Q1 2027 Flex Ltd Earnings Call

July 29, 2026

Speaker #1: Understanding why. Welcome to Flex's first quarter fiscal 2027 earnings conference call. Presently, all participants are in the listen-only mode. After the speaker's remarks, there'll be a question-and-answer session.

Speaker #1: If you'd like to ask a question, please press star 1 on your phone. If you'd like to withdraw your question, please press star 2.

Speaker #1: As a reminder, this call is being recorded. I will now turn the call over to Mrs. Michelle Simmons. Mrs. Simmons, you may begin.

Speaker #2: Good morning. And thank you for joining us today for Flex's first quarter fiscal 2027 earnings conference call. With me today is Ravithi Advisi, our Chief Executive Officer, Kevin Crumb, our Chief Financial Officer, and Michael Hartung, our Chief Commercial Officer.

Speaker #2: 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 call contains forward-looking statements, which are based on current expectations and assumptions.

Speaker #2: These statements involve risks and uncertainties that could cause actual results to differ materially. These statements reflect expected results for the full fiscal year, and did not give effect to the planned spin-off of the Cloud & Power Infrastructure segment.

Speaker #2: For a full discussion of these risks and uncertainties, please see the cautionary statement in our presentation press release, or in the Risk Factors section on our most recent filings with the SEC.

Operator: Thank you for standing by. Welcome to Flex's first quarter fiscal 2027 earnings conference call. Presently, all participants are in listen-only mode. After the speakers' remarks, there'll be a question and answer session. If you'd like to ask a question, please press star one on your phone. If you'd like to withdraw your question, please press star two. As a reminder, this call is being recorded. I will now turn the call over to Mrs. Michelle Simmons. Mrs. Simmons, you may begin.

Speaker #2: 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.

Speaker #1: press star 1 on your phone. If you'd like to withdraw your question, please press star 2. As a reminder, this call is being recorded.

Speaker #2: Additionally, all results will be on a non-GAAP basis unless we specifically state 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 in the summary financials posted on the Investor Relations website.

Speaker #1: Mrs. Simmons,

Speaker #2: Good morning. And thank you for joining us today for FLEX's first quarter fiscal 2027 earnings conference call. With me today is Revathi Advaithi, our Chief Executive Officer, Kevin Krumm, our Chief Financial Officer, and Michael Officer. as a copy of the earnings press release, are available on the Investor Relations section at flex.com. is being recorded and will be available for replay on our corporate website.

Michelle Simmons: Good morning, and thank you for joining us today for Flex's first quarter fiscal 2027 earnings conference call. With me today is Revathi Advaithi, our Chief Executive Officer, Kevin Krumm, our Chief Financial Officer, and Michael Hartung, our Chief Commercial Officer. 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. These statements reflect expected results for the full fiscal year and did not give effect to the planned spin-off of the Cloud and Power Infrastructure segment.

Speaker #2: Now I'd like to turn the call over to our CEO. Ravithi?

Speaker #3: Good morning, and thank you, Michelle. In Q1, our teams delivered another exceptional quarter while continuing to prepare two industry-leading companies for the next phase of growth as standalone businesses.

Speaker #2: section at flex.com. This call 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.

Speaker #3: We delivered strong revenue growth, margin expansion across all three segments, and record adjusted earnings per share of $1. Our Cloud & Power Infrastructure segment grew 35% year-over-year, and as we stated before, our investments in this business are on track to drive accelerated growth and margin expansion in the second half of the fiscal year.

Speaker #2: Cloud & Power Infrastructure segment. For a full discussion of these risks and uncertainties, please see the cautionary statement in our presentation, press release, or in the Risk Factors section at our most recent filings with the SEC.

Speaker #3: We also saw strong growth in our communications and industrial business units driven by high-value markets such as networking, automation, and energy infrastructure. Now, we're in the midst of a generational build-out driven by AI and demand is not slowing down.

Michelle Simmons: For a full discussion of these risks and uncertainties, please see the cautionary statement in our presentation, press release, or in the Risk Factors section in our most recent filings with the SEC. 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 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 in the summary financials posted on the investor relations website. Now I'd like to turn the call over to our CEO. Revathi?

Speaker #2: 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.

Speaker #3: We have built two focus companies to win in the AI era, and these results reflect the strength of our strategy. Our results also reflect our focus on long-term execution.

Speaker #3: Our addition to the S&P 500 last month reflects our progress over the last several years, and the enduring strength of our strategy. We also continue to build momentum in some of our fastest-growing markets, expanding our partnership with Cerebras to scale manufacturing of the CS3, one of the world's most advanced AI accelerator systems right here in the United States.

Speaker #2: Now I'd like to turn the call over to our CEO. Revathi, good morning.

Revathi Advaithi: Good morning, and thank you, Michelle. In Q1, our teams delivered another exceptional quarter while continuing to prepare two industry-leading companies for the next phase of growth as standalone businesses. We delivered strong revenue growth, margin expansion across all three segments, and record adjusted earnings per share of $1. Our Cloud and Power Infrastructure segment grew 35% year-over-year, and as we stated before, our investments in this business are on track to drive accelerated growth and margin expansion in H2 of the fiscal year. We also saw strong growth in our communications and industrial business units, driven by high-value markets such as networking, automation, and energy infrastructure. Now we're in the midst of a generational build-out driven by AI, and demand is not slowing down. We have built two focus companies to win in the AI era, and these results reflect the strength of our strategy.

Speaker #3: And thank you, Michelle. In Q1, our teams delivered another exceptional quarter while continuing to prepare two industry-leading companies for the next phase of growth as standalone businesses.

Speaker #3: We also launched a new liquid cooling solution through JetCool and showcased our next-generation power and infrastructure technologies at Computex. As we continue executing our long-term strategy for both Flex and SpinCo, I want to reiterate our vision for both companies.

Speaker #3: We delivered strong revenue growth, margin expansion across all three segments, and record adjusted earnings per share of $1. Our cloud and power infrastructure segment grew 35% year over year, and as we stated before, our investments in this business are on track to drive accelerated growth and margin expansion in the second half of the fiscal year.

Speaker #3: We have built two great businesses that are entering different phases of growth: the spin allows each company to sharpen its strategic focus, align capital allocation with its growth priorities, and create greater value for customers and shareholders.

Speaker #3: SpinCo requires a capital allocation framework designed for rapid growth as demand for AI infrastructure accelerates. Many people still think about AI as a compute story.

Speaker #3: We have built two focus companies to win in the AI era and these results reflect the strength of our strategy. Our results also reflect our focus on long-term execution.

Speaker #3: I think it's increasingly becoming an infrastructure story, and more specifically a power story. AI may live in the cloud, but the infrastructure behind it is very physical.

Revathi Advaithi: Our results also reflect our focus on long-term execution. Our addition to the S&P 500 last month reflects our progress over the last several years and the enduring strength of our strategy. We also continue to build momentum in some of our fastest-growing markets, expanding our partnership with Cerebras to scale manufacturing of the CS-3, one of the world's most advanced AI accelerator systems right here in the United States. We also launched a new liquid cooling solution through JetCool and showcased our next-generation power and infrastructure technologies at COMPUTEX. As we continue executing our long-term strategy for both FLEX and SpinCo, I want to reiterate our vision for both companies. We have built two great businesses that are entering different phases of growth. The spin allows each company to sharpen its strategic focus, align capital allocation with its growth priorities, and create greater value for customers and shareholders.

Speaker #3: It must be built, powered, cooled, integrated, and deployed at scale. As AI scales, the constraint is no longer just the chip. It's everything around the chip: power, cooling, electrical systems, and ultimately the That's the challenge customers are trying to solve today.

Speaker #3: We saw this coming years ago, and that's why we invested in power compute and thermal management technologies long before AI became front-page news. What started inside Flex is a set of businesses supporting the next-generation of data centers has evolved into a leading solutions provider.

Speaker #3: We also launched a new liquid cooling solution through Jet Cool and showcased our next-generation power and infrastructure technologies at Computex. As we continue executing our long-term strategy for both FLEX and SPINCO, I want to reiterate our vision for both companies.

Speaker #3: I want to be very clear: SpinCo is not a data center components company. It's a digital and electrical infrastructure company built to help customers solve the power cooling and scaling challenges that come with AI.

Speaker #3: We have built two great businesses that are entering different phases of growth. The SPIN allows each company to sharpen its strategic focus, align capital allocation with its growth priorities, and create greater value for customers and shareholders.

Speaker #3: That's where we believe SpinCo's uniquely positioned to excel. We see our ability to bring together power thermal management and compute technologies combined with the ability to deploy these capabilities at global scale as a true differentiator in this space.

Speaker #3: SPINCO requires a capital allocation framework designed for rapid growth as demand for AI infrastructure accelerates. Many people still think about AI as a compute story.

Revathi Advaithi: SpinCo requires a capital allocation framework designed for rapid growth as demand for AI infrastructure accelerates. Many people still think about AI as a compute story. I think it's increasingly becoming an infrastructure story and more specifically, a power story. AI may live in the cloud, but the infrastructure behind it is very physical. It must be built, powered, cooled, integrated, and deployed at scale. As AI scales, the constraint is no longer just the chip. It's everything around the chip: power, cooling, electrical systems, and ultimately, the grid capacity. That's the challenge customers are trying to solve today. We saw this coming years ago, and that's why we invested in power compute and thermal management technologies long before AI became front-page news. What started inside FLEX as a set of businesses supporting the next generation of data centers has evolved into a leading solutions provider.

Speaker #3: I think it's increasingly becoming an infrastructure story and more specifically a power story. AI may live in the cloud, but the infrastructure behind it is very physical.

Speaker #3: We have spent years working alongside the world's leading technology companies as they design, build, and expanded critical infrastructure. That combination of power expertise, systems integration, and execution is difficult to replicate.

Speaker #3: And I would say we're still early. We believe we're at the beginning of one of the largest electrical transformations happening today. What's happening in the data centers is just the starting point.

Speaker #3: As AI scales, demand will extend far beyond compute, driving investment across power systems, cooling technologies, electrical infrastructure, and ultimately the grid itself. That's why we don't view this as a short-term investment cycle.

Speaker #3: That's the challenge customers are trying to solve today. We saw this coming years ago, and that's why we invested in power compute and thermal management technologies long before AI became front-page news.

Speaker #3: The work required to power the next-generation of AI will take years, creating ongoing opportunity across the broader electrical ecosystem with a very long tail.

Speaker #3: What started inside FLEX as a set of businesses supporting the next-generation of data centers has evolved into a leading solutions provider. I want to be very clear: SPINCO is not a data center components company.

Revathi Advaithi: I want to be very clear. SpinCo is not a data center components company. It's a digital and electrical infrastructure company built to help customers solve the power cooling and scaling challenges that come with AI. That's where we believe SpinCo is uniquely positioned to excel. We see our ability to bring together power, thermal management, and compute technologies, combined with the ability to deploy these capabilities at global scale as a true differentiator in this space. We have spent years working alongside the world's leading technology companies as they design, build, and expanded critical infrastructure. That combination of power expertise, systems integration, and execution is difficult to replicate. I would say we're still early. We believe we're at the beginning of one of the largest electrical transformations happening today. What's happening in the data centers is just the starting point.

Speaker #3: We are building SpinCo to lead that transformation. At the same time, Flex is exceptionally well-positioned to drive long-term value creation as a leading global manufacturing platform.

Speaker #3: It's a digital and electrical infrastructure company built to help customers solve the power cooling and scaling challenges that come with AI. That's where we believe SPINCO's uniquely positioned to excel.

Speaker #3: Following the separation, Flex will remain a global manufacturing leader with a proven playbook and strategy, with deep customer relationships across diversified end markets and exposure to attractive long-term secular growth trends.

Speaker #3: We see our ability to bring together power thermal management and compute these capabilities at global scale as a true differentiator in this space. We have spent years working alongside the world's leading technology companies as they design, build, and expanded critical infrastructure.

Speaker #3: These include healthcare, where an aging population and increasing prevalence of chronic disease are driving demand for medical devices and drug delivery solutions. And robotics and warehouse automation, where regionalization and labor shortages support meaningful operations opportunities for continued growth.

Speaker #3: That combination of power expertise, systems integration, and execution is difficult to replicate. And I would say we're still early. We believe we're at the beginning of one of the largest electrical transformations happening today.

Speaker #3: While SpinCo will focus on digital and electrical infrastructure, Flex will continue to benefit from pull-through demand in data centers, providing contract manufacturing services in the advanced networking and energy infrastructure markets.

Speaker #3: What's happening in the data centers is just the starting point. As AI scales, demand will extend far beyond compute, driving investment across power systems, cooling technologies, electrical infrastructure, and ultimately the grid itself.

Revathi Advaithi: As AI scales, demand will extend far beyond compute, driving investment across power systems, cooling technologies, electrical infrastructure, and ultimately, the grid itself. That's why we don't view this as a short-term investment cycle. The work required to power the next generation of AI will take years, creating ongoing opportunity across the broader electrical ecosystem with a very long tail. We are building SpinCo to lead that transformation. At the same time, FLEX is exceptionally well-positioned to drive long-term value creation as a leading global manufacturing platform. Following the separation, FLEX will remain a global manufacturing leader with a proven playbook and strategy, with deep customer relationships across diversified end markets and exposure to attractive long-term secular growth trends. These include healthcare, where an aging population and increasing prevalence of chronic disease are driving demand for medical devices and drug delivery solutions.

Speaker #3: What remains underappreciated is the strength of the Flex portfolio and the related opportunity ahead. The same discipline playbook that has driven our transformation over the last 7 years will continue to guide Flex as it enters this next phase of growth.

Speaker #3: That's why we don't view this as a short-term investment cycle. The work required to power the next-generation of AI will take years, creating ongoing opportunity across the broader electrical ecosystem with a very long tail.

Speaker #3: We are building SPINCO to lead that transformation. At the same time, FLEX is exceptionally well-positioned to drive long-term value creation as a leading global manufacturing platform.

Speaker #3: Ultimately, we are creating two distinct and focused leaders: each with the scale, strategy, and opportunity to succeed on its own. Now, turning to our transaction update on slide 6, our dedicated separation management office and cross-functional teams continue to make tremendous progress towards the separation, and we are on track for tax-free spin-off in the first quarter of calendar 2027.

Speaker #3: Following the separation, FLEX will remain a global manufacturing leader with a proven playbook and strategy, with deep customer relationships across diversified end markets, and exposure to attractive long-term secular growth trends.

Speaker #3: Today, we're also pleased to announce additional leadership appointments for both SpinCo and Flex, effective upon completion of the separation. Thanks to the strong bench and depth of expertise, we have built at Flex in recent years; we have strong leadership teams in place for both companies, ready to execute from day one, providing confidence, clarity, and continuity for our customers, employees, and shareholders.

Revathi Advaithi: Robotics and warehouse automation, where regionalization and labor shortages support meaningful operation opportunities for continued growth. While SpinCo will focus on digital and electrical infrastructure, Flex will continue to benefit from pull-through demand in data centers, providing contract manufacturing services in the advanced networking and energy infrastructure markets. What remains underappreciated is the strength of the Flex portfolio and the related opportunity ahead. The same disciplined playbook that has driven our transformation over the last seven years will continue to guide Flex as it enters this next phase of growth. Ultimately, we are creating two distinct and focused leaders, each with the scale, strategy, and opportunity to succeed on its own. Now turning to our transaction update on slide six.

Speaker #3: While SPINCO will focus on digital and electrical infrastructure, FLEX will continue to benefit from pull-through demand and data centers providing contract manufacturing services in the advanced networking and energy infrastructure markets.

Speaker #3: For more details on the extended leadership teams of each company, please refer to the press release we issued this morning. While it's certainly an exciting and dynamic time at Flex, we're executing from a position of strength.

Speaker #3: What remains underappreciated is the strength of the FLEX portfolio and the related opportunity ahead. The same discipline playbook that has driven our transformation over the last seven years will continue to guide FLEX as it enters this next phase of growth.

Speaker #3: Our teams are winning by delivering incredibly well for our customers, and at the same time executing with discipline to deliver exceptional results. We are excited about what's ahead, and we look forward to sharing more in the months to come including at our investor day on November 10th, where we will provide additional details on the path forward for both companies.

Speaker #3: Ultimately, we are creating two distinct and focused leaders. Each with the scale, strategy, and opportunity to succeed on its own. Now turning to our transaction update on slide six, our dedicated separation management office and cross-functional teams continue to make tremendous progress towards the separation, and we are on track for tax-free spin-off in the first quarter of calendar 2027.

Speaker #3: With that, I'll turn the call over to Kevin, who will walk through the financials in more detail.

Revathi Advaithi: Our dedicated separation management office and cross-functional teams continue to make tremendous progress towards the separation, and we are on track for tax-free spin-off in Q1 of calendar 2027. Today, we are also pleased to announce additional leadership appointments for both SpinCo and Flex, effective upon completion of the separation. Thanks to the strong bench and depth of expertise we have built at Flex in recent years, we have strong leadership teams in place for both companies ready to execute from day one, providing confidence, clarity, and continuity for our customers, employees, and shareholders. For more details on the extended leadership teams of each company, please refer to the press release we issued this morning. While it's certainly an exciting and dynamic time at Flex, we are executing from a position of strength.

Speaker #1: Thank you, Revathi. And good morning, everyone. I'm honored to be a part of this exciting journey and to work alongside both teams during this transformative period.

Speaker #1: It has been an incredible journey so far, and I'm energized about the opportunities in front of these businesses. I'll now review our results for the first quarter, fiscal year 27, which reflects strong execution as we continue preparing for the upcoming spin-off of our cloud and power infrastructure segment.

Speaker #3: Today, we're also pleased to announce additional leadership appointments for both SPINCO and FLEX, effective upon completion of the separation. Thanks to the strong bench and depth of expertise, we have built at FLEX in recent years; we have strong leadership teams in place for both companies, ready to execute from day one, providing confidence, clarity, and continuity for our customers, employees, and shareholders.

Speaker #1: I'll start with our key financials on slide 8. First quarter revenue came in at $7.9 billion, up 21% year over year. Adjusted gross profit totaled $761 million, and adjusted gross margin improved to 9.6%, up 50 basis points from the prior year.

Speaker #1: Adjusted operating profit was $534 million, up 35% year over year, with adjusted operating margins at 6.7%, up 70 basis points from the prior year, driven by business mix and underlying productivity improvements.

Speaker #3: Our teams are winning by delivering incredibly well for our customers and, at the same time, executing with discipline to deliver exceptional results. We are excited about what's ahead, and we look forward to sharing more in the months to come including at our investor day on November 10th, where we will provide additional details on the path forward for both companies.

Revathi Advaithi: Our teams are winning by delivering incredibly well for our customers, at the same time executing with discipline to deliver exceptional results. We are excited about what's ahead, we look forward to sharing more in the months to come, including at our Investor Day on 10 November, where we will provide additional details on the path forward for both companies. With that, I will turn the call over to Kevin, who will walk through the financials in more detail.

Speaker #1: Finally, adjusted earnings per share for the quarter increased to $1 per share, up 39% year over year. Turning to our quarterly segment results on the next slide, regulated manufacturing solutions revenue were $2.7 billion, up 12% year over year, driven by strength in industrial.

Speaker #3: With that, I'll turn the call over to Kevin, who will walk through the financials in more detail.

Speaker #1: Adjusted operating income was $176 million, and adjusted operating margin was 6.6%, up 130 basis points year over year, driven by the aforementioned strong performance in industrial.

Speaker #1: Thank you, Revathi. And good morning, everyone. I'm honored to be a part of this exciting journey and to work alongside both teams during this transformative period.

Kevin Krumm: Thank you, Revathi, good morning, everyone. I am honored to be a part of this exciting journey, to work alongside both teams during this transformative period. It has been an incredible journey so far, I am energized about the opportunities in front of these businesses. I will now review our results for Q1 FY27, which reflects strong execution as we continue preparing for the upcoming spin-off of our Cloud and Power Infrastructure segment. I will start with our key financials on slide eight. Q1 revenue came in at $7.9 billion, up 21% year over year. Adjusted gross profit totaled $761 million, adjusted gross margin improved to 9.6%, up 50 basis points from the prior year.

Speaker #1: Revenue from integrated technology solutions segment totaled $3.1 billion, an increase of 20% year over year, driven by exceptional growth in communications. Adjusted operating income was $158 million, and adjusted operating margin was 5.2%, up 10 basis points year over year, driven by the strong performance in communications and offset by weakness in consumer-related end markets.

Speaker #1: I'll start with our key financials on slide eight. First quarter revenue came in at $7.9 billion, up 21% year over year. Adjusted gross profit totaled $761 million, and adjusted gross margin improved to 9.6%, up 50 basis points from the prior year.

Speaker #1: Finally, cloud and power infrastructure revenue totaled $2.2 billion, up 35% from the prior year, driven by strong growth in power as cloud and cooling continues to ramp new programs.

Kevin Krumm: Adjusted operating profit was $534 million, up 35% year over year, with adjusted operating margins at 6.7%, up 70 basis points from the prior year, driven by business mix and underlying productivity improvements. Finally, adjusted earnings per share for the quarter increased to $1 per share, up 39% year over year. Turning to our quarterly segment results on the next slide. Regulated Manufacturing Solutions revenue were $2.7 billion, up 12% year over year, driven by strength in industrial. Adjusted operating income was $176 million, and adjusted operating margin was 6.6%, up 130 basis points year over year, driven by the aforementioned strong performance in industrial. Revenue from Integrated Technology Solutions segment totaled $3.1 billion, an increase of 20% year over year, driven by exceptional growth in communications.

Speaker #1: Adjusted operating income was $214 million, and adjusted operating margin was 9.7%, up 20 basis points year over year, driven by growth and margin expansion in power.

Speaker #1: Moving to cash flow on slide 10, free cash flow in the quarter was $41 million. Free cash flow was negatively impacted by one-time cash costs of $24 million driven by activity related to the announced spin-off.

Speaker #1: Q1 inventory was up 10% sequentially, and 24% year over year, largely driven by revenue growth. Inventory, net of working capital advances, was $56 days, an increase of 1 day from the prior year.

Speaker #1: Adjusted operating income was $176 million, and adjusted operating margin was 6.6%, up 130 basis points year over year, driven by the aforementioned strong performance in industrial.

Speaker #1: First quarter net capex totaled $235 million, or approximately 3% of revenue. Turning to our updated outlook on slide 11, for fiscal year 27, our expectations are the following: revenue to be between 33.7 and 35.2 billion dollars, up 23% at the midpoint.

Kevin Krumm: Adjusted operating income was $158 million, and adjusted operating margin was 5.2%, up 10 basis points year over year, driven by the strong performance in communication and offset by weakness in consumer-related end markets. Finally, Cloud and Power Infrastructure revenue totaled $2.2 billion, up 35% from the prior year, driven by strong growth in power as cloud and cooling continues to ramp new programs. Adjusted operating income was $214 million, and adjusted operating margin was 9.7%, up 20 basis points year over year, driven by growth and margin expansion in power. Moving to cash flow on slide 10. Free cash flow in the quarter was $41 million. Free cash flow was negatively impacted by one-time cash costs of $24 million, driven by activity related to the announced spin-off. Q1 inventory was up 10% sequentially and 24% year over year, largely driven by revenue growth.

Speaker #1: Adjusted operating margin to be between 7% and 7.2%, an increase of approximately 80 basis points year over year at the midpoint. We expect an adjusted tax rate of approximately 21%.

Speaker #1: Finally, cloud and power infrastructure revenue totaled $2.2 billion, up 35% from the prior year, driven by strong growth in power as cloud and cooling continues to ramp new programs.

Speaker #1: We expect adjusted EPS to be between $4.42 and $4.74 a share, up 39% at the midpoint. Finally, we expect capex to be in the range of $1.5 to $1.6 billion, as a reminder, our prior guidance for free cash flow conversion of 60% excluded costs associated with the spin-off of our CPI segment.

Speaker #1: Adjusted operating income was $214 million, and adjusted operating margin was 9.7%, up 20 basis points year over year, driven by growth and margin expansion in power.

Speaker #1: Moving to cash flow on slide 10, free cash flow in the quarter was $41 million. Free cash flow was negatively impacted by one-time cash costs of $24 million, driven by activity related to the announced spin-off.

Speaker #1: Incorporating costs associated with the spin-off, we now expect free cash flow conversion to be approximately 40%. Moving to our updated fiscal year 27 segment outlook, for RMS, we expect revenue to be up mid-single digits to high-single digits due to continued strength and high value end markets within industrial, including warehouse automation, robotics, and energy infrastructure.

Kevin Krumm: Inventory net of working capital advances was 56 days, an increase of one day from the prior year. First quarter net CapEx totaled $235 million, or approximately 3% of revenue. Turning to our updated outlook on slide 11. For fiscal year 2027, our expectations are the following. Revenue to be between $33.7 and $35.2 billion, up 23% at the midpoint. Adjusted operating margin to be between 7% and 7.2%, an increase of approximately 80 basis points year over year at the midpoint. We expect an adjusted tax rate of approximately 21%. We expect adjusted DPS to be between $4.42 and $4.74 a share, up 39% at the midpoint. Finally, we expect CapEx to be in the range of $1.5 to $1.6 billion. As a reminder, our prior guidance for free cash flow conversion of 60% excluded costs associated with the spin-off of our CPI segment.

Speaker #1: For ITS, we expect revenue to be up high-single digits to low double digits, driven by continued strong performance in communications. And for CPI, we expect revenue to be up 65 to 75 percent, driven by both cloud and power, with power's growth rate exceeding clouds.

Speaker #1: Finishing off with our guidance for the second quarter on slide 13, we expect RMS revenue to be up mid-single digits to high-single digits on continued strength in industrial.

Speaker #1: Adjusted operating margin to be between 7% and 7.2%, an increase of approximately 80 basis points year over year at the midpoint. We expect an adjusted tax rate of approximately 21%.

Speaker #1: We expect ITS revenue to be up high-single digits to low double digits on continued strength in communications, offset by weakness in consumer-related end markets.

Speaker #1: We expect CPI revenue to be up 45 to 55 percent, as new programs continue to ramp in both cloud and power. For total flex, we expect revenue in the range of $7.95 to $8.25 billion.

Speaker #1: Up 19% at the midpoint, with adjusted operating income between $535 and $565 million. Interest and other expense is estimated to be around $58 million, and the adjusted tax rate to be around 21%.

Kevin Krumm: Incorporating costs associated with the spin-off, we now expect free cash flow conversion to be approximately 40%. Moving to our updated fiscal year 2027 segment outlook. For RMS, we expect revenue to be up mid-single digits to high single digits due to continued strength in high-value end markets within industrial, including warehouse automation, robotics, and energy infrastructure. For ITS, we expect revenue to be up high single digits to low double digits, driven by continued strong performance in communications. For CPI, we expect revenue to be up 65% to 75%, driven by both cloud and power, with power's growth rate exceeding cloud's. Finishing off with our guidance for Q2 on slide 13. We expect RMS revenue to be up mid-single digits to high single digits on continued strength in industrial.

Speaker #1: Lastly, we anticipate adjusted EPS to be between $1 and $1.07 per share, up 32% at the midpoint, based on approximately 375 million weighted average shares outstanding.

Speaker #1: In summary, we are off to a strong start for fiscal year 27, and we are well positioned to deliver upon the commitments we made at the beginning of the year.

Speaker #1: With that, I'll now turn the call back over to the operator to begin Q&A.

Speaker #2: Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad.

Speaker #1: Finishing off with our guidance for the second quarter on slide 13, we expect RMS revenue to be up mid-single digits to high-single digits on continued strength in industrial.

Speaker #2: If you'd like to move your question from the queue, please press star 2. We ask you to please ask one question in one follow-up, then return to the queue.

Speaker #1: We expect ITS revenue to be up high-single digits to low double digits on continued strength in communications, offset by weakness in consumer-related end markets.

Kevin Krumm: We expect ITS revenue to be up high single digits to low double digits on continued strength in communications, offset by weakness in consumer-related end markets. We expect CPI revenue to be up 45% to 55% as new programs continue to ramp in both Cloud and Power. For total Flex, we expect revenue in the range of $7.95 to $8.25 billion, up 19% at the midpoint, with adjusted operating income between $535 and $565 million. Interest and other expense is estimated to be around $58 million, and the adjusted tax rate to be around 21%. Lastly, we anticipate adjusted EPS to be between $1 and $1.7 per share, up 32% at the midpoint based on approximately 375 million weighted average shares outstanding.

Speaker #2: Once again, that's star 1 to be placed into question queue, and a confirmation tone will indicate your line is in the question queue. Our first question today is coming from Rupal Bhattacharya from Bank of America.

Speaker #1: We expect CPI revenue to be up 45 to 55 percent, as new programs continue to ramp in both cloud and power. For total FLEX, we expect revenue in the range of $7.95 to $8.25 billion.

Speaker #2: Your line is now live.

Speaker #3: Hi. Thanks for taking my question. Today would be my first question is on margins in the CPI segment. Looks like revenues grew sequentially, but op margin was slightly lower, maybe 20 bits.

Speaker #3: Is that because of program ramps that you're focused on? And in a broader sense, can you talk about growth drivers for margins in this segment?

Speaker #3: Power has good margins, but today lower than some of its peers. So how do you plan to grow margins in the power segment? And then for compute, what guardrails do you have to make sure margins remain within your target range, as some AI projects could have lower margins?

Speaker #1: Lastly, we anticipate adjusted EPS to be between $1 and $1.07 per share, up 32% at the midpoint, based on approximately $375 million weighted average shares outstanding.

Speaker #3: And I have a follow-up. Thank you.

Speaker #1: In summary, we are off to a strong start for fiscal year 27, and we are well positioned to deliver upon the commitments we made at the beginning of the year.

Kevin Krumm: In summary, we are off to a strong start for fiscal year 2027, and we are well-positioned to deliver upon the commitments we made at the beginning of the year. With that, I will now turn the call back over the operator to begin Q&A.

Speaker #4: Yeah, Rupal, thanks for that question. I would say that margins in CPI is pretty much in track with the guidance we gave for the quarter and the year.

Speaker #1: With that, I'll now turn the call back over to the operator to begin Q&A.

Speaker #4: We said that in the CPI segment that the revenue is kind of back half-loaded. We have been making investments in that, and then we also said that we expect to have at least 100 basis points improvement in margin in the CPI segment for the year from a year-over-year perspective.

Speaker #2: Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to be placed into question queue, please press star one on your telephone keypad. If you would like to remove your question from the queue, please press star two. We ask you please ask one question and one follow-up, then return to the queue. Once again, that is star one to be placed into the question queue, and a confirmation tone will indicate your line is in the question queue. Our first question today is coming from Ruplu Bhattacharya from Bank of America. Your line is now live.

Speaker #2: If you'd like to move your question from the queue, please press star two. We ask you to please ask one question in one follow-up, then return to the queue.

Speaker #4: And we're on track with that. So feel very good about that. I would say what guides margins for this segment, obviously on the compute side, we have been executing on that strategy for a while, and we're fairly mature in these.

Speaker #2: Once again, that's star one to be placed into question queue and a confirmation tone will indicate your line is in the question queue. Our first question today is coming from Rupal Bhattacharya from Bank of America.

Speaker #2: Your line is now live.

Speaker #4: When there are new programs which there are always significant new programs initially, there's some investment, but when the program matures, then kind of the margin flow-through rate is pretty good.

Speaker #3: Hi. Thanks for taking my questions. Today would be my first question is on margins in the CPI segment. Looks like revenues grew sequentially, but up margin was slightly lower, maybe 20 bits.

Ruplu Bhattacharya: Hi. Thanks for taking my questions. Revathi, my first question is on margins in the CPI segment. Looks like revenues grew sequentially, but op margin was slightly lower, maybe 20 basis points. Is that because of program ramps that you are focused on? In a broader sense, can you talk about growth drivers for margins in this segment? Power has good margins, but today lower than some of its peers. How do you plan to grow margins in the Power segment? For compute, what guardrails do you have to make sure margins remain within your target range, as some AI projects could have lower margins? I have a follow-up. Thank you.

Speaker #4: So those ups and downs in the cloud side and the compute integration side is part of the game. But as you have seen in our folio results, typically, that through the year we do pretty well in terms of both revenue and our margin.

Speaker #3: Is that because of program ramps that your focused on? And in a broader sense, can you talk about growth drivers for margins in this segment?

Speaker #4: I would say on the power side, we have said that, hey, we've built the power business through a whole bunch of acquisitions, which requires investment, particularly when these businesses are growing at 70-plus percent.

Speaker #3: And I have a follow-up. Thank you.

Speaker #4: So we're making those investments, and that drives kind of requirement for the margin to be slightly muted compared to our peers, but we're very comfortable with moving it in the direction of where the peers in the electrical infrastructure are.

Speaker #4: Yeah, Rupal, thanks for that question. I would say that margins in CPI is pretty much in track with the guidance we gave for the quarter and the year.

Revathi Advaithi: Yeah, Ruplu, thanks for that question. I would say that margins in Cloud and Power Infrastructure is pretty much on track with the guidance we gave for the quarter and the year. We said that in the Cloud and Power Infrastructure segment that the revenue is kind of back half loaded. We have been making investments in that. We also said that we expect to have at least 100 basis points improvement in margin in the Cloud and Power Infrastructure segment for the year from a year-over-year perspective, and we're on track with that. Feel very good about that. I would say what guides margins for this segment, obviously on the compute side, we have been executing on that strategy for a while, and we're fairly mature in these.

Speaker #4: We said that in the CPI segment that the revenue is kind of back half loaded. We have been making investments in that. And then we also said that we expect to have at least 100 basis points improvement in margin in the CPI segment for the year from a year-over-year perspective.

Speaker #4: So I'd say, Rupal, in summary, CPI is absolutely where we said the quarter would be and where the guide would be for the year.

Speaker #4: And we're on track to deliver the margin improvement, just as we said for kind of our current fiscal year.

Speaker #3: Okay. Thanks for the details there, Revathi. The follow-up maybe is for Michael or for Kevin. When you think about the segments and remain code, the regulated markets and especially the ITS segments, are you happy with the product portfolio?

Revathi Advaithi: When there are new programs, which there are always significant new programs, initially there's some investment, when the program matures, kind of the margin flow-through rate is pretty good. Those ups and downs in the cloud side and the compute integration side is part of the game. As you have seen in our full-year results, typically, that through the year, we do pretty well in terms of both revenue and our margin. I'd say on the power side, we've said that, hey, we've built the power business through a whole bunch of acquisitions, which requires investment, particularly when these businesses are growing at 70%+. We're making those investments, and that drives kind of requirement for the margin to be slightly muted compared to our peers, we're very comfortable with moving it in the direction of where the peers in the electrical infrastructure are.

Speaker #3: I mean, if the focus is on longer life cycle, higher margin segments, is there more potential to do more pruning or more optimization of both the portfolio as well as the footprint?

Speaker #4: So those ups and downs in the cloud side and the compute integration side is part of the game. But as you have seen in our full year results, typically, that through the year we do pretty well in terms of both revenue and our margin.

Speaker #3: So how are you thinking about that as you look out over the next couple of years? Thank you.

Speaker #5: Yes. Good morning, Rupal. Thanks for the question. I'd say we're absolutely happy with where we're starting from in the business. And if you might recall, our strategy going forward will be to continue to emphasize the high-value growth markets that are tied to these longer-term secular trends.

Speaker #5: And these markets exist in both the RMS business and the ITS business. So up to this point in time, we've been deploying capital, both human and financial, towards the highest returns, and that's been the data center.

Speaker #4: So we're making those investments, and that drives kind of requirement for the margin to be slightly muted compared to our peers. But we're very comfortable with moving it in the direction of where the peers in the electrical infrastructure are.

Speaker #5: The strategic clarity, as a result of the spin, enables us to provide greater focus on those high-value growth markets. In terms of optimization, a regular part of our process here in the business is to always look to optimize the portfolio.

Speaker #4: So I'd say, Rupal, in summary, CPI is absolutely where we said the quarter would be and where the guide would be for the year.

Revathi Advaithi: I'd say, Ruplu, in summary, Cloud and Power Infrastructure is absolutely where we said the quarter would be and where the guide would be for the year. We're on track to deliver the margin improvement just as we said for kind of our current fiscal year.

Speaker #4: And we're on track to deliver the margin improvement, just as we said for kind of our current fiscal year.

Speaker #5: You've seen the benefits of that in our Q4 results, our Q1 results, and our guide. And we expect to continue to optimize the portfolio as we go forward in the theme of emphasizing high-value markets and de-emphasizing low-value markets along the way.

Speaker #3: Okay. Thanks for the details there, Revathi. The follow-up maybe is for Michael or for Kevin. When you think about the segments in remaining quarter, regulated markets and especially the ITS segments, are you happy with the product portfolio?

Ruplu Bhattacharya: Okay. Thanks for the details there, Revathi. The follow-up maybe is for Michael or for Kevin. When you think about the segments in RemainCo, the Regulated Manufacturing Solutions and especially the Integrated Technology Solutions segments, are you happy with the product portfolio? I mean, if the focus is on longer life cycle, higher margin segments, is there more potential to do more pruning or more optimization of both the portfolio as well as the footprint? How are you thinking about that as you look out over the next couple of years? Thank you.

Speaker #5: So in short, really pleased with the starting point of where we jump off from on this business.

Speaker #3: I mean, if the focus is on longer life cycle, higher margin segments, is there more potential to do more pruning or more optimization of both the portfolio as well as the footprint?

Speaker #3: Thank you for all the details.

Speaker #2: Thank you. Our next question today is coming from Mark Delaney from Goldman Sachs. Your line is now live.

Speaker #1: Yes. Good morning, and thank you very much for taking the questions. I was hoping to start on CPI. I think the folio guidance for CPI revenue implies two-age revenue is up closer to 100%, so some acceleration.

Speaker #3: So how are you thinking about that as you look out over the next couple of years? Thank you.

Kevin Krumm: Yes. Good morning, Ruplu. Thanks for the question. I'd say we're absolutely happy with where we're starting from in the business. If you might recall, our strategy going forward will be to continue to emphasize the high-value growth markets that are tied to these longer-term secular trends. These markets exist in both the RMS business and the ITS business. Up to this point in time, we've been deploying capital, both human and financial, towards the highest returns, and that's been the data center. The strategic clarity as a result of the spin enables us to provide greater focus on those high-value growth markets. In terms of optimization, a regular part of our process here in the business is to always look to optimize the portfolio.

Speaker #1: I know the company has program wins, as you were just describing, but can you speak more on your visibility into that acceleration for two-age?

Speaker #1: And on that kind of broader theme of visibility into the CPI growth, any change in your views for CPI into next year? Because I think you were expecting an acceleration to over 80% growth for fiscal 28.

Speaker #5: Mark, good morning. This is Kevin. From a CPI perspective, yeah, directionally, the ramp that you were referring to is what's going to happen as we move through the year.

Speaker #5: The strategic clarity as a result of the spin enables us to provide greater focus on those high-value growth markets. In terms of optimization, a regular part of our process here in the business is to always look to optimize the portfolio.

Speaker #5: So we started at 35% in Q1. We're guiding to 45 to 55 in Q2, and then still the 65 to 75 for the full year.

Kevin Krumm: You've seen the benefits of that in our Q4 results, our Q1 results, and our guide, and we expect to continue to optimize the portfolio as we go forward in the theme of emphasizing high-value markets and de-emphasizing low-value markets along the way. In short, really pleased with the starting point of where we jump off from on this business.

Speaker #5: So certainly, strong growth in the back half of the year, as you referenced. I would say from a visibility standpoint, we've talked about our demand see-through in this business, and it remains strong.

Speaker #5: We're still at that 90%-plus booked business at this point. For the next three quarters. So we feel good and remain confident in our visibility around this business.

Speaker #5: So in short, really pleased with the starting point of where we jump off from on this business.

Speaker #3: Thank you for all the details.

Ruplu Bhattacharya: Thank you for all the details.

Speaker #2: Thank you. Our next question today is coming from Mark Delaney from Goldman Sachs. Your line is now live.

Operator: Thank you. Our next question today is coming in from Mark Delaney from Goldman Sachs. Your line is now live.

Speaker #5: I would say as we think about next year, while we're not going to guide to next year on a quarterly basis, the framework that we offered earlier in the year still holds, and we expect the investments that we're making this year in CapEx and the ramp we see in the back half of the year to continue strong growth performance next year and our visibility next year still remains robust.

Speaker #6: Yes. Good morning, and thank you very much for taking the questions. I was hoping to start on CPI. I think the full year guidance for CPI revenue implies two-age revenue is up closer to 100%, so some acceleration.

Mark Delaney: Yes, good morning, and thank you very much for taking the questions. I was hoping to start on CPI. I think the full year guidance for CPI revenue implies H2 revenue is up closer to 100%, so some acceleration. Can you speak more on your visibility into that acceleration for H2? On that kind of broader theme of visibility into the CPI growth, any change in your views for CPI into next year? Because I think you were expecting an acceleration to over 80% growth for fiscal 2028.

Speaker #6: I know the company has program wins, as you were just describing, but can you speak more on your visibility into that acceleration for two-age?

Speaker #6: And on that kind of broader theme of visibility into the CPI growth, any change in your views for CPI into next year? Because I think you were expecting an acceleration to over 80% growth for fiscal '28.

Speaker #1: That's helpful context. My other question was on cooling and Revathi, you mentioned jet cool and spoke about cooling. So I was hoping you could give a bit more detail on how big that market might be for Flex today.

Speaker #1: And maybe more qualitatively, if you could speak around the traction that you're seeing in areas like cold plates and CDUs. Thank you.

Speaker #5: Mark, good morning. This is Kevin. From a CPI perspective, yeah, directionally, the ramp that you were referring to is what's going to happen as we move through the year.

Kevin Krumm: Mark, good morning. This is Kevin. From a CPI perspective, directionally, the ramp that you were referring to is what's going to happen as we move through the year. We started at 35% in Q1. We're guiding to 45% to 55% in Q2, and then still the 65% to 75% for the full year. Certainly, strong growth in H2 as you referenced. I would say from a visibility standpoint, we've talked about our demand see-through in this business, and it remains strong. We're still at that 90% plus booked business at this point for the next three quarters. We feel good and remain confident in our visibility around this business.

Speaker #4: Yeah. I'd say, Mark, the market itself for cooling liquid cooling, as you're aware, is growing quite well and the market size is increasing as more air cooling is getting replaced with liquid cooling.

Speaker #5: So we started at 35% in Q1. We're guiding to 45 to 55 in Q2, and then still the 65 to 75 for the full year.

Speaker #4: I'd say our acquisition with Jet Cool really got us some cold plate capability. I'd say industry-leading cold plate capability. And then we had to develop and introduce CDUs into the market.

Speaker #4: So we're in the process of qualifying those products with the right-end customers to scale that business up. It also gave us kind of manufacturing capability and co-design capability with some customers who already have their cooling product that helps us co-design with them.

Speaker #5: We're still at that 90%-plus booked business at this point. For the next three quarters. So we feel good and remain confident in our visibility around this business.

Kevin Krumm: I would say as we think about next year, while we're not going to guide to next year on a quarterly basis, the framework that we offered earlier in the year still holds, and we expect the investments that we're making this year in CapEx and the ramp we see in H2 to continue strong growth performance next year, and our visibility next year still remains robust.

Speaker #4: The way I think about cooling in the CPI portfolio is that it's still nascent. And it will be a pretty important part of our growth strategy overall for CPI.

Speaker #4: Within the cloud segment. So we're pretty bullish about it. I would say, but there's work to be done in terms of scaling that business to where we need it to go.

Speaker #6: That's helpful context. My other question was on cooling and Revathi, you mentioned jet cool and spoke about cooling. So I was hoping you could give a bit more detail on how big that market might be for FLEX today and maybe more qualitatively, if you could speak around the traction that you're seeing in areas like cold plates and CDs.

Mark Delaney: That's helpful context. My other question was on cooling, and Revathi, you mentioned JetCool and spoke about cooling. I was hoping you could give a bit more detail on how big that market might be for Flex today, and maybe more qualitatively, if you could speak around the traction that you're seeing in areas like cold plates and CDUs. Thank you.

Speaker #2: Thank you. Our next question today is coming from Tim Long from Barclays. Your line is now live.

Speaker #3: Thank you. Yeah. Just one and then a follow-up, if I could. On the communications business, it sounds like it was really strong in the outlooks very favorable there.

Speaker #6: Thank you.

Speaker #3: But just give us a little bit of color on kind of visibility, sustainability of that strength. How broad-based is it in the customer base?

Revathi Advaithi: Mark, the market itself for cooling, liquid cooling, as you're aware, is growing quite well, and the market size is increasing as more air cooling is getting replaced with liquid cooling. I'd say our acquisition with JetCool really got us some cold plate capability. I'd say industry-leading cold plate capability, and then we had to develop and introduce CDUs into the market. We're in the process of qualifying those products with the right end customers to scale that business up. It also gave us kind of manufacturing capability and co-design capability with some customers who already have their cooling product that helps us co-design with them. The way I think about cooling in the CPI portfolio is that it's still nascent, and it will be a pretty important part of our growth strategy overall for CPI within the cloud segment.

Speaker #3: And then I'll come back with a follow-up. Thank you.

Speaker #5: Good morning, Tim. Thanks for the question. Yeah. We've identified within our communications business that our advanced networking business, in particular, is one of those high-value growth markets that we expect to drive growth over a sustained period in our business.

Speaker #4: I'd say our acquisition with jet cool really got us some cold plate capability. I'd say industry-leading cold plate capability and then we had to develop and introduce CDUs into the market.

Speaker #5: And that's being positively influenced by pull-through demand from the data center. So if you step back and think about this business communications continues to be one of our largest healthiest businesses.

Speaker #5: In Romainco going forward, it will continue to really spread across not just high-speed switches, but optical switches, network interface cards. So it's fairly broad-based within that advanced networking ecosystem.

Speaker #4: The way I think about cooling in the CPI portfolio is that it's still nascent. And it will be a pretty important part of our growth strategy overall for CPI.

Speaker #5: And very much tied to this sustained demand from the data center.

Speaker #4: Within the cloud segment. So we're pretty bullish about it. I would say, but there's work to be done in terms of scaling that business to where we need it to go.

Revathi Advaithi: We're pretty bullish about it, I would say, but there's work to be done in terms of scaling that business to where we need it to go.

Speaker #3: Okay. Great. Great. And then maybe a follow-up for Revathi. You mentioned kind of being able to bundle or a little bit more have a full solution power cooling rack.

Speaker #2: Thank you. Our next question today is coming from Tim Long from Barclays. Your line is now live.

Operator: Thank you. Our next question today is coming from Tim Long from Barclays. Your line is now live.

Speaker #3: Could you just touch on kind of I know it's early on the cooling side, but maybe just give us some examples or some thoughts of customer activity where you're seeing the benefit of having these multiple pieces.

Speaker #3: Thank you. Yeah. Just one and then a follow-up, if I could. On the communications business, it sounds like it was really strong in the outlooks very favorable there.

Tim Long: Thank you. Just one and then a follow-up, if I could. On the communications business, it sounds like it was really strong. The outlook's very favorable there, but just give us a little bit of color on kind of visibility, sustainability of that strength, how broad-based is it in the customer base? I'll come back with a follow-up. Thank you.

Speaker #3: But just give us a little bit of color on kind of visibility, sustainability of that strength. How broad-based is it in the customer base?

Speaker #4: Yeah. I'd say, Tim, that we are seeing it across multiple customers, hyperscalers, without naming any. I would say that you can see that most customers now are quickly thinking about, "Hey, we need to before we deploy the next generation silicon, we need to be thinking about power capability and power requirements." They're already thinking about, "How does life look like when we go to an SST technology?" So we're seeing a lot of conversations at a very high level and strategic level with customers on kind of silicon cooling, power, how all that comes together for next generation products, which we didn't see two and three years ago because what customers don't want to be is in the situation they are today where the power requirement becomes an afterthought, and then we are in a struggle to make sure that we have enough power to for these data centers.

Speaker #3: And then I'll come back with a follow-up. Thank you.

Speaker #5: Good morning, Tim. Thanks for the question. Yeah. communications business that our advanced networking business in particular is one of those high-value growth markets that we expect to drive growth over a sustained period in our business.

Kevin Krumm: Good morning, Tim. Thanks for the question. Yeah, we've identified within our communications business that our advanced networking business in particular is one of those high-value growth markets that we expect to drive growth over a sustained period in our business, and that's being positively influenced by pull-through demand from the data center. If you step back and think about this business, communications continues to be one of our largest, healthiest businesses in RemainCo going forward. It will continue to really spread across not just high-speed switches, but optical switches, network interface cards. It's fairly broad-based within that advanced networking ecosystem and very much tied to the sustained demand from the data center.

Speaker #5: And very much tied to this sustained demand from the data center.

Speaker #3: Okay. Great. Great. And then maybe a follow-up for Revathi. You mentioned kind of being able to bundle or a little bit more have a full solution power cooling rack.

Tim Long: Okay. Great. Then maybe a follow-up for Revathi. You mentioned kind of being able to bundle or a little bit more have a full solution power cooling rack. Could you just touch on kind of the, I know it's early on the cooling side, but maybe just give us some examples or some thoughts of customer activity where you're seeing the benefit of having these multiple pieces.

Speaker #4: So I'd say in the last kind of few months, several hyperscaler customers at a very high level, we've had strategic conversations around power cooling and kind of thinking about next generation silicon.

Speaker #4: And that really puts us in the unique position of one of the few people who are able to do this. So I feel pretty good that three years ago we thought this is where it would go, but now the conversations are actually heading in that direction.

Speaker #4: Yeah. I'd say, Tim, that we're seeing it across multiple customers, hyperscalers without naming any. I would say that you can see that most customers now are quickly thinking about, hey, we need to before we deploy the next generation silicon, we need to be thinking about power capability and power requirements.

Revathi Advaithi: Yeah, I'd say, Tim, that we are seeing it across multiple customers, hyperscalers. Without naming any, I would say that you can see that most customers now are quickly thinking about, Hey, before we deploy the next generation silicon, we need to be thinking about power capability and power requirements. They're already thinking about, How does life look like when we go to an SST technology? We're seeing a lot of conversations at a very high level and strategic level with customers on kind of silicon cooling power, how all that comes together for next generation products, which we didn't see two and three years ago. What customers don't want to be is in the situation they are today, where the power requirement becomes an afterthought, and then we are in a struggle to make sure that we have enough power for these data centers.

Speaker #4: I'd say from a platform perspective, what we announced with Nvidia a few months ago in terms of developing an overall modular platform which encompasses everything that we do is a good example.

Speaker #4: Of a customer who's thinking about it and moving it in that direction.

Speaker #4: They're already thinking about how does life look like when we go to an SST technology? So we're seeing a lot of conversations at a very high level and strategic level with customers on kind of silicon cooling power.

Speaker #3: Okay. Thank you.

Speaker #2: Thank you. Our next question today is JP Morgan. Your line is now live.

Speaker #3: Hi. Good morning. And thank you for the question. Maybe just for the first one, relative to the CPI growth outlook that you provided, maybe can you just discuss the constraints that you're seeing just given the current backdrop that we're in?

Speaker #4: How all that comes together for next generation products, which we didn't see two and three years ago because what customers don't want to be is in the situation they are today where the power requirement becomes an afterthought and then we are in a struggle to make sure that we have enough power to for these data centers.

Speaker #3: Just interested in hearing potentially what's limiting you from calling for further upside here. And where things are maybe more acute in terms of the constraints that you guys are seeing.

Speaker #3: And how are you thinking about those trending going forward? And any levers you have internally in terms of how you're thinking about offsetting some of them?

Revathi Advaithi: I'd say in the last kind of few months, several hyperscaler customers at a very high level, we've had strategic conversations around power cooling and kind of thinking about next generation silicon. That really puts us in the unique position of one of the few people who are able to do this. I feel pretty good that three years ago we thought this is where it would go, but now the conversations are actually heading in that direction. I'd say from a platform perspective, what we announced with NVIDIA a few months ago in terms of developing an overall modular platform, which encompasses everything that we do, is a good example of a customer who's thinking about it and moving it in that direction.

Speaker #3: And then I have a follow-up. Thank you.

Speaker #4: Yeah. Joseph, I'll start by saying that our guide for CPI for the year was 70%. So growth year over year. So it's a pretty strong and robust number in terms of year-over-year growth.

Speaker #4: So we feel really good about that. I would say we beat the midpoint of our guide for Q1. We set 30%. We came in higher than that.

Speaker #4: So obviously, the year is accelerating exactly like we planned. And Q2 is higher than Q1. And we had clearly mentioned that this is back half loaded.

Speaker #4: I'd say from a platform perspective, what we announced with NVIDIA a few months ago in terms of developing an overall modular platform which encompasses everything that we do is a good example of a customer who's thinking about it and moving it in that direction.

Speaker #4: Which is mainly driven by the capacity investments we are making. We announced a big capex, which involves pretty significant investment in terms of facilities, cooling infrastructure, manufacturing infrastructure, all of those are going in place.

Speaker #3: Okay. Thank you.

Tim Long: Okay. Thank you.

Speaker #2: Thank you. Our next question today is coming from Joseph Cardozo from JP Morgan. Your line is now live.

Operator: Thank you. Our next question today is coming from Joseph Cardoso from JPMorgan. Your line is now live.

Speaker #4: And that combined with the customers generational shift and platforms is what has driven our kind of the way we've given our guidance for the full year.

Joseph Cardoso: Hi. Good morning, and thank you for the question. Maybe just for the first one, relative to the CPI growth outlook that you provided, maybe can you just discuss the constraints that you're seeing, just given the current backdrop that we're in? Just interested in hearing potentially what's limiting you from calling for further upside here, and where things are maybe more acute in terms of the constraints that you guys are seeing, and how are you thinking about those trending going forward and any leverage you have internally in terms of how you're thinking about offsetting some of them. Then I have a follow-up. Thank you.

Speaker #4: So we feel very good about the 70% guide that we've given for this year and the 80% that we've given for next year because those are pretty significant numbers.

Speaker #4: Don't see any significant constraints per se other than putting the capacity investments in place and making sure those factories are ramped up, which we know how to manage really well.

Speaker #3: And how are you thinking about those trending going forward? And any levers you have internally in terms of how you're thinking about offsetting some of them?

Speaker #3: And then I have a follow-up. Thank you.

Speaker #4: So Joseph, I feel really good about the guidance we gave and we're on track to deliver that.

Speaker #4: Yeah. Joseph, I'll start by saying that our guide for CPI for the year was 70%. So growth year over year. So it's a pretty strong and robust number in terms of year-over-year growth.

Revathi Advaithi: Yeah, Joseph, I'll start by saying that our guide for CPI for the year was 70%. Growth year over year. It's a pretty strong and robust number in terms of year over year growth. We feel really good about that. I would say, we beat the midpoint of our guide for Q1. We said 30%, we came in higher than that. Obviously the year is accelerating exactly like we planned, and Q2 is higher than Q1, and we had clearly mentioned that this is back half loaded, which is mainly driven by the capacity investments we are making. We announced a big CapEx, which involves pretty significant investment in terms of facilities, cooling infrastructure, manufacturing infrastructure. All of those are going in place.

Speaker #4: So we feel really good about that. I would say we beat the midpoint of our guide for Q1. We set 30%. We came in higher than that.

Speaker #3: And really what I'm trying to get at is, for example, is this mostly advanced manufacturing, or are you also seeing some pull-through around power cooling in the rest of the portfolio there?

Speaker #4: So obviously the year is accelerating exactly like we planned. And Q2 is higher than Q1. And we had clearly mentioned that this is back half loaded.

Speaker #3: Thanks for the questions.

Speaker #4: Yeah. I'd say we've talked we've been quite public about and Cerebras has been about our engagement with them. And we have I think there is videos published by us and them in terms of our full engagement.

Speaker #4: We've been working on this for a while, right, with them. And I would say that it is definitely a manufacturing cooling engagement because those go hand in hand.

Speaker #4: And that combined with the customers generational shift and platforms is what has driven our kind of the way we've given our guidance for the full year.

Revathi Advaithi: That combined with the customer's generational shift in platforms is what has driven the way we've given our guidance for the full year. We feel very good about the 70% guide that we've given for this year and the 80% that we have given for next year, because those are pretty significant numbers. Don't see any significant constraints per se, other than putting the capacity investments in place and making sure those factories are ramped up, which we know how to manage really well. Joseph Cardoso, I feel really good about the guidance we gave, and we're on track to deliver that.

Speaker #4: But it is also we're also working on things like next generation power, which is things that we'll be thinking about with them in the future.

Speaker #4: So we feel very good about the 70% guide that we've given for this year and the 80% that we've given for next year because those are pretty significant numbers.

Speaker #4: So it's a pretty holistic partnership with Cerebras. It's going extremely well. We're scaling up a lot for them. So I would say that this is a good example of us diversifying our hyperscaler involvement in our CPI business that we have of scaling up with another customer.

Speaker #4: So Joseph, I feel really good about the guidance we gave and we're on track to deliver that.

Speaker #3: Thank you.

Speaker #3: Yeah. That's great to hear. And then maybe just as my follow-up, you mentioned the engagement with Cerebras. I'm not sure how much you can talk about it, but any way you can kind of frame out how representative this engagement to FLEX broader AI accelerator opportunity and really what I'm trying to get at is, for example, is this mostly advanced manufacturing or are you also seeing some pull through around power cooling in the rest of the portfolio there?

Joseph Cardoso: No, that's great to hear. Maybe just as my follow-up, you mentioned the engagement with Cerebras. I'm not sure how much you can talk about it, but any way you can kind of frame out how representative this engagement to Flex a broader AI accelerator opportunity. Really what I'm trying to get at is, for example, is this mostly advanced manufacturing, or are you also seeing some pull-through around power cooling in the rest of the portfolio there? Thanks for the questions.

Speaker #2: Thank you. As a reminder, that's Star 1 to be placed into question Q. Our next question is coming from Ruben Roy from Steeple. Your line is now live.

Speaker #5: Yeah. Hi. Thanks. First question I had a follow-up on Tim's question on ITS, Kevin. You mentioned advanced networking and we've got the guide moving higher.

Speaker #5: For the year, can you talk a little bit about some of the dynamics there? Are you seeing share gains in advanced networking versus just broader market growth, which we're hearing from a lot of your peers?

Speaker #3: Thanks for the questions.

Speaker #4: Yeah. I'd say we've talked we have been quite public about and Cerebras has been about our engagement with them. And we have I think there is videos published by us and them in terms of our full engagement.

Revathi Advaithi: Yeah, I would say we've been quite public about, Cerebras has been about our engagement with them, I think there is videos published by us and them in terms of our full engagement. We've been working on this for a while, with them. I would say that it is definitely a manufacturing cooling engagement because those go hand in hand. We're also working on things like next generation power, which is things that we'll be thinking about with them in the future. It's a pretty holistic partnership with Cerebras. It's going extremely well. We're scaling up a lot for them. I would say that this is a good example of us diversifying our hyperscaler involvement in our CPI business that we have talked about, and it's a great example of scaling up with another customer.

Speaker #5: And I guess the kind of the longer-term question is, how are you thinking about durability into fiscal 28 on that business? Thanks.

Speaker #4: We've been working on this for a while, right, with them. And I would say that it is definitely a manufacturing cooling engagement because those go hand in hand.

Speaker #3: Thanks for the question, Ruben. This is actually Michael. In terms of the communications business and the underlying strength in the advanced networking business itself, first, it was a driver in our Q4 result.

Speaker #4: But it is also we're also working on things like next generation power, which is things that we'll be thinking about with them in the future.

Speaker #3: It was a big driver in our Q1 result. And that strength has continuing into our Q2 guide and in FY 27 guide. So we're seeing continued strength in that business.

Speaker #3: I'd say it's a combination of two of the things that you mentioned. One is ongoing increased demand from the customers that we have had for a number of years in many cases.

Speaker #4: And it's a great example of scaling up with another customer.

Speaker #3: And we're actually winning share in some of those product segments as well. So we have good diversity across a number of large OEMs in the advanced networking space.

Speaker #3: Thank you.

Joseph Cardoso: Thank you.

Speaker #2: Thank you. As a reminder, that's star one to be placed into question Q. Our next question is coming from Ruben Roy from Steeple. Your line is now live.

Operator: Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from Ruben Roy from Stifel. Your line is now live.

Speaker #3: And we also cover a number of product categories as well from high-speed switching, to optical products, to interface technologies as well. So I'd say two things.

Speaker #5: Yeah. Hi. Thanks. First question I had a follow-up on Tim's question on ITS, Kevin. You mentioned advanced networking and we've got the guide moving higher.

Ruben Roy: Hi, thanks. First question, I had a follow-up on Tim's question on ITS. Kevin, you mentioned advanced networking, and we've got the guide moving higher for the year. Can you talk a little bit about some of the dynamics there? Are you seeing share gains in advanced networking versus just broader market growth, which we're hearing from a lot of your peers? I guess the kind of the longer-term question is, how you're thinking about durability into fiscal '28 on that business. Thanks.

Speaker #3: One, yes, sustained demand in our advanced networking business, good diversity across customers, and good diversity across product segments as well.

Speaker #4: And we feel good about the durability into FY 28 because it's all related to AI infrastructure spending, right? So as that continues, right, you're going to continue to see this business ramp with that.

Speaker #5: And I guess the kind of the longer-term question is, how are you thinking about durability into fiscal 28 on that business? Thanks.

Speaker #5: Right. Thank you, Michael and Revathi. Revathi, if I could follow up on for the follow-up on the and thinking through capacity ads and that type of thing, you talked a little bit about that in May.

Michael Hartung: Thanks for the question, Ruben. This is actually Michael. In terms of the communications business and the underlying strength in the advanced networking business itself, first, it was a driver in our Q4 result. It was a big driver in our Q1 result, and that strength is continuing into our Q2 guide and in our FY27 guide. We're seeing continued strength in that business. I'd say it's a combination of two of the things that you mentioned. One is ongoing increased demand from the customers that we have had for a number of years in many cases. We're actually winning share in some of those product segments as well. We have good diversity across a number of large OEMs in the advanced networking space. We also cover a number of product categories as well, from high-speed switching to optical products to interface technologies as well.

Speaker #5: But 90 days later, can you give us an update on sort of installed capacity against sort of the large second-half ramp? I don't know if you can give us a percentage or high-level view on what's customer qualified today or what you still have to commission towards kind of meeting the strong growth you're expecting in the second half.

Speaker #3: It was a big driver in our Q1 result. And that strength has continuing into our Q2 guide and in our FY 27 guide. So we're seeing continued strength in that business.

Speaker #3: I'd say it's a combination of two of the things that you mentioned. One is ongoing increased demand from the customers that we have had for a number of years in many cases.

Speaker #5: Thanks.

Speaker #4: Yeah. Ruben, I'd say we feel very good about our full year plan here for this business. These capacity investments and movements have been going on for a bit.

Speaker #3: And we're actually winning share in some of those product segments as well. So we have good diversity across a number of large OEMs in the advanced networking space.

Speaker #3: And we also cover a number of product categories as well, from high-speed switching to optical products to interface technologies as well. So I'd say two things.

Speaker #4: So it just didn't start like 90 days ago. We've been doing that before that. So feel very good about it. You can see that in the acceleration in Q2.

Michael Hartung: I'd say two things. One, yes, sustained demand in our advanced networking business, good diversity across customers, and good diversity across product segments as well.

Speaker #3: One, yes, sustained demand in our advanced networking business, good diversity across customers, and good diversity across product segments as well.

Speaker #4: Just like we planned. And then we see the back half pretty much going per plan. And most of the capex that we announced is for this acceleration in FY 27 and FY 28.

Revathi Advaithi: We feel good about the durability into FY28 because it's all related to AI infrastructure spending, right? As that continues, you're going to continue to see this business ramp with that.

Speaker #4: So we're installing that capex. I don't see any major concerns about how that capacity installing is going. It's going really well. Flex knows how to do this extremely well.

Speaker #5: Right. Thank you, Michael and Revathi. Revathi, if I could follow up on for the follow-up on the CPI discussion and thinking through capacity ads and that type of thing, you talked a little bit about that in May.

Ruben Roy: Right. Thank you, Michael and Revathi. Revathi, if I could follow up on, for the follow-up on the CPI discussion and thinking through capacity adds and that type of thing. You talked a little bit about that in May. 90 days later, can you give us an update on sort of installed capacity against sort of the large H2 ramp? I don't know if you can give us a percentage or high level view on what's customer qualified today or what you still have to commission towards kind of meeting the strong growth you're expecting in the H2.

Speaker #4: We run large projects well. And this is both in cloud and power, right? Our power business is also growing in the 70-plus percent range.

Speaker #4: So feel very good about the progress in terms of both cloud and power. And feel very good about the guide for the year. We are on track for it.

Speaker #5: But 90 days later, can you give us an update on sort of installed capacity against sort of the large second half ramp? I don't know if you can give us a percentage or high-level view on what's customer qualified today or what you still have to commission towards kind of meeting the strong growth you're expecting in the second half.

Speaker #4: Definitely to do the 70% or better than that.

Speaker #2: Thank you. Our next question today is coming from Luke Chung from Baird. Your line is now live.

Speaker #6: Good morning. Thanks for taking the questions. To start with, Revathi, just be great to get your updated perspective on the transition to high-voltage, both 400-volt plus or minus and 800-volt, and specifically to the extent there might be any risk of delays or push-out, just how we should think through what impacts might or might not be relative to the CPI guidance.

Speaker #5: Thanks.

Operator: Thanks.

Ruben Roy: Thanks.

Speaker #4: Yeah. Ruben, I'd say we feel very good about our full year plan here for this business. These capacity investments and movements have been going on for a bit.

Revathi Advaithi: Yeah, Ruben, I'd say we feel very good about our full year plan here for this business. These capacity investments and movements have been going on for a bit. It just didn't start 90 days ago. We have been doing that before that. Feeling very good about it, and you can see that in the acceleration in Q2, just like we planned. We see the H2 pretty much going per plan. Most of the CapEx that we announced is for this acceleration in FY27 and FY28. We're installing that CapEx. I don't see any major concerns about how that capacity installing is going. It's going really well. Flex knows how to do this extremely well. We run large projects well. This is both in Cloud and Power, right? Our power business is also growing in the 70-plus% range.

Speaker #4: So it just didn't start like 90 days ago. We've been doing that before that. So we feel very good about it. You can see that in the acceleration in Q2.

Speaker #6: I think especially for fiscal 28. Thank you.

Speaker #4: Yeah. I would say first is on 400-volt, which is kind of the immediate programs that we are working on, followed by 800-volt. We feel very good about the progress on those programs.

Speaker #4: Just like we planned. And then we see the back half pretty much going per plan. And most of the capex that we announced is for this acceleration in FY 27 and FY 28.

Speaker #4: Don't see any major limitations, at least to the guide. We have given for 27 and 28. We feel pretty good about that guide. I'm sure there's lots of conversations about component constraints and all of that.

Speaker #4: So we're installing that capex. I don't see any major concerns about how that capacity installing is going. It's going really well. FLEX knows how to do this extremely well.

Speaker #4: We run large projects well. And this is both in cloud and power, right? Our power business is also growing in the 70-plus percent range.

Speaker #4: But we have planned all of that in the guide we have given. And if anything, there should be some upside to that, I would say, as availability becomes better.

Speaker #4: So we feel very good about the progress in terms of both cloud and power. And I feel very good about the guide for the year.

Revathi Advaithi: Feel very good about the progress in terms of both Cloud and Power, and feel very good about the guide for the year. We are on track for it, definitely to do the 70% or better than that.

Speaker #4: But the technology transition itself is going well. We feel good about the pace of customers and how that is being deployed. So I'd say we've mentioned this before.

Speaker #4: We are on track for it. Definitely to do the 70% or better than that.

Speaker #2: Thank you. Our next question today is coming from Luke Chung from Baird. Your line is now live.

Operator: Thank you. Our next question today is coming from Luke Junk from Baird. Your line is now live.

Speaker #4: Flex is kind of the leader in this transition on the embedded power side. And I would say that our ability to develop and deploy that 400-volt technology followed by 800-volt is really, really strong.

Speaker #6: Good morning. Thanks for taking the questions. To start with, Revathi, just be great to get your updated perspective on the transition to high voltage both 400-volt plus or minus and 800-volt and specifically to the extent there might be any risk of delays or push-out.

Luke Junk: Good morning. Thanks for taking the questions. To start with, Revathi, it would just be great to get your updated perspective on the transition to 400 volt plus or minus and 800 volt, and specifically to the extent there might be any risk of delays or push-out, just how we should think through what impacts might or might not be relative to the CPI guidance, I think especially for FY28. Thank you.

Speaker #4: So I feel really good about that we're on track for it. And we'll see kind of as we update our long-term guidance in the investor day, we will give you some more clarity around that.

Speaker #6: Just how we should think through what impacts might or might not be relative to the CPI guidance. I think especially for fiscal 28. Thank you.

Speaker #4: Yeah. I would say first is on 400-volt, which is kind of the immediate programs that we are working on, followed by 800-volt. We feel very good about the progress on those programs.

Speaker #6: Okay. Yeah. We'll look forward to that. For my follow-up, Revathi, hoping you could just double-click on the company's modular capabilities and CPI. Certainly, we're getting more questions about this.

Revathi Advaithi: I would say first is on 400 volt, which is kind of the immediate programs that we are working on, followed by 800 volt. We feel very good about the progress on those programs. Don't see any major limitations, at least to the guide we have given for FY27 and FY28. We feel pretty good about that guide. I'm sure there's lots of conversations about component constraints and all of that, but we have planned all of that in the guide we have given. If anything, there should be some upside to that, I would say, as availability becomes better. The technology transition itself is going well. We feel good about the pace of customers and how that is being deployed. I'd say, we've mentioned this before, Flex is kind of the leader in this transition on the embedded power side.

Speaker #6: You outlined some pretty interesting capabilities in the past. Just wondering how that figures into the expanding infrastructure opportunity overall that you reviewed in the prepared comments morning.

Speaker #4: I don't see any major limitations, at least to the guide we have given for 27 and 28. We feel pretty good about that guide.

Speaker #4: Yeah. I'd say Luke, when I think about modular, right, you can think about modular in terms of, like I talked about earlier, the partnership we announced with NVIDIA, which is putting everything in a modular capability and deploying kind of mini data centers.

Speaker #4: I'm sure there's lots of conversations about component constraints and all of that. But we have planned all of that in the guide we have given.

Speaker #4: And if anything, there should be some upside to that, I would say, as availability becomes better. But the technology transition itself is going well.

Speaker #4: That's one way to think about modular. The other way to think about modular is power businesses have been doing modular deployment for power for a long period of time, whether it's in the utility space or the data center space.

Speaker #4: We feel good about the pace of customers and how that is being deployed. So I'd say we've mentioned this before, FLEX is kind of the leader in this transition on the embedded power side.

Speaker #4: And for that, we added capacity in Dallas. After our Crown acquisition, now with EP Square acquisition, we're adding capacity in Iowa to really continue to drive that modular power business.

Speaker #4: And I would say that our ability to develop and deploy that 400-volt technology followed by 800-volt is really, really strong. So I feel really good about that we're on track for it.

Revathi Advaithi: I would say that our ability to develop and deploy that 400 volt technology followed by 800 volt is really, really strong. I feel really good about that we're on track for it, and we'll see kind of as we update our long-term guidance in the Investor Day, we will give you some more clarity around that.

Speaker #4: So we are very mature in that. And if anything, that is growing pretty significantly. So I think about it in terms of the holistic, like modular deployment, which is what people are doing in terms of IT deployment or power deployment.

Speaker #4: And we'll see kind of as we update our long-term guidance in the investor day, we will give you some more clarity around that.

Speaker #4: It should become a bigger and bigger part of kind of, I would say, all customers' requirements. And if anything, I think we're fighting against capacity constraints in that space to do more of it.

Luke Junk: Okay. Yeah. We'll look forward to that. For my follow-up, Revathi, hoping you could just double-click on the company's modular capabilities and CPI. Certainly, we're getting more questions about this. You outlined some pretty interesting capabilities in the past. Just wondering how that figures into the expanding infrastructure opportunity overall that you reviewed in the prepared comments this morning.

Speaker #4: But it's the direction everyone is heading, Luke, because there's just so much easier to pick it up and deploy it at the customer side.

Speaker #2: Thank you. Our next question today is coming from Stephen Fox from Fox Advisors. Your line is now live.

Revathi Advaithi: Yeah. I'd say, Luke, when I think about modular, you can think about modular in terms of, like I talked about earlier, the partnership we announced with NVIDIA, which is putting everything in a modular capability and deploying kind of mini data centers. That's one way to think about modular. The other way to think about modular is power businesses have been doing modular deployment for power for a long period of time, whether it's in the utility space or the data center space. For that, we added capacity in Dallas after our Crown acquisition. Now with EP² acquisition, we're adding capacity in Iowa to really continue to drive that modular power business. We are very mature in that, and if anything, that is growing pretty significantly.

Speaker #7: Hi. Good morning. I was wondering if you could do a deep dive into some of the industrial strengths you mentioned. How much of it is cyclical versus secular?

Speaker #7: And what you're doing to continue to address that demand. And then I have a follow-up.

Speaker #8: Yeah. Good morning, Stephen. This is Michael. Thanks for the question. I'd say when you think about our industrial business, that's been identified as one of the business units that will be really containing multiple high-value markets that will be our growth focus going forward.

Speaker #4: And for that, we added capacity in Dallas. After our Crown acquisition, now with EP Squared acquisition, we're adding capacity in Iowa to really continue to drive that modular power business.

Speaker #8: Within that group, you have two different markets that I'd like to point out. The first one is around energy infrastructure. Now, as you already know, we're spinning our power product portfolio into Spenco.

Speaker #8: And we're maintaining our contract manufacturing capability for that industry. And so we will be a contract manufacturer for things ranging from power generation, transmission.

Revathi Advaithi: I think about it in terms of the holistic modular deployment, which is what people are doing in terms of IT deployment or power deployment. It should become a bigger and bigger part of kind of, I would say, all customers' requirements. If anything, I think we're fighting against capacity constraints in that space to do more of it. It's the direction everyone is heading, Luke, because it's just so much easier to pick it up and deploy it at the customer site.

Speaker #8: Distribution, and storage. And that energy infrastructure business has great pull-through demand from not just data center infrastructure, but also utility-scale infrastructure as well. So we see sustained demand from that segment within industrial.

Speaker #4: But it's the direction everyone is heading, Luke, because there's just so much easier to pick it up and deploy it at the customer side.

Speaker #8: On the other side, we have our robotics and warehouse automation business. And again, tied to the longer-term secular trend, in this case, around regionalization.

Speaker #2: Thank you. Our next question today is coming from Stephen Fox from Fox Advisors. Your line is now live.

Operator: Thank you. Our next question today is coming from Steven Fox from Fox Advisors. Your line is now live.

Speaker #8: As we talked about, regionalization is accelerating. And many of those regions are now suffering from things like wage inflation, labor scarcity. And they're on the constant search for productivity improvements.

Speaker #7: Hi. Good morning. I was wondering if you could do a deep dive into some of the industrial strengths you mentioned. How much of it is cyclical versus secular?

Steven Fox: Hi. Good morning. I was wondering if you could do a deep dive into some of the industrial strength you mentioned, how much of it is cyclical versus secular, and what you are doing to continue to address that demand, and then I have a follow-up.

Speaker #7: And what you're doing to continue to address that demand. And then I have a follow-up.

Speaker #8: Our warehouse automation business is perfectly aligned to help solve those problems for our OEM partners. So both of those markets we've called out as being high-value growth markets.

Michael Hartung: Good morning, Steven. This is Michael. Thanks for the question. I would say when you think about our industrial business, that has been identified as one of the business units that will be really containing multiple high-value markets that will be our growth focus going forward. Within that group, you have two different markets that I would like to point out. The first one is around energy infrastructure. Now, as you already know, we are spinning our power product portfolio into SpinCo, and we are maintaining our contract manufacturing capability for that industry. We will be a contract manufacturer for things ranging from power generation, transmission, distribution, and storage. That energy infrastructure business has great pull-through demand from not just data center infrastructure, but also utility scale infrastructure as well. We see sustained demand from that segment within industrial.

Speaker #8: And both are tied to these longer-term secular trends that we think are sustainable over the long term.

Speaker #7: And just to be clear, Michael, right now you're saying that this is all more secular in nature than any kind of cyclical recovery?

Speaker #8: Yeah. We see this tied very much to an ongoing infrastructure build-out, both directly with the energy infrastructure businesses and then supporting productivity over the long term in our warehouse automation business.

Speaker #8: And we're maintaining our contract manufacturing capability for that industry. And so we will be a contract manufacturer for things ranging from power generation, transmission, distribution, and storage.

Speaker #7: Got it. And then as a follow-up, can you give us an update on the Amazon partnership? You had a big commercial agreement announced. I guess it's been over a year now.

Speaker #7: Maybe longer. And then how does that work out as you split the business? Is that all tied to one side of the business or another?

Speaker #8: And that energy infrastructure business has great pull-through demand from not just data center infrastructure, but also utility-scale infrastructure as well. So we see sustained demand from that segment within industrial.

Speaker #7: Can you just sort of give us a feel for that too? Thank you.

Speaker #8: On the other side, we have our robotics and warehouse automation business. And again, tied to the longer-term secular trend in this case around regionalization, as we talked about, regionalization is accelerating.

Speaker #8: I'll answer the hey, Stephen. This is Kevin. Good morning. I'll answer the last part of that question first, which is the benefit to the Amazon arrangement really is across all of our businesses.

Michael Hartung: On the other side, we have our robotics and warehouse automation business. Again, tied to the longer-term secular trend, in this case, around regionalization. As we talked about, regionalization is accelerating, and many of those regions are now suffering from things like wage inflation, labor scarcity, and they are on the constant search for productivity improvements. Our warehouse automation business is perfectly aligned to help solve those problems for our OEM partners. Both of those markets we have called out as being high-value growth markets, both are tied to these longer-term secular trends that we think are sustainable over the long term.

Speaker #8: So you'll see that both on the CPI business that we're spinning out, as well as the existing businesses that we have. And Michael talked about some of the end markets that we work in there.

Speaker #8: And many of those regions are now suffering from things like wage inflation, labor scarcity, and they're on the constant search for productivity improvements. Our warehouse automation business is perfectly aligned to help solve those problems for our OEM partners.

Speaker #8: So I would say from that perspective, it's broad across the flex portfolio from an update standpoint. There's really nothing to update. I would say that we'll continue to assess our the arrangement with them as we move through this year and get ready to spin the CPI business in early 2027.

Speaker #8: So both of those markets we've called out as being high-value growth markets, and both are tied to these longer-term secular trends, that we think are sustainable over the long term.

Speaker #7: And just to be clear, Michael, right now you're saying that this is all more secular in nature than any kind of cyclical recovery?

Steven Fox: Just to be clear, Michael, right now you are saying that this is all more secular in nature than any kind of cyclical recovery?

Speaker #8: And when we have an update, of course, we'll update everybody.

Michael Hartung: We see this tied very much to an ongoing infrastructure build-out, both directly with the energy infrastructure businesses, and then supporting productivity over the long term in our warehouse automation business.

Speaker #2: Thank you. Our next question today is coming from Steve Barger from KeyBank Capital Markets. Your line is now live.

Speaker #9: Thanks. Revathy, you talked about your first-mover advantage in terms of serving broad segments of the data center. But it does look like other EMS companies are also expanding capabilities in a similar way.

Speaker #7: Got it. And then as a follow-up, can you give us an update on the Amazon partnership? You had a big commercial agreement announced. I guess it's been over a year now.

Steven Fox: Got it. As a follow-up, can you give us an update on the Amazon partnership? You had a big commercial agreement announced, I guess it's been over a year now, maybe longer. How does that work out as you split the business? Is that all tied to one side of the business or another? Can you just sort of give us a feel for that too? Thank you.

Speaker #9: What percentage of your engagements are contracting for the unified power cooling and compute portfolio versus taking a more selective approach to your products and services?

Speaker #7: Maybe longer. And then how does that work out as you split the business? Is that all tied to one side of the business or another?

Speaker #7: Can you just sort of give us a feel for that too? Thank you.

Speaker #4: Yeah. I would say, Steve, first is when we are talking about other EMS companies moving into the same space, I think maybe there's some misconception around it because our power business is based on having true IP and product capability.

Speaker #8: I'll answer the, "Hey, Stephen. This is Kevin. Good morning." I'll answer the last part of that question first, which is the benefit to the Amazon arrangement really is across all of our businesses.

Kevin Krumm: Hey, Steven, this is Kevin. Good morning. I'll answer the last part of that question first, which is the benefit to the Amazon arrangement really is across all of our businesses. You'll see that both on the CPI business that we're spinning out, as well as the existing businesses that we have. Michael talked about some of the end markets that we work in there. I would say from that perspective, it's broad across the Flex portfolio. From an update standpoint, there's really nothing to update. I would say that we'll continue to assess the arrangement with them as we move through this year and get ready to spin the CPI business in early 2027. When we have an update, of course, we'll update everybody.

Speaker #8: So you'll see that both on the CPI business that we're spinning out, as well as the existing businesses that we have in Michael talked about some of the end markets that we work in there.

Speaker #4: It is where we do contract manufacturing for end markets there. That'll stay with kind of the base energy infrastructure business that Michael talked about.

Speaker #8: So I would say from that perspective, it's broad across the FLEX portfolio from an update standpoint. There's really nothing to update. I would say that we'll continue to assess our the arrangement with them as we move through this year and get ready to spin the CPI business in early 2027.

Speaker #4: So I think there is some confusion around kind of what the real capability is. So the real requirement in the power business is not just being able to develop products for what is needed, but then be able to integrate that in, like I talked about with 400-volt design, 800-volt design, and then the future of solid-state that is going to be coming our way.

Speaker #8: And when we have an update, of course, we'll update everybody.

Speaker #2: Thank you. Our next question today is coming from Steve Barger from KeyBank Capital Markets. Your line is now live.

Operator: Thank you. Our next question today is coming from Steve Barger from KeyBanc Capital Markets. Your line is now live.

Speaker #4: So integrated design, like I had mentioned earlier in the call today, which is thinking about sidecars on power, cooling racks, and fully integrated modular design is becoming a bigger and bigger conversation at very high levels in the hyperscalers.

Steve Barger: Thanks. Revathi, you talked about your first-mover advantage in terms of serving broad segments of the data center.

Speaker #4: So to be able to do that, you have to have true product technology. You need to be able to design and develop 400-volt and 800-volt design to be able to have those conversations.

Speaker #4: So I would say where I see the differentiation is where an electrical player, with true product capability, cooling player, with true product capability, and then an integrated design capability including all of compute integration, I would say I haven't seen anybody just have that capability yet.

Speaker #9: No, I agree. I do think you have a really good model. And I'm just can you tell us are most of your conversations at a high level talking about taking that full suite of integrated products?

Speaker #4: I would say I wouldn't say. It's more about taking the full suite of integrated products, but it's about designing that full suite of integrated products which is kind of more important than anything else, right?

Speaker #4: So that is how I see about it. I want us to win in each individual category, Steve, whether it's cooling or sidecar or compute integration or even just building and developing your metal for fabricating all of that.

Speaker #4: But I want to lead the technology conversation with our customers in terms of what is the future of power look like with your next-generation silicon?

Speaker #4: How can we cool it enough? What kind of cooling makes sense? Those are the conversations we are having. And I think that is the most important part of how we lead this conversation.

Speaker #2: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Speaker #4: Thank you. We delivered another strong quarter, and we're executing our proven strategy as we move towards the spin-off. As always, I want to thank our customers for their trust and partnership.

Speaker #4: Of course, our shareholders for their support. And in the global flex team for their continued dedication and contributions. We look forward to speaking with you again next quarter.

Speaker #4: Thank you, everyone.

Speaker #2: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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