Flex Targets 7% Margin by 2029 as Axiom Spin-Off Reshapes Growth Strategy

Key Points

• Flex aims to raise adjusted operating margin to at least 7% by fiscal 2029, with mid-single-digit revenue growth, after separating its Axiom power and product business; no spin-off date was disclosed.
• Flex plans to increase the six targeted high-value markets’ share of revenue from 24% in fiscal 2026 to 35%–40% by fiscal 2029. These markets—including healthcare, robotics, energy infrastructure and advanced networking—are expected to grow at double-digit rates and earn above-average margins.
• For fiscal 2027, Flex reaffirmed revenue growth guidance of high single digits to low double digits and an adjusted operating margin of 5.9%–6.1%. Its capital priorities include reducing debt, investing in organic growth and automation, and returning excess cash to shareholders.

Flex NASDAQ: FLEX outlined plans to shift more of its revenue toward higher-margin markets and reach an adjusted operating margin of at least 7% by fiscal 2029, as the contract manufacturer prepares to separate its Axiom power and product business.

At its Innovation Day in Austin, Texas, executives said Flex would focus investment on six markets: medical devices, drug delivery, energy infrastructure, robotics, advanced networking and satellite communications. Those businesses accounted for 24% of revenue in fiscal 2026 and are expected to represent 35% to 40% by fiscal 2029.

Michael Hartung, Flex’s chief commercial officer and president, said the company expects the targeted markets to grow at double-digit rates and generate margins above the company average. Flex is targeting mid-single-digit overall revenue growth and an adjusted operating margin of 7% or more in fiscal 2029 on a pro forma post-spin basis.

“This is not growth for growth’s sake,” Hartung said. “It is profitable growth that we can repeat over and over again.”

Spin-off and financial targets

CEO Revathi Advaithi said separating Axiom would allow the two businesses to pursue different capital allocation, management and research priorities. Flex will retain its contract manufacturing operations, while Axiom will include the embedded and critical power product portfolios, Hartung said.

Hartung added that compute operations associated with data center thermal management will move to Axiom, while networking will remain with Flex. The transcript did not provide a spin-off date.

For fiscal 2027, Flex reaffirmed expectations for overall revenue growth in the high single digits to low double digits and an adjusted operating margin of 5.9% to 6.1%. On a pro forma post-spin basis, it expects an adjusted operating margin of 5.7% to 5.9%.

CFO Amy Schwetz said approximately two-thirds of the expected margin expansion through fiscal 2029 would come from growth and mix improvement in the high-value markets. Productivity and fixed-cost leverage are also expected to contribute.

Schwetz said Flex’s targets are based on organic growth and capital spending of approximately 2% of revenue. The company also expects free cash flow conversion of at least 80% of adjusted net income.

Healthcare, robotics and networking

Mike Thoeny, expected president of regulated manufacturing solutions, said healthcare would be a leading destination for capital after the spin. Flex’s design contributions in healthcare earn an average of 250 basis points of additional margin over base electronics manufacturing services programs, he said.

Thoeny said the energy infrastructure and robotics businesses were each on track to double revenue in fiscal 2027. Following the separation, Flex will retain manufacturing expertise for power systems, while Axiom will own the system intellectual property, he said.

Dennis Kirkpatrick, expected president of integrated technology solutions, described advanced networking as Flex’s largest high-value market. He said the business was expected to deliver a second consecutive year of double-digit growth in fiscal 2027, supported by demand for high-speed switching and optical connectivity. Satellite communications is also expected to grow at a double-digit rate that year.

Capital allocation priorities

Schwetz said maintaining an investment-grade balance sheet and reducing debt would be the first capital allocation priority, followed by investment in organic growth and automation. Flex also plans to consider selective acquisitions and return excess cash to shareholders, primarily through repurchases.

Flex intends to reduce its retained Axiom stake through tax-efficient exchanges rather than open-market sales, Schwetz said. The process could begin as early as the first full quarter after the spin and is expected to be completed within 24 months, subject to market, tax and lockup considerations. Proceeds would be applied to debt.

Asked about potential acquisitions, Hartung said Flex would focus on assets that strengthen its high-value markets, identifying healthcare as a possible area for further development. He also said the company did not intend to disclose individual forecasts for each of the six markets, which it plans to manage as a portfolio.

About Flex (NASDAQ:FLEX)

Flex Ltd. is a global manufacturing and supply-chain services company that works with businesses to design, engineer, manufacture and support products. Its services include product development, sourcing, production, logistics and after-market support. The company serves a range of industries, including automotive, healthcare, industrial, lifestyle and communications, as well as cloud and data-center markets. Its work spans products and systems such as medical devices, vehicle components, industrial equipment and technology infrastructure.

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