Flex Q1 2026 Earnings Report

Flex EPS Results

• Actual EPS: $0.72
• Consensus EPS: $0.63
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $0.51

Flex Revenue Results

• Actual Revenue: $6.58 billion
• Expected Revenue: $6.27 billion
• Beat/Miss: Beat by +$307.68 million
• YoY Revenue Growth: +4.10%

Flex Announcement Details

• Quarter: Q1 2026
• Date: 7/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 8:30AM ET

Flex (NASDAQ:FLEX) provides technology, supply chain, and manufacturing solutions in Asia, the Americas, and Europe. It operates through three segments: Flex Agility Solutions (FAS), Flex Reliability Solutions (FRS), and Nextracker. The FAS segment offers flexible supply and manufacturing system comprising communications, enterprise and cloud solution, which includes data, edge, and communications infrastructure; lifestyle solution including appliances, consumer packaging, floorcare, micro mobility, and audio; and consumer devices, such as mobile and high velocity consumer devices. Its FRS segment provides complex ramps with specialized production models and critical environments, which comprise automotive including next generation mobility, autonomous, connectivity, electrification, and smart technologies; health solutions, such as medical devices, medical equipment, and drug delivery; and industrial solutions including capital equipment, industrial devices, and renewables and grid edge. The Nextracker segment offers solar tracker and software solutions, which are used in utility-scale and ground-mounted distributed generation solar projects. In addition, it provides a broad array of services including design and engineering, component services, rapid prototyping, fulfillment, and circular economy solutions. The company was formerly known as Flextronics International Ltd. and changed its name to Flex Ltd. in September 2016. Flex Ltd. was founded in 1969 and is headquartered in Singapore.

Flex Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Flex reported Q1 revenue of $6.6 B up 4% YoY, with a record-adjusted EPS of $0.72 and a 6% operating margin, above guidance.
• Positive Sentiment: The data center segment grew ~35% YoY to approximately $6.5 B in revenue, representing 25% of total sales, with integrated cloud and power solutions driving demand.
• Positive Sentiment: Full-year FY26 guidance was raised to $25.9 B–$27.1 B in revenue and $2.86–$3.06 in adjusted EPS, reflecting confidence in meeting targets.
• Positive Sentiment: Free cash flow reached $268 M with a 98% conversion rate, while capital allocation priorities include maintaining investment-grade ratings, funding growth, pursuing M&A, and returning capital via share repurchases.
• Negative Sentiment: Newly incorporated tariffs are expected to pass through to customers without materially affecting revenue growth, but will act as a headwind to margins, and interest expense guidance was raised on higher rates and refinancing timing.

Presentation

[Operator]

Thank you for standing by. Welcome to Flex's First Quarter Fiscal twenty twenty six Earnings Conference Call. Presently, all participants are in a listen only mode. After the speakers' remarks, there will be a question and answer session. As a reminder, this call is being recorded.

[Operator]

I will now turn the call over to Ms. Michelle Simmons. You may begin.

[Michelle Simmons, SVP - Investor & Public Relations at Flex]

Thank you. Good morning, and thank you for joining us today for Flex's first quarter fiscal twenty twenty six earnings conference call. With me today is our Chief Executive Officer, Ravathi Advaisi and Chief Financial Officer, Kevin Crum. We'll give brief remarks followed by Q and A. Slides for today's call as well as a copy of the earnings press release are available on the Investor Relations section at flex.com.

[Michelle Simmons, SVP - Investor & Public Relations at Flex]

This call is being recorded and will be available for replay on our corporate website. Today's call contains forward looking statements, which are based on our current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release or in the Risk Factors section in our most recent filings with the SEC. Note, this information is subject to change and we undertake no obligation to update these forward looking statements.

[Michelle Simmons, SVP - Investor & Public Relations at Flex]

Please note, all growth metrics will be on a year over year basis unless stated otherwise. Additionally, all results will be on a non GAAP basis unless we specifically state it's a GAAP result. The full non GAAP to GAAP reconciliations can be found in the appendix slides of today's presentation as well as in the summary financials posted on our Investor Relations website. Now I'd like to turn the call over to our CEO. Revathi?

[Revathi Advaithi, CEO & Director at Flex]

Thank you, Michelle. Good morning and thank you for joining us today. So starting on Slide four. Flex just wrapped up an exceptional quarter delivering positive results against our guidance. The groundwork we have laid out over the last several years continues to position us well in driving profitable growth with a growing data center business as well as serving as a manufacturer of choice for our partners.

[Revathi Advaithi, CEO & Director at Flex]

The benefits we are seeing from our global footprint are a result of our actions that started years ago as we focused on being able to meet the needs of our customers wherever they are in the world. Our revenues were up were $6,600,000,000 up 4%. Our adjusted operating margin was 6%, and we delivered adjusted EPS of $0.72 a record Q1 number for Flex. Our great start to fiscal year twenty twenty six gives us improved confidence in our ability to hit our fiscal year commitments, which has been reflected in our improved FY 2026 guidance. But we're not done.

[Revathi Advaithi, CEO & Director at Flex]

So let's turn to Slide five. Our portfolio mix continues to shift as data center becomes a larger and more strategic contributor and this quarter was no exception. We delivered strong performance across both our cloud and power portfolios and we continue to expect this business to deliver approximately $6,500,000,000 in revenue, growing at least 35% year over year and representing 25% of our total revenue. But what makes this business truly compelling isn't just the size or the growth, it's the architecture and integration behind it. So let's take a moment to unpack what this means.

[Revathi Advaithi, CEO & Director at Flex]

On the cloud side, we deliver vertically integrated IT hardware and infrastructure solutions, including metal fabrication, custom rack assembly and direct to chip liquid cooling technology. On the power side, our solutions span the full stack from board level modules managing power to the chip all the way to the facility level with modular power pods. Flex is the only provider providing both end to end cloud IT integration and a full power and cooling portfolio at scale. And that matters because customers today are in an arms race to scale. They don't just need custom rack solutions, but they also need power for their chips.

[Revathi Advaithi, CEO & Director at Flex]

They need to cool it and they need to deploy it quickly. Delivering integrated scalable solutions from grid to chip is essential, and it's a key reason why Flex continues to be a strategic partner of choice. That brings me to our broader geographic footprint and scale on Slide six. Our global operational scale remains one of Flex's most significant competitive advantages, not just in data center, but across all our end markets. And it's not just the size of our footprint, but our ability to shift and scale complex production across regions to meet evolving customer needs.

[Revathi Advaithi, CEO & Director at Flex]

We operate more than 49,000,000 square feet globally, including 7,000,000 square feet in The U. S. And 9,000,000 in Mexico, giving us manufacturing footprints in North America. But what truly sets us apart is how we operate. Across our sites, we have embedded AI enabled systems, advanced automation and localized supply chains designed for speed, flexibility and resilience.

[Revathi Advaithi, CEO & Director at Flex]

These capabilities are critical not only in data center, but also across our other end markets, including automotive, healthcare, industrials and more, which account for 75% of total Flex revenue. These are highly regulated complex products that require global design and delivery. Of this scale, paired with deep supply chain expertise, enables Flex to help customers navigate challenges like tariffs, regional regulations and supply disruptions. We have led the shift towards regionalization and the impact is clear. Americas revenue for us rose to 49% in fiscal year twenty twenty five, up from 38% in fiscal year twenty twenty, while Asia declined to 30%, down from 41% over the same period.

[Revathi Advaithi, CEO & Director at Flex]

These shifts reflect evolving customer needs and Flex's ability to execute. So looking ahead, we're especially bullish on our advanced manufacturing capabilities, where we see continued productivity gains from deploying AI and intelligence systems across our factories. You can see by bringing together advanced manufacturing services and Flex IP products, all supported by advanced automation and AI capabilities, are powering transformation across industries and geographies. While there is no shortage of news flow around uncertainty in the markets, we remain confident in our positioning. The flex you see today is not the same company it was ten years ago from the people to the portfolio of businesses.

[Revathi Advaithi, CEO & Director at Flex]

We have positioned ourselves to lead in our markets, focusing on profitability and transformational acquisitions that continue to evolve who we are as a company. We were early to focus on high growth end markets such as a data center and power, build a scaled and regionalized footprint and integrate services in a way that transform Flex from a contract manufacturer into a strategic end to end partner. I remain deeply confident in our strategy and the unique value we deliver. The solutions we provide and capabilities we have built have positioned us for one of the most compelling opportunity in Flex's history. With that, I'll turn it over to Kevin to walk through the financials. Kevin?

[Kevin Krumm, CFO at Flex]

Thank you, Ravesty, and good morning, everyone. I'll start with our key financials on Slide eight. First quarter revenue came in at $6,600,000,000 up 4%, driven by strong data center growth across both cloud and power end markets. Gross profit totaled $596,000,000 and gross margin improved to 9.1%, up 130 basis points. Operating profit was $395,000,000 with operating margins at 6%, up 120 basis points.

[Kevin Krumm, CFO at Flex]

Finally, earnings per share for the quarter increased more than 40% to zero seven two dollars per share. Turning to our quarterly segment results on the next slide. In Reliability Solutions, revenue was $2,900,000,000 down 2% year over year, in line with our expectations. Results reflected continued macro related pressure in Automotive and Renewables, which was partially offset by strength in Power. While all three reporting units saw modest declines, operating income improved to $172,000,000 and segment margin expanded 100 basis points to 6%, demonstrating strong execution, continued focus on mix and disciplined cost management.

[Kevin Krumm, CFO at Flex]

Agility Solutions revenue totaled 3,700,000,000 up a strong 10% year over year, driven by robust cloud and AI demand that more than offset continued softness in traditional telecom and consumer facing end markets. Operating income was $240,000,000 with operating margin expanding 120 basis points to 6.5%, supported by effective cost management and favorable mix shift, including increased penetration of value added services. Moving to cash flow on Slide 10. Free cash flow in the quarter was $268,000,000 representing conversion of 98%. Net inventory was up 3% sequentially, driven by increased volumes and down 11% year over year.

[Kevin Krumm, CFO at Flex]

Inventory, net of working capital advances, was fifty five days, a reduction of seven days versus the prior year. Net CapEx totaled $131,000,000 or approximately 2% of revenue and we purchased around $247,000,000 of stock, which was approximately 7,000,000 shares. Our capital allocation priorities remain unchanged. We are committed to maintaining our investment grade balance sheet, funding strategic investments to support organic growth, pursuing accretive M and A opportunities and returning capital to our shareholders through opportunistic share repurchases. In the quarter, we acquired a new manufacturing site in Poland, which will produce low and medium voltage switchgear, power pods and busways.

[Kevin Krumm, CFO at Flex]

This doubles our power capacity in Europe, allowing us to meet the rising global demand for reliable data center power. It is also a great example of Flex deploying capital in a margin accretive way to grow our capabilities and our products portfolio. Looking at our full year guidance on Slide 11. As we head into the second quarter and we look out to the rest of the year, the macro environment remains dynamic. That said, we're continuing to execute well and the steps we've taken to focus Flex on high growth, strategically important end markets are delivering results.

[Kevin Krumm, CFO at Flex]

One of the key enablers of our performance is our global scale. It has allowed us to support customers and accelerating the regionalization strategies, bringing manufacturing closer to end markets to improve agility, reduce risk and meet evolving trade requirements. While the situation continues to evolve, a few key points to keep in mind. We expect tariffs to remain largely pass through costs with strong contractual protections in place. Importantly, while last quarter we did not incorporate the direct impact of tariffs into our revenue guidance, this quarter we're doing so.

[Kevin Krumm, CFO at Flex]

With greater clarity around the scope and timing of the tariff impact, we believe this adjustment provides a more accurate view of expected revenue performance. That said, incorporating our current view to tariffs does not have a material impact on our full year guided growth rates. With that context, our updated FY twenty twenty six expectations are revenue between $25.9 and $27,100,000,000 which increases our midpoint by approximately $600,000,000 adjusting operating margin adjusted operating margin between 66.1% adjusted EPS between $2.86 and $3.06 per share, adjusted tax rate of 21% and we continue to expect strong cash generation and maintain our 80% plus free cash flow conversion target for FY 2026. We'll continue to monitor the tariff environment and adjust as needed. But as it stands today, we're confident in our ability to navigate these shifts while delivering against our financial commitments.

[Kevin Krumm, CFO at Flex]

Moving to our segment outlook for the year. Our segment outlook remains largely consistent with last quarter's as end market demand trends continue to track in line with our expectations. For Reliability Solutions, we now expect revenue to be down low single digit to up mid single digit, a marginal improvement from our prior view. Continued strength in Data Center Power is helping offset macro related softness in automotive, core industrial and renewables. For Agility Solutions, we anticipate modest year over year growth in the low to mid single digit range, reflecting a slight improvement from our prior year outlook.

[Kevin Krumm, CFO at Flex]

Growth will be driven by sustained demand in cloud, ongoing benefit from previously secured lifestyle wins and strategic share gains in networking. These tailwinds are expected to be partially offset by continued softness in enterprise IT, telco and consumer devices. Finishing off with our guidance for the second quarter on slide 13. We expect Reliability Solutions revenue to be down low single digit to up low single digit with continued weakness in automotive and Parts of Health offset by solid performance in our Power business. We expect Agility Solutions revenue to be up low single digit to up mid single digit with strength in Cloud and continued momentum in Networking offset by ongoing softness in traditional telecom and consumer facing end markets.

[Kevin Krumm, CFO at Flex]

For total Flex, we expect revenue in the range of 6,500,000,000.0 to $6,800,000,000 with adjusted operating income between $375 and $415,000,000 Interest and other expense is estimated to be around $38,000,000 and the adjusted tax rate to be approximately 21%. Lastly, we anticipate adjusted EPS to be between $0.70 and $0.78 per share based on approximately $381,000,000 weighted average shares outstanding. With that, I'll now turn the call back over to the operator to begin Q and A.

[Operator]

Thank you. We will now begin the question and answer portion of today's call. Our first question comes from the line of Samik Chatterjee with JPMorgan Chase and Company. Please proceed with your question.

[Samik Chatterjee, MD & Equity Research Analyst at J.P. Morgan]

Hi. Thank you for taking my questions. Strong print here maybe and strong margins as well. Maybe if I can start with the margin outlook for the year. You did a 6% in 1Q.

[Samik Chatterjee, MD & Equity Research Analyst at J.P. Morgan]

You're guiding to hold that level. I'm a bit surprised along with the increase in the midpoint of the revenue, you're not seeing more leverage on the margin side for the full year outlook. Maybe you can clarify that as to why the margin outlook doesn't isn't improving along with the revenue guide? And then I have a quick follow-up. Thank you.

[Kevin Krumm, CFO at Flex]

Hey, Samik. This is Kevin. What I would say is we held our prior margin guided range of 6% to 6.1%. The math would be if you were looking at operating profit dollars, we did pass through and therefore improve our operating profit outlook as well. What I would say on the revenue volume, especially in the back half of the year, we remain cautiously optimistic there.

[Kevin Krumm, CFO at Flex]

We have brought in tariffs, as I said before. That's largely low calorie revenue and actually is a headwind to our margin performance. So that's an element you're seeing in the back half of the year. And then, we are making a few investments in the back half of the year as well.

[Revathi Advaithi, CEO & Director at Flex]

So Mig, I'll say first is its first quarter. It was a very strong set of numbers for Q1. And as you can see, pretty much you're seeing the 6% kind of flow through. So we feel we're always conservative about our kind of how we forecast the year, but it's a really strong set of numbers, both for the current quarter and the full year.

[Samik Chatterjee, MD & Equity Research Analyst at J.P. Morgan]

Okay. Okay. No, got it. And for my follow-up, I see for the data center revenue, you're outlining the target of 35% year over year. Maybe you can sort of give us a bit more details on what the trends were in 1Q itself?

[Samik Chatterjee, MD & Equity Research Analyst at J.P. Morgan]

And if you can break it out between cloud and power? And is your are your expectations still consistent for power to maybe have a stronger year than cloud this year? Thank you.

[Revathi Advaithi, CEO & Director at Flex]

Yes. Samik, I'll say that first is we feel very good about our 35% growth forecast that we gave for this fiscal year. It's the first time we've given a full year fiscal forecast for our data center business, and that's because of it's becoming a large percent of our overall portfolio. We're in line with that 35%. And I would say from a quarterly perspective, we don't want to give quarterly guidance and quarterly numbers because they tend to move around.

[Revathi Advaithi, CEO & Director at Flex]

But the 35%, we feel very strong about. We're still in line with what we had said earlier in the start of the year that Power will be stronger. And that's because they had a little bit softer last year relative to the cloud business, but they're both going to be pretty significantly strong in terms of the overall 35%. So on track for that and continued also margin accretion to the overall Flex portfolio. So pretty robust numbers, I would say, data center for both cloud and power.

[Samik Chatterjee, MD & Equity Research Analyst at J.P. Morgan]

Got it. Thank you. Thanks for taking my questions.

[Operator]

Thank you. Our next question comes from the line of Mark Delaney with Goldman Sachs Asset Management. Please proceed with your question.

[Mark Delaney, US Autos & Industrial Tech at Goldman Sachs]

Yes, good morning. Thank you very much for taking my questions. Flux's products, assembly and services capabilities has allowed it to do very well in the data center. I'm hoping to better understand how the market for products may be evolving. Amazon recently announced the plans to use some of its own internally designed cooling products

[Mark Delaney, US Autos & Industrial Tech at Goldman Sachs]

So do you think this may be a trend of hyperscalers doing more power and cooling products in house more generally long term? And if so, how may Flex fit into those plans?

[Revathi Advaithi, CEO & Director at Flex]

Yes. I'd say, Mark, that as we look at our capability around IT rack integration, around cooling and power, we've toggled towards having product capability and our own technology capability around both power and on cooling. How I feel about cooling is very bullish. I think Amazon's announcement really validates the fact that we needed the capability both for manufacturing capability, but also technology capability. So having both is really important.

[Revathi Advaithi, CEO & Director at Flex]

You can't have one or the other. I would say that hyperscale is continuing to invest in their capability, we see as a positive thing. So whether it is providing it as an advanced manufacturing solution or bringing our own IP and technology into the manufacturing side of it or into the design side of it, giving a fully integrated solution is the right way to go. And again, as I've said this before, Mark, is having both compute and power with cooling overall, we think is a good way to go. So we view this announcement as a positive.

[Mark Delaney, US Autos & Industrial Tech at Goldman Sachs]

That's helpful. Thanks, Revathi. My other question was just to better contextualize the full year guidance compared to 1Q results. The 1Q earnings results were very strong. Earnings were $0.10 above the midpoint of your prior guidance.

[Mark Delaney, US Autos & Industrial Tech at Goldman Sachs]

You only raised the full year outlook for earnings at the midpoint by $05 So I'm hoping to better understand is the implied lower level of earnings for the balance of the year compared to your previous guidance. Is that just a question of timing and some conservatism? Or are there any businesses that are weakening more than you had previously expected?

[Kevin Krumm, CFO at Flex]

Mark, this is Kevin. I'll take that. So first, first quarter was a great quarter, above expectations. The team navigated really well. As Ravathi alluded to earlier, one quarter does not necessarily make the entire year.

[Kevin Krumm, CFO at Flex]

So, but as we look at it, we did raise revenue and as I said earlier, sort of the midpoint of OP profit dollars. You don't see that pass all the way through to EPS because we lost a little guide to guide in the interest and other line item. That said, when you look at first half versus back half, which I think was the other part of your question, especially maybe looking at EPS or OP growth rates, I would say the first half of this year, we are getting a benefit, from a prior year comparison. Prior year revenue was down pretty significantly in the first half of the year. So we had some absorption issues that impacted operating profit pretty significantly.

[Kevin Krumm, CFO at Flex]

So that is a comparison benefit that the first half of the year is getting. The other thing I would say is we're seeing growth this year in the data center. We talked about that. And so we're going to continue making investments in programs and capability in the back half of the year to support that.

[Revathi Advaithi, CEO & Director at Flex]

And then, Mark, what I would say is none of our end markets have changed in terms of what how we guided for the year and how we felt the markets were performing. So that's good news. I think in all this uncertainty, our guide is pretty strong in terms of how we felt the markets were going to perform. So we feel good about that. And then again, quarter, like I said before, and we are generally conservative in how we guide.

[Revathi Advaithi, CEO & Director at Flex]

And I think that's people expect that from us and that goes into the mix master.

[Mark Delaney, US Autos & Industrial Tech at Goldman Sachs]

Okay. Congratulations again on good results. Thank you.

[Kevin Krumm, CFO at Flex]

Thanks, Mark.

[Operator]

Thank you. Our next question comes from the line of Steven Fox with Fox Advisors. Please proceed with your question.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

Hi, good morning. I had a couple of questions as well. First off, I was wondering if you can give us a sense for where you stand on some of the capacity constraints you had ninety days ago. I know you just mentioned you're making investments in the second half. You bought a plant in Poland.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

But how constrained are you now versus ninety days ago? When do you think you sort of catch up with demand, if that's the right terminology? And then I have a follow-up.

[Revathi Advaithi, CEO & Director at Flex]

Yes. I would say, Stephen, first is I think it's a good problem to have where we have so much growth that we have to continue to invest in capacity. And you are well aware of all the supply demand equation in terms of AI infrastructure, which we see both in cloud and power. I feel good about the investments that we have announced in making. Our Dallas facility is ramping up very well.

[Revathi Advaithi, CEO & Director at Flex]

We just bought this facility in Poland, which is a fully capable facility that really helps us kind of from a European perspective. So we feel really good about the new investments we are making. My hope is that we continue to make investments in growth for AI infrastructure, both in power and cloud. And our goal would always be not to have so much capacity, but just enough capacity where we're able to bring down lead times and keep up with the demand. And I feel like we're in the right place.

[Revathi Advaithi, CEO & Director at Flex]

You see that with our numbers, right? 35% is a very strong number for data center growth. And we're delivering that because we have new capacity and we will continue to add more.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

That's helpful. And then I know you just said there wasn't much change in some of your non data center markets versus ninety days ago. But I was curious if there's any green shoots, especially in like automotive, industrial, for example, where maybe, some companies are seeing some better cyclical trends. Thanks.

[Revathi Advaithi, CEO & Director at Flex]

Yes. I would say that for automotive, at least our I know that from the end markets externally, you're hearing that there are some upsides. I think we gave a fairly conservative guide. And so we're in line with the guide in terms of numbers itself. So I feel good that we took this view because I think how the year will turn out is pretty much how we thought it's going to work out.

[Revathi Advaithi, CEO & Director at Flex]

And then our if you look at our auto portfolio, we're kind of more geared toward North America. And so that kind of fits into the overall kind of how we compare the global numbers. I'd say industrial is also performing as we've expected, right? In kind of end markets that are infrastructure related, there is green shoots on areas like renewables, you know the story there. And then I'd say the other areas to think about is on the networking side, we've talked about that we've had really good strong gain share gains, and that's a big plus for us.

[Revathi Advaithi, CEO & Director at Flex]

And then on the health care side, equipment has performed in line, but devices has been extremely strong. So that's kind of how the overall markets have evolved. And being good at predicting the end markets in this environment, I would say, is quite a plus and we feel good about kind of how we have looked at the year.

[Steven Fox, Founder & CEO at Fox Advisors, LLC]

Great. That's all helpful. Thank you.

[Kevin Krumm, CFO at Flex]

Thanks, Stephen.

[Operator]

Thank you. Our next question comes from the line of Ruplu Bhattacharya with Bank of America. Please proceed with your question.

[Ruplu Bhattacharya, Director at Bank of America]

Hi, thanks for taking my questions. I have two, one for Kevin, one for Revathi. Maybe I'll start with Kevin. Can you give us a little bit more detail in terms of what you factored in, in terms of tariff impact to the full year guide on the top line operating margin and EPS. Are you assuming any impact to the USMCA exceptions?

[Ruplu Bhattacharya, Director at Bank of America]

What do you think about the February tariff impact? And I think you said to an earlier question that there is some impact on the interest and expense line that's impacting EPS guide or the increase of $05 Can you clarify how much that is? And then I have a follow-up for Revathi.

[Kevin Krumm, CFO at Flex]

Okay. So on tariffs, basically, our view that we're pushing through, is as of the June view, sort of the pause, okay? So that's what we've brought in. We do not see any USMCA impact. And as I said earlier, it's dynamic.

[Kevin Krumm, CFO at Flex]

Our customers are making moves, to offset impacts of tariffs, etcetera. So we're not guiding to a tariff number this year. What I said on the release, I'll repeat or on the script, I'll repeat here, which is tariffs are going to have, will not have a material impact on our growth rate when you look at our revenue growth year on year. They do have an impact on margin performance. We've talked about that in the past because you're passing it through.

[Kevin Krumm, CFO at Flex]

They're largely a pass through for us. So you see that in this updated guide as well. You asked on interest expense. I would say there's really two elements to that. One is we are looking at the timing of interest rate.

[Kevin Krumm, CFO at Flex]

We have variable interest rates that are included in there. We also have timing of refinancing. That's included in our view to the rest of the year. And then we also have costs associated with currency exposures. We brought all those views into this revised guidance, which is why you're seeing an increase in that line item guide to guide.

[Ruplu Bhattacharya, Director at Bank of America]

Thanks for all the details there. Revathi, can I ask, when we look at the two segments, Reliability and Agility, can you help us rank order for each of those segments? How like which end markets you expect to grow stronger? Which ones grow weaker? And how does that impact your decision to invest in different end markets?

[Ruplu Bhattacharya, Director at Bank of America]

So I mean, I'm sure you're going to be investing in cloud and power, but beyond that, as you think about investing for growth, I mean, which end markets or which segments should we expect more spend from Flex on? Thank you.

[Revathi Advaithi, CEO & Director at Flex]

Yes. So I'd say, Rupu, our view on kind of what's weaker and stronger despite all the noise in the end markets hasn't changed very significantly. So as an example, automotive, where we kind of projected the year, it was going to be weak and somewhat spotty and it is going to turn out to be that way. I would say our consumer kind of end markets both in lifestyle and consumer devices are kind of holding its own. I would say that we were expecting that to be slow for the year and it is definitely playing out that way.

[Revathi Advaithi, CEO & Director at Flex]

The places that we expected kind of strong growth in, which is in our medical device business and healthcare and infrastructure related items for industrial, power and cloud, networking, all those are pretty much in line with what we were expecting it to be. So I would say how the end markets are playing out are fairly in line with what we were expecting. In terms of investments, it will always be the prioritize towards the higher growth, higher return end markets for us. And so I would say data center is driving a large part of our investment both in cloud and in power, not just for kind of this year, but we are investing for the future. I mean 35% growth does require investment.

[Revathi Advaithi, CEO & Director at Flex]

So you heard Kevin talk about continued investment this year for kind of what will drive growth next year. And but it doesn't mean that other businesses aren't getting their share. Healthcare is getting its share of investments, but we'll it's our job to prioritize towards the higher growth, higher return end markets.

[Ruplu Bhattacharya, Director at Bank of America]

Okay. Thank you for all the details. Appreciate it.

[Operator]

Thank you. Our next question comes from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your question.

[Steve Barger, Managing Director - Equity Research at KeyBanc Capital Markets]

Thanks. Good morning. Ravathi, for data centers, what percentage of customers engage with the entire suite of IT integration and power products? And for customers that are partial users, how successful have you been at converting them to more content?

[Revathi Advaithi, CEO & Director at Flex]

Yes. Steve, I'd say that's a great question. First is, as you know very well, the host of customers, whether it's hyperscalers or kind of these neo cloud folks who are coming up or colo, is a small set of customers at the end of the day, right? So it's not a large population. So most of them, particularly the hyperscalers will be buying a whole suite of products, whether it is IT integration, cooling or power.

[Revathi Advaithi, CEO & Director at Flex]

And so we do see kind of them going across the spectrum. And then on kind of colos, it will tend to be a little bit more spotty. I'd say lean more towards kind of the power side, but heading more towards kind of cooling and IT integration when scale presents itself as an opportunity. So I would say and then our ability to convert the compute and power coming together is becoming more and more reality because as you see technology heading towards this higher power density, the one megawatt rack that you hear about, having an integrated cooling solution, power solution and having your compute all integrated together is going to become part of reality. So technology is heading in that direction.

[Revathi Advaithi, CEO & Director at Flex]

We were ahead of the game And now customers want that integrated solution, which puts us in a great sweet spot because there's nobody else who's doing that.

[Steve Barger, Managing Director - Equity Research at KeyBanc Capital Markets]

Yes. I agree. To your earlier comment on hyperscalers making some internal investments, are you seeing customers standardizing on solutions? Or is each DC still more custom even if it's the same owner?

[Revathi Advaithi, CEO & Director at Flex]

Yes. I would say each hyperscalers is kind of their own solution. And each colo kind of tends to gravitate towards kind of whoever is their largest customer base in terms of the standardized solution that they usually implement. So that hasn't changed in a significant way. I think the biggest places that we get to really influence technologies, Steve, for all of them would be like if you need high power density to power your chip, then we're designing a power for you that really needs to work well with heat and cooling.

[Revathi Advaithi, CEO & Director at Flex]

So there, we will may use their technology, but most of the time we are using our technology, integrating that and providing them an end to end solution. So it will be a mix, I would say, to your question.

[Steve Barger, Managing Director - Equity Research at KeyBanc Capital Markets]

Understood. Thanks.

[Operator]

Thank you. I'll now turn the call back over to the CEO for any closing remarks.

[Revathi Advaithi, CEO & Director at Flex]

Okay, great. Thank you so much. So we look forward to speaking with you again next quarter. And on behalf of my entire leadership team, I do want to thank our customers, our shareholders and of course to the Flex team around the world for all your hard work, dedication and your contributions. Thank you, everyone.

[Operator]

Thank you. This now concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Michelle Simmons, SVP - Investor & Public Relations
• Revathi Advaithi, CEO & Director
• Kevin Krumm, CFO

Analysts

• Samik Chatterjee, MD & Equity Research Analyst at J.P. Morgan
• Mark Delaney, US Autos & Industrial Tech at Goldman Sachs
• Steven Fox, Founder & CEO at Fox Advisors, LLC
• Ruplu Bhattacharya, Director at Bank of America
• Steve Barger, Managing Director - Equity Research at KeyBanc Capital Markets