Flex Ltd. (FLEX) | The Buildout — AI Infrastructure
The Verdict
Flex designs and builds advanced power, cooling, and compute-integration systems for the physical layer of AI data centers. It also runs regulated manufacturing and technology solutions across healthcare, industrial, automotive, and networking. The planned separation of its Cloud and Power Infrastructure segment into SpinCo concentrates the AI infrastructure business, while the remaining Flex keeps diversified manufacturing.
| Market Cap | — |
| Revenue (TTM) | $29.3B |
| Revenue Growth | +12.2% |
| EBITDA Margin (TTM) | 7.1% |
| Net Cash | $2.1B |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- CPI revenue is guided to grow 65–75% in FY27 and over 80% in FY28; power inside CPI is growing in the 70%-plus range.
- Q1 FY27 revenue was $7.9B, up 21% y/y, with all three segments growing; adjusted EPS was $1.00, up 39% y/y.
- Management says more than 90% of business is booked for the next three quarters, a high visibility level.
- Named relationships include Google, Cerebras CS-3 AI accelerator manufacturing, NVIDIA modular platform development, and JetCool liquid cooling.
- FY26 CPI growth of 38% exceeded the prior 35% target; the tax-free spin remains on track for Q1 calendar 2027.
What We’re Watching
- FY27 free cash flow conversion was lowered to ~40% including spin costs; Q1 inventory rose 10% sequentially and 24% y/y.
- Q1 CPI adjusted operating margin expanded only 20 bps y/y against a full-year commitment of at least 100 bps.
- The Google contract was not updated by name on the latest call; the Amazon arrangement was deferred.
- Spin execution and tax-free treatment remain risk factors through Q1 calendar 2027.
The thesis is strengthening on revenue and visibility but tempered by cash generation and margin proof. Management raised FY27 guidance after one quarter, reaffirmed the CPI ramp, and kept the spin on schedule. The key open question is whether the back-half-loaded CPI revenue and margin recovery convert into normalized cash flow after the FY27 investment year.
Earnings Beat
Q1 FY27 revenue was $7.9B, up 21% y/y. Reported gross margin was 9.4% and EBITDA margin was 6.7%. Adjusted EPS was $1.00, up 39% y/y. CPI revenue rose 35% y/y to $2.2B.
| 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% |
We are still at that 90%-plus booked business at this point. For the next three quarters.— Kevin Krumm, CFO, 2026-07-29
Management tone: Management remained confident and execution-focused, with more specificity on demand visibility, capacity installation, and spin milestones than on the prior call. They deferred the Amazon update and did not mention Google by name, while owning the reduced cash flow guide directly.
Management Guidance
For FY27, management raised total revenue guidance to $33.7B–$35.2B, adjusted operating margin to 7.7%–8.2%, adjusted EPS to $4.42–$4.74, and capex to $1.5B–$1.6B. Free cash flow conversion is guided to roughly 40% including spin costs. CPI revenue growth of 65–75% was reaffirmed. Q2 FY27 guidance calls for revenue of $7.95B–$8.25B, adjusted EPS of $1.00–$1.07, and CPI growth of 45–55%.
Trajectory
Revenue is stepping up quarter-over-quarter from $6,804M to $7,928M across the trailing four quarters, and FY27 guidance implies full-year growth of about 23% at the midpoint after 8% in FY26. The driver is CPI, which is guided to accelerate from Q1's 35% y/y to 45–55% in Q2 and 65–75% for the full year. Margins are stable to modestly improving, but the cash side is pressured by capex, inventory and spin costs.
The Model
The model projects FY+1 revenue of $33,600M and EBITDA of $3,158M (9.4% margin), and FY+2 revenue of $43,600M and EBITDA of $4,534M (10.4% margin). Near-term revenue is anchored to the updated FY27 guide, while FY+2 reflects the CPI growth framework of 80% or more and continued mix shift toward power and cooling.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $27.9B | $34.9B | $46.0B |
| YoY Growth | — | +24.8% | +31.9% |
| EBITDA | $2.0B | $2.8B | $4.1B |
| EBITDA Margin | 7.1% | 8.0% | 9.0% |
Projections are the median of 5 independent model runs. The model’s revenue sits 6.7% above analyst consensus.
For FY27, management raised total revenue guidance to $33.7B–$35.2B, adjusted operating margin to 7.7%–8.2%, adjusted EPS to $4.42–$4.74, and capex to $1.5B–$1.6B. Free cash flow conversion is guided to roughly 40% including spin costs. CPI revenue growth of 65–75% was reaffirmed. Q2 FY27 guidance calls for revenue of $7.95B–$8.25B, adjusted EPS of $1.00–$1.07, and CPI growth of 45–55%.
What Could Go Right — and Wrong
- CPI prints toward the upper end of the 65–75% FY27 guide, with H2 growth approaching the 100% level analysts flagged.
- Cooling/CDU qualification converts to named customer wins, adding a second growth vector inside CPI.
- The 400V/800V architecture shift expands power content per rack and broadens the market.
- Google or Amazon announces a concrete expansion or update, resolving named-customer uncertainty.
- November Investor Day provides clean standalone SpinCo and RemainCo financials and capital allocation plans.
- H2 CPI ramp slips and full-year growth misses the 65–75% guide.
- CPI margin recovery stalls below the at least 100 bps full-year improvement.
- Component shortages or capacity constraints cap shipments despite demand.
- Spin is delayed or loses tax-free treatment.
- Top-ten customer concentration grows further or a named hyperscaler contract shifts.
Looking Ahead
The next twelve months hinge on the back-half CPI ramp and the separation. Management expects capacity installation to stay on plan, Q2 CPI growth of 45–55%, and FY27 CPI growth of 65–75%. The November 10 Investor Day should provide standalone financials for SpinCo and RemainCo, and the spin is expected to complete in Q1 calendar 2027.
- Q2 FY27Q2 FY27 earnings — Tests CPI growth of 45–55% and the first hard check of acceleration.
- November 10, 2026Investor Day for Flex and SpinCo — Expected standalone financials, strategy, and capital allocation.
- H2 FY27H2 CPI ramp — Full-year CPI guide implies a large back-half growth step-up.
- Q1 calendar 2027CPI spin-off completion — Tax-free separation of CPI into SpinCo; new leadership effective.
- FY28Capex normalization — CPI capex guided to roughly 2.5–3% of revenue; ITS/RMS below 2%.
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 | $13.8B | +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 | −$2.2B | — |
| 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%
- ROIC35.5%
- FCF Conversion51.5%
- SBC / Revenue0.5%
The Company
Flex Ltd. is a global advanced manufacturing and technology company operating across roughly 30 countries. It runs three segments: Integrated Technology Solutions (ITS), Regulated Manufacturing Solutions (RMS), and Cloud and Power Infrastructure (CPI). CPI is the primary AI-exposed segment, combining integrated compute systems, liquid cooling, and high-density rack/board-level power with utility and facility electrical infrastructure.
The company operates through design, engineering, supply chain, manufacturing, and integrated services. Mexico is its largest single-country manufacturing location by revenue, followed by the U.S. and China. Flex has announced a tax-free spin-off of CPI into SpinCo, expected to complete in Q1 calendar 2027, with Revathi Advaithi becoming SpinCo CEO and Michael Hartung becoming Flex CEO.
Business Segments
Competitive Landscape
Flex differentiates itself as an electrical and thermal product company with IP and integrated design capability, rather than a legacy contract manufacturer. CEO Revathi Advaithi said, 'I have not seen anybody just have that capability yet,' referring to integrated power, cooling, and compute design.
Supply Chain
Flex sits between component suppliers and hyperscaler/enterprise customers in the AI infrastructure chain. The 10-K notes that certain components are sourced from a limited number of suppliers and that customer-directed suppliers may be sole sources, but it does not name them.
More on FLEX: Earnings recap