Flex Q3 2026 Flex Ltd Earnings Call | AllMind AI Earnings | AllMind AI
Q3 2026 Flex Ltd Earnings Call
Operator: Thank you for standing by. Welcome to Flex's Q3 fiscal year 2026 earnings conference call. Presently, all participants are in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star one on your telephone. If you'd like to withdraw your question, please press star two. As a reminder, this call is being recorded. I'll now turn the call over to Mrs. Michelle Simmons. You may begin.
Operator: Thank you for standing by. Welcome to Flex's Q3 fiscal year 2026 earnings conference call. Presently, all participants are in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star one on your telephone. If you'd like to withdraw your question, please press star two. As a reminder, this call is being recorded. I'll now turn the call over to Mrs. Michelle Simmons. You may begin.
Speaker #1: for . Thank you standing by flex s Welcome to third quarter fiscal Year Conference 2026 Earnings Call . Presently , all participants are in listen only mode .
Michelle Simmons: Thank you, Rob. Good morning, and thank you for joining us today for Flex's Q3 fiscal 2026 earnings conference call. With me today is our Chief Executive Officer, Revathi Advaithi, and Chief Financial Officer, Kevin Krumm. We'll give brief remarks followed by Q&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. 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 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.
Michelle Simmons: Thank you, Rob. Good morning, and thank you for joining us today for Flex's Q3 fiscal 2026 earnings conference call. With me today is our Chief Executive Officer, Revathi Advaithi, and Chief Financial Officer, Kevin Krumm. We'll give brief remarks followed by Q&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. 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 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.
Michelle Simmons: Note: This information is subject to change, and we undertake no obligation to update these forward-looking statements. 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 that 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 the summary financials posted on the investor relations website. Now I'd like to turn the call over to our CEO. Revathi?
Michelle Simmons: Note: This information is subject to change, and we undertake no obligation to update these forward-looking statements. 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 that 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 the summary financials posted on the investor relations website. Now I'd like to turn the call over to our CEO. Revathi?
Revathi Advaithi: Thanks. Good morning, and thank you for joining us today. As you know, this is an exciting time for Flex. There's a lot, lot happening here. Our portfolio is continuing to evolve, and I look forward to sharing with you as to where we are headed. But let's start with the quarter. So beginning on slide 4, we had another exceptional quarter, delivering results above our guidance across all metrics. Revenue came in at $7.1 billion, up 8% versus last year, and adjusting operating margin was 6.5%. That was yet another quarter above 6%. We reported adjusted EPS of $0.87, up 13%, and that was another record for Flex. So this performance reflects the strength of our differentiated business model. Let's start with data center first.
Revathi Advaithi: Thanks. Good morning, and thank you for joining us today. As you know, this is an exciting time for Flex. There's a lot, lot happening here. Our portfolio is continuing to evolve, and I look forward to sharing with you as to where we are headed. But let's start with the quarter. So beginning on slide 4, we had another exceptional quarter, delivering results above our guidance across all metrics. Revenue came in at $7.1 billion, up 8% versus last year, and adjusting operating margin was 6.5%. That was yet another quarter above 6%. We reported adjusted EPS of $0.87, up 13%, and that was another record for Flex. So this performance reflects the strength of our differentiated business model. Let's start with data center first.
Speaker #2: Relations Now , I'd like presentation , as the call over to our CEO , Revathy
Revathi Advaithi: As you all know, there's tremendous complexity in the data center deployment, and the market needs an ecosystem of integrated products, capabilities, technologies, and services. Flex's holistic approach is resonating with customers, enabling them to build at the scale, speed, and quality demanded by the AI era, while drawing on Flex's more than five decades of experience navigating major technology shifts across industries. The growth we're seeing in data centers is being driven by rapidly expanding compute and AI workloads, and those demands are here to stay. As customers continue to scale, complexity increases. Every design choice has downstream implications across the ecosystem and requires a systems-level approach. This is where Flex is uniquely positioned to help. Our data center portfolio is built around three tightly connected capabilities. That is, computer integration, cooling, and power. At the same time, scaling IT infrastructure adds additional layers of complexity.
Revathi Advaithi: As you all know, there's tremendous complexity in the data center deployment, and the market needs an ecosystem of integrated products, capabilities, technologies, and services. Flex's holistic approach is resonating with customers, enabling them to build at the scale, speed, and quality demanded by the AI era, while drawing on Flex's more than five decades of experience navigating major technology shifts across industries. The growth we're seeing in data centers is being driven by rapidly expanding compute and AI workloads, and those demands are here to stay. As customers continue to scale, complexity increases. Every design choice has downstream implications across the ecosystem and requires a systems-level approach. This is where Flex is uniquely positioned to help. Our data center portfolio is built around three tightly connected capabilities. That is, computer integration, cooling, and power. At the same time, scaling IT infrastructure adds additional layers of complexity.
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Speaker #2: three tightly connected capabilities built . That is , compute , integration , cooling , power and . At data time , it scaling additional layers of complexity to scale effectively .
Revathi Advaithi: To scale effectively, power, cooling, and IT infrastructure must be designed to move together and adapt as technologies and workloads evolve. While many companies address individual elements of this ecosystem, very few can integrate all three in a cohesive and end-to-end way. This quarter, we reinforced that leadership through several milestones. We announced the development of modular data center systems with NVIDIA to reimagine deployment for speed and scale, as well as a partnership with LG to advance thermal management solutions designed for gigawatt-scale data centers. We also deployed our advanced rack-level, vertically integrated liquid cooling solution at the Equinix co-innovation facility, demonstrating these capabilities in real-world environments. In addition, we introduced a new AI infrastructure platform, the first globally manufactured data center platform to integrate power, cooling, compute, and services into modular design, and this is capable of accelerating deployment timelines by up to 30%.
Revathi Advaithi: To scale effectively, power, cooling, and IT infrastructure must be designed to move together and adapt as technologies and workloads evolve. While many companies address individual elements of this ecosystem, very few can integrate all three in a cohesive and end-to-end way. This quarter, we reinforced that leadership through several milestones. We announced the development of modular data center systems with NVIDIA to reimagine deployment for speed and scale, as well as a partnership with LG to advance thermal management solutions designed for gigawatt-scale data centers. We also deployed our advanced rack-level, vertically integrated liquid cooling solution at the Equinix co-innovation facility, demonstrating these capabilities in real-world environments. In addition, we introduced a new AI infrastructure platform, the first globally manufactured data center platform to integrate power, cooling, compute, and services into modular design, and this is capable of accelerating deployment timelines by up to 30%.
Speaker #2: cooling , it infrastructure adds infrastructure and designed to move Power together and technologies and workloads evolve . While many companies address individual this ecosystem elements of , very few can integrate all three in a cohesive and end to end way quarter , we This reinforced .
Speaker #2: leadership through several We development of modular data center announced the milestones . systems with Nvidia to reimagine for speed and deployment scale . well As with partnership LG advance thermal management to solutions gigawatt scale data centers .
Speaker #2: We also deployed advanced rack our level integrated , vertically cooling solution at the Equinix Co-innovation facility , demonstrating these real capabilities in environments .
Speaker #2: world In we introduced a new AI as a infrastructure platform , the first globally manufactured data center platform to integrate , cooling , compute and modular design into .
Revathi Advaithi: These milestones demonstrate what sets Flex apart, our ability to understand the interdependencies and translate that insight into a comprehensive, differentiated offering that helps customers move faster, scale with confidence, and stay ahead in a rapidly evolving industry. While our data center business growth reflects where the industry is headed, that momentum extends across our diversified portfolio. Flex remains a trusted global manufacturing partner across a wide range of industries as we continue to move into higher value, more complex product categories that also help drive margin improvement. Beyond data centers, we continue to see robust momentum across our diversified end markets, each benefiting from long-term secular trends. In health solutions, demand for medical devices remains strong, and we saw an improvement in the medical equipment category. In core industrial, we're seeing demand in productivity-driven areas like warehouse automation and robotics, along with strength in select semiconductor-related capital equipment programs.
Revathi Advaithi: These milestones demonstrate what sets Flex apart, our ability to understand the interdependencies and translate that insight into a comprehensive, differentiated offering that helps customers move faster, scale with confidence, and stay ahead in a rapidly evolving industry. While our data center business growth reflects where the industry is headed, that momentum extends across our diversified portfolio. Flex remains a trusted global manufacturing partner across a wide range of industries as we continue to move into higher value, more complex product categories that also help drive margin improvement. Beyond data centers, we continue to see robust momentum across our diversified end markets, each benefiting from long-term secular trends. In health solutions, demand for medical devices remains strong, and we saw an improvement in the medical equipment category. In core industrial, we're seeing demand in productivity-driven areas like warehouse automation and robotics, along with strength in select semiconductor-related capital equipment programs.
Speaker #2: And this is capable services power deployment timelines by these two milestones, 30%. Up demonstrate what Flex sets out to understand the interdependencies and translate that ability, comprehensive insight into a differentiated offering that helps customers move faster.
Speaker #2: Scale with and stay ahead in a rapidly evolving industry. While our core business growth reflects where the data is headed, that momentum extends across our industry-diversified portfolio and gives us confidence.
Speaker #2: remains Flex a trusted global partner manufacturing across a wide range of industries . As we continue to move higher value , more complex product also that drive margin into improvement categories data centers , we continue momentum across our diversified end markets .
Speaker #2: remains Flex a trusted global partner manufacturing across a wide range of industries . As we continue to move higher value , more complex product also that drive margin into improvement categories data centers , we continue momentum across our diversified end markets robust Each benefiting to see from long term secular trends in health Demand for solutions .
Speaker #2: Devices remain medical, and we saw an improvement in the medical equipment category in Core Industrial. We're seeing demand in productivity areas like warehouse, driven along with strength in select semiconductor and robotics-related capital programs and equipment.
Revathi Advaithi: Another area of strength not reflected in data center is high-performance networking and satellite communication products, serving next-generation network and infrastructure platforms. So we are pleased to see that AI is driving momentum in our portfolio outside of what we include in data centers. Looking ahead, we believe in the strategic choices we have made to support both near and long-term success for Flex and our customers. We continue to expand and optimize our global footprint while investing in advanced technologies and capabilities that help customers manage complexities at scale across industries and geographies. The challenges our customers face are increasingly interconnected, whether supporting highly regulated healthcare devices, large-scale data center deployments, next-generation mobility platforms, or cutting-edge consumer technologies. Success today demands speed, flexibility, and resilience. Flex is well positioned to adapt as markets evolve, technologies mature, and customer requirements continue to change.
Revathi Advaithi: Another area of strength not reflected in data center is high-performance networking and satellite communication products, serving next-generation network and infrastructure platforms. So we are pleased to see that AI is driving momentum in our portfolio outside of what we include in data centers. Looking ahead, we believe in the strategic choices we have made to support both near and long-term success for Flex and our customers. We continue to expand and optimize our global footprint while investing in advanced technologies and capabilities that help customers manage complexities at scale across industries and geographies. The challenges our customers face are increasingly interconnected, whether supporting highly regulated healthcare devices, large-scale data center deployments, next-generation mobility platforms, or cutting-edge consumer technologies.
Speaker #2: Another area of strength not reflected in data high performance networking and satellite communication products . Serving next generation network and infrastructure platforms . So we are pleased to see AI is driving momentum in our portfolio what we that in centers data Looking .
Speaker #2: ahead , we believe in the include choices we have made to support both near and long term success for Flex and our customers .
Speaker #2: We expand and optimize our global continue to footprint investing while advanced technologies and that customers help complexity at scale across industries and geographies .
Speaker #2: The challenges our customers face are increasingly interconnected , whether supporting highly regulated healthcare devices , scale data large center deployment , next generation mobility or cutting edge platforms , consumer technologies .
Revathi Advaithi: Success today demands speed, flexibility, and resilience. Flex is well positioned to adapt as markets evolve, technologies mature, and customer requirements continue to change. We see ourselves as a strategic enabler, helping leading brands navigate complexity, improve performance, and scale with confidence in a fast-moving world. Now I'll turn the call over to Kevin to walk through the details of our financials.
Speaker #2: today Success demands , flexibility speed and resilience . Flex is well positioned to as adapt markets evolve . Technologies mature and customer requirements continue to change .
Revathi Advaithi: We see ourselves as a strategic enabler, helping leading brands navigate complexity, improve performance, and scale with confidence in a fast-moving world. Now I'll turn the call over to Kevin to walk through the details of our financials.
Speaker #2: We see ourselves as strategic enabler , a helping , leading brands navigate complexity , improve performance and scale with fast moving . Now call over to world details of our , I'll turn the .
Kevin Krumm: Thank you, Revathi, and good morning, everyone. I'll now review our Q3 performance, which reflects disciplined execution and continued progress against our strategic priorities. I'll start with our key financials on slide 8. Q3 revenue came in at $7.1 billion, up 8% year-over-year, driven by continued strong performance in data center and improving momentum in our industrial and health solutions businesses. Adjusted gross profit totaled $690 million, and adjusted gross margin improved to 9.8%, up 50 basis points year-over-year. Adjusted operating profit was $460 million, with adjusted operating margins at 6.5%, up 40 basis points year-over-year, a record for Flex. The margin improvement reflects disciplined cost management and our deliberate shift towards higher-value products and services.
Kevin S. Krumm: Thank you, Revathi, and good morning, everyone. I'll now review our Q3 performance, which reflects disciplined execution and continued progress against our strategic priorities. I'll start with our key financials on slide 8. Q3 revenue came in at $7.1 billion, up 8% year-over-year, driven by continued strong performance in data center and improving momentum in our industrial and health solutions businesses. Adjusted gross profit totaled $690 million, and adjusted gross margin improved to 9.8%, up 50 basis points year-over-year. Adjusted operating profit was $460 million, with adjusted operating margins at 6.5%, up 40 basis points year-over-year, a record for Flex. The margin improvement reflects disciplined cost management and our deliberate shift towards higher-value products and services.
Speaker #4: Thank you
Speaker #4: and good morning , walk through everyone now review our
Speaker #4: and good morning , walk through everyone
Speaker #4: execution and continued against our progress strategic priorities . I'll start with our key financials slide eight . Third quarter revenue came in at $7.1 billion , 8% year over up driven by year , continued strong performance and data center .
Speaker #4: And improving momentum in our solutions industrial and businesses health . Adjusted gross profit totaled adjusted gross $690 million and margin improved 9.8% , 50 basis up points year over on year .
Speaker #4: Adjusted profit to operating Kevin to was $460 million , with adjusted operating margins 6.5% , at 40 basis points year over for up confidence in a The margin improvement reflects flex .
Speaker #4: year , and our cost management higher towards value deliberate shift products and . Finally , adjusted earnings services per share for the quarter increased 13% year over year to $0.87 per share , underscoring strength in our execution .
Kevin Krumm: Finally, adjusted earnings per share for the quarter increased 13% year-over-year to $0.87 per share, underscoring strength in our execution. Turning to our quarterly segment results on the next slide, Reliability revenue accelerated this quarter, totaling $3.2 billion, up 10% year-over-year. Power continues to drive strong growth alongside Core Industrial and Health Solutions. Adjusted operating income improved to $233 million, and adjusted operating margin was 7.2%, up 50 basis points year-over-year, driven by Power and Core Industrial. Agility revenue totaled $3.8 billion, up 6% from the previous year.
Kevin S. Krumm: Finally, adjusted earnings per share for the quarter increased 13% year-over-year to $0.87 per share, underscoring strength in our execution. Turning to our quarterly segment results on the next slide, Reliability revenue accelerated this quarter, totaling $3.2 billion, up 10% year-over-year. Power continues to drive strong growth alongside Core Industrial and Health Solutions. Adjusted operating income improved to $233 million, and adjusted operating margin was 7.2%, up 50 basis points year-over-year, driven by Power and Core Industrial. Agility revenue totaled $3.8 billion, up 6% from the previous year.
Speaker #4: Turning to our segment results on the next slide . Reliability , revenue accelerated this quarter , totaling $3.2 billion , up 10% year over year .
Speaker #4: Continues to drive quarterly strong growth alongside core Industrial and Health Solutions Power. Adjusted income improved operating to $233 million and adjusted operating margin was 7.2%, up 50 basis points year over year, driven by Power and core Industrial agility.
Kevin Krumm: Data center-related end markets continued to drive strong growth, but were partially offset by softness in our consumer-related end markets. Adjusted operating income was $239 million, and adjusted operating margin for the segment was 6.3%, unchanged from a strong quarter in Q3 last year. Moving to cash flow on slide 10. Cash flow in the quarter was $275 million, showing robust conversion drive, driven by efficient working capital management. Inventory was up 5% sequentially and up 5% year-over-year. Inventory net of working capital advances was 56 days, flat from the prior year. Net CapEx totaled $145 million, or approximately 2% of revenue, and we repurchased around $200 million of stock in the quarter, which was approximately 3.3 million shares. Our capital allocation priorities remain unchanged.
Kevin S. Krumm: Data center-related end markets continued to drive strong growth, but were partially offset by softness in our consumer-related end markets. Adjusted operating income was $239 million, and adjusted operating margin for the segment was 6.3%, unchanged from a strong quarter in Q3 last year. Moving to cash flow on slide 10. Cash flow in the quarter was $275 million, showing robust conversion drive, driven by efficient working capital management. Inventory was up 5% sequentially and up 5% year-over-year. Inventory net of working capital advances was 56 days, flat from the prior year. Net CapEx totaled $145 million, or approximately 2% of revenue, and we repurchased around $200 million of stock in the quarter, which was approximately 3.3 million shares. Our capital allocation priorities remain unchanged.
Speaker #4: Revenue $3.8 billion , totaled 6% from the previous year . Data center related end markets continue to drive strong growth , but were offset by softness in our consumer related end partially markets .
Speaker #4: Adjusted operating income was $239 million and adjusted margin operating for the segment was 6.3% , unchanged from a strong quarter in Q3 last year .
Speaker #4: Moving to cash flow on slide ten, cash flow in the quarter was $275 million, showing robust conversion driven by efficient working capital management.
Speaker #4: Inventory was up 5% sequentially and up 5% year over year . Inventory , net of working capital , advances , was 56 days flat from the prior year .
Speaker #4: CapEx Net totaled $145 million , or approximately 2% of revenue , and we repurchased around $200 million of stock in the quarter , which was approximately 3.3 million shares , our allocation capital remain unchanged .
Kevin Krumm: We are committed to maintaining our investment-grade balance sheet, funding strategic investments to support organic growth, and pursuing accretive M&A opportunities, while returning capital to shareholders through opportunistic share repurchases. Turning to our full-year guidance on slide 11. For Reliability Solutions, we expect revenue to be up mid-single digits, driven by strong data center power demand and solid growth in Core Industrial and Health Solutions. For Agility Solutions, we expect revenue to be up mid-single digits, driven by continued strength in cloud, offset by softness in demand in consumer devices and lifestyle. Finishing with our guidance for the fourth quarter on slide 13, we expect to exit the year with very good momentum. We anticipate Reliability Solutions revenue to be up low double digits to mid-teens, driven by continued strength in power and further growth in Core Industrial and Health Solutions.
Kevin S. Krumm: We are committed to maintaining our investment-grade balance sheet, funding strategic investments to support organic growth, and pursuing accretive M&A opportunities, while returning capital to shareholders through opportunistic share repurchases. Turning to our full-year guidance on slide 11. For Reliability Solutions, we expect revenue to be up mid-single digits, driven by strong data center power demand and solid growth in Core Industrial and Health Solutions. For Agility Solutions, we expect revenue to be up mid-single digits, driven by continued strength in cloud, offset by softness in demand in consumer devices and lifestyle. Finishing with our guidance for the fourth quarter on slide 13, we expect to exit the year with very good momentum. We anticipate Reliability Solutions revenue to be up low double digits to mid-teens, driven by continued strength in power and further growth in Core Industrial and Health Solutions.
Speaker #4: We are committed to maintaining our investment-grade balance sheet funding, strategic investments to support growth, and organically pursuing accretive M&A opportunities, while returning capital to shareholders through opportunistic share repurchases.
Speaker #4: Turning to our full year guidance on slide 11 . For reliability solutions , we expect be revenue to up mid-single by strong data digits , driven center power , demand and solid growth in core industrial and health solutions for agility Solutions , we revenue to be up expect mid-single digits , driven by continued strength in cloud , offset by softness in demand and consumer devices and lifestyle finishing with finishing with our guidance for the fourth quarter on slide 13 , we expect our exit the year with very good momentum .
Speaker #4: We anticipate solutions Reliability up revenue to be digits to by driven strength continued in power and further core growth in industrial and health solutions .
Kevin Krumm: We expect Agility Solutions revenue to be up low to mid-single digits, as cloud and networking growth is offset by softer demand for consumer devices and lifestyle. As we enter the last quarter of our fiscal year, we are pleased to see our team's hard work translate into meaningful progress against our strategy. Our disciplined execution and focus on portfolio management is reflected in our full year results. For the fiscal year, we now expect the following: revenue to be between $27.2 billion and $27.5 billion, which is $350 million higher at the midpoint versus our prior guide. Adjusted operating margin of approximately 6.3%. Adjusted EPS between $3.21 and $3.27 per share, a midpoint increase of 11 cents per share.
Kevin S. Krumm: We expect Agility Solutions revenue to be up low to mid-single digits, as cloud and networking growth is offset by softer demand for consumer devices and lifestyle. As we enter the last quarter of our fiscal year, we are pleased to see our team's hard work translate into meaningful progress against our strategy. Our disciplined execution and focus on portfolio management is reflected in our full year results. For the fiscal year, we now expect the following: revenue to be between $27.2 billion and $27.5 billion, which is $350 million higher at the midpoint versus our prior guide. Adjusted operating margin of approximately 6.3%. Adjusted EPS between $3.21 and $3.27 per share, a midpoint increase of 11 cents per share.
Speaker #4: We expect Agility Solutions revenue to be up low to mid-single digits, as cloud and networking is offset by softer consumer demand for end devices.
Speaker #4: As we enter the last quarter of growth fiscal year , we are pleased to see our our hard work translate meaningful progress into against our strategy , our disciplined execution and focus on portfolio management is reflected in our full year results for the fiscal year , we now expect the following revenue to be between 27.2 billion and $27.5 billion , which is $350 million higher at the midpoint versus our prior guide operating .
Speaker #4: Adjusted approximately Adjusted 6.3% . Ebit , adjusted EPs $3 and between 21 , and $3.27 per share . A mid-point increase of $0.11 per share .
Kevin Krumm: Finally, we anticipate further strong cash generation and maintain our guidance of 80%+ free cash flow conversion for the year. Moving to our segment outlook for the year. For TotalFlex, we expect revenue to be between $6.75 billion and $7.05 billion, with adjusted operating income of $445 million to $475 million. We expect an adjusted tax rate of 21%. Finally, we anticipate adjusted EPS to be between $0.83 and $0.89 per share on approximately 375 million weighted average shares. As we close FY 2026, we remain focused on disciplined execution. Margin expansion, driven by our product and services mix, underscores the resiliency of our model, and with our improving revenue momentum, positions us for continued profitable growth in FY 2027.
Kevin S. Krumm: Finally, we anticipate further strong cash generation and maintain our guidance of 80%+ free cash flow conversion for the year. Moving to our segment outlook for the year. For TotalFlex, we expect revenue to be between $6.75 billion and $7.05 billion, with adjusted operating income of $445 million to $475 million. We expect an adjusted tax rate of 21%. Finally, we anticipate adjusted EPS to be between $0.83 and $0.89 per share on approximately 375 million weighted average shares. As we close FY 2026, we remain focused on disciplined execution. Margin expansion, driven by our product and services mix, underscores the resiliency of our model, and with our improving revenue momentum, positions us for continued profitable growth in FY 2027.With that, I'll now turn the call over to the operator to begin Q&A.
Speaker #4: And finally , we anticipate further strong cash generation maintain our guidance 80% plus free cash flow conversion for the year of and . Moving to our segment outlook for the year for Flex Total .
Speaker #4: For Total Flex , we expect revenue to be between 6.7 5,000,000,007.05 billion , with adjusted operating income of 445 million to 404 , 475 million .
Speaker #4: We adjusted tax rate expect an of 21% . And finally , we anticipate adjusted EPs to be between $0.83 and $0.89 per share .
Speaker #4: On approximately 375 million weighted average shares . As we close FY 26 , we remain focused on disciplined execution margin . Margin expansion driven by our product and services mix underscores the resiliency of our model and with our revenue improving momentum , positions us for continued profitable growth in FY 27 .
Kevin Krumm: With that, I'll now turn the call over to the operator to begin Q&A.
Operator: Thank you. We'll now begin the question and answer portion of today's call. If you'd like to ask a question, please press star one on your phone. As a reminder, we ask you to please limit yourself to one question and one follow-up. One moment please, for the first question. Our first question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question.
Operator: Thank you. We'll now begin the question and answer portion of today's call. If you'd like to ask a question, please press star one on your phone. As a reminder, we ask you to please limit yourself to one question and one follow-up. One moment please, for the first question. Our first question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question.
Speaker #4: With all that, I will now turn the call over to the operator to begin Q&A.
Speaker #1: Thank you. We'll now begin the question and answer portion of today's call. If you'd like to ask a question, please press star one on your phone.
Speaker #1: As a reminder , we ask that you please limit yourself to one question and one follow up . One moment please . For the first question , our first question comes from Ruplu Bhattacharya with America .
Ruplu Bhattacharya: Hi, thank you for taking my questions. Revathi, you're seeing strong growth in data center. Where do you see the bigger opportunity? Is it in power or in compute? And correspondingly, where are you focusing Flex's investments this year? I ask because as we look out over the next couple of years, there's a bunch of new AI programs that are scheduled to come online. Do you think Flex has the opportunity to benefit from one or more of those? And does Flex have the manufacturing capacity to handle these opportunities, or do you expect to need to retrofit any facility to handle more AI-related work? And I have a follow-up.
Ruplu Bhattacharya: Hi, thank you for taking my questions. Revathi, you're seeing strong growth in data center. Where do you see the bigger opportunity? Is it in power or in compute? And correspondingly, where are you focusing Flex's investments this year? I ask because as we look out over the next couple of years, there's a bunch of new AI programs that are scheduled to come online. Do you think Flex has the opportunity to benefit from one or more of those? And does Flex have the manufacturing capacity to handle these opportunities, or do you expect to need to retrofit any facility to handle more AI-related work? And I have a follow-up.
Speaker #1: Please see Bank of with your questions.
Speaker #5: Hi. Thank you for taking my questions. You're seeing strong growth in data center. Where do you see the bigger opportunity?
Speaker #5: Is it in power or in compute and correspondingly , where are you focusing Flex's investments this year ? I ask because as we look out over the next couple of years , there's a bunch of new AI programs that are scheduled to come online .
Speaker #5: Do you flex has the think opportunity to opportunity to benefit from one or more of those ? And does flex have the manufacturing capacity to handle these opportunities , or do you expect to retrofit any facility need to to more AI related work ?
Revathi Advaithi: Thanks, Ruplu. First is, you know, we're really thrilled with the performance that we're showing across all the business segments that we have. Now, with regard to data centers, you know, we're still in line with the very strong year-over-year growth that we talked about earlier in the year, and we'll update that at the completion of the full year next quarter. This year, if you look at our investments, first thing is both power and compute, growing very, very strongly, whether it's embedded power or critical power or the compute side, for the year, if you look at it. And our investments, I would say, have been in both and parts of our businesses.
Revathi Advaithi: Thanks, Ruplu. First is, you know, we're really thrilled with the performance that we're showing across all the business segments that we have. Now, with regard to data centers, you know, we're still in line with the very strong year-over-year growth that we talked about earlier in the year, and we'll update that at the completion of the full year next quarter. This year, if you look at our investments, first thing is both power and compute, growing very, very strongly, whether it's embedded power or critical power or the compute side, for the year, if you look at it. And our investments, I would say, have been in both and parts of our businesses.
Speaker #5: have a follow And I up handle .
Speaker #2: Thanks , Ruplu . First is , you know , we're really thrilled with the performance that we're showing across all the business segments that we have now with regard to data centers .
Speaker #2: You know , we're still in line with very strong year over year growth that we talked about earlier in the year . And we'll update that at the completion of the full year next quarter this year .
Speaker #2: If you look at our investments , first thing is both power and compute growing very , very strongly , whether it's embedded power or critical power or the compute year , for the side look if you at it and our investments , I would say have been in both parts of our businesses , power has been more heavy this year in terms of investments for capacity .
Revathi Advaithi: Power has been more heavy this year in terms of investments for capacity, but we expect that, because of the large AI infrastructure spend that you continue to see and new programs coming on board for compute, that we will be investing more in compute capacity in the next few years. But that is normal, Ruplu, as far as I'm concerned, right? Some years, one, you know, segment will be a little higher investment than the other. As you add in capacity, you digest that capacity, and you move forward. So next year, I think we'll be adding probably more capacity in our embedded power business, not as much in our critical power business, because we'll be digesting the capacity we're adding this year.
Revathi Advaithi: Power has been more heavy this year in terms of investments for capacity, but we expect that, because of the large AI infrastructure spend that you continue to see and new programs coming on board for compute, that we will be investing more in compute capacity in the next few years. But that is normal, Ruplu, as far as I'm concerned, right? Some years, one, you know, segment will be a little higher investment than the other. As you add in capacity, you digest that capacity, and you move forward. So next year, I think we'll be adding probably more capacity in our embedded power business, not as much in our critical power business, because we'll be digesting the capacity we're adding this year.
Speaker #2: But we expect that because of the large AI infrastructure spend that you see and new continue to programs board coming on for , for compute that we will be investing more in compute capacity next in the few years .
Speaker #2: So but is that normal . Ruplu as far as I'm concerned . Right . Some years , one , you know , be a segment will investment little than higher the other as you add in capacity , you digest that capacity and you move forward .
Speaker #2: So so next think year I we'll be adding probably more capacity in our embedded power business . Not as much in our critical power business , because we'll be digesting the capacity .
Revathi Advaithi: Then, you know, we'll have to continue to add capacity in compute because of AI programs coming into play, as you just mentioned. So yeah, I think that's a continuous process. It's a good problem to have with the tremendous growth we're seeing, so we're pretty excited about the opportunity.
Revathi Advaithi: Then, you know, we'll have to continue to add capacity in compute because of AI programs coming into play, as you just mentioned. So yeah, I think that's a continuous process. It's a good problem to have with the tremendous growth we're seeing, so we're pretty excited about the opportunity.
Speaker #2: We're adding this year, and then we'll have to continue to add capacity in compute because of AI programs coming into play, as you just mentioned.
Speaker #2: So yeah , I think that's a continuous process . It's a good problem to have with a tremendous growth . We're seeing . So we're pretty excited about the opportunity .
Ruplu Bhattacharya: Okay, thanks for the details there, Revathi. Can I ask a follow-up? You guided fiscal 2026 operating margins to 6.3%. I'm wondering, conceptually, is there a ceiling on how high operating margin for Flex can go, given the business mix that you currently have? I mean, you've done a great job focusing the company on the longer life cycle, higher margin segments. Do you think it would be now strategic to maybe focus Flex more on AI and other higher growth opportunities, and maybe exit completely the lower margin consumer-related segments? Thanks for taking my questions. Appreciate it.
Ruplu Bhattacharya: Okay, thanks for the details there, Revathi. Can I ask a follow-up? You guided fiscal 2026 operating margins to 6.3%. I'm wondering, conceptually, is there a ceiling on how high operating margin for Flex can go, given the business mix that you currently have? I mean, you've done a great job focusing the company on the longer life cycle, higher margin segments. Do you think it would be now strategic to maybe focus Flex more on AI and other higher growth opportunities, and maybe exit completely the lower margin consumer-related segments? Thanks for taking my questions. Appreciate it.
Speaker #5: Okay . Thanks for the details there . Revathy . ask a Can I follow up . You've guided fiscal 26 operating margins to 6.3% .
Speaker #5: I'm conceptually , is there a ceiling on how high operating margin for flex can go , given the business wondering mix that you currently I mean , have ?
Speaker #5: A great job you've done focusing the company life on the longer cycle, higher margin segments. Do you think it would be strategic to maybe focus Flex more on AI and other higher growth opportunities, and maybe exit completely?
Kevin Krumm: Hi, Ruplu. Hi, Ruplu, this is Kevin. I'll take the first stab at answering this question. I would say that, you know, we got this question last year at this time, are our margins stable and sustainable? And I would say last year, as we looked into this year, we answered it, yeah, we believe our margins are sustainable when you look across our underlying business units. And then we expect our underlying business units to continue to drive margin improvement, plus there'll be mix impacts. So when you look at our margins this year, I think we've delivered against that. Our underlying businesses have improved across, you know, from a margin standpoint, and we've seen positive mix impacts. As we go forward here, our answer isn't gonna change.
Kevin S. Krumm: Hi, Ruplu. Hi, Ruplu, this is Kevin. I'll take the first stab at answering this question. I would say that, you know, we got this question last year at this time, are our margins stable and sustainable? And I would say last year, as we looked into this year, we answered it, yeah, we believe our margins are sustainable when you look across our underlying business units. And then we expect our underlying business units to continue to drive margin improvement, plus there'll be mix impacts. So when you look at our margins this year, I think we've delivered against that. Our underlying businesses have improved across, you know, from a margin standpoint, and we've seen positive mix impacts. As we go forward here, our answer isn't gonna change.
Speaker #5: The lower margin consumer related segments ? Thanks for taking my questions . Appreciate it .
Speaker #6: Hi .
Speaker #4: Hi , Ruplu . This is Kevin . I'll take the first stab at answering this question . I would say that , we got you know , this question last year at this time are our stable margins ?
Speaker #4: Stable . And sustainable . And I would say last year , as we looked into this year , we Yeah , we believe our margins answered it .
Speaker #4: are sustainable . When you across look our underlying business units and then and we expect our underlying business units to continue to drive margin improvement , plus they'll be mixed impacts .
Speaker #4: So when you look at our margins this year , I think we've delivered against that . Our underlying businesses have improved across , you know , from a standpoint .
Kevin Krumm: When you look across our business units, we expect them to continue to deliver margin expansion year on year, and we expect there to be mixed impacts in our business. So, that's how I would answer your question right now. As it relates to the overall portfolio, we're comfortable with where we are. I'll leave it at that.
Kevin S. Krumm: When you look across our business units, we expect them to continue to deliver margin expansion year on year, and we expect there to be mixed impacts in our business. So, that's how I would answer your question right now. As it relates to the overall portfolio, we're comfortable with where we are. I'll leave it at that.
Speaker #4: Margin, and we've seen positive mix impacts as we go forward here. Our answer isn't going to change. When you look across our business units, we expect them to continue to deliver margin expansion year on year.
Speaker #4: And we expect there to be mixed impacts in our business . So that's how I would answer your question right now , as it relates to the overall portfolio .
Revathi Advaithi: Yeah, Ruplu, I'd say, the only thing I'd add is, all of you know that we got to the 6% a year ahead of the long-term guide that we had given, and, you know, it is a continued focus on shifting our mix, which is exactly what you're talking about. And, you know, we make investments into the highest areas of return and the highest areas of growth, and that has driven the mix shift and improved our operating margin. Now, with the growth in data centers continuing to be strong that we expect in the next few years, I think you'll see that mix shift. But we've also done a tremendous job on productivity, and I expect with AI implementation in our own facilities, that'll also continue to be strong for us.
Revathi Advaithi: Yeah, Ruplu, I'd say, the only thing I'd add is, all of you know that we got to the 6% a year ahead of the long-term guide that we had given, and, you know, it is a continued focus on shifting our mix, which is exactly what you're talking about. And, you know, we make investments into the highest areas of return and the highest areas of growth, and that has driven the mix shift and improved our operating margin.
Speaker #4: We're comfortable with where we are . I'll leave it at that .
Speaker #2: Yeah , I'd say the only thing I'd add is all of , you know , that we got to the 6% a year ahead of the long term guide that we had given , and , you know , it is a continued focus on shifting our mix , which is exactly what you're talking about .
Speaker #2: And , you know , we make investments into the highest areas of return . And the highest areas of growth . And that is driven the mix shift and improved our operating margin .
Revathi Advaithi: Now, with the growth in data centers continuing to be strong that we expect in the next few years, I think you'll see that mix shift. But we've also done a tremendous job on productivity, and I expect with AI implementation in our own facilities, that'll also continue to be strong for us. So, more to come on Investor Day in May, in terms of long-term guide on margins, so stay tuned for that.
Speaker #2: Now , with the growth data in centers continuing to be strong , that we expect in the next few years , I think you'll see that mix shift .
Speaker #2: But we've also done a tremendous job on productivity . And and I expect with AI implementation in our own facilities , that will also continue to be strong for us .
Revathi Advaithi: So, more to come on Investor Day in May, in terms of long-term guide on margins, so stay tuned for that.
Speaker #2: So more to come on . Investor Day in May . In terms term of long guide on margins . stay So tuned for that okay .
Ruplu Bhattacharya: Okay, thank you for all the details. Appreciate it.
Ruplu Bhattacharya: Okay, thank you for all the details. Appreciate it.
Operator: Our next question is from the line of Samik Chatterjee with J.P. Morgan. Please proceed with your questions.
Operator: Our next question is from the line of Samik Chatterjee with J.P. Morgan. Please proceed with your questions.
Speaker #5: Thank you for all the details . Appreciate it .
Samik Chatterjee: Yep. Hi, thank you for taking my questions. Maybe, Revathi, I appreciate your comments on the power business doing robust growth right now. If you can help us differentiate a bit between embedded power and critical power, just in terms of what you're seeing from a competitive landscape perspective, where do you see sort of more opportunity for share gains for Flex? Is it more on embedded and critical, and where do you see more opportunity to, like, gain large customers, large cloud customers, that would make a more material impact on that, growth or inflection growth? Sort of help us just differentiate between the two as much as you sort of have a high margin business across both of them. And I have a follow-up.
Samik Chatterjee: Yep. Hi, thank you for taking my questions. Maybe, Revathi, I appreciate your comments on the power business doing robust growth right now. If you can help us differentiate a bit between embedded power and critical power, just in terms of what you're seeing from a competitive landscape perspective, where do you see sort of more opportunity for share gains for Flex? Is it more on embedded and critical, and where do you see more opportunity to, like, gain large customers, large cloud customers, that would make a more material impact on that, growth or inflection growth? Sort of help us just differentiate between the two as much as you sort of have a high margin business across both of them. And I have a follow-up.
Speaker #1: Our next question is from the line of Samik Chatterjee with JP Morgan. Please go ahead with your question.
Speaker #7: Yep . Hi . Thank you for taking my questions . Maybe I appreciate your comments on the power business doing robust growth right now .
Speaker #7: If you can help us differentiate a bit between embedded power and critical power , just in terms of what you're seeing from a competitive landscape perspective , where do you see sort of more opportunity share gains for for flex ?
Speaker #7: Is it more on embedded and critical, and where do you see more opportunity to gain large customers? Large cloud customers that would make a more material impact on that growth or inflection growth—sort of help us just between the two.
Revathi Advaithi: Yeah, Samik, again, we'll talk more about this in our Investor Day. But at a high level, I would say both businesses, Embedded Power and Critical Power, are growing very, very strongly, right, for through this year. So we feel good about that. Critical Power is driven by, you know, it's all about, you know, how quickly can you manage your lead times? How quickly can you manage installations? Innovation does play a role, but it's all about kind of putting these large power pods in. Schedule management is a huge part of, you know, what people expect from that particular group of products, and that we compete with the traditional electrical players that you all know about.
Revathi Advaithi: Yeah, Samik, again, we'll talk more about this in our Investor Day. But at a high level, I would say both businesses, Embedded Power and Critical Power, are growing very, very strongly, right, for through this year. So we feel good about that. Critical Power is driven by, you know, it's all about, you know, how quickly can you manage your lead times? How quickly can you manage installations? Innovation does play a role, but it's all about kind of putting these large power pods in. Schedule management is a huge part of, you know, what people expect from that particular group of products, and that we compete with the traditional electrical players that you all know about.
Speaker #7: As much as you sort of have a high margin business across both of them and I have a follow up .
Speaker #2: Yeah . So again , we'll talk more about this in our Investor Day . But at a high level , I would say both businesses embedded power and critical power are growing very , very strongly .
Speaker #2: Right . through this For year . So we feel good about that critical power is driven by you know it's all about , you know , how quickly can you manage your lead times , how quickly can you manage installations .
Speaker #2: Innovation does play a role , but it's all of putting these about kind large power pods in schedule . Management is a huge part of , you know , what people expect from that particular group of that we products .
Revathi Advaithi: I would say the Embedded Power is very different in the sense that it is going through huge technology shift with what is happening in the 800-volt DC category, larger 1-megawatt deployments, in terms of rack power itself. So big technology shift that is happening there. We are in the forefront of that technology shift. There are only a very small group of competitors who play in that space, which is a significant advantage for us. And, you know, we're very excited about the changes that is happening in 800-volt DC and larger megawatt deployments that are happening across hyperscalers. So I would say that business is growing very well. We expect that to accelerate with these large power deployments and, you know, power-hungry data racks that are happening.
Revathi Advaithi: I would say the Embedded Power is very different in the sense that it is going through huge technology shift with what is happening in the 800-volt DC category, larger 1-megawatt deployments, in terms of rack power itself. So big technology shift that is happening there. We are in the forefront of that technology shift. There are only a very small group of competitors who play in that space, which is a significant advantage for us. And, you know, we're very excited about the changes that is happening in 800-volt DC and larger megawatt deployments that are happening across hyperscalers. So I would say that business is growing very well. We expect that to accelerate with these large power deployments and, you know, power-hungry data racks that are happening.
Speaker #2: And compete with the traditional electrical players that you all know about . I would say the embedded power is very different in the sense that it is going through huge technology shift with with what is happening in the 800 volt DC category , larger one megawatt deployments in terms of rack power itself .
Speaker #2: So big technology shift that is happening there . We are in the forefront of that technology shift . There are only group a very small of competitors who play in that space , which is a significant advantage for us .
Speaker #2: And , you know , we're very excited about changes that is happening in 800 volt DC and larger megawatt deployments that happening are across hyperscalers .
Speaker #2: I would So say that business is growing very well . We expect that to accelerate with these large power deployments . And , you power hungry data racks that are happening spaces both we're where seeing strong growth know , and , you the the 35% this guide year is pretty strong .
Revathi Advaithi: So in both spaces, we're seeing strong growth. And you know, the 35% guide this year is pretty strong, and if it continues at a pretty double-digit pace, I will be quite excited about the growth in these categories. But I would stay tuned for what comes out of Embedded Power, just because of the technology shift that is happening and the very small set of competitors in that space.
Revathi Advaithi: So in both spaces, we're seeing strong growth. And you know, the 35% guide this year is pretty strong, and if it continues at a pretty double-digit pace, I will be quite excited about the growth in these categories. But I would stay tuned for what comes out of Embedded Power, just because of the technology shift that is happening and the very small set of competitors in that space.
Speaker #2: And if that continues at a pretty double digit pace , I will be quite excited about the growth in these categories . But I would stay tuned for what comes out of embedded power just because of the technology shift that is happening and the very small set of competitors in that space .
Samik Chatterjee: Got it. Got it. No, very helpful. And for my follow-up, the full year revenue guide expectation for Agility was sort of walked down a bit, and I'm assuming it's the consumer end markets being soft, that's sort of probably impacting it. But it's a bit more, also a bit surprising on the flip side to see not more upside from the compute side to sort of offset that, where you're clearly growing much faster in power, and that's driving the reliability acceleration. But Agility didn't have as much upside on compute to offset that. I mean, anything going on specifically on that front? Because the cloud companies have obviously been pretty strong in their spending, so anything you can help us there? Thank you.
Samik Chatterjee: Got it. Got it. No, very helpful. And for my follow-up, the full year revenue guide expectation for Agility was sort of walked down a bit, and I'm assuming it's the consumer end markets being soft, that's sort of probably impacting it. But it's a bit more, also a bit surprising on the flip side to see not more upside from the compute side to sort of offset that, where you're clearly growing much faster in power, and that's driving the reliability acceleration. But Agility didn't have as much upside on compute to offset that. I mean, anything going on specifically on that front? Because the cloud companies have obviously been pretty strong in their spending, so anything you can help us there? Thank you.
Speaker #2: .
Speaker #7: it , got it . No . Got Very helpful . And for follow my up , the full year revenue guide expectation for agility was sort of walked down a bit .
Speaker #7: And I'm assuming it's the consumer . And being soft . markets That sort of probably impacting it . But it's a bit more also a bit surprising .
Speaker #7: On the flip side, to see not more upside from the compute side to sort of offset that, where you're clearly growing much faster in power.
Speaker #7: And that's driving the reliability acceleration . agility But as much upside on compute to offset that . I mean , anything going on specifically on that front , because the cloud companies have obviously been pretty strong in you can spending .
Revathi Advaithi: No, actually, I mean, we're very pleased with Agility's kind of growth. If you think about first, as I'd say, data center growth remains on track for what we have said for the full year guide, and we will update that when we finish the year. So that remains on track, and we are comfortable with that. I think the additional upside that you're seeing in Agility is driven by kind of what is happening in high-speed networking or network interface cards. And I'll just remind you that we don't include those end markets in our data center business. But these are data center-related infrastructure deployments that are happening, that is really driving very good growth for Agility. The place that I see softness for Agility is basically consumer-related end markets, which is lifestyle and consumer devices.
Revathi Advaithi: No, actually, I mean, we're very pleased with Agility's kind of growth. If you think about first, as I'd say, data center growth remains on track for what we have said for the full year guide, and we will update that when we finish the year. So that remains on track, and we are comfortable with that. I think the additional upside that you're seeing in Agility is driven by kind of what is happening in high-speed networking or network interface cards. And I'll just remind you that we don't include those end markets in our data center business. But these are data center-related infrastructure deployments that are happening, that is really driving very good growth for Agility. The place that I see softness for Agility is basically consumer-related end markets, which is lifestyle and consumer devices.
Speaker #7: anything their So help us there . Thank you .
Speaker #2: Know , actually , I mean , we're very pleased with agility kind of growth . And and if you think about first is I'd say data center growth remains on track for what we've said for the full year guide .
Speaker #2: will update And we that when we finish the year . And so that remains on track . And we're comfortable with that . I think the additional upside that you're seeing in agility is driven by kind of what is happening in high speed networking or network interface cards , and I'll just remind you that we don't include those end markets in our data center business .
Speaker #2: But these data are center related infrastructure deployments that are happening . That is really driving very good growth for agility . The place that I see softness for agility is basically consumer related and markets , which is lifestyle and consumer devices very pleased .
Revathi Advaithi: So very pleased with the growth in data centers and data center-supported infrastructure deployment, like networking or NIC cards, that we don't report in our overall, that we don't, talk about in our overall data center numbers. So, you know, I'd say really strong growth in Agility, just offset by consumer end markets.
Revathi Advaithi: So very pleased with the growth in data centers and data center-supported infrastructure deployment, like networking or NIC cards, that we don't report in our overall, that we don't, talk about in our overall data center numbers. So, you know, I'd say really strong growth in Agility, just offset by consumer end markets.
Speaker #2: growth with the in So data centers and data supported center infrastructure deployment like networking or Nic cards that we don't report in our overall that we don't talk about in our overall data center numbers .
Samik Chatterjee: Okay, great. Thank you. Thanks for taking my questions.
Samik Chatterjee: Okay, great. Thank you. Thanks for taking my questions.
Speaker #2: So , you know , I'd say really strong growth in agility just by offset consumer and markets .
Operator: The next questions are from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.
Operator: The next questions are from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.
Speaker #7: Okay . Great . Thank you . Thanks for taking my questions .
Mark Delaney: Yes, good morning, and thank you very much for taking the questions. First, I was hoping to better understand if Flex is already seeing material upside that it would attribute specifically to the Amazon warrant deal that you reached in calendar 2025. And if not, when might that be additive to your business in a more meaningful way?
Mark Delaney: Yes, good morning, and thank you very much for taking the questions. First, I was hoping to better understand if Flex is already seeing material upside that it would attribute specifically to the Amazon warrant deal that you reached in calendar 2025. And if not, when might that be additive to your business in a more meaningful way?
Speaker #1: The next are from the line of questions Mark Delaney with Goldman Sachs . Please just give us your questions .
Speaker #8: Hi . Yes good morning . Thank you very much for taking the questions . First , I was hoping to better understand if flex is already seeing material upside that it would attribute specifically to the Amazon warrant deal that you reached in calendar 25 , and if not , when might that be additive to your business ?
Kevin Krumm: Hey, Mark, this is Kevin. I'll take the first part of your question. Short answer is, the warrants are not incremental, nor were they expected to be material incremental to FY 2026. So it's really that program as we move forward, you know, is where we'd expect to see that. Deployments are complex, and they scale over time. And so that's kind of how we expect the upside and the additional revenue to come to us.
Kevin S. Krumm: Hey, Mark, this is Kevin. I'll take the first part of your question. Short answer is, the warrants are not incremental, nor were they expected to be material incremental to FY 2026. So it's really that program as we move forward, you know, is where we'd expect to see that. Deployments are complex, and they scale over time. And so that's kind of how we expect the upside and the additional revenue to come to us.
Speaker #8: In a more meaningful way?
Speaker #4: this is Hey Mark , Kevin . I'll take the first part of your question . Short is the answer warrants are not incrementally , they nor were be material expected to , incremental to FY 26 .
Speaker #4: So it's really that program as we move forward, you know, is where we'd expect to see that deployments are complex and they scale over time.
Revathi Advaithi: Yeah. Mark, only, the only thing I'd add is that in our overall growth rate that we gave for the year, which is a 35% growth rate for data center, we were expecting, you know, pretty decent growth with our hyperscale customers, and it is playing out the way we imagined it to be. The only other thing I'll add is but when we'll update you with kind of the customer consigned inventory mix shift, that does play into some of these growth rate numbers. But our growth with with AWS is very strong and is going as expected, and we continue to expect to see that growth rate continue into the few, next few years, and then more to update that in our Investor Day.
Revathi Advaithi: Yeah. Mark, only, the only thing I'd add is that in our overall growth rate that we gave for the year, which is a 35% growth rate for data center, we were expecting, you know, pretty decent growth with our hyperscale customers, and it is playing out the way we imagined it to be. The only other thing I'll add is but when we'll update you with kind of the customer consigned inventory mix shift, that does play into some of these growth rate numbers. But our growth with with AWS is very strong and is going as expected, and we continue to expect to see that growth rate continue into the few, next few years, and then more to update that in our Investor Day.
Speaker #4: And so, that's kind of how we expect the upside and the additional revenue to come to us.
Speaker #2: Yeah , the only the only thing mark I'd add is that in our overall growth rate gave that we for the year , which is 35% growth rate for data center , we were expecting , you know , pretty decent growth with our hyperscale customers .
Speaker #2: is And it playing out the way we imagined it to be . The only other thing I'll add is when we'll update you with kind of the customer consigned inventory mix shift that does play into some of these growth rate numbers , but our growth with with AWS is very strong and is going as expected .
Speaker #2: And we continue to expect to that see growth rate continue into the few next years . And then more to update that in our Investor Day .
Mark Delaney: Very helpful. Thank you both. And my other question was on margins in the reliability segment. You spoke a bit already around company-wide margins and the longer-term path you're on. You spoke a bit about mix, but reliability margins were quite strong, over 7%. Hoping to better understand if there's anything episodic in reliability margins that might be more one-time in nature, or is this just indicative of mix and some of the longer term potential of that business segment? Thanks.
Mark Delaney: Very helpful. Thank you both. And my other question was on margins in the reliability segment. You spoke a bit already around company-wide margins and the longer-term path you're on. You spoke a bit about mix, but reliability margins were quite strong, over 7%. Hoping to better understand if there's anything episodic in reliability margins that might be more one-time in nature, or is this just indicative of mix and some of the longer term potential of that business segment? Thanks.
Speaker #8: Very helpful . Thank you both . And my other question was on margins and the reliability segment . You spoke a bit already around company wide margins and the longer term path you're on .
Speaker #8: You spoke a bit about mix , but reliability , margins were quite strong . Over 7% . Hoping to better . If there's episodic in anything reliability margins that might be more nature one time in .
Kevin Krumm: Hey, Mark, this is Kevin. I'll answer that. Reliability margins in Q3 were strong. Really what you're seeing there is underlying mix impacts from continued growth and power, year-on-year improvements in our Core Industrial business. Some of that's related to what Revathi was referencing earlier, which is strong performance in industrial and our non-data center, related end markets that still have exposure to some of the secular AI trends. But generally, what you're seeing in Q3 is power, improvement, power mix, and strong underlying performance in Core Industrial. And as we move to Q4, we would expect those to continue.
Kevin S. Krumm: Hey, Mark, this is Kevin. I'll answer that. Reliability margins in Q3 were strong. Really what you're seeing there is underlying mix impacts from continued growth and power, year-on-year improvements in our Core Industrial business. Some of that's related to what Revathi was referencing earlier, which is strong performance in industrial and our non-data center, related end markets that still have exposure to some of the secular AI trends. But generally, what you're seeing in Q3 is power, improvement, power mix, and strong underlying performance in Core Industrial. And as we move to Q4, we would expect those to continue.
Speaker #8: Or is this just indicative of mix and some of the longer-term potential of that business segment? Thanks.
Speaker #4: This is I'll Hey , Mark . Kevin . that answer reliability margins in Q3 were strong . Really what is you're seeing underlying mix impacts from continued growth in power year on year improvements in our core industrial business .
Speaker #4: Some of that's related to what we're was referencing earlier , which is strong performance in industrial our and non center related end markets that still have exposure to the some of secular AI trends , but generally what you're seeing in Q3 is .
Speaker #4: Power improvement , power mix and strong underlying performance in core industrial . And as we move to Q4 , we would expect those to continue .
Mark Delaney: Thank you.
Mark Delaney: Thank you.
Operator: Again, if you'd like to ask a question, please press star one on your phone. The next question is from the line of Steven Fox with Fox Advisors. Please proceed with your question.
Operator: Again, if you'd like to ask a question, please press star one on your phone. The next question is from the line of Steven Fox with Fox Advisors. Please proceed with your question.
Speaker #8: Thank you .
Speaker #1: Again, if you'd like to ask a question, please press star one on your phone. The next question is from the line of Steven Fox with Fox Advisors.
Steven Fox: Hi, just to follow up on that last question. Kevin, I'm looking at incremental margins just from the last quarter that are, like, 20, 20 percent. You dropped, like, $250 million more profits quarter-over-quarter on $250 million of sales. So can you just maybe dig into that a little bit more? It feels like we're glossing over some pretty powerful moves there. Like, how would you force rank those incremental margins? Thanks. Then I had a follow-up.
Steven Fox: Hi, just to follow up on that last question. Kevin, I'm looking at incremental margins just from the last quarter that are, like, 20, 20 percent. You dropped, like, $250 million more profits quarter-over-quarter on $250 million of sales. So can you just maybe dig into that a little bit more? It feels like we're glossing over some pretty powerful moves there. Like, how would you force rank those incremental margins? Thanks. Then I had a follow-up.
Speaker #1: Please receive with your questions .
Speaker #9: Hi . Just to follow up on that last question , Kevin , I'm looking at incremental margins just from last quarter that are like 20 , 20% .
Speaker #9: You dropped like 250 million more profits quarter over quarter on 250 million of sales . So can you just maybe dig into that a little bit more ?
Speaker #9: feels like It we're glossing over some pretty powerful moves there . Like , how would you force rank those incremental margins ? Thanks .
Kevin Krumm: ... Mark, I'm gonna have to ask a clarifying question. Or Steven, sorry. You're, you're referring to Q3 margin performance, noting the beat that we had in revenue?
Kevin S. Krumm: Mark, I'm gonna have to ask a clarifying question. Or Steven, sorry. You're, you're referring to Q3 margin performance, noting the beat that we had in revenue?
Speaker #9: up And then I .
Speaker #4: Mark , I'm going to a have to ask clarifying question or Steven , sorry , you're referring to Q3 margin performance , noting the beat that we had in revenue .
Steven Fox: No, I'm just looking Q3 versus Q2, and sales were up $250 million plus, and profits were up, like, $50 million plus quarter over quarter. So that's like you're dropping 20% sequential margins incrementally, and I'm just not sure why it's that strong.
Steven Fox: No, I'm just looking Q3 versus Q2, and sales were up $250 million plus, and profits were up, like, $50 million plus quarter over quarter. So that's like you're dropping 20% sequential margins incrementally, and I'm just not sure why it's that strong.
Speaker #4: I'm just .
Speaker #9: looking just Q3 I'm Q2 and sales were up and 250 million plus profits were up like 50 million plus quarter over quarter . So that's like you're dropping 20% sequential margins incrementally .
Kevin Krumm: We had a strong quarter. A lot of that is related to the question we just had, which is underlying margin performance and reliability. Our power business continued to drive margin improvement in Q3, Steven, and then we also saw improvement sequentially in Core Industrial for some of the reasons I said. So I would, I would just reiterate, our strong margin performance in Q3, sequentially or year-on-year, was related to continued mix impacts and growth in our power business and continued margin improvement in our Core Industrial business.
Kevin S. Krumm: We had a strong quarter. A lot of that is related to the question we just had, which is underlying margin performance and reliability. Our power business continued to drive margin improvement in Q3, Steven, and then we also saw improvement sequentially in Core Industrial for some of the reasons I said. So I would, I would just reiterate, our strong margin performance in Q3, sequentially or year-on-year, was related to continued mix impacts and growth in our power business and continued margin improvement in our Core Industrial business.
Speaker #9: just not why it's I'm that sure strong .
Speaker #4: We had a strong quarter. A lot of that is related to the question we just had, which is underlying margin performance and reliability.
Speaker #4: Our power business continued to drive margin improvement in Q3 . Steven . And then we also saw improvement sequentially in core industrial for some of the reasons So I I said .
Speaker #4: would I would just reiterate our strong margin performance in Q3 sequentially or year on year was related to continued impacts and growth in mix our power business and continued margin improvement in our core industrial business .
Steven Fox: So, not to pin you down, but what should we take away that it's mainly power that drove sort of that outperformance?
Steven Fox: So, not to pin you down, but what should we take away that it's mainly power that drove sort of that outperformance?
Kevin Krumm: No, I would say it was power, power mix, and Core Industrial, Steven.
Kevin S. Krumm: No, I would say it was power, power mix, and Core Industrial, Steven.
Speaker #9: So not to pin you down , but not should we take away that ? It's mainly power that drove drove sort of that outperformance ?
Steven Fox: Okay, that's helpful. And then, Revathi, I noticed this morning's Wall Street Journal, the headline is: US Manufacturing is in Retreat. I was curious if you could react to that headline and based on what you're seeing in the US. Thanks.
Steven Fox: Okay, that's helpful. And then, Revathi, I noticed this morning's Wall Street Journal, the headline is: US Manufacturing is in Retreat. I was curious if you could react to that headline and based on what you're seeing in the US. Thanks.
Speaker #4: No, I would say it was Power. Power mix and core Industrial. Stephen.
Speaker #9: Okay , that's helpful . And then Revathy , I noticed this Street morning's Wall Journal , the headline is us manufacturing in retreat is is .
Revathi Advaithi: Yeah. Steven, I would say we are definitely not seeing that. You know, we are not only investing in our own capacity in US manufacturing, but we continue to get a lot of inbound requests from customers on future projects, you know, that require US manufacturing. So we're not seeing that at all. You know, we're one of the world's largest manufacturers. We see a lot of activity in terms of what goes on in these multiple end markets. So I would say, you know, our biggest investments are still happening in North America, and US is continuing to expand across many of our facilities. So I have to go read that article, I haven't read it yet, and see what the macros are saying, but we're not seeing that being reflected, Steven, at all in our businesses.
Revathi Advaithi: Yeah. Steven, I would say we are definitely not seeing that. You know, we are not only investing in our own capacity in US manufacturing, but we continue to get a lot of inbound requests from customers on future projects, you know, that require US manufacturing. So we're not seeing that at all. You know, we're one of the world's largest manufacturers. We see a lot of activity in terms of what goes on in these multiple end markets.
Speaker #9: I was curious if you could react to that headline, and what you're seeing based on the US. Thanks.
Speaker #2: Yeah Stephen , I . would say are we definitely not seeing that . You know , we are not only investing our in our own capacity in us but we manufacturing , to get continue lot of a inbound requests from customers on future projects .
Speaker #2: that us You know , require manufacturing not . So we're seeing that at all . You know , largest we're manufacturers . one of the world's lot of We see a activity of what in terms goes on in these multiple end markets .
Revathi Advaithi: So I would say, you know, our biggest investments are still happening in North America, and US is continuing to expand across many of our facilities. So I have to go read that article, I haven't read it yet, and see what the macros are saying, but we're not seeing that being reflected, Steven, at all in our businesses.In fact, most of our investments are being driven by what's expected in US, and in Mexico.
Speaker #2: So I our would biggest investments say , you know , still are happening in America and North us is continuing to expand across many of our facilities .
Speaker #2: So I have to go that article . read read it yet I haven't what the and see macros are saying . But we're not seeing that being Stephen , all in our at businesses .
Speaker #2: So I have to go that article . read read it yet I haven't what the and see macros are saying . But we're not seeing that being Stephen , all in our at reflected .
Revathi Advaithi: In fact, most of our investments are being driven by what's expected in US, and in Mexico.
Steven Fox: Great. I appreciate that color, and congrats on the great performance.
Steven Fox: Great. I appreciate that color, and congrats on the great performance.
Speaker #2: Investments are being, most of them, driven by what's expected in the U.S. and in Mexico.
Revathi Advaithi: Thanks, Steven.
Revathi Advaithi: Thanks, Steven.
Operator: Thank you. The last question is from the line of Jacob Moore with KeyBanc Capital Markets. Please proceed with your question.
Operator: Thank you. The last question is from the line of Jacob Moore with KeyBanc Capital Markets. Please proceed with your question.
Speaker #9: Great . I appreciate that congrats on color and the great performance .
Speaker #2: Thanks , Stephen .
Speaker #1: Thank you . The last question is from the line of Jacob Moore with KeyBanc Capital Markets questions . Your .
Jacob Moore: Hi, good morning. Thanks for taking our questions. This is Jacob on for Steve Barger. First from us is on automotive. I think we're all glad to hear that stabilization is the trend, but if we could just dig into that a little bit, what trends does that assume between unit volume versus content? And how do you think that those trends inform your view of growth from here? Or do you think that automotive maintains at these levels for a while?
Jacob Moore: Hi, good morning. Thanks for taking our questions. This is Jacob on for Steve Barger. First from us is on automotive. I think we're all glad to hear that stabilization is the trend, but if we could just dig into that a little bit, what trends does that assume between unit volume versus content? And how do you think that those trends inform your view of growth from here? Or do you think that automotive maintains at these levels for a while?
Speaker #10: Good morning . Hi . Thanks for taking our questions . This is on for Jacob Steve Barger . First from us is on automotive .
Speaker #10: I think we're all glad to hear that stabilization is a trend . But if we could just dig into that a little bit , what trends does that assume between unit volume versus content .
Speaker #10: And how do you think that those trends inform your view of growth from here ? Or do you think that automotive maintains at these levels for a while ?
Revathi Advaithi: Well, Jacob, thank you for asking a question that's not data center related, but still all good. I'd say the comment on auto stabilizing was more... If you recall, what we have said in the last few quarters is that programs were at Flex, were in flux, right? Because people were trying to decide what EV programs to put on hold, how to switch to some hybrid programs or combustion engine programs. So there was a lot of confusion in terms of which platforms were gonna grow for which customers. So the stabilization comment is more in terms of clarity, which you can see from a lot of auto OEMs, in terms of what programs are going on hold, which cars are being pulled off, and what platform investments are being made.
Revathi Advaithi: Well, Jacob, thank you for asking a question that's not data center related, but still all good. I'd say the comment on auto stabilizing was more... If you recall, what we have said in the last few quarters is that programs were at Flex, were in flux, right? Because people were trying to decide what EV programs to put on hold, how to switch to some hybrid programs or combustion engine programs. So there was a lot of confusion in terms of which platforms were gonna grow for which customers. So the stabilization comment is more in terms of clarity, which you can see from a lot of auto OEMs, in terms of what programs are going on hold, which cars are being pulled off, and what platform investments are being made.
Speaker #2: As Jacob , thank you for asking a question that's not data center related , but still all good . I'd say the the on comment stabilizing was more if you recall what we have said in the last few quarters is that programs were at flex , were in flux , right , because people were to trying decide what EV programs to on put hold , how to some switch to hybrid or programs a engine combustion So programs .
Speaker #2: there was a lot of confusion in terms of which were going to platforms grow , for which customers . So the stabilization comment is more in terms of clarity , which you can see from a lot of auto OEMs in terms programs of are going what on which cars are hold , pulled off and being what platform investments are made , being that helps lot in and terms us a being of able to make forecasts and really understand see the where we end market growth in terms of unit volume versus content say , would itself .
Revathi Advaithi: And that helps us a lot in terms of being able to make forecasts and really understand where we see the end market growth. In terms of unit volume versus content itself, I would say, you know, you as well as I know, kind of what the global car forecasts are right now. They haven't moved significantly. If anything, that only dropped. So for us, any automotive growth actually comes from continuing to invest in future compute platforms. And because compute is needed in every vehicle, whether it is a combustion engine or a hybrid or an EV, that is what drives our automotive growth for us, is continuing to win in these software-defined compute platforms, which is agnostic of any platform itself. And that is super helpful for us.
Revathi Advaithi: And that helps us a lot in terms of being able to make forecasts and really understand where we see the end market growth. In terms of unit volume versus content itself, I would say, you know, you as well as I know, kind of what the global car forecasts are right now. They haven't moved significantly. If anything, that only dropped. So for us, any automotive growth actually comes from continuing to invest in future compute platforms.
Speaker #2: I you know , you as well as kind I know , of what the global , you know , car forecasts are right now .
Speaker #2: They haven't moved significantly . If anything they've only dropped . So for us any automotive growth actually comes from continuing to invest in future compute platforms .
Revathi Advaithi: And because compute is needed in every vehicle, whether it is a combustion engine or a hybrid or an EV, that is what drives our automotive growth for us, is continuing to win in these software-defined compute platforms, which is agnostic of any platform itself. And that is super helpful for us. We like the first, the stabilization and clarity of platforms, and it is definitely not unit volume. It is driven more by these compute platforms accelerating.
Speaker #2: And because compute is needed in every vehicle , whether it is a combustion engine or hybrid or an EV , that is what drives our growth for us automotive is continuing to win in these software defined compute which is platforms , agnostic of any platform itself .
Revathi Advaithi: We like the first, the stabilization and clarity of platforms, and it is definitely not unit volume. It is driven more by these compute platforms accelerating.
Speaker #2: And that is super helpful for us . And so we like the first the clarity of stabilization and platforms . And it is definitely not unit volume .
Jacob Moore: Got it. Thanks. That's helpful. And then the second one from us is, it's on the effect of skyrocketing memory prices. I think naturally, more price-sensitive markets, like consumer, are most vulnerable to that trend. But could you just talk through any dynamics that you're planning for as memory prices jump sharply? Are you seeing or anticipating any demand effects, on consumer products or other high memory content platforms?
Jacob Moore: Got it. Thanks. That's helpful. And then the second one from us is, it's on the effect of skyrocketing memory prices. I think naturally, more price-sensitive markets, like consumer, are most vulnerable to that trend. But could you just talk through any dynamics that you're planning for as memory prices jump sharply? Are you seeing or anticipating any demand effects, on consumer products or other high memory content platforms?
Speaker #2: is driven more It by these compute platforms accelerating .
Speaker #10: Got it . Thanks . That's helpful . And then the second one from us is it's on the effect of skyrocketing memory prices .
Speaker #10: I think naturally more price sensitive markets like consumer are most vulnerable to that trend . But could you just talk through any dynamics that you're planning for as memory prices jump sharply ?
Speaker #10: Are you seeing or anticipating any demand effects on consumer products or other high content memory platforms ?
Revathi Advaithi: Yeah, I would say the good news for us, Jacob, is that most of our customers, outside of what we use in our own products in the power side, are all procured by our customers. Our volume of memory procurement is happening by our customers directly from the memory suppliers. So I'm sure, I mean, you hear this in the calls that the memory companies have. You know, they are selecting few end markets more than the others, so you are seeing a bigger distribution go to data centers and those types of end markets. That being said, we're not seeing a significant effect in terms of consumer end markets, because those end markets are soft to begin with.
Revathi Advaithi: Yeah, I would say the good news for us, Jacob, is that most of our customers, outside of what we use in our own products in the power side, are all procured by our customers. Our volume of memory procurement is happening by our customers directly from the memory suppliers. So I'm sure, I mean, you hear this in the calls that the memory companies have. You know, they are selecting few end markets more than the others, so you are seeing a bigger distribution go to data centers and those types of end markets.
Speaker #11: Yeah , I would say .
Speaker #2: The good news for us , Jacob , is that most of our customers , outside of what we use in our own products , in the power side , are all procured by our customers , our our volume of memory procurement is happening by our customers directly .
Speaker #2: From the memory suppliers . And so I'm sure I mean , you hear this in the in the calls that the memory companies have , you know , they are selecting few end markets more than the others .
Speaker #2: So you are seeing a bigger distribution go to data centers . And those types of end markets , that being said , we're not seeing a significant effect in terms of consumer end markets because those end markets are soft to begin with .
Revathi Advaithi: That being said, we're not seeing a significant effect in terms of consumer end markets, because those end markets are soft to begin with.So, you know, memory is not driving any kinda demand issue, or supply issue in terms of consumer end markets. But I think, you know, you're hearing from memory companies that there is allocation of material that is happening, and, you know, we bake that into our forecast.
Revathi Advaithi: So, you know, memory is not driving any kinda demand issue, or supply issue in terms of consumer end markets. But I think, you know, you're hearing from memory companies that there is allocation of material that is happening, and, you know, we bake that into our forecast.
Speaker #2: So , you know not , memory is driving any kind of issue or supply terms of issue in consumer and markets . But I think , you know , you're hearing from from memory companies is that there allocation of material that is happening .
Jacob Moore: All right. Understood, and I appreciate you taking the questions.
Jacob Moore: All right. Understood, and I appreciate you taking the questions.
Speaker #2: And , you know , we bake that into our forecasts .
Operator: Thanks, Jacob. Thank you. I'll now turn the call back over to the CEO for any closing remarks.
Operator: Thanks, Jacob. Thank you. I'll now turn the call back over to the CEO for any closing remarks.
Speaker #10: Understood . And I All appreciate the questions you taking right . .
Speaker #12: Jacob Thanks . .
Revathi Advaithi: Thank you. So on behalf of our leadership team, I want to give a sincere thank you to all our customers for their trust and partnership, our shareholders for your continued support, and to all our employees across Flex. We're looking forward to speaking to all of you again when we report our fourth quarter results, and most importantly, I'm hoping to see most of you in person at our Investor Day, which will be held on 13 May, here in Austin. Thank you, all.
Revathi Advaithi: Thank you. So on behalf of our leadership team, I want to give a sincere thank you to all our customers for their trust and partnership, our shareholders for your continued support, and to all our employees across Flex. We're looking forward to speaking to all of you again when we report our fourth quarter results, and most importantly, I'm hoping to see most of you in person at our Investor Day, which will be held on 13 May, here in Austin. Thank you, all.
Speaker #1: Thank you . I'll now turn the call back over to the CEO for any closing remarks .
Speaker #2: Thank you . So on behalf of our leadership team , I want to give a sincere thank you to all our customers for their trust and partnership .
Speaker #2: shareholders for your continued support . And to all our employees across flex looking forward to speaking to all of you . We're again .
Speaker #2: When we report our fourth quarter results . And most importantly , I'm hoping to see most of you in person Investor Day , at our which will be held on May 13th here in you Austin .
Operator: Thank you. This now concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Thank you. This now concludes today's conference call. Thank you for joining. You may now disconnect.
