What Management Said
Read the full Q1 2027 transcript ↗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 did 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 Q1, our teams delivered another exceptional quarter while continuing to prepare two industry-leading companies for the next phase of growth as standalone businesses.
We delivered strong revenue growth, margin expansion across all three segments, and record-adjusted earnings per share of $1. As we stated before, our investments in this business are on track to drive accelerated growth and margin expansion in the second half of the fiscal year. We also saw strong growth in our communications and industrial business units driven by high-value markets such as networking, automation, and energy infrastructure. We have built two great businesses that are entering different phases of growth.
The spin allows each company to sharpen its strategic focus, align capital allocation with its growth priorities, and create greater value for customers and shareholders. SpinCo requires a capital allocation framework designed for rapid growth as demand for AI infrastructure accelerates. We see our ability to bring together power, thermal management, and compute technologies, combined with the ability to deploy these capabilities at global scale as a true differentiator in this space. As AI scales, demand will extend far beyond compute, driving investment across power systems, cooling technologies, electrical infrastructure, and ultimately, the grid itself.
What went well
- Flex delivered a strong start to fiscal 2027 with first-quarter revenue up 21% year over year to $7.9 billion and record adjusted EPS of $1.00, up 39%, alongside margin expansion across all three segments.
- The Cloud and Power Infrastructure (CPI) segment grew 35% to $2.2 billion on strong Power growth and ramping Cloud/Cooling programs, with adjusted operating income of $214 million (9.7% margin), positioning the AI-infrastructure business for a back-half acceleration.
- Adjusted operating profit rose 35% to $534 million (6.7% margin, up 70 basis points) and adjusted gross margin improved 50 basis points to 9.6% on favorable business mix and productivity; GAAP operating income was $392 million and GAAP EPS $0.76.
- Flex was added to the S&P 500 and remains on track for a tax-free spin-off of the CPI segment in the first quarter of calendar 2027, announcing full leadership teams for both Flex (RemainCo) and SpinCo.
- The company deepened its AI franchise - expanding its Cerebras partnership to manufacture the CS-3 accelerator in the U.S., launching a JetCool liquid-cooling solution, and advancing a modular platform with NVIDIA - and reported CPI demand see-through of 90%+ booked business for the next three quarters.
- Regulated Manufacturing Solutions grew 12% to $2.7 billion with margin up 130 basis points to 6.6% on industrial strength, and Integrated Technology Solutions grew 20% to $3.1 billion on exceptional communications/advanced-networking demand.
What went wrong
- Free cash flow was just $41 million, negatively impacted by $24 million of one-time cash costs related to the announced spin-off, and full-year free-cash-flow conversion guidance was cut to ~40% from 60% once spin costs are included.
- Inventory rose 24% year over year (up 10% sequentially) on revenue growth, with inventory net of working-capital advances up one day to 56 days.
- Within ITS, consumer-related end markets remained weak, partially offsetting the strong communications performance and holding segment margin expansion to just 10 basis points.
- CPI adjusted operating margin ticked down about 20 basis points sequentially on new-program ramp investments, and Power margins remain below electrical-infrastructure peers as recent acquisitions are still being invested behind.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | FY2027 | $33.7B-$35.2B (up 23% at the midpoint) |
| Adjusted operating margin | FY2027 | 7.0%-7.2% (~80 bps improvement at the midpoint) |
| Adjusted EPS | FY2027 | $4.42-$4.74 (up 39% at the midpoint); ~21% adjusted tax rate |
| Capital expenditures / FCF conversion | FY2027 | CapEx $1.5B-$1.6B; FCF conversion ~40% including spin-off costs |
| Revenue / Adjusted EPS | Q2 FY2027 | Revenue $7.95B-$8.25B (+19% at midpoint), adjusted operating income $535M-$565M, adjusted EPS $1.00-$1.07 (~375M shares) |
| CPI revenue growth | FY2027 / FY2028 | +65-75% in FY2027 (Q2 +45-55%, power exceeding cloud); framework of ~80% growth in FY2028 still holds |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +21% to $7.9B | Broad-based growth led by CPI (+35%), ITS communications (+20%) and RMS industrial (+12%). |
| Adjusted EPS | +39% to $1.00 (record) | Revenue growth, business mix and productivity; GAAP diluted EPS $0.76. |
| CPI revenue | +35% to $2.2B | Strong Power growth and ramping Cloud/Cooling programs; adjusted operating margin 9.7% (+20 bps). |
| ITS revenue | +20% to $3.1B | Exceptional communications/advanced-networking growth offset by consumer-related weakness; margin +10 bps to 5.2%. |
| RMS revenue | +12% to $2.7B | Strength in industrial (warehouse automation, robotics, energy infrastructure); margin +130 bps to 6.6%. |
| Adjusted operating margin | +70 bps to 6.7% | Business mix and underlying productivity improvements across all segments. |
| Free cash flow | $41M | Reduced by $24M of one-time spin-off cash costs and higher inventory to support revenue growth. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| CPI spin-off into a digital/electrical infrastructure company | CPI a segment within Flex | Tax-free spin targeted for Q1 calendar 2027; SpinCo positioned not as a data center components company but as a digital/electrical infrastructure leader combining power, thermal and compute at global scale, with a growth-oriented capital-allocation framework. | — |
| AI as a power and infrastructure story | AI framed as compute | Management argues the binding AI constraint is power, cooling, electrical systems and grid capacity - not the chip - and that the electrical transformation is a multi-year, long-tail opportunity extending well beyond the data center. | — |
| Integrated power-cooling-compute differentiation | Individual capabilities | Hyperscalers are increasingly having high-level strategic conversations about power/cooling for next-generation silicon; Flex touts true product IP across electrical (400V/800V, future solid-state), cooling (JetCool cold plates/CDUs) and compute integration, plus modular deployment (NVIDIA platform, Crown/EP2 power capacity). | — |
| RemainCo Flex secular growth | Diversified manufacturing | Post-spin Flex focuses on high-value secular markets - healthcare/medical devices, robotics/warehouse automation (regionalization, labor shortages), and energy infrastructure - plus advanced-networking pull-through demand from data centers, with continued portfolio optimization. | — |
| CPI capacity ramp and visibility | Investment phase | The 65-75% full-year CPI growth is back-half loaded and driven by capacity investments (facilities, cooling, manufacturing) now being installed; 90%+ of the next three quarters is booked, with robust FY2028 visibility. | — |
| Customer diversification | Concentrated hyperscaler exposure | The Cerebras engagement (US manufacturing + cooling, with future power) exemplifies hyperscaler diversification, and the Amazon commercial arrangement benefits both CPI and RemainCo businesses. | — |
Q&A Summary
Ruplu Bhattacharya (Bank of America) asked about CPI margins (slightly lower sequentially) and margin growth drivers in power/compute, and whether RemainCo needs more portfolio/footprint optimization.
Advaithi said CPI is on track with guidance (at least 100 bps of full-year margin improvement), with new-program investment and acquisition-driven power growth (70%+) temporarily muting margins toward peer levels; Hartung said RemainCo is happy with its starting portfolio and will keep optimizing toward high-value markets.
Mark Delaney (Goldman Sachs) asked about visibility into the ~100% second-half CPI acceleration and cooling (JetCool) traction.
Krumm confirmed the ramp (35% in Q1, 45-55% in Q2, 65-75% full year) with 90%+ booked for the next three quarters and robust FY2028 visibility; Advaithi said liquid cooling is still nascent but strategically important, with JetCool adding industry-leading cold plates and CDUs being qualified with customers.
Tim Long (Barclays) asked about the sustainability and breadth of communications strength and examples of bundled power/cooling/rack solutions.
Hartung called advanced networking a durable high-value growth market (switches, optical, NICs) tied to data center pull-through; Advaithi cited high-level hyperscaler conversations on integrated silicon/cooling/power for next-generation products - unseen two to three years ago - and the NVIDIA modular platform as proof points.
Joseph Cardoso (JPMorgan) asked what constraints limit further CPI upside and how representative the Cerebras engagement is.
Advaithi said the 70% full-year CPI guide is strong and on track (Q1 beat, Q2 higher, back-half loaded on capacity investment) with no significant constraints beyond ramping factories, and that Cerebras is a holistic manufacturing/cooling partnership (with future power) exemplifying hyperscaler diversification.
Ruben Roy (Stifel) asked whether ITS advanced-networking strength reflects share gains and how durable it is into FY2028, plus a CPI capacity update.
Hartung cited both increased demand from long-standing customers and share wins across product segments with good customer/product diversity; Advaithi tied FY2028 durability to AI infrastructure spending and said capacity investments (in cloud and power) have been underway for a while and are progressing well.
Luke Junk (Baird) asked about the high-voltage (400V/800V) transition risk to the CPI outlook and the company's modular capabilities.
Advaithi said Flex feels good about 400V (immediate) and 800V programs with no major limitations to FY2027/FY2028 guidance and potential upside as component availability improves, and framed modular capability across integrated mini-data-centers (NVIDIA) and mature modular power deployment (Dallas/Iowa capacity).
Steven Fox (Fox Advisors) asked how much industrial strength is cyclical versus secular and for an Amazon partnership update.
Hartung said industrial strength (energy infrastructure and robotics/warehouse automation) is tied to sustained secular infrastructure build-out and regionalization rather than a cyclical recovery; Krumm said the Amazon arrangement benefits businesses across the whole Flex portfolio with no new update at this time.
Steve Barger (KeyBanc) asked what share of engagements are for the unified power/cooling/compute portfolio versus a selective approach given other EMS entrants.
Advaithi said the differentiation is true product IP in electrical and cooling plus integrated design capability (400V/800V and future solid-state), which she has not seen combined elsewhere, and that conversations center on designing the full integrated suite for next-generation silicon while winning each category individually.
More on Flex Ltd.
Reported 2026-07-29 · figures from the Flex Ltd. Q1 2027 earnings call.
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