Flex Ltd. (FLEX) | The Buildout — AI Infrastructure
The Verdict
Flex is an advanced manufacturing and design partner. It builds products for other companies across networking, industrial, automotive, healthcare, and consumer markets, and it designs and makes power and cooling equipment for data centers. That last piece matters for AI: as clusters draw more power and need liquid cooling, the electrical and thermal equipment around the chip becomes a larger part of what a data center requires. Flex's cloud and power infrastructure segment makes that equipment, spanning utility-grade power infrastructure down to board-level power, plus liquid cooling and compute integration. Management argues the company can design power and cooling together as one system rather than as parts added later. The planned spin is meant to let that unit stand on its own.
| Market Cap | — |
| Revenue (TTM) | $29.3B |
| Revenue Growth | +12.2% |
| EBITDA Margin (TTM) | 7.1% |
| Net Debt | $3.1B |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Cloud and power infrastructure revenue was $6.6B in FY26, about 24% of the $27.9B total, and grew 38% that year.
- Management guides that segment to grow 65–75% in FY27 and has framed FY28 at over 80%.
- Management says it is 90%-plus booked for the next three quarters — a forward-visibility claim it does not disclose as a backlog number.
- FY27 guidance was raised one quarter after it was initiated: revenue, margin, EPS, and CapEx all moved up.
- The power business is described as IP- and product-bearing rather than contract manufacturing, spanning embedded power, distributed power, and thermal.
What We’re Watching
- The FY27 CPI ramp is back-half loaded: Q1 grew 35%, Q2 is guided to 45–55%, implying second-half growth near 100%.
- The fastest-growing piece, cloud and compute integration, is lower-margin than power, so mix can pressure segment margin as revenue accelerates.
- Free cash flow conversion was cut to about 40% including spin costs, and capital spending steps up to $1.5–1.6B in FY27 from $625M in FY26.
- The ten largest customers were 45% of FY26 net sales, and the two largest named AI relationships — Google and Amazon — drew no fresh update in July.
The thesis is strengthening on demand and weaker on cash. Management raised full-year guidance a single quarter after setting it, and the AI-exposed segment is guided to grow faster than the company did in any recent year. But the guide leans on a second half that has not happened yet, capital spending is up sharply, cash conversion was cut, and the two largest named AI relationships went quiet this quarter. The open question is whether the capacity Flex is installing converts into the guided second-half revenue and margin, or slips.
Earnings Beat
Flex reported FQ1 FY27 revenue of $7.9B, up 21% year over year and above its guided $7.35–7.65B range. Gross margin was 9.4%. Adjusted EPS of $1.00 was up 39% and described as a record. The standout was the cloud and power infrastructure segment, where revenue grew 35%.
| Metric | Q1 FY2027 | Q4 FY2026 | Q1 FY2026 | YoY |
|---|---|---|---|---|
| Revenue | $7.9B | $7.5B | $6.6B | +20.6% |
| Gross margin | 9.4% | 9.8% | 8.7% | +70bps |
| EBITDA | $532M | $555M | $453M | +17.4% |
| EPS | $0.76 | $0.67 | $0.50 | +51.2% |
| Cloud & Power Infrastructure revenue | $2.2B | $1.8B | n/a | +35% |
Many people still think about AI as a compute story. I think it is increasingly becoming an infrastructure story and more specifically, a power story.— Revathi Advaithi, CEO, 2026-07-29
Management tone: The July call kept the confident, specific tone of the prior one and sharpened the framing around power and the planned spin. Management raised full-year guidance a quarter after setting it. They were direct about soft spots — calling cooling 'still nascent,' saying power margins sit below peers because the business was built through acquisitions, and stating the free cash flow conversion cut plainly. They were quieter on Google, which they did not mention, and offered no update on Amazon.
Management Guidance
For FY27, management guides revenue of $33.7–35.2B, adjusted operating margin of 7.7–8.2%, and adjusted EPS of $4.42–4.74. CapEx is guided to $1.5–1.6B, the adjusted tax rate to about 21%, and free cash flow conversion to about 40% including spin costs. By segment, RMS is guided up mid-to-high single digits, ITS up high-single to low-double digits, and cloud and power infrastructure up 65–75%. Management notes the guidance does not give effect to the planned spin-off.
Trajectory
Revenue has risen each of the last four quarters, from $6.8B to $7.9B, and grew 21% year over year in the latest period. The driver is the cloud and power infrastructure segment, which grew 35% and is guided to accelerate sharply as capacity comes online. Gross margin has held in a narrow band, between 9.0% and 9.8%, over those four quarters. Management has said FY26's segment-margin dip reflects deliberate ramp investment in that unit and expects to recoup it. Because the FY27 CPI guide implies second-half growth near 100%, the year is carried by the back half.
The Model
The model projects FY+1 revenue of $34,800M with EBITDA of $2,801M, an 8.05% margin. For FY+2 it projects revenue of $35,125M with EBITDA of $2,775M, a 7.9% margin. The near-term figure sits within management's raised FY27 revenue guidance range of $33.7–35.2B and reflects the back-half capacity ramp. The FY+2 projection implies revenue flattening and EBITDA slightly below FY+1, and the individual projection runs for that year spread widely.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $27.9B | $34.8B | $35.1B |
| YoY Growth | — | +24.7% | +0.9% |
| EBITDA | $2.0B | $2.8B | $2.8B |
| EBITDA Margin | 7.1% | 8.1% | 7.9% |
Projections are the median of 4 independent model runs. The model’s revenue sits 6.7% above analyst consensus.
For FY27, management guides revenue of $33.7–35.2B, adjusted operating margin of 7.7–8.2%, and adjusted EPS of $4.42–4.74. CapEx is guided to $1.5–1.6B, the adjusted tax rate to about 21%, and free cash flow conversion to about 40% including spin costs. By segment, RMS is guided up mid-to-high single digits, ITS up high-single to low-double digits, and cloud and power infrastructure up 65–75%. Management notes the guidance does not give effect to the planned spin-off.
What Could Go Right — and Wrong
- CPI revenue grows at or above the guided 65–75% in FY27 and the over-80% framework in FY28.
- The second-half capacity ramp converts on schedule, de-risking the back-half-loaded guide.
- Liquid cooling moves from qualification to volume, adding a second growth pillar in the segment.
- Power margins recover the 100 basis points management has committed for FY27.
- Capital spending normalizes in FY28 as promised, restoring free cash flow conversion.
- The second-half CPI ramp slips, and the full-year guide is missed because so much of it is weighted late.
- Cloud and compute integration keeps growing faster than power, holding segment margin down.
- Component cost inflation cannot be passed through on customer-specified parts.
- A large hyperscaler changes its sourcing, given the concentration behind the segment.
- CapEx stays elevated past FY28 and free cash flow conversion does not recover.
Looking Ahead
Over the next year the two things to watch are the second-half CPI ramp and the spin. Management has said FY27 CPI growth is back-half loaded and that it is 90%-plus booked for the next three quarters, so quarterly delivery of the segment guide is the main test. The spin itself is targeted for the first quarter of calendar 2027.
- November 10Investor Day — Long-term guidance, 400V/800V detail, and margins for both companies.
- FQ2 FY27Q2 FY27 results — Guides CPI up 45–55% and total revenue of $7.95–8.25B.
- PendingEPC Power close — Regulatory clearance and completion of the $4.4B power-conversion deal.
- Q1 calendar 2027CPI spin-off to Axiom — Tax-free separation of the CPI unit; Form 10 already filed.
- FY27 second halfCapacity ramp conversion — Implied CPI growth near 100%; capacity installation is the gate.
- FY28CapEx normalization — Management targets a return to historical spending levels.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $25.8B | $27.9B | $29.3B | +8.1% |
| Gross Margin | 8.4% | 9.3% | 9.5% | +93bps |
| EBITDA | $1.7B | $2.0B | $2.1B | +16.8% |
| EBITDA Margin | 6.6% | 7.1% | 7.1% | +53bps |
| Net Income | $838M | $880M | $973M | +5.0% |
| Free Cash Flow | $1.1B | $1.1B | $1.1B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)9.5%
- EBITDA Margin (TTM)7.1%
- Net Margin (TTM)3.3%
- ROIC13.9%
- FCF Conversion51.5%
- SBC / Revenue0.9%
The Company
Flex is an advanced manufacturing and design partner. It builds products for other companies across networking, industrial, automotive, healthcare, and consumer markets, and it designs and makes power and cooling equipment for data centers. That last piece is the AI-facing part: as clusters draw more power and need liquid cooling, the electrical and thermal equipment around the chip becomes a larger share of what a data center requires. Its cloud and power infrastructure segment makes utility- and facility-level electrical infrastructure, high-density rack- and board-level power systems, and liquid cooling, and it also integrates compute into racks and pods.
The company describes itself as the advanced, end-to-end manufacturing partner of choice and operates across approximately 30 countries. Its largest manufacturing footprints by FY26 revenue are Mexico at 25%, the U.S. at 19%, China at 16%, and Malaysia at 11%. It reports in three segments: Integrated Technology Solutions, Regulated Manufacturing Solutions, and Cloud and Power Infrastructure. The first two remain in the company after the spin; the third becomes Axiom Solutions International.
Business Segments
Competitive Landscape
Flex competes on two fronts. In power and cooling for data centers it faces equipment makers named in its supply-chain wiring, including Vertiv, Eaton, Schneider, and nVent. In electronics manufacturing it faces Celestica, Jabil, Sanmina, and Benchmark. Management argues the power business rests on having "true IP and product capability" rather than contract manufacturing, and that its combined power, cooling, and systems depth is hard to match. Analysts have tested that claim directly, and management has reframed questions about full-suite adoption rather than quantifying them.
- Advanced Energy (AEIS)Documented competitor; the source notes it is expanding data-center power capacity toward ~$5B and preparing for 800V architectures.
- Celestica (CLS)Documented competitor in EMS/ODM; a neighbor whose 2027 growth is expected to accelerate above 65%.
- Sanmina (SANM)Documented competitor in EMS/ODM; named in the competitor set without further discussion.
- Vertiv (VRT)Named in wiring as a power and cooling competitor; also appears as a supplier and a bidirectional relationship.
- Eaton (ETN)Named in wiring as a power-equipment competitor; also listed as a supplier of PDU transformers.
Supply Chain
Flex sits between component makers — semiconductors, connectors, passives, circuit boards — and the hyperscalers and OEMs that deploy data centers. It assembles and integrates, and management argues its power and cooling products are increasingly designed in. No counterparty transcript in the source material names Flex directly.
More on FLEX: Earnings recap