Plexus Q3 Earnings Call Highlights

Key Points

• Record Q3 results: Plexus reported $1.305 billion in revenue, up 28% year over year, while non-GAAP operating margin reached 6.3% and EPS of $2.32 exceeded guidance.
• Raised growth outlook: The company expects fiscal 2026 revenue growth above 20% and sees fiscal 2027 growth potentially exceeding its 9%–12% long-term target, with operating-margin expansion and more than $100 million in free cash flow.
• Strong demand and pipeline: Aerospace and defense and industrial markets drove results, with a record $4.5 billion manufacturing opportunity funnel and $135 million of aerospace and defense wins during the quarter. Plexus is also expanding capacity in Malaysia to support more than $500 million of additional production.

Plexus NASDAQ: PLXS reported record fiscal third-quarter revenue of $1.305 billion, exceeding its guidance range and rising 12% sequentially and 28% from a year earlier, as demand strengthened across its aerospace and defense, healthcare life sciences, and industrial markets.

President and Chief Executive Officer Todd Kelsey said the company’s performance was supported by new program launches, market-share gains and supply-chain execution. Non-GAAP operating margin reached 6.3%, at the high end of guidance and 30 basis points above the prior-year period, while non-GAAP diluted earnings per share of $2.32 exceeded the company’s outlook.

Kelsey also said a tornado near the company’s corporate headquarters earlier in the week caused significant damage in the local community but had no material impact on Plexus operations or headquarters.

Fiscal 2026 and 2027 Outlook

For the fiscal fourth quarter, Plexus forecast revenue of $1.33 billion to $1.38 billion, which would represent 4% sequential growth and 28% year-over-year growth at the midpoint. The company guided for non-GAAP operating margin of 6.1% to 6.5% and non-GAAP EPS of $2.47 to $2.63.

The company now expects fiscal 2026 revenue growth of more than 20%, along with non-GAAP operating margin above 6%. Looking ahead, Kelsey said Plexus sees the potential for fiscal 2027 revenue growth exceeding its long-term 9% to 12% target, accompanied by operating-margin expansion and a return to meaningful free-cash-flow generation.

“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,” Kelsey said.

Chief Financial Officer David Abuhl said the company expects fiscal 2027 capital expenditures to remain within a range of 2% to 3% of revenue. Plexus expects fiscal 2026 capital expenditures of $100 million to $120 million and projects fiscal fourth-quarter free cash flow to be break-even or slightly negative due to working-capital investment timing. For fiscal 2027, it expects free cash flow to exceed $100 million.

Market-Sector Performance

Aerospace and defense revenue rose 10% sequentially in the fiscal third quarter, exceeding the company’s expectation for a mid-single-digit increase. Plexus expects fourth-quarter revenue in the sector to be approximately flat sequentially but up more than 30% year over year. For fiscal 2026, it now expects aerospace and defense revenue growth of more than 20%, led by defense and unmanned systems.

The sector secured $135 million in new program wins during the quarter, including a secure wireless communications system for a new defense and security customer and a naval submarine electronics program. Plexus said its aerospace and defense wins totaled $400 million year to date, more than twice its combined fiscal 2024 and fiscal 2025 performance.

Healthcare life sciences revenue increased 2% sequentially, exceeding the company’s forecast for flat growth. Plexus expects flat sequential revenue in the fourth quarter, as delays in program ramps are expected to offset stronger customer demand. The company raised its fiscal 2026 expectation for the sector to high-teens year-over-year growth, while its preliminary fiscal 2027 view calls for at least mid-single-digit growth as activity normalizes after a period of product launches.

Industrial revenue increased 23% sequentially, well ahead of the company’s low-double-digit forecast. Plexus attributed the outperformance to demand in semiconductor capital equipment and other industrial subsectors, as well as operational and supply-chain execution. It expects high-single-digit to low-double-digit sequential industrial growth in the fiscal fourth quarter and more than 20% growth for fiscal 2026.

Industrial wins totaled $67 million during the quarter and included a new battery energy storage systems program for data centers. Initial production of that program is underway, according to the company. Kelsey said data-center power and thermal management are part of a broader strategy, with a data-center opportunity funnel of approximately $500 million.

Pipeline, Capacity and Cash Cycle

Plexus said its qualified manufacturing opportunity funnel reached a record $4.5 billion, up 12% sequentially and 23% from a year earlier. The funnel increased by more than $800 million year over year, with aerospace and defense and industrial both reaching record levels.

To support anticipated growth, Plexus is expanding production capacity at an existing site in Penang, Malaysia. Kelsey said the project is already underway and is expected to add more than $500 million of capacity without a meaningful margin impact because it is part of an existing profitable facility. Executives said the company could support close to $6 billion in revenue with its current footprint, depending on where revenue is generated.

Third-quarter cash from operations totaled $25.9 million, while capital expenditures were $26.6 million, resulting in free cash flow usage of just under $1 million. Plexus repurchased $20.6 million of stock during the quarter and had about $21 million remaining under its current authorization.

The company ended the quarter in a net cash position, with $172 million outstanding on its revolving credit facility and more than $320 million available to borrow. Its cash cycle improved to 62 days, the best quarterly result in more than five years, while return on invested capital reached 14.9%.

About Plexus (NASDAQ:PLXS)

Plexus Corp. 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.

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