Plexus Corp. (PLXS) | The Buildout — AI Infrastructure
The Verdict
Plexus is an electronics manufacturing services provider. It designs, manufactures and services complex electronics for other companies' products, working in regulated end markets where qualification and compliance matter. Its customers sit in aerospace and defense, healthcare and life sciences, and industrial markets. Its link to the AI build-out runs mostly through the industrial sector: it makes electronics for semiconductor capital equipment, and it is building an early data-center power, thermal and battery-storage business out of its Thailand and Malaysia sites. It is not an AI pure-play and it discloses no AI revenue share.
| Market Cap | — |
| Revenue (TTM) | $4.6B |
| Revenue Growth | +14.2% |
| EBITDA Margin (TTM) | 6.7% |
| Net Cash | $15M |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- FY2026 revenue growth has been raised twice in two quarters — from the high end of the 9%-12% goal, to 'mid-teens or greater,' to 'greater than 20%.'
- Record qualified-opportunity funnel, up 23% y/y, with record funnels in both Aerospace/Defense and Industrial.
- Aerospace & Defense wins of $400M year-to-date, more than 2x combined FY2024 and FY2025, including $135M in Q3 alone.
- Non-GAAP operating margin moved from 5.7% in Q2 FY2025 to 6.3% in Q3 FY2026, with FY2026 guided above 6% and FY2027 expansion framed.
- Q3 ended in a net cash position — $314.1M of cash against $299.3M of total debt — with a 62-day cash cycle, its best in over five years, and 14.9% ROIC, 590 bps above WACC.
What We’re Watching
- FY2026 free cash flow was guided down from about $100M to $50-75M and then left un-restated; Q4 is guided to breakeven or slight usage, and the derived nine-month figure is roughly negative $35M.
- Two items were left un-refreshed on the Q3 call: the FY2026 free-cash-flow range (not restated) and the Malaysia facility's break-even trajectory (went silent).
- Win value fell 28% sequentially, from a record $355M in Q2 to $255M in Q3, even as program count rose — management was not asked about it.
- Healthcare was raised to high-teens FY2026 growth but framed at short-term growth moderation for FY2027, with Q4 roughly flat on program-ramp delays.
On the business evidence the case is strengthening: two consecutive quarters of operational beats and raises, a record funnel, a step-change in aerospace and defense wins, and an operating-margin inflection that management has moved from aspiration to a stated floor. The offset is cash. Free cash flow was cut and, on the arithmetic in the material, lands negative for FY2026, against a FY2027 free-cash-flow promise. The open question is whether the growth is a durable step-change or a ramp cycle being bought with working capital.
Earnings Beat
Plexus reported record FY2026 Q3 revenue of $1.305B, up 12% sequentially and 28% y/y, exceeding guidance. Gross margin was 10.1%, in line. Non-GAAP operating margin came in at 6.3%, the top end of guidance, and free cash flow was just under $1M of usage.
| Metric | Q3 FY2026 | Q2 FY2026 | Q3 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $1.3B | $1.2B | $1.0B | +28.1% |
| Gross margin | 10.1% | 10.2% | 10.1% | +0bps |
| EBITDA | $80M | $81M | $73M | +9.4% |
| EPS | $1.58 | $1.82 | $1.64 | −4.0% |
| Qualified funnel | $4.5B | $4.0B | n/a | +23% y/y (disclosed) |
| New program wins | $255M | $355M | n/a | — |
we see Plexus positioned to deliver more than 20% revenue growth for fiscal 2026— Todd Kelsey, President and CEO, 2026-07-30
Management tone: Management's commentary sharpened across two calls. The FY2026 Q2 register was 'momentum is accelerating broadly'; on FY2026 Q3 the company reported a record quarter, raised its full-year revenue-growth outlook a second time, and volunteered a preliminary FY2027 frame above its long-term goal. Management also stated the offsets in the same call — healthcare growth moderation, Q4 free cash flow at breakeven or slight usage, and a still-tight supply chain — and framed the FY2027 figures as 'potential' rather than guidance.
Management Guidance
Management guided FY2026 Q4 revenue to $1.33-$1.38B, about 4% sequential and 28% y/y at the midpoint, with non-GAAP operating margin of 6.1%-6.5% and free cash flow at breakeven or slight usage. For FY2026 overall it guided revenue growth greater than 20%, non-GAAP operating margin greater than 6%, and capex of $100-$120M. It framed FY2027 as revenue growth in excess of its 9%-12% goal, operating-margin expansion, free cash flow in excess of $100M, and capex of 2%-3% of revenue — deferring FY2027 operating-margin detail to the fiscal Q4 call.
Trajectory
The revenue ladder has stepped up for four straight quarters: $1,058M, $1,070M, $1,164M and $1,305M, with the sequential rate moving from 3.9% to 12.1% and Q4 guided to about $1.355B at the midpoint, roughly 3.8% sequential. The code-computed signals show revenue accelerating while gross, operating and EBITDA margins are stable. Industrial drove the Q3 beat, up 23% sequentially against a low-double-digit forecast, on semi-cap demand and program ramps; aerospace and defense decelerated to +10% sequential from +19% in Q2 and is guided about flat in Q4. Because roughly 78% of cost of sales is bought-in material (derived from the 10-Q's cost structure), gross margin stays pinned near 10% and the margin story runs through operating margin — non-GAAP 5.7% in Q2 FY2025 to 6.3% in Q3 FY2026.
The Model
The model projects FY+1 revenue of $5,670M and EBITDA of $420M, a 7.4% margin, rising to FY+2 revenue of $6,355M and EBITDA of $496M, a 7.8% margin. The near term is anchored on the guided quarterly ladder and on the more-than-$0.5B of capacity being added at Penang inside an already-profitable facility. FY+2 carries the step beyond that, against a trailing TTM EBITDA margin of 6.7%.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $4.0B | $5.7B | $6.4B |
| YoY Growth | — | +40.6% | +12.1% |
| EBITDA | $280M | $420M | $496M |
| EBITDA Margin | 6.9% | 7.4% | 7.8% |
Projections are the median of 5 independent model runs. The model’s revenue sits 12.0% above analyst consensus.
Management guided FY2026 Q4 revenue to $1.33-$1.38B, about 4% sequential and 28% y/y at the midpoint, with non-GAAP operating margin of 6.1%-6.5% and free cash flow at breakeven or slight usage. For FY2026 overall it guided revenue growth greater than 20%, non-GAAP operating margin greater than 6%, and capex of $100-$120M. It framed FY2027 as revenue growth in excess of its 9%-12% goal, operating-margin expansion, free cash flow in excess of $100M, and capex of 2%-3% of revenue — deferring FY2027 operating-margin detail to the fiscal Q4 call.
What Could Go Right — and Wrong
- FY2026 closes at greater than 20% revenue growth with every guided line met or beaten, extending the two-quarter beat-and-raise pattern.
- The $4.5B qualified funnel converts into revenue at the pace implied, with the Aerospace/Defense and Industrial funnels feeding the ramp.
- The $400M of year-to-date Aerospace & Defense wins ramp as contracted programs, with FY2026 A&D growth led by defense and unmanned.
- The data-center power, thermal and battery-storage funnel — conservatively around $0.5B — converts pre-win pilots into announced wins.
- FY2027 free cash flow reaches the guided level, validating the working-capital explanation for the FY2026 cut.
- FY2026 free cash flow lands near the derived negative figure and FY2027 falls short of $100M, showing growth is being bought with working capital.
- A major customer program transfers; the only documented third-party manufacturing commitment in the material is Teradyne's.
- Healthcare's FY2027 moderation proves structural rather than digestion — peer Sanmina's Medical segment grew 22%.
- The Q4 sequential deceleration, from 12.1% to about 3.8%, extends, putting the FY2027 frame of more than 9%-12% out of reach.
- Component supply tightness — semiconductors, passives, memory and raw PCB fabs — becomes binding despite customer-funded inventory preplacement.
Looking Ahead
Over the next 12 months the company closes FY2026 and tests its preliminary FY2027 frame of revenue growth above the 9%-12% goal, margin expansion, free cash flow generation and a cash cycle sustained in the low-to-mid 60s. The fiscal Q4 call is where management said it will give FY2027 operating-margin detail and where the chief operating officer returns. After that the milestones are the Penang capacity coming online, the data-center funnel converting from pre-win pilots into announced wins, and whether the new long-term operating-margin target is set above the current 6%.
- AugustBoard repurchase discussion — Board to discuss the next authorization; about $21M remained.
- Fiscal Q4 2026Q4 earnings and FY2027 detail — Confirms FY2026 commitments; FY2027 margin detail due.
- Fiscal Q4 2026Chief operating officer returns — Oliver Mihm was absent in Q3 and is slated to return.
- Fiscal Q1 2027A&D sequential growth return — Management expects aerospace and defense to resume growth.
- FY2027Free-cash-flow test — Guided to free cash flow in excess of $100M.
- FY2027Malaysia capacity online — More than $0.5B of capacity being added at Penang.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $4.0B | $4.0B | $4.6B | +1.8% |
| Gross Margin | 9.6% | 10.1% | 10.0% | +52bps |
| EBITDA | $246M | $280M | $307M | +14.1% |
| EBITDA Margin | 6.2% | 6.9% | 6.7% | +75bps |
| Net Income | $112M | $173M | $185M | +54.8% |
| Free Cash Flow | $341M | $154M | $62M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)10.0%
- EBITDA Margin (TTM)6.7%
- Net Margin (TTM)4.0%
- ROIC12.0%
- FCF Conversion20.1%
- SBC / Revenue1.0%
The Company
Plexus is an electronics manufacturing services provider. The FY2025 10-K describes it as partnering with customers to 'design, manufacture and service highly complex products in demanding regulatory environments,' serving market-leading and disruptive companies in the Aerospace/Defense, Healthcare/Life Sciences and Industrial market sectors. It builds secure wireless communication systems, naval submarine electronics and space hardware, surgical robotics and imaging platforms, and semiconductor capital equipment; management says Plexus has 'more electronics in orbit than any other EMS provider.'
It operates a global footprint. The 10-K business summary describes 'a global team of over 20,000 members across our 26 facilities,' while the same filing's property table enumerates only 16 named sites — a gap the source does not reconcile. The largest enumerated site is Penang, Malaysia, at 1,530,000 owned square feet, and that is the site now being expanded. Manufacturing is concentrated in Asia-Pacific, which is 56% of revenue, against 34% in the Americas and 10% in EMEA (derived). Roughly 89% of cost of sales is variable and about 88% of that is material and component cost, an arithmetic path to roughly 78% of cost of sales being bought-in material — which is why gross margin stays near 10%.
Business Segments
Competitive Landscape
Plexus competes in an electronics manufacturing services industry alongside peers including Celestica, Flex, Jabil, Benchmark Electronics and Sanmina. The record shows Plexus hard to replace in aerospace and defense, security and space — dual-region U.S. and EU regulatory compliance at Boise and Oradea, a nuclear-control compliance standard at Boise, and management's claim to have 'more electronics in orbit than any other EMS provider.' It looks more exposed in Industrial and semi-cap, where larger peers carry 8.0%-8.2% operating margins against Plexus's 6.3% and are adding capacity in the same Southeast Asia corridor.
- CelesticaNamed in filings. Peer read-through: Q2 revenue $4.70B (+62% y/y), adjusted operating margin 8.2% (a company high), FY2026 raised to $20.5B (+65%), OpenAI named as a customer, and explicit share-takeback language.
- SanminaNamed in filings. Peer read-through: Q3 FY2026 revenue $3.46B (+69.7% y/y), communications/cloud/AI +173.2%, non-GAAP operating margin 8.0%, plus a competitive Industrial takeaway and a Medical 'lift and shift' win.
- Benchmark ElectronicsNamed in filings. Peer read-through: Q2 revenue $756M (+18% y/y), Aerospace & Defense revenue -12% y/y but the biggest booking contributor, a fourth Penang facility ramping and a third Thailand building under construction, operating margin 5.2%.
- FlexNamed in filings. Theme material cites a Cloud & Power Infrastructure spin-off framed at 65-75% FY27 revenue growth and a multi-year Google contract; not discussed in Plexus's own material.
- JabilNamed in filings; not discussed.
Supply Chain
Plexus sits mid-chain: it buys components, bare boards and subassemblies from suppliers and manufactures finished products for OEM customers. One neighbor names it directly — Teradyne's filing identifies Plexus as a manufacturer of its FLEX, Magnum and ETS products.
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