Plexus Q3 2026 Earnings Report

Plexus EPS Results

• Actual EPS: $2.32
• Consensus EPS: $2.13
• Beat/Miss: Beat by +$0.19
• One Year Ago EPS: $1.64

Plexus Revenue Results

• Actual Revenue: $1.30 billion
• Expected Revenue: $1.23 billion
• Beat/Miss: Beat by +$75.30 million
• YoY Revenue Growth: +28.20%

Plexus Announcement Details

• Quarter: Q3 2026
• Date: 7/29/2026
• Time: After Market Closes
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 8:30AM ET

Plexus (NASDAQ:PLXS) (NASDAQ: PLXS) is a global provider of electronics manufacturing services (EMS) and precision engineered electronics solutions. Headquartered in Neenah, Wisconsin, the company partners with original equipment manufacturers across industries such as medical, industrial, aerospace and defense, computing, and communications. Plexus offers a full suite of services that span new product introduction, product lifecycle management, supply chain management, printed circuit board assembly, system integration, and aftermarket support.

Founded in 1979, Plexus has grown from a regional electronics assembler into a multinational organization with manufacturing and engineering centers across North America, Europe, and Asia. The company’s turnkey approach allows customers to streamline development timelines and manage complex products through a single point of accountability, from initial design through volume production and beyond.

Plexus’s service offerings include embedded software development, mechanical design and rapid prototyping, test and quality engineering, and aftermarket services such as repair, refurbishment, and logistics. By integrating advanced manufacturing technologies—such as automation, robotics, and data-driven process controls—the company aims to help customers reduce total cost of ownership and accelerate time to market for mission-critical products.

Under the leadership of President and CEO Todd W. Kelsey, Plexus emphasizes a customer-centric culture built on collaboration, innovation, and operational excellence. The company maintains environmental and quality certifications across its sites, reflecting its commitment to regulatory compliance and continuous improvement in serving global markets.

Plexus Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record fiscal third-quarter performance: Revenue reached $1.305 billion, up 28% year over year, while non-GAAP operating margin was 6.3% and EPS was $2.32, both ahead of or at the high end of guidance.
• Positive Sentiment: Plexus raised its outlook for sustained growth, now expecting fiscal 2026 revenue growth above 20% and fiscal 2027 growth exceeding its 9%-12% long-term target. Aerospace and defense and industrial markets are expected to lead, with healthcare growth moderating after a strong product-launch year.
• Positive Sentiment: New program wins totaled $255 million in annualized revenue during the quarter, including $135 million from aerospace and defense, while the qualified manufacturing funnel reached a record $4.5 billion. The company also cited approximately $500 million of data-center-related opportunities focused on power and thermal management.
• Positive Sentiment: Management reported a best-in-more-than-five-years cash cycle of 62 days and expects operating margin expansion and meaningful free cash flow above $100 million in fiscal 2027. Plexus plans to expand Malaysian capacity by more than $500 million of potential revenue while keeping capital expenditures at roughly 2%-3% of revenue.
• Negative Sentiment: Supply-chain conditions are tightening, requiring component pre-placement and additional working-capital investment, while fiscal fourth-quarter free cash flow is expected to be break-even or slightly negative. Higher interest expense is also expected to increase non-operating costs in the fourth quarter and into fiscal 2027.

Presentation

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Good morning. Thank you for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements, including, without limitation, those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, and future business outlook. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company's periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended September 27, 2025, and the safe harbor and fair disclosure statement in our press release.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

We encourage participants on the call this morning to access the live webcast and supporting materials at plexus.com, clicking on Investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer, and David Abuhl, Senior Vice President, Chief Financial Officer. Unfortunately, Oliver Mihm, our Executive Vice President and Chief Operating Officer, is unexpectedly feeling unwell and could not make the call today. Oliver will rejoin us on our fiscal fourth quarter call. With today's earnings call, Todd Kelsey will provide summary comments before turning the call over to me and David Abuhl for further details. With that, let me now turn the call over to Todd Kelsey. Todd Kelsey?

[Todd Kelsey, President and CEO at Plexus]

Thank you, Shawn Harrison. Good morning, everyone. Earlier this week, a devastating tornado struck near our corporate headquarters, causing significant damage to our local community. Our thoughts and prayers go out to all of those impacted. Thankfully, no fatalities or missing persons were reported. There was no material impact to Plexus's operations or our headquarters. Please advance to slide three. Our differentiated value proposition, focused on unmatched quality and delivery, is creating customer success. Plexus generated record revenue in the fiscal third quarter by capturing strengthening end market demand and successfully launching numerous new programs. As a result, we see Plexus positioned to deliver more than 20% revenue growth for fiscal 2026. We anticipate Plexus will sustain this momentum and currently see the potential to generate fiscal 2027 revenue growth in excess of our 9%-12% goal.

[Todd Kelsey, President and CEO at Plexus]

We expanded our funnel of qualified manufacturing opportunities to a record level, creating the potential to sustain strong long-term revenue growth. We delivered solid operating performance with a robust 6.3% non-GAAP operating margin for our fiscal third quarter. We anticipate further strong operating results for our fiscal fourth quarter. Consequently, we expect our fiscal 2026 non-GAAP operating margin to exceed 6% and see the potential for continued operating margin expansion in fiscal 2027. Finally, our working capital efficiency remains robust while supporting accelerated revenue growth. Fiscal third quarter cash cycle exceeded our expectations and was the best in more than five years. We expect to sustain this performance into fiscal 2027 and anticipate a return to meaningful free cash flow generation. Please advance to slide four.

[Todd Kelsey, President and CEO at Plexus]

With all three of our market sectors contributing better than expected performance, fiscal third quarter revenue of $1.305 billion exceeded our guidance range, representing a 12% sequential and a 28% year-over-year increase. Additionally, non-GAAP operating margin of 6.3% met the high end of guidance, increasing 30 basis points year-over-year on continued efficiency gains and revenue leverage. Finally, non-GAAP EPS of $2.32 exceeded our guidance range. Please advance to slide five. Our go-to-market team continued to drive strong performance. For the third quarter, we secured 31 new manufacturing programs with $255 million in annualized revenue when fully ramped into production. This result included an exciting new partnership in our industrial market sector supporting battery energy storage systems for data centers, as well as another robust contribution from our aerospace and defense market sector of $135 million.

[Todd Kelsey, President and CEO at Plexus]

Year to date, our $400 million of aerospace and defense wins represents a result more than two times our combined fiscal 2024 and 2025 performance. This positions us for long-term secular market outgrowth. Furthermore, aerospace and defense engineering solutions wins were significant. Finally, our funnel of qualified manufacturing opportunities expanded to a record $4.5 billion in support of sustaining robust long-term revenue growth. Please advance to slide six. At Plexus, we are committed to advancing sustainability through our value of innovating responsibly. Our customer partnerships are central to our strategy. During our fiscal third quarter, ASM honored Plexus with its Supplier Performance Award for overall supplier excellence and PRISM Sustainability Award for circularity. These recognitions underscore our commitment to deep customer collaboration and advancing sustainable practices across our value chain. We also continue to take proactive steps to reduce our environmental footprint.

[Todd Kelsey, President and CEO at Plexus]

Earlier in July, we were thrilled to receive the Gold Award for renewable energy at the Positive Impact Awards in Malaysia, highlighting our dedication to renewable energy adoption and sustainable manufacturing. As of fiscal 2026, all of our Penang facilities operate on 100% renewable energy through a combination of on-site generation and purchased renewable energy. Finally, we continue to build trust through transparency. In June, we released our annual sustainability report that showcases our commitment to innovating responsibly and establishes our formal greenhouse gas emission reduction targets. I'm grateful for the continued recognition by our customers and our communities of our global team members' efforts to live our values, deliver excellence, and create a lasting positive impact. Please advance to slide seven. For our fiscal fourth quarter, we forecast continued revenue strength led by our industrial market sector.

[Todd Kelsey, President and CEO at Plexus]

We are guiding revenue of $1.33 billion-$1.38 billion, representing 4% sequential and 28% year-over-year growth at the guidance midpoint. We are also guiding non-GAAP operating margin of 6.1%-6.5% and non-GAAP EPS of $2.47-$2.63. Due to success in launching numerous new programs, market share gains, and supportive disruptive technologies, we are driving sustained momentum and revenue growth in excess of market growth. As a result, we now anticipate generating greater than 20% revenue growth for fiscal 2026, with greater than 6% non-GAAP operating margin and disciplined working capital efficiency. Finally, our differentiated value proposition, focused on providing unmatched quality and delivery, is resulting in robust performance. This focus has positioned Plexus to sustain momentum for fiscal 2027 and beyond. For fiscal 2027, we currently see the potential to maintain quarterly sequential revenue expansion and generate revenue growth in excess of our 9%-12% goal.

[Todd Kelsey, President and CEO at Plexus]

Supporting our bullish outlook is continued strong growth from our aerospace and defense and industrial markets, including semiconductor capital equipment, with continued growth in Healthcare Life Sciences. Finally, during fiscal 2027, we anticipate delivering operating margin expansion while continuing to make important investments in talent and technology, and support future growth and operational efficiency. We also expect disciplined working capital efficiency, prudent capital expenditures, and a return to meaningful free cash flow generation. I will now turn the call over to Shawn Harrison for additional analysis of the performance of our market sectors. Shawn Harrison.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Thank you, Todd Kelsey. For each of our market sectors, I will discuss our fiscal third quarter performance and our expectations for our fiscal fourth quarter, provide an updated fiscal 2026 growth outlook, review the annualized revenue contribution of our quarterly wins performance, and offer preliminary growth commentary for fiscal 2027. I will also provide an overview of our record funnel of qualified manufacturing opportunities. Beginning with our Aerospace Defense sector on Slide 8, following robust 19% sequential growth last quarter, fiscal third quarter revenue increased 10% sequentially. Growth was better than our expectation of a mid-single-digit increase. The common theme for this quarter, outstanding execution from our supply chain and operation teams, helped to accelerate the capture of robust demand from multiple customers.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

For our fiscal fourth quarter, following three consecutive quarters of strong sequential revenue growth, we expect revenue to be approximately flat versus our fiscal third quarter and to increase more than 30% year-over-year. We anticipate a return to sequential revenue growth in our fiscal first quarter of 2027. Finally, for fiscal 2026, we now expect our Aerospace Defense sector to deliver outstanding revenue growth of more than 20%, led by our defense and unmanned subsectors. Fiscal third quarter wins for the sector were a very strong $135 million. Our teams in Boise, Idaho, and Oradea, Romania, won a secure wireless communication system with a new defense and security customer. Our ability to provide dual-region support will ensure U.S. and EU regulatory compliance for the customer. Furthermore, the win helps in establishing our Oradea, Romania, site as our center of defense excellence in continental Europe.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Our focus on superior customer service also led an existing customer to award our Boise team a naval submarine electronics program. As we look ahead to our fiscal 2027, we see the potential for continued robust revenue growth for our Aerospace Defense sector that should well exceed our 9%-12% goal. We anticipate exceptional growth from our defense, unmanned, security, and space subsectors associated with program ramps, market share gains, and robust end market demand, as well as continued commercial aerospace demand improvement. Please advance to Slide 9. Healthcare Life Sciences market sector revenue increased 2% sequentially for our fiscal third quarter. The result exceeded our flat revenue growth forecast due to our successful support of program ramps and improved customer demand. For the fiscal fourth quarter, we expect approximately flat sequential revenue, with delays in program ramps offsetting stronger customer demand.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

For fiscal 2026, we now anticipate revenue to increase in the high teens year-over-year, an excellent result and well ahead of our estimate of mid-single-digit healthcare life sciences market growth. We generated fiscal third-quarter wins of $53 million. Our team in Neenah, Wisconsin, won a prototype build of instruments utilized in a customer's surgical robotics platform that Plexus currently supports. Our teams in Haining, China, and Oradea, Romania, won the production of a next-generation ultrasound platform. Our long-standing relationship with this leading healthcare customer and our ability to provide global support drove the market share gain. Our strong engineering relationship and long-term record of superior execution resulted in a follow-on award for our team in Penang, Malaysia, to produce a market-leading patient monitoring device.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

As we consider fiscal 2027 for our healthcare life sciences sector, we see the potential to achieve at least mid-single-digit revenue growth against a market estimated to again grow in the mid-single digits. We expect to continue to benefit from program ramps and strong demand for surgical robotics and therapeutic and monitoring solutions. We expect short-term growth moderation as activity normalizes following a year of tremendous success in helping numerous customers launch new products. Advancing to the industrial sector on slide 10, fiscal third-quarter revenue increased 23% sequentially, well ahead of our forecast for low-double-digit growth. Our team's ongoing delivery of operational and supply chain excellence in support of expanding demand in our semi-cap and other industrial sub-sectors drove the outperformance. For the fiscal fourth quarter, we expect high-single-digit to low-double-digit sequential revenue growth associated with strengthening end-market demand and program ramps.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

We now anticipate revenue for fiscal 2026 to increase by a very strong 20+%. The market sector generated $67 million in wins for the fiscal third quarter. The wins included a new partnership to build battery energy storage systems used by data centers. In awarding the program to our Bangkok, Thailand team, the customer valued engagement by Plexus leadership, our transparent communication, and expert technical insights. Initial production for this program is already underway. Our team in Guadalajara, Mexico also won a follow-on award for an innovative vehicle imaging and inspection system. We see the potential for a very strong fiscal 2027 for our industrial sector, with revenue growth that should well exceed our 9%-12% goal.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

We expect another year of robust growth from our semi-cap sub-sector, along with strong demand for industrial automation and robotics, test and measurement, and energy management and storage solutions. Please advance to slide 11 for a review of our funnel of qualified manufacturing opportunities. The funnel reached another record this quarter. For our fiscal third quarter, our funnel was $4.5 billion, an increase of 12% sequentially and 23% year-over-year, or growth of more than $800 million. Within this performance, our aerospace, defense, and industrial market sectors also achieved record funnels. Our differentiated value proposition, which is focused on providing unmatched quality and delivery, continues to create opportunities in support of sustaining a strong and durable long-term revenue growth trajectory. I will now turn the call over to David Abuhl. David Abuhl?

[David Abuhl, SVP and CFO at Plexus]

Thank you, Shawn Harrison, and good morning, everyone. Our fiscal third quarter results are summarized on slide 12. Gross margin of 10.1% was in line with our guidance. Benefits from revenue leverage and continued operational productivity gains more than offset inflationary pressures and other cost increases. Selling and administrative expense of $70.1 million was in line with guidance and included typical stock-based compensation expenses, as well as those related to executive retirement. Excluding these expenses, we gained nearly 50 basis points of leverage compared to our fiscal second quarter. Our non-GAAP operating margin of 6.3% met the top end of our guidance, benefiting from leverage on revenue growth, operational efficiencies, and continued cost discipline. Non-operating expense of $4.8 million was favorable to expectations, driven by additional interest income.

[David Abuhl, SVP and CFO at Plexus]

Non-GAAP diluted EPS of $2.32 exceeded the top end of our guidance due to higher revenue and the other items mentioned, partially offset by a tax rate at the upper end of our guidance. Turning to our cash flow and balance sheet on slide 13. For the fiscal third quarter, we delivered $25.9 million in cash from operations and spent $26.6 million on capital expenditures, resulting in a better-than-expected free cash flow usage of just under $1 million. We repurchased $20.6 million of our stock in the quarter, and we have approximately $21 million remaining on the current repurchase authorization. As we continue to invest in our growth trajectory, we will also return cash to shareholders through our repurchase program. We will discuss our next share repurchase authorization with our board in August.

[David Abuhl, SVP and CFO at Plexus]

We ended the third quarter in a net cash position, and we had $172 million outstanding under our revolving credit facility, with over $320 million available to borrow. Return on invested capital was 14.9% in the fiscal third quarter, which was the highest in several years, and 590 basis points above our weighted average cost of capital. Despite an increase in invested capital to support our robust revenue growth, we continue to generate healthy ROIC. Turning to cash cycle days on slide 14. We delivered a 62-day cash cycle in the fiscal third quarter, which is the best quarterly result in over five years. Our team continues to drive improvements across all areas of working capital, including notable progress in days of inventory. Let me turn to our guidance for the fiscal fourth quarter, summarized on slide 15.

[David Abuhl, SVP and CFO at Plexus]

As Todd Kelsey has already provided the revenue and EPS guidance, I will review some additional details. Fiscal fourth quarter gross margin is expected to be in the range of 10%-10.3%. At the midpoint, gross margin will be modestly higher than the fiscal third quarter, as we expect ongoing productivity improvements and leverage from higher revenue to offset investments in capabilities and IT, as well as other cost increases. Our outlook for selling and administrative expense for the fiscal fourth quarter is in the range of $57.5 million-$58.5 million. We expect to gain leverage versus the prior quarter on higher revenue. Fiscal fourth quarter non-GAAP operating margin is expected to be in the range of 6.1%-6.5%, exclusive of stock-based compensation expense. At the midpoint, Plexus would demonstrate another quarter of good progress toward our goal of consistently delivering non-GAAP operating margin at or above 6%.

[David Abuhl, SVP and CFO at Plexus]

We also anticipate meeting this goal for fiscal 2026. As we consider fiscal 2027, we anticipate expansion in operating margin to accompany our robust revenue growth outlook. We continue to benefit from leverage on higher revenue and our prior investments in operational efficiency, while concurrently making strategic investments in incremental operational efficiency, expanding our competitive moat, especially in aerospace and defense, and investing in our people. We will discuss more about our fiscal 2027 outlook, including future expectations for operating margin, with our fiscal fourth quarter earnings call. Non-operating expense in the fiscal fourth quarter is anticipated to be approximately $6.3 million, up sequentially primarily due to higher interest expense. For fiscal 2027, we would expect the quarterly run rate to be slightly higher due to higher interest expense.

[David Abuhl, SVP and CFO at Plexus]

We are estimating a non-GAAP effective tax rate of between 12% and 14% for the fiscal fourth quarter, bringing the full fiscal year 2026 rate to between 15% and 17%. For our fiscal 2027, our preliminary view is a non-GAAP effective tax rate between 16% and 18%. In support of our accelerating revenue momentum, we continue to strategically increase our working capital investments. Yet through our focus on working capital efficiency, we still expect to end the fiscal year with cash cycle days in the low to mid-60s. We would expect to sustain this performance during fiscal 2027. Additionally, given our robust revenue outlook, we've made the decision to expand production capacity at one of our sites in Malaysia.

[David Abuhl, SVP and CFO at Plexus]

Because of our ability to expand existing facilities, we expect to be able to deliver incremental capacity and maintain fiscal 2027 capital expenditures in a range of 2%-3% of revenue. For fiscal 2026, our capital expenditures forecast is unchanged at $100 million-$120 million. As a result of these factors and the timing of our working capital investments, we are now forecasting free cash flow in the fiscal fourth quarter to be break even or a slight usage of cash. However, we would expect to return to meaningful free cash flow generation in excess of $100 million for fiscal 2027, benefiting from our sustained robust profitability, prudent capital expenditures, and our focus on working capital efficiency. With that, Dara, let's open the call for questions.

[Operator]

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you'd like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from David Williams with Needham & Company. Your line is open. Please go ahead.

[David Williams, Analyst at Needham]

Good morning, everyone. Thanks for taking the question, and hoping Oliver feels better soon. The outlook in your commentary is very positive as we look out into 2027. How should we maybe think about your capability of supply and meeting that demand next year? Are there other additional capacity expansion plans that we'll need or any other things we should be thinking about? Maybe your confidence level in kind of that growth trajectory.

[Todd Kelsey, President and CEO at Plexus]

Our confidence level in our growth trajectory that we put out there is high. Our supply chain team, we take into account we're mindful of the tightness of the supply chain right now, and as we provide projections, whether it be for Q4 or for fiscal 2027, that has that in mind. Our team's doing a great job of managing through those, as you saw with our Q3 results. The reason why we got upside was the job that our supply chain team did in managing through that. With respect to capacity, given the substantial growth, we're certainly pulling in our expansion plans. As David Abuhl mentioned, we'll be adding additional capacity to our new site in Penang, Malaysia, which we're able to do rather efficiently.

[Todd Kelsey, President and CEO at Plexus]

We're being thoughtful about other regions, about when and if we need to expand within those regions. Probably the final category with regards to expansion is around people and making sure we have the right people in place. Now, our efforts around efficiency have helped us in that area, in that we don't need to add as many people as we would have previously needed to support the revenue growth. We continue to add people, and as of right now, everything looks fine from that perspective as well too. We feel good about the projections of exceeding our 9%-12% revenue growth target for 2027.

[David Williams, Analyst at Needham]

Okay. Thanks so much for that. Appreciate it. On the semi-cap equipment space and maybe the broader industrial, it sounds like everything there is improving, even maybe broadening out a bit on the demand side. How do you think about the semi-cap equipment? As you look and talk to your customers, are your forecasts and visibility, is that expanding or contracting? How do you think about that semi-cap equipment specifically and maybe the broader industrial as well? Thank you.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Yeah. Morning, David Williams. It's Shawn Harrison. Semi-cap equipment, we're delivering robust growth this fiscal year. We anticipate robust growth next fiscal year. I think we've been pretty straightforward that we expect to outgrow WFE as we have historically based upon additional customer acquisitions as well as just market share gains that we had during the last upcycle as well as the time period that cycle flattened out.

[David Abuhl, SVP and CFO at Plexus]

Really strong growth. Visibility has improved into fiscal 2027 as well, which does help give us that confidence and allows us to make sure that we're getting materials in place to support that growth. Doing extremely well in that market sub-sector, outperforming the market. In broader industrials, the market is getting a little bit healthier. We had a long period of inventory digestion. I think that the key for us is, we're expanding our customer base, expanding into technologies, where we didn't play previously. Last quarter, you heard about power into the data center. This quarter, you're hearing about energy storage outside the data center. Adding new and exciting customers in addition to the market health is giving us confidence for growth in 2027.

[David Williams, Analyst at Needham]

Great. Thanks so much. I appreciate it.

[Todd Kelsey, President and CEO at Plexus]

Thanks, David Williams.

[Operator]

Your next question comes from Ruben Roy with Stifel. Your line is open. Please go ahead.

[Ruben Roy, Analyst at Stifel]

Yes. Hi, good morning. Thanks, and congrats, team, on the strong momentum into the fiscal year-end. I guess, Todd Kelsey, to start and maybe to follow up on David's question, you guys are on track to exit the fiscal year at well over a $5 billion run rate. I'm just wondering, Todd Kelsey, if we build this out over the next several years, three, four years, and Plexus sort of grows even after next year back to your stated compounded annual growth goal of 9%-12%. You guys are probably going to be start thinking about $8 billion-$10 billion revenue company. I'm wondering if you could talk a little bit more about if there are structural changes needed to get there, manufacturing, engineering, sustaining services, geographic balance of the manufacturing footprint.

[Ruben Roy, Analyst at Stifel]

Anything else that you're thinking about today as sort of the business is inflecting in a lot of your markets. Thanks.

[Todd Kelsey, President and CEO at Plexus]

Yeah, Ruben Roy, it's interesting because we've been really starting to think about that growth trajectory, probably two to three years ago. A lot of the energy we've been putting in is thinking about what do we need to do to scale to be this eight, 10-plus billion dollar company. Some of the internal processes that we've put in place, like our sales inventory operations planning process, for instance, some efforts that we've put in around driving consistency through the NPI process across the globe and driving stronger performance in that area have played into that. We've also done some things from an organizational standpoint with the way we've aligned the organization. We think from a standpoint of services, we're in pretty good shape right now from what we can see. What we like about footprint is we like this whole idea of the campus model.

[Todd Kelsey, President and CEO at Plexus]

I think you'll continue to see us, for the most part, expand in areas where we're already located, because we think that works really well from an efficiency standpoint as well. We're taking a number of steps to make sure that we're prepared for that level of growth.

[David Abuhl, SVP and CFO at Plexus]

Ruben Roy, this is David Abuhl, good morning. Maybe just a quick build. On our last call, we talked about the efficiency that our teams are driving in operations. As Todd Kelsey mentioned, we've been on this journey of preparedness for a little while. In the last 12 months, our teams have been able to improve our operating equipment effectiveness tremendously, in some areas over 10%. That's unleashing capacity, and we're not done yet, even on our internal footprint, much less the additions we're talking about to our campuses. We like where the dots are on the map, so to speak, from a manufacturing standpoint, and we're able to add ample capacity to our existing sites through either turning on a cold shell and warming that up, or even expanding the throughput on existing sites. We're really pleased with.

[Ruben Roy, Analyst at Stifel]

Great. Thanks for that detail, Todd Kelsey and David Abuhl. For a follow-up, maybe I'll ask a question to Shawn Harrison here. If you look at the guide for next year and you look at the segments, aerospace and defense and industrial now, Shawn Harrison, are over 60% of revenue. You guys have typically targeted healthcare at sort of mid-single-digit growth. That's not going to drive a lot of the growth next year if that ends up happening. Maybe you could just talk through what you're seeing to get to what we would assume would be sort of strong double-digit growth in the aerospace and defense and industrial businesses. I guess if you could talk, Shawn Harrison, a little bit about how much of that growth you think is coming from just the market dynamics, especially in places like semi-cap versus maybe share growth. Thanks.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Thanks, Ruben Roy, morning. You're correct. We're going to need strong growth from aerospace and defense. I'll let you do the math to back into what the percentage must be to get us above 12% for next fiscal year. It's going to be very strong growth. Within industrial and specifically semi-cap, we would expect to outgrow WFE again next year, that could help you triangulate a little bit of the growth profile there. Within our industrial markets, I mentioned earlier that it is getting healthier, we are adding new customers that are amplifying that growth profile. Within aerospace and defense, the one sub-sector that still isn't fully growing rapidly is commercial aerospace. We still think there's upside for that sub-sector in fiscal 2027 as Boeing and Airbus continue to get healthier, that is around a third of that market sector.

[David Abuhl, SVP and CFO at Plexus]

There's some upside there, but just tremendous growth in defense, unmanned security, and space. We have clear leadership positions. Todd mentioned $400 million of wins year-to-date. Some of those actually will ramp in fiscal 2027, amplifying that growth outlook. In addition to just the markets there, in particular in defense and unmanned, are quite strong, but our leadership is amplifying that growth. Finally, in healthcare, we would expect to get back to our normal growth algorithm after fiscal 2027. We had a tremendous year this year in launching new products, substantially outgrowing the market, growing in the high teens. Typically when you launch new products, there's a little bit of a digestion period, and we will see that in fiscal 2027 before growth gets on track. We do expect that sector to, again, grow in the 9%-12% long term.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Hopefully I answered all the questions. I know there was a lot to cover.

[Ruben Roy, Analyst at Stifel]

Yep. Very helpful. Thanks, Shawn Harrison.

[Operator]

Your next question comes from Melissa Fairbanks with Raymond James. Your line is open. Please go ahead.

[Melissa Fairbanks, Analyst at Raymond James]

Hey, guys. Congrats on the record results. I am sorry to hear Oliver's not feeling well. Hope he gets better very soon. I had kind of a more general question. We've heard a lot about extending lead times for components, price increases in semis, obviously higher memory costs. A lot of companies are starting to pre-place inventory ahead of where they see their demand going. I believe that you've commented that you do have some pre-placement going on maybe a quarter or two ago. Just wondering how that might impact cash conversion or cash cycle.

[David Abuhl, SVP and CFO at Plexus]

Yeah. Hi, Melissa Fairbanks. This is David Abuhl, and good morning. Yeah, to your point, the supply chain is tightening. Yet we're very pleased, as Todd Kelsey said, at how our supply chain teams are managing through that. There are some components where we're working very closely with our customers on the forecast, on which components we need to get ahead of. We've been taking action on that. Hence, you're seeing our ability to unlock revenue growth in a rapid sense. There are tight spots. We're not going to gloss over that. Yet we're also very pleased with the discipline that our teams are using to approach this. Our sales inventory and operating plan process that Todd Kelsey alluded to as well is really paying dividends for us.

[David Abuhl, SVP and CFO at Plexus]

We're pleased to see that overall cash cycle days are in the low to mid 60s. Honestly, a result that we're super pleased with in the quarter is 62 days, the best we've done in five years. That included great improvement in inventory and days of inventory on hand, improving even sequentially versus last quarter. I'd say there are issues, Melissa Fairbanks, we're getting ahead of, but it's nothing that's insurmountable, and cash cycle days are in a really good spot at the moment.

[Todd Kelsey, President and CEO at Plexus]

Yeah, one of the things I would add, Melissa Fairbanks, is that typically in situations like this where we're pre-placing inventory, while we're always working with our customers on those decisions, and they're typically funding those.

[Todd Kelsey, President and CEO at Plexus]

Sure

[Todd Kelsey, President and CEO at Plexus]

pre-placements.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Melissa Fairbanks, Shawn Harrison, because I feel like I want to chime in as well. Our supply chain team started this process last fall. They started seeing tightening in certain components, and they stepped up with leadership in engaging with our customers nine months ago, or even longer than that, to make sure that we were able to support this really strong growth that we're delivering this year.

[Melissa Fairbanks, Analyst at Raymond James]

Fantastic. I love it. Maybe going into a little bit of detail on the aerospace and defense side of things, I know that one of the areas you're particularly excited about is space, commercial space. I was wondering, are you able to give us a breakdown of what the contribution from your space business is versus your traditional Boeing, Airbus business and defense?

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Yeah. This is Shawn Harrison again. As I mentioned, commercial aerospace is about a third of the portfolio. Defense and unmanned is about the same size. That business will more than double in revenue versus where it was two years ago. The remainder of the portfolio is going to be equally split between security and commercial space. Now, we're seeing rapid growth in all of those, but just the even more rapid growth we're seeing in defense and unmanned isn't changing the split. We're really happy with our clear leadership in commercial space. As our market sector leader there likes to say, we have more electronics in orbit than any other EMS provider, and that leadership is helping us create additional opportunities. It's growing rapidly, but our defense and unmanned business is growing even more rapidly, which is exciting.

[Melissa Fairbanks, Analyst at Raymond James]

Great. Thanks very much. That's all for me, guys.

[Todd Kelsey, President and CEO at Plexus]

Thanks, Melissa Fairbanks.

[Operator]

A reminder, if you'd like to ask a question, please press star one to raise your hand. Your next question comes from Steve Barger with KeyBanc Capital Markets. Your line is open. Please go ahead.

[Analyst at KeyBanc Capital Markets]

Hey, good morning. This is Jacob on for Steve this morning. Thanks for taking our questions. The first one, sorry to belabor the point on capacity expansion, maybe a little bit more detail could be helpful here. Could you just help us understand the timeline for the expansion that you've announced today, what that's going to get you in terms of top-line capacity versus your prior commentary for capacity in excess of $5 billion, and then how you think that that spend and ramp will affect your margin cadence as we head into fiscal 2027?

[Todd Kelsey, President and CEO at Plexus]

Yeah, it's already underway, the expansion, it would be somewhere north of a half a billion dollars of additional capacity we would add through this, we wouldn't expect it to have a meaningful impact to margin because it's part of an existing facility that's already profitable.

[David Abuhl, SVP and CFO at Plexus]

Jacob, maybe to build there as well. We're able to do this and maintain our capital expenditures as a percent of revenue between 2%-3%

[David Abuhl, SVP and CFO at Plexus]

That's true as of fiscal 2025, 2026. We're looking in 2027, we think we can maintain that same range while we add this capacity, just given the campus approach. It's not a new dot on the map, which would require more capital-intensive work. We're pleased to be able to keep capital expenditures in that range as we go through here.

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Jacob, it's Shawn Harrison. We can do, if the revenue lands in the right place, close to $6 billion of revenue today. We do have upside potential in terms of our sites, depending upon where the revenue lands, and this incremental capacity is to ensure we meet the strong demand we see from our customers.

[Analyst at KeyBanc Capital Markets]

Okay. Got it. That's really helpful color. I appreciate it. My follow-up here is actually on non-semi-cap industrial. I guess, are you starting to see any pickups in the more traditional industrial end markets as it appears that the broader industrial landscape gets a little bit better? What sort of trends are you seeing there in those other sub-markets?

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Yeah, I would say a small pickup, but our non-semi-cap industrial is a cross-section of technologies we support from industrial automation robotics to energy management and storage to broadband communications and test and measurement. Some pickup in the traditional industrial markets, but for us, it's a cross-section of technologies, and we're generally seeing stronger trends there. I wouldn't just tie it solely to industrial production, I think just the cross-section of technologies we support as well as I mentioned earlier, just the new customers, the new technologies that we've been adding over the past few years.

[Analyst at KeyBanc Capital Markets]

Got it. Thank you very much.

[Todd Kelsey, President and CEO at Plexus]

Thank you, Jacob.

[Operator]

Your next question comes from Ruben Roy with Stifel. Your line is open. Please go ahead. Are you with us, Ruben?

[Shawn Harrison, VP of Communications and Investor Relations at Plexus]

Ruben, you there?

[Ruben Roy, Analyst at Stifel]

Sorry, guys, I got my follow-up. Thanks for taking a follow-up. Hey, Todd Kelsey, I wanted to circle back on the data center power win.

[Todd Kelsey, President and CEO at Plexus]

Yep.

[Ruben Roy, Analyst at Stifel]

This is the second quarter in a row that you talked about that type of win. How is this working? Is this opportunistic, or is it a strategy to sort of expand in that marketplace? How large is that data center funnel today? Maybe if you could talk about the capabilities that Plexus is bringing to the marketplace that's enabling you to win there. That'd be helpful. Thank you.

[Todd Kelsey, President and CEO at Plexus]

Sure. Ruben Roy, it is part of a broader data center strategy. Now, the areas of focus for us in the data center are power, and that could be power inside the data center or power external to the data center, as is the case of the win this quarter, and thermal management. We have a number of active opportunities, well, a number of active programs to begin with. Beyond the ones we've announced, there's a few that are in very early stages of pilot-type production right now, but I would call them pre-win stage right now. We have the two active ones that we've announced, and we have a overall funnel that's conservatively somewhere around a half a billion dollars right now.

[Ruben Roy, Analyst at Stifel]

Perfect. That's all I had. Thank you.

[Todd Kelsey, President and CEO at Plexus]

All right. Thanks.

[Operator]

There are no further questions at this time. I will now turn the call back to Todd Kelsey for closing remarks.

[Todd Kelsey, President and CEO at Plexus]

All right. Thank you, Dara. Thank you to the shareholders, investors, analysts, and Plexus team members who joined the call this morning. In closing, as we leverage our differentiated value proposition, fiscal 2026 will be a great year for Plexus, with exceptional revenue growth, solid operating margin, and robust return on invested capital. We're also well-positioned for strong results in fiscal 2027, with revenue growth exceeding our 9%-12% goal, expanding operating margin, meaningful free cash flow, and outstanding return on invested capital. Have a nice day.

[Operator]

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

Participants

Executives

• Shawn Harrison, VP of Communications and Investor Relations
• Todd Kelsey, President and CEO
• David Abuhl, SVP and CFO

Analysts

• David Williams, Analyst at Needham
• Ruben Roy, Analyst at Stifel
• Melissa Fairbanks, Analyst at Raymond James
• Analyst at KeyBanc Capital Markets