What Management Said
Read the full Q3 2026 transcript ↗With today's earnings call, Todd Kelsey will provide summary comments before turning the call over to me and David Abuhl for further details. Plexus generated record revenue in the fiscal third quarter by capturing strengthening end market demand and successfully launching numerous new programs. As a result, we see Plexus positioned to deliver more than 20% revenue growth for fiscal 2026. We anticipate Plexus will sustain this momentum and currently see the potential to generate fiscal 2027 revenue growth in excess of our 9%-12% goal.
We expanded our funnel of qualified manufacturing opportunities to a record level, creating the potential to sustain strong long-term revenue growth. We delivered solid operating performance with a robust 6.3% non-GAAP operating margin for our fiscal third quarter. Consequently, we expect our fiscal 2026 non-GAAP operating margin to exceed 6% and see the potential for continued operating margin expansion in fiscal 2027. Finally, our working capital efficiency remains robust while supporting accelerated revenue growth.
We expect to sustain this performance into fiscal 2027 and anticipate a return to meaningful free cash flow generation. With all three of our market sectors contributing better than expected performance, fiscal third quarter revenue of $1.305 billion exceeded our guidance range, representing a 12% sequential and a 28% year-over-year increase. Additionally, non-GAAP operating margin of 6.3% met the high end of guidance, increasing 30 basis points year-over-year on continued efficiency gains and revenue leverage. For the third quarter, we secured 31 new manufacturing programs with $255 million in annualized revenue when fully ramped into production.
What went well
- Plexus generated record fiscal third-quarter revenue of $1.305 billion, exceeding the guidance range and representing 12% sequential and 28% year-over-year growth, with all three market sectors beating expectations.
- Non-GAAP operating margin of 6.3% met the high end of guidance (up 30 basis points year over year) and non-GAAP EPS of $2.32 exceeded the guidance range on revenue leverage and operational efficiency.
- The company secured 31 new manufacturing programs worth $255 million in annualized revenue, including a battery energy storage systems win for data centers and a very strong $135 million of aerospace and defense wins ($400 million year to date — more than 2x combined fiscal 2024-2025).
- The funnel of qualified manufacturing opportunities reached a record $4.5 billion (up 12% sequentially, 23% year over year, +$800 million), with aerospace/defense and industrial funnels also at records.
- Cash cycle improved to 62 days, the best quarterly result in over five years, on notable inventory-days progress, and return on invested capital hit 14.9% — the highest in several years and 590 basis points above WACC.
- Momentum lifted the full-year outlook to greater than 20% revenue growth for fiscal 2026 with non-GAAP operating margin above 6%, and management sees fiscal 2027 revenue growth exceeding its 9-12% goal.
What went wrong
- Free cash flow was a slight usage of just under $1 million in the quarter, and Q4 free cash flow is now expected to be break-even or a slight cash usage as working-capital investments support accelerating revenue.
- GAAP results trailed non-GAAP (GAAP EPS $1.58 vs $2.32, GAAP operating margin 4.7% vs 6.3%), reflecting stock-based compensation and executive-retirement expenses.
- Healthcare/Life Sciences growth is expected to moderate to at least mid-single digits in fiscal 2027 (a digestion period) after a tremendous high-teens fiscal 2026, and Q4 healthcare revenue is guided approximately flat as program-ramp delays offset stronger demand.
- Aerospace/Defense revenue is expected to be approximately flat sequentially in Q4 after three straight quarters of strong sequential growth, before resuming growth in fiscal Q1 2027.
- The supply chain is tightening (extending lead times, semiconductor and memory price increases), requiring proactive component pre-placement, and non-operating expense is rising sequentially (to ~$6.3M in Q4) on higher interest expense.
- COO Oliver Mihm was unexpectedly unwell and could not join the call, and a tornado struck near the Neenah headquarters (no material operational impact or fatalities).
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | Fiscal Q4 2026 | $1.33B-$1.38B (4% sequential, 28% YoY growth at midpoint) |
| Non-GAAP operating margin | Fiscal Q4 2026 | 6.1%-6.5% |
| Non-GAAP EPS | Fiscal Q4 2026 | $2.47-$2.63 |
| Revenue growth | FY2026 | Greater than 20% (raised) |
| Non-GAAP operating margin | FY2026 | Greater than 6% (met) |
| Revenue growth | FY2027 | Potential to exceed the 9-12% goal, with continued sequential expansion and operating-margin expansion |
| Capital expenditures | FY2026 / FY2027 | $100M-$120M FY2026; 2%-3% of revenue in FY2027 (Malaysia site expansion via campus model) |
| Free cash flow | FY2027 | Return to meaningful generation, in excess of $100 million |
| Non-GAAP effective tax rate | FY2026 / FY2027 | 15%-17% FY2026 (Q4 12%-14%); preliminary 16%-18% FY2027 |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Revenue | +28% to $1.305B (record) | Strengthening end-market demand and numerous successful new-program launches across all three sectors, plus supply-chain execution accelerating demand capture. |
| GAAP diluted EPS | $1.58 | GAAP figure below the $2.32 non-GAAP EPS due to stock-based compensation and executive-retirement expenses. |
| Non-GAAP EPS | $2.32 (above guidance) | Higher revenue, revenue leverage, operational efficiency and favorable non-operating expense (interest income). |
| Operating margin (GAAP) | 4.7% | Non-GAAP operating margin was 6.3% (up 30 bps YoY); GAAP lower on SBC/retirement costs. |
| Aerospace/Defense revenue | +10% sequential, >20% FY2026 | Outstanding supply-chain execution and robust demand across defense and unmanned subsectors; $135M of wins in the quarter. |
| Industrial revenue | +23% sequential, 20+% FY2026 | Semiconductor capital equipment strength plus new customers/technologies (data-center energy storage), outgrowing WFE. |
| Healthcare/Life Sciences revenue | +2% sequential, high-teens FY2026 | Program ramps and improved demand for surgical robotics and monitoring; ahead of a mid-single-digit market. |
| Cash cycle days | 62 days (best in 5+ years) | Working-capital discipline and notable improvement in days of inventory even amid accelerating revenue. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Aerospace & defense outgrowth | Building momentum | $400M of A&D wins year to date (>2x combined FY2024-25) position Plexus for secular outgrowth well beyond the 9-12% goal in FY2027, led by defense, unmanned, security and space (Plexus claims more electronics in orbit than any EMS peer), with commercial aerospace still an upside lever as Boeing/Airbus recover. | — |
| Semi-cap and industrial recovery | Inventory digestion | Semiconductor capital equipment is delivering robust growth expected to outgrow WFE again in FY2027; broader industrial is getting healthier with new customers and technologies (industrial automation, robotics, test and measurement, energy management/storage) amplifying growth beyond market health. | — |
| Data-center strategy | Power win last quarter | A deliberate data-center strategy targeting power (inside and outside the data center) and thermal management; a second consecutive quarterly win (energy storage) plus early-stage pilot programs, with a data-center funnel conservatively around half a billion dollars. | — |
| Capacity and scaling to $8-10B | ~$5B run rate | Expanding an existing Malaysia (Penang) site adds north of $500 million of capacity (existing sites can support close to $6 billion) via the efficient campus model with no meaningful margin drag; multi-year preparedness work (S&OP, NPI consistency, org alignment) positions Plexus for an eventual $8-10 billion scale. | — |
| Operational efficiency / OEE | Efficiency journey | Operating equipment effectiveness improved over 10% in some areas in the last 12 months, unlocking capacity and reducing the headcount needed to support revenue growth, supporting operating-margin expansion in FY2027. | — |
| Supply-chain management | Tightening | The supply-chain team began engaging customers on component pre-placement roughly nine months ago; customer-funded pre-placements let Plexus unlock rapid revenue growth while keeping cash-cycle days in the low-to-mid 60s. | — |
| Capital returns | Buyback program | $20.6M of stock repurchased in the quarter (~$21M remaining on authorization); a new authorization will be discussed with the board in August alongside continued growth investment. | — |
Q&A Summary
David Williams (Needham) asked about Plexus's ability to supply and meet the strong 2027 demand and confidence in the growth trajectory.
Kelsey expressed high confidence, noting supply-chain tightness is factored into projections, capacity is being pulled forward (efficient Penang expansion), and efficiency gains reduce headcount needs — supporting expectations to exceed the 9-12% FY2027 growth target.
David Williams (Needham) asked how semi-cap equipment and broader industrial visibility are trending.
Harrison said semi-cap is delivering robust growth expected to continue, outgrowing WFE on customer acquisitions and share gains; Abuhl added visibility into FY2027 has improved, and broader industrial is healthier with expanding customers and technologies (data-center power and energy storage).
Ruben Roy (Stifel) asked what structural changes are needed to scale toward an $8-10 billion company.
Kelsey said Plexus has been preparing for two to three years via its S&OP process, NPI consistency, and organizational alignment, favors the efficient campus model (expanding where already located), and feels well positioned on services; Abuhl added OEE improvements over 10% are unlocking capacity across the existing footprint.
Ruben Roy (Stifel) asked, with A&D and industrial now over 60% of revenue and healthcare only mid-single-digit growth, what drives the strong FY2027 growth and how much is market vs share.
Harrison said very strong A&D growth is needed (defense/unmanned/security/space, amplified by ramping wins), industrial outgrowing WFE with new customers, commercial aerospace an upside lever, while healthcare digests a tremendous FY2026 before returning to its 9-12% algorithm after FY2027.
Melissa Fairbanks (Raymond James) asked how component pre-placement affects cash conversion and cash cycle.
Abuhl said the team is managing the tightening supply chain well, getting ahead of specific components while keeping cash-cycle days in the low-to-mid 60s (62 in the quarter, best in five years); Kelsey and Harrison added that customers typically fund the pre-placements, which began roughly nine months ago.
Melissa Fairbanks (Raymond James) asked for the split of the space business versus Boeing/Airbus and defense.
Harrison said commercial aerospace is about a third, defense and unmanned about the same size (more than doubling versus two years ago), with the remainder split between security and commercial space; all are growing rapidly, but defense/unmanned fastest, and Plexus has clear leadership in commercial space.
Jacob (KeyBanc, for Steve) asked for detail on the capacity-expansion timeline, top-line capacity added, and margin impact.
Kelsey said the expansion is already underway, adds north of $500 million of capacity via an existing profitable facility with no meaningful margin impact; Abuhl said capex stays at 2-3% of revenue thanks to the campus approach, and Harrison noted existing sites can support close to $6 billion of revenue.
Jacob (KeyBanc) asked whether traditional (non-semi-cap) industrial markets are picking up.
Harrison described a small pickup, but emphasized Plexus's non-semi-cap industrial is a cross-section of technologies (automation/robotics, energy management/storage, broadband, test and measurement) with generally stronger trends driven by new customers and technologies rather than industrial production alone.
Ruben Roy (Stifel, follow-up) asked about the data-center power win — opportunistic or strategic, funnel size, and capabilities.
Kelsey said it is part of a broader data-center strategy focused on power (inside and outside the data center) and thermal management, with two announced active programs plus early-stage pilots and a funnel conservatively around half a billion dollars.
More on Plexus Corp
Reported 2026-07-30 · figures from the Plexus Corp Q3 2026 earnings call.
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