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    FLEX
    Earnings call· Sep 2025(Q2 FY26)

    FLEX LTD. FLEX

    Oct 29, 2025 Source

    Executive summary

    Flex Q2 FY26 — Strong Data Center Growth and Raised Full-Year Guidance

    Flex delivered a strong second quarter, driven by robust data center performance and a strategic shift towards higher-value technology businesses. The company raised its full-year guidance across all key metrics, despite headwinds from the Ukraine facility shutdown and unfavorable FX. Management expressed confidence in continued momentum, particularly in cloud and power, with an updated long-term outlook anticipated at the May Investor Day.

    Highlights

    5

    • Revenue reached $6.8 billion, growing 4% year-over-year.

    • Operating margin was an impressive 6%, marking the fourth consecutive quarter at or above this level.

    • Adjusted EPS increased 23% year-over-year to $0.79, a new record for Flex.

    • Full-year FY26 revenue guidance raised by $500 million at the midpoint to $26.7 billion - $27.3 billion.

    • Data center revenue is expected to grow at least 35% for FY26, outperforming industry rates.

    Concerns

    4

    • Temporary loss of operations at the Mukachevo facility in Ukraine, impacting revenue by over $100 million in H2 FY26.

    • Weakening trends observed in consumer devices and lifestyle end markets.

    • Unfavorable FX impacts across the business compared to the Q1 guide.

    • Continued pressure in the automotive segment, though stabilizing.

    Guidance & targets

    13
    CategoryTargetConfidence
    Full-year FY26 Revenue
    $26.7 billion to $27.3 billion
    high materiality
    High
    Full-year FY26 Adjusted Operating Margin
    6.2% to 6.3%
    high materiality
    High
    Full-year FY26 Adjusted EPS
    $3.09 to $3.17 per share
    high materiality
    High
    Full-year FY26 Free Cash Flow Conversion
    80% plus
    medium materiality
    High
    Full-year FY26 Data Center Revenue Growth
    at least 35%
    high materiality
    High
    Full-year FY26 Reliability Solutions Revenue Growth
    low to mid-single digits
    medium materiality
    Medium
    Full-year FY26 Agility Solutions Revenue Growth
    mid- to high single digits
    medium materiality
    Medium
    Q3 FY26 Revenue
    $6.65 billion to $6.95 billion
    high materiality
    High
    Q3 FY26 Adjusted Operating Income
    $405 million to $435 million
    high materiality
    High
    Q3 FY26 Adjusted Tax Rate
    21%
    medium materiality
    High
    Q3 FY26 Adjusted EPS
    $0.74 to $0.80 per share
    high materiality
    High
    Q3 FY26 Reliability Solutions Revenue Growth
    mid- to high single digits
    medium materiality
    Medium
    Q3 FY26 Agility Solutions Revenue Growth
    down to up low single digits
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Reliability Solutions
    Driven by strong growth in Power and moderate growth in Health Solutions and Core Industrial, partially offset by continued pressure in auto. Margin expansion due to favorable mix impacts from Power and strong execution/cost management.
    Operating income: $197 millionOperating margin change YoY: +105 bps
    		$3.0 billion3%—6.5%
    Agility Solutions
    Driven by robust cloud demand, which more than offset softness in communications and consumer end markets. Operating margin slightly down compared to a very strong prior-year quarter.
    Operating income: $227 millionOperating margin change YoY: -5 bps
    		$3.8 billion4%—6.0%

    Operational metrics

    10
    Revenue
    $6.8 billionUp 4% YoY
    Q2 FY26

    All results are non-GAAP unless stated otherwise.

    Gross profit
    $632 million
    Q2 FY26

    All results are non-GAAP unless stated otherwise.

    Non-GAAP gross margin
    9.3%Up 80 bps YoY
    Q2 FY26

    All results are non-GAAP unless stated otherwise.

    Operating profit
    $409 million
    Q2 FY26

    All results are non-GAAP unless stated otherwise.

    Non-GAAP operating margin
    6.0%Up 55 bps YoY
    Q2 FY26

    Fourth consecutive quarter at or above this level. All results are non-GAAP unless stated otherwise.

    Non-GAAP EPS
    $0.79Up 23% YoY
    Q2 FY26

    Record EPS for Flex. All results are non-GAAP unless stated otherwise.

    Inventory days
    55 daysReduction of 3 days YoY
    Q2 FY26

    Inventory, net of working capital advances.

    CapEx
    $148 million
    Q2 FY26

    Net CapEx.

    Share repurchases
    $297 million
    Q2 FY26

    Opportunistic share repurchases.

    Ukraine facility revenue impact
    Slightly north of $100 million
    H2 FY26

    Revenue headwind due to temporary loss of operations at Mukachevo facility.

    Industry KPIs

    7
    MetricValueDetails
    Segment revenue growthReliability Solutions: $3.0 billion; Agility Solutions: $3.8 billionUSD
    Content per device per vehicle—
    Design wins product cycle ramps—
    Order visibility backlog policy—
    Capacity expansion internal sourcing—
    End market revenue mix organic growthIT datacom, industrial, auto, comms, defense, energy, medical
    Operating margin incremental leverage6.0%%

    Product announcements

    1
    ProductTypeDetails
    Flex's new AI infrastructure platformlaunch

    Deals & partnerships

    3
    NVIDIAEcosystem partner for next-gen 800-volt DC AI factories and AI infrastructure platform

    Flex partnered with NVIDIA as part of their ecosystem on next-gen 800-volt DC AI factories, which improve energy efficiency, lower cooling costs, and eliminate points of failure as data centers grow in size and complexity. This is part of Flex's new AI infrastructure platform.

    AmazonCollaboration in the cloud data center business

    Flex announced a partnership with Amazon, which is contributing to the company's positive outlook for the cloud data center business. This is viewed as a long-term play.

    UndisclosedAsset acquisition in Poland

    Flex acquired a new asset in Poland, enhancing its capacity and capability for compute, power, and cooling in the EMEA region.

    Capital programs

    3
    Compute operations expansionunderway

    Incrementally invested significantly in compute operations in Guadalajara and in the U.S. to support data center growth.

    Cooling manufacturing capability ramp-upunderway

    Continued investment in cooling and ramping up manufacturing capability after the acquisition of JetCool.

    Power capability expansionunderway

    Announced new facilities in Dallas and expanded facilities in Fontana and Colombia to add to power capability in the U.S.

    Risks & headwinds

    5
    Temporary loss of operations at Ukraine facilityH2 FY26

    Slightly north of $100 million revenue headwind in H2 FY26 (approx. 1% of Flex revenue)

    Mitigation: Management is committed to rebuilding operations and supporting colleagues.

    Dynamic tariff landscape

    Largely a pass-through, but situation remains fluid

    Mitigation: Partnering closely with customers to deliver resilient forward-looking solutions; global scale and capacity enable regionalization strategies.

    Unfavorable FX impacts

    Impacted business versus Q1 guide

    Mitigation: Overcoming these headwinds through strong revenue and cost execution.

    Weakening trends in consumer devices and lifestyle

    Offsetting cloud growth in Agility Solutions

    Mitigation: Focusing on strong demand in data center power and medical devices to offset.

    Continued pressure in automotive segment

    Offsetting growth in Reliability Solutions

    Mitigation: Market stabilizing; being platform agnostic (ICE, hybrid, EV) helps, with continued compute wins across platforms. Will invest if business shows expected returns.

    What to watch in Q3 FY26

    5

    Data Center Revenue Growth

    May Investor Day
    CurrentAt least 35% for FY26
    TargetUpdated long-term guidance for growth rate and margin improvement

    Why it matters

    Data center is a key growth driver, and an updated long-term outlook will inform future revenue and profitability expectations.

    I'll step back and say, feel very good about kind of the 35% growth rate we have talked about, which we said is at least that much for the year. But I feel even strongly about the updated forward-looking guide, we'll come back📌 and give you in May in terms of growth rate of that business and then the margin improvement of that business driven by the mix of compute and power and cooling within that space.

    Q&A highlights

    5

    Why was data center revenue guidance not raised despite strong commentary, and how is the mix of custom vs. merchant silicon evolving, especially with new GPU launches?

    Management stated they provide data center guidance annually and will update it at the full-year review, but confirmed it will be 'better' than the 'at least 35%' stated. They participate in both custom and merchant silicon, with custom silicon often leading to more specialization and complex products where Flex excels. They are bullish on the forward-looking pipeline and will provide updated long-term guidance in May.

    “I will remind you that 35% is a very strong number compared to the industry and the end market itself. So we feel very good about that. So your math is directionally correct. So there's at least 35%. Obviously, we'll be better than that, and we'll update that in our full year guide when we do it at the end of the year.”

    asked by Ruplu Bhattacharya · answered by Revathi Advaithi

    2 min read5 chapters

    Detailed Narrative

    01

    AI Infrastructure Build-Out and Flex's Role

    Flex is positioned at the forefront of the AI infrastructure build-out, partnering with leading technology companies to design, build, and deliver power, cooling, and systems infrastructure. The company's offerings span from grid to chip, combining proprietary products with advanced manufacturing capabilities. This activity is already reflected in current results, with more programs expected to ramp over coming quarters and years, driving long-term growth.

    02

    New AI Infrastructure Platform and NVIDIA Partnership

    Flex unveiled a new AI infrastructure platform at the OCP Global Summit, which unifies power, cooling, and compute in pre-engineered scalable designs. This platform aims to help data center operators deploy up to 30% faster and scale reliably. Flex partnered with NVIDIA on next-gen 800-volt DC AI factories, which improve energy efficiency, lower cooling costs, and eliminate points of failure in complex data centers.

    03

    Strategic Portfolio Shift and Margin Expansion

    The company continues its strategic shift towards higher-value, technology-driven businesses, which is strengthening its margin profile. The data center business, comprising cloud and power, is particularly accretive due to the integration of compute, power, and cooling, and the deployment of Flex's own IP and products. This mix shift is a key driver for the expected continued margin improvement.

    04

    Impact of Ukraine Facility and Tariff Landscape

    The temporary loss of operations at the Mukachevo facility in Ukraine, damaged by a missile strike, is expected to result in a revenue headwind of over $100 million in the second half of FY26. Despite this, Flex raised its full-year guidance, demonstrating resilience. The company also continues to navigate a dynamic tariff landscape, which is largely a pass-through but remains fluid.

    05

    Capital Allocation and Investment Priorities

    Flex's capital allocation priorities remain consistent: maintaining an investment-grade balance sheet, funding strategic investments for organic growth, pursuing accretive M&A, and returning capital to shareholders through opportunistic share repurchases. The company is making significant CapEx investments in data center operations in North America (Guadalajara, U.S., Dallas, Fontana, Colombia) to support future growth in this segment.

    AI-generated summary of the company’s earnings call. Not investment advice.