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. These statements reflect expected results for the full fiscal year and do not give effect to the planned spin-off of the Cloud and Power Infrastructure segment. Please note all growth metrics will be on a year-over-year basis unless stated otherwise. In addition to our earnings presentation, we also published a separate presentation regarding the proposed transaction which will be discussed on today's call.

This decision reflects our conviction that the business has achieved the scale, growth profile, and strategic importance to stand on its own. It also positions Flex to sharpen its identity and invest more aggressively in its highest growth, highest technology opportunities. Post-spin, as Flex allocates capital towards higher growth industries such as healthcare, robotics, warehouse automation, and networking, we believe the company is entering its next phase of transformation. We believe spinning Flex into two distinct companies positions both to sharpen strategic focus, improve operating discipline, and align capital allocation with their respective growth and margin priorities.

Earlier this week, we closed our acquisition of Electrical Power Products or EP², strengthening our power portfolio with utility-grade specification-driven solutions for grid modernization and electrification. These capabilities are becoming critical as data center growth places greater demands on power availability and reliability. They span power infrastructure, thermal systems, and complex hardware manufacturing deployed at scale across our global footprint. Capital deployment for these projects is already underway, it will remain elevated through FY 2027 as this growth, alongside broader CPI growth, requires expanded investment.

What went well
  • Fourth quarter revenue came in at $7.5 billion, up 17% year over year, with adjusted EPS of $0.93, up 27%.
  • Adjusted gross margin improved to a record 9.9% (up 50 basis points) and adjusted operating margin reached a company-record 6.7% (up 50 basis points).
  • Full-year fiscal 2026 revenue was $27.9 billion, up 8%, with adjusted operating income of $1.8 billion (up 21%) and full-year adjusted EPS of $3.30 (up 25%).
  • CPI (data center) revenue grew 38% year over year to $6.6 billion for the full year, exceeding the 35% target, with Q4 CPI up 31%.
  • Flex announced its intent to spin off the Cloud and Power Infrastructure business into a new public company, expected to complete in the first quarter of calendar 2027, and closed the acquisition of Electrical Power Products (EP2).
  • The company secured substantial incremental business with several hyperscaler and data center customers, including a multi-year contract with Google, underpinning CPI growth expectations of 65%-75% in FY2027.
  • Full-year free cash flow was approximately $1.1 billion, and Flex repurchased $944 million of stock (about 19 million shares) for the year.
What went wrong
  • CPI full-year adjusted operating margin was 9.2%, down 100 basis points year over year, reflecting incremental infrastructure investments in critical power and ramp costs in cloud.
  • ITS full-year revenue was $11.1 billion, down 2% from the prior year, due to persistent softness in Lifestyle.
  • Cloud margins remain lower than power margins within CPI, with ramp costs weighing on the cloud business.
  • FY2027 free cash flow conversion is guided to approximately 60% (excluding spin costs), reflecting elevated CapEx of $1.4 billion-$1.6 billion to fund the data center build-out.

Guidance Changes

MetricPeriodCurrent guidance
RevenueFY2027$32.3 billion to $33.8 billion (up 18% at the midpoint)
Adjusted operating marginFY20277% to 7.1% (up approximately 80 basis points)
Adjusted EPSFY2027$4.21 to $4.51 (up 32% at the midpoint)
CapExFY2027$1.4 billion to $1.6 billion (elevated, expected to normalize in FY2028)
CPI revenue growthFY2027up 65% to 75%
CPI revenue growthFY2028over 80% (further acceleration)
RevenueQ1 FY2027$7.35 billion to $7.65 billion (up 14% at the midpoint)
Adjusted operating incomeQ1 FY2027$469 million to $499 million

Performance Breakdown

MetricYoYNote
Q4 total revenue up 17% Strong growth across the portfolio, led by Cloud, Power, and Industrial.
Full-year revenue up 8% Continued strong growth in Cloud, Power, and Industrial, offset by persistent softness in consumer-related end markets.
RMS Q4 revenue up 13% Strong growth in industrial and healthcare, with margin gains driven by industrial and automotive.
ITS Q4 revenue up 13% Primarily driven by strength in communications.
CPI Q4 revenue up 31% Growth in both business units, with Power's growth rate exceeding Cloud's.
CPI full-year revenue up 38% Strong data center demand; exceeded the 35% target, though margin fell 100 basis points on critical power infrastructure investment and cloud ramp costs.
Full-year adjusted EPS up 25% Increased adjusted operating income and strong share repurchases.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Corporate structuresingle integrated Flexintent to spin off Cloud and Power Infrastructure into a new public company in Q1 calendar 2027Separating into two focused companies
Segment reportingReliability Solutions and Agility SolutionsRegulated Manufacturing Solutions (RMS), Integrated Technology Solutions (ITS), and Cloud and Power Infrastructure (CPI)New three-segment structure
CapEx cycleFY2026 CapEx ~2.2% of revenueFY2027 CapEx $1.4-$1.6 billion, elevated to build data center capacityElevated in fy2027, normalizing in fy2028
LeadershipRevathi Advaithi CEO of FlexAdvaithi to become CEO of SpinCo; Michael Hartung to become CEO of FlexLeadership transition tied to spin
CPI marginFY2025 base9.2% in FY2026, down 100 bps on investmentExpected to recoup 100 bps in fy2027 and expand 50-100 bps in fy2028

Q&A Summary

How did you weigh the spin against the scale, diversification, and customer concentration of the power and cloud business?
Management views the value unlock as clear and frames the AI data center and power architecture shift as a one-time change. The CPI business has a diversified product portfolio (power, thermal, compute) and a diversified customer base across hyperscalers, colos, neoclouds, and utilities, making it well set up to run standalone; the decision felt like a no-brainer.
How much of the CPI growth acceleration is attributable to the multi-year Google agreement?
The acceleration is related to Google and multiple other hyperscalers, plus growth across colos and neoclouds, described as very diversified. Flex feels good about the 65%-75% and 80%+ growth rates, well distributed across product lines and customers, and is booked out in capacity and backlog for the next two years.
How should we think about the power franchise's embedded versus critical/distributed power subcomponents?
Embedded power (power for the chip) is accelerating significantly with the shift to 400V and 800V DC, and distributed power (low/medium voltage switchgear, power pods, up to utility-grade infrastructure) is also growing end to end. Flex will share more detailed growth rates as the new segmentation is reported each quarter.
As cloud scales through FY2027, will its margin profile converge toward the CPI segment average, and what is the FY2028 spread versus power?
Cloud had ramp costs in FY2027 that Flex expects to absorb while scaling. Cloud margins are lower than power margins and are expected to remain lower within CPI. Power also had FY2027 infrastructure investment that Flex expects to grow into, driving roughly 100 basis points of CPI margin improvement.
Can the two companies grow faster standalone, and how high can CPI margins go medium term?
CPI is guided to 65%-75% then 80%+ growth, supported by continued product portfolio expansion such as the EP2 acquisition. Programs are expected to extend beyond FY2028 into FY2029. CPI margin (9.2% in FY2026) is expected to recoup ~100 bps in FY2027 and expand a further 50-100 bps in FY2028, driven by product mix and improving products-business margins.
How much of CPI growth is the demand environment versus Flex's integrated full-suite model, and what is the durable moat?
Today much of the growth is still individual-product based, but technology roadmaps are migrating toward complete architecture as customers re-architect their organizations. The moat is the ability to deliver fully assembled, fully tested, ready-to-deploy systems combining power, cooling, and compute at scale and complexity that very few companies can replicate.

More on Flex Ltd.

Reported 2026-05-06 · figures from the Flex Ltd. Q4 2026 earnings call.

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