flex is passing through the June view (the pause) with no USMCA impact, not guiding to a specific tariff number; tariffs have no material impact on growth rate but pressure margin. The interest expense increase reflects variable interest rates, timing of refinancing, and costs associated with currency exposures.

More on Flex Ltd.

Reported 2025-07-24 · figures from the Flex Ltd. Q1 2026 earnings call.

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