Flex Ltd. Q2 FY2026 earnings call

• CEO Revathi Advaithi thanked the Flex team globally and acknowledged the resilience of the team in Ukraine after the Mukachevo facility damage. • The company had an exceptional quarter with revenue of $6.8 billion, up 4% year-over-year; operating margin of 6%; adjusted EPS of $0.79, up 23% year-over-year. • The data center business is strong with cloud and power, having unveiled Flex's new AI infrastructure platform in partnership with NVIDIA, and expects at least 35% growth this year. • The diversified portfolio includes Health Solutions with steady medical device demand, Communications and Enterprise with strength in optical switches and SATCOM devices, and Automotive with a stabilizing market. • The company started the year with volatility but exceeded expectations and raised guidance due to its scale, technical depth, and global footprint.

Reliability: Revenue $3 billion, up 3% year-over-year as strong growth in Power and moderate growth in Health Solutions and Core Industrial was slightly offset by continued pressure in auto. Operating income improved to $197 million and segment margin expanded by 105 basis points to 6.5%, driven by favorable mix impacts from Power and strong execution and cost management across the entire segment. Agility revenue totaled $3.8 billion, an increase of 4% year-over-year, driven by robust cloud demand that more than offset softness in communications and consumer end markets. Operating income was $227 million, with operating margin down 5 basis points to 6%. Data center business continues to deliver outstanding results across both cloud and power, with revenue expected to grow at least 35% this year. Health Solutions sees steady medical device demand and anticipates improvement in medical equipment later this year. In communications and enterprise, there is strength in optical switches and SATCOM devices supporting next-generation connectivity requirements. In automotive, the market is stabilizing compared to prior quarters with compute deals added in the first half of FY '26.

• Full-year FY '26 revenue is expected to be between $26.7 billion and $27.3 billion, a $500 million improvement from the prior guide midpoint. Adjusted operating margin is between 6.2% and 6.3%, and adjusted EPS is between $3.09 and $3.17 per share. • Reliability Solutions is expected to have revenue growth in the low to mid-single digits, driven by strong demand in data center power and medical devices, offset by a soft but stabilizing environment in renewables and auto. • Agility Solutions is expected to have revenue growth in the mid to high single digits, driven by continued strength in cloud, offset by a weakening trend in consumer devices and lifestyle and a temporary loss of operations at the Mukachevo facility in Ukraine. • Q3: Reliability Solutions revenue is expected to be up in the mid to high single digits, driven by continued robust power demand and increased growth in Medical Devices. Agility Solutions revenue is expected to be down to up in the low single digits as cloud growth is offset by weakening trends in consumer devices and reduced expectations in Lifestyle. Total Flex revenue is expected to be in the range of $6.65 billion to $6.95 billion, with adjusted operating income between $405 million and $435 million and adjusted EPS between $0.74 and $0.80 per share.

Q: Ruplu Bhattacharya inquired about no upside to the data center revenue guide despite strength.

A: Revathi Advaithi stated that data center is not a reporting segment, they provided initial information at the beginning of the year and will update the full-year guide.

Q: Tim Long asked about the op margin improvement in the second half and the economics of the cloud data center.

A: Kevin Krumm said the mix of growth in higher-margin businesses drives the margin improvement; Revathi Advaithi said the cloud and power business is accretive with integration and own IP.

Q: Samik Chatterjee asked about the drivers of the guide increase and the impact of the Ukraine facility shutdown.

A: Revathi Advaithi said the increase is from data center, health, and automotive; Kevin Krumm said the impact of the Ukraine facility shutdown is approximately 1% of Flex revenue.

Q: Steven Fox asked about the growth acceleration into the fourth quarter and the auto segment.

A: Kevin Krumm said the growth is driven by data center power, medical, etc.; Revathi Advaithi said the automotive segment is stabilizing with compute wins but depends on returns.

Q: Jacob Moore asked about the value add from engineering and services and the op margin in the fourth quarter.

A: Revathi Advaithi said value-added services are around $1 billion, and the mix drives the margin; Kevin Krumm said the acceleration of higher-margin businesses drives the fourth-quarter margin.

Q: Mark Delaney asked about data center capacity and AI/automation.

A: Revathi Advaithi said the company has invested in regions and will need more CapEx, and announced a partnership with NVIDIA for data center infrastructure, and is working on AI/robotics in factories for productivity.