Flex NASDAQ: FLEX reported second-quarter fiscal 2027 revenue of $8.5 billion, up 25% from a year earlier, as growth accelerated across its three operating segments. The company also raised its full-year outlook, citing strength in its Cloud and Power Infrastructure business and contributions from recently completed acquisitions.
Adjusted earnings per share rose 49% year over year to a record $1.18. Adjusted operating profit increased 48% to $607 million, while adjusted operating margin expanded 110 basis points to 7.1%. Adjusted gross margin improved 60 basis points to 9.9%.
“Revenue growth accelerated. We expanded margin across all three segments, and earnings reached a new record of $1.18 per share,” Chief Executive Officer Revathi Advaithi said.
Segment growth led by cloud and power infrastructure
Cloud and Power Infrastructure, or CPI, was the company’s fastest-growing segment during the quarter. Revenue rose 54% to $2.5 billion, supported by continued demand in power as well as cloud and cooling. Adjusted operating income reached $268 million, and operating margin expanded 240 basis points to 10.7%.
Within CPI, Flex said power operating margin increased to about 16%, an improvement of roughly 550 basis points from a year earlier. Chief Financial Officer Kevin Krumm attributed the improvement to volume growth, the scaling of investments made last year, mix, pricing and operating leverage.
Regulated Manufacturing Solutions revenue increased 9% to $2.7 billion, driven by industrial demand. Segment operating margin rose 50 basis points to 6.4%. Integrated Technology Solutions revenue increased 22% to $3.3 billion, led by communications, while operating margin rose 20 basis points to 5.5%.
Michael Hartung, Flex’s chief commercial officer and expected post-spin CEO of Flex, said industrial markets including energy infrastructure, warehouse automation and robotics helped support growth. He also said communications demand remained strong, particularly in advanced networking tied to AI-related data-center construction.
Hartung noted that consumer-related end markets remained weaker, though communications growth helped offset that pressure within ITS.
Spin-off preparations and Axiom strategy
Flex continues to prepare for the planned separation of its Cloud and Power Infrastructure segment, which will be named Axiom. The company said Axiom filed a Form 10 registration statement last month and that it has announced expected leadership teams for both businesses. The spin-off remains subject to approvals and completion, with management referring to an expected early-2027 timing.
Advaithi said Axiom will focus on power, thermal management and compute capabilities for increasingly complex AI infrastructure. She said the company views compute, cooling and power as important elements of the strategy, while describing Flex’s cooling presence as still nascent relative to its positions in compute and power.
Flex completed its acquisition of EPC Power on Oct. 14. Advaithi said the acquisition adds power-conversion capabilities and complements Axiom’s work on 800-volt architecture and solid-state transformers. She said the company believes it can help customers achieve 97% power efficiency using digital rectifiers available today, rather than waiting for a broader transition to solid-state transformer technology.
The company also introduced prefabricated AI Modules at the Open Compute Project event, saying the products can accelerate AI-factory deployment by up to 50%.
Raised full-year outlook
For fiscal 2027, Flex now expects revenue of $34.9 billion to $35.9 billion, representing 27% growth at the midpoint. The company forecasts adjusted EPS of $4.84 to $5.16, up 52% at the midpoint, and adjusted operating margin of 7.6% to 7.8%.
- CPI revenue is expected to increase 75% to 85%, including about 10 percentage points of growth from acquisitions completed during the year.
- Combined RMS and ITS revenue is expected to rise 8% to 11%.
- CPI adjusted operating margin is projected at 11.5% to 11.7%.
- Capital expenditures are expected to total $1.5 billion to $1.6 billion, with approximately two-thirds related to CPI.
- Free-cash-flow conversion is expected to be approximately 40%.
Krumm said about half of the company’s $950 million increase in revenue guidance reflected underlying improvement at Flex, with the other half tied approximately to the EPC Power acquisition.
Free cash flow was $261 million in the second quarter, including a $61 million effect from one-time cash costs associated with spin-off activity. Inventory rose 13% sequentially and 39% year over year as the company supported higher-growth, higher-value programs.
Flex also expects elevated interest expense in the near term following debt incurred for the EPC Power acquisition. The company has agreed to sell $2 billion of Axiom convertible preferred stock, with net proceeds intended to repay about $2 billion of the $4.4 billion in acquisition-related debt. Despite the increased interest expense, Krumm said Flex expects the EPC Power acquisition to be accretive in fiscal 2027.
Third-quarter forecast
For the third quarter, Flex forecast revenue of $8.87 billion to $9.17 billion, up 28% at the midpoint, and adjusted EPS of $1.19 to $1.25. CPI revenue is expected to rise 105% to 115%, while RMS is projected to grow low single digits to mid-single digits and ITS revenue is expected to increase mid-single digits to high single digits.
Management said it has incorporated anticipated component shortages into its forecasts. Advaithi said capacity, power availability and supply-chain planning for planned CPI growth have been underway for multiple years, while the company continues to manage a supply-demand imbalance in components.
Flex plans to provide additional detail on the strategies, markets and long-term plans for Flex and Axiom at its Innovation Day on Nov. 10.
About Flex (NASDAQ:FLEX)
Flex Ltd. NASDAQ: FLEX is a global manufacturing and supply chain solutions provider. The company helps original equipment manufacturers design, engineer, manufacture, distribute and service products across their lifecycles.
Flex serves customers in industries including automotive, communications, consumer electronics, health care, industrial, lifestyle and cloud infrastructure. Its capabilities include product design and engineering, printed circuit board assembly, systems integration, supply chain management, logistics, and aftermarket services.
The company was founded in 1969 as Flextronics and later adopted the name Flex.
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