FLEX Q4 FY26 earnings call FLEX

Flex announced its intent to spin off the Cloud and Power Infrastructure (CPI) segment into a new publicly traded company, with the spin expected to complete in the first quarter of calendar 2027. SpinCo will be a global critical-digital-infrastructure company delivering end-to-end power and thermal management "from grid to chip" for AI data centers and mission-critical applications like utilities. Management framed the timing around two structural shifts: AI compute density that requires power and thermal to be engineered as a unified system, and a generational electrical transformation toward solid-state transformers and 800-volt DC distribution. Stand-alone financials will be provided over upcoming quarters; the Investor Day was postponed to the fall for more disclosure.

Beginning this quarter, Flex reports in three segments: Regulated Manufacturing Solutions (RMS), Integrated Technology Solutions (ITS), and Cloud and Power Infrastructure (CPI). RMS (formerly Reliability Solutions) houses industrial, automotive and health care, with critical and embedded power removed from industrial into the new CPI segment. ITS (formerly Agility Solutions) holds communications (former non-cloud CEC) and lifestyle (former consumer devices). CPI consolidates the former data-center power and cloud businesses once housed within industrial and CEC, reported via cloud and cooling-and-power business units, and is the entity slated to spin off.

Q4 revenue was $7.5B, up 17% YoY, with record adjusted gross margin of 9.9% (+50 bps) and record adjusted operating margin of 6.7% (+50 bps); Q4 adjusted EPS rose 27% to $0.93. For the full year, revenue reached $27.9B (+8%), adjusted operating income was $1.8B (+21%), adjusted operating margin was 6.3% (+70 bps), and adjusted EPS was $3.30 (+25%). Margin strength was driven by favorable product mix, operational efficiency and strong share repurchases. The company generated ~$1.1B of free cash flow and exceeded revenue expectations across all segments.

CPI grew 38% in FY26 to $6.6B, exceeding the 35% target, and is guided to grow 65%-75% in FY27 and over 80% in FY28. The acceleration is underpinned by a multiyear contract with Google plus incremental business across multiple hyperscalers, neoclouds, colos and utilities — spanning power infrastructure, thermal systems and complex hardware manufacturing at scale. Power growth continues to outpace cloud growth, and power margins remain higher than cloud margins. Management said the business is booked out on capacity and backlog for the next couple of years, with line of sight into FY28 and FY29 requirements, and some programs continuing to grow into FY29.

FY27 CapEx is guided to $1.4B-$1.6B, a sharp step-up from $625M (~2.2% of revenue) in FY26, to build foundational power and cooling infrastructure for the data-center market. Management characterized this elevated investment as unique to FY27, with CapEx returning to historical levels in FY28 — CPI at ~2.5%-3% of revenue and ITS and RMS below 2%. Capital deployment for the new programs is already underway. FY27 free cash flow conversion is guided to ~60% (excluding spin costs) reflecting the front-loaded spend.

After the spin, Flex will continue as a leading advanced-manufacturing company building highly complex products at global scale, targeting low-to-mid-single-digit revenue growth. Capital will be allocated toward higher-growth industries such as health care, robotics, warehouse automation and networking tied to data-center infrastructure. Management emphasized continued margin expansion via productivity, early adoption of AI-enabled technologies and portfolio mix optimization, alongside strong cash generation and buybacks. FY26 ITS and RMS combined adjusted operating margin rose 80 bps to 5.4%, with strength across the portfolio except lifestyle.

Revathi Advaithi will become CEO of SpinCo to lead the compute-infrastructure platform, while Michael Hartung, currently Chief Commercial Officer, will become CEO of Flex. Hartung joined Flex in 2007 and has held a range of senior leadership roles. Kevin Krumm continues as CFO through the transition. Management pointed to its track record executing spins, including NEXTracker, as evidence it can deliver this milestone.

Flex closed its acquisition of Electrical Power Products (EP2) earlier in the week, adding utility-grade, specification-driven solutions for grid modernization and electrification. Combined with existing power distribution, switchgear, thermal management and integrated rack-scale capabilities, EP2 strengthens Flex's ability to deliver end-to-end utility-to-chip solutions and increases exposure to long-cycle, margin-accretive programs supporting grid resiliency. The power franchise spans embedded power (for the chip), distributed power (low- and medium-voltage switchgear, power pods) and utility-grade infrastructure out to the substation, all accelerating with 400V/800V DC transitions.