Earnings call transcript: Flex Ltd beats Q4 2025 forecasts, stock dips

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals strong financial performance with record high revenue, EPS, and margins, alongside significant share repurchases. The Q&A highlights optimism in data center growth and robust customer engagement. However, management's vague responses on tariffs and inventory impacts introduce some uncertainty. Overall, the positive financial results and strategic growth initiatives outweigh these concerns, suggesting a positive stock price movement.

Key Financial Performance

Revenue $6,400,000,000, growing almost 4% year over year.

Adjusted Operating Margin 6.2%, up 80 basis points year over year, marking a new quarterly record.

Adjusted EPS $0.73, up 28% year over year.

Annual Adjusted Operating Margin 5.7%, despite macroeconomic headwinds, achieving record annual margins.

Annual Adjusted EPS $2.65, up 23% year over year, driven by record operating profit and strong free cash flow.

Free Cash Flow $1,100,000,000 for the fiscal year, a record high.

Gross Profit $602,000,000, with gross margin improving to 9.4%, up 80 basis points.

Operating Profit $396,000,000, with operating margins at 6.2%, up 80 basis points.

Net Inventory Down 4% sequentially and 18% year on year.

Net CapEx $423,000,000 for the fiscal year, approximately 1.6% of revenue.

Share Repurchases $1,300,000,000, representing about 9% of outstanding shares.

Reliability Segment Revenue $11,700,000,000 with operating margin finishing at 5.8%.

Agility Segment Revenue $14,100,000,000 delivering a 6.1% operating margin.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

New Product Launches: Flex won two PACE awards in the automotive space with its NVIDIA DRIVE AGX powered Jupiter compute platform and backup DCDC converter.

Market Expansion: Flex's data center revenue grew about 50% year over year, reaching approximately $4.8 billion in fiscal 2025, driven by strong demand in cloud and power solutions.

Geographic Expansion: Flex expanded its operational footprint with four new strategic locations in the U.S., totaling 7 million square feet across 17 facilities.

Operational Efficiency: Flex achieved a record adjusted operating margin of 6.2% in Q4 and 5.7% for the full year, driven by strong mix improvements and operational excellence.

Free Cash Flow: Flex generated over $1 billion in free cash flow, exceeding its 80% adjusted free cash flow conversion target for the second consecutive year.

Strategic Shifts: FlexForward strategy focuses on shifting towards higher value businesses, integrating products and services for greater vertical integration and customization.

Customer Sourcing Model: Flex is seeing an increase in customer-sourced inventory models, particularly in the cloud business, which is expected to mute reported growth rates but enhance operating profit.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Macroeconomic Headwinds: Despite achieving record annual adjusted operating margins, the company continues to face macroeconomic headwinds that could impact future performance.

Tariff Risks: Tariffs are a pass-through cost, but the company is exposed to potential increases in costs due to tariffs on raw materials procured from China and other countries. This could affect cash flow timing and operating margins.

Demand Slowdown: There are risks of demand slowdown, particularly in the automotive sector, which could impact revenue and margins.

Inventory Management: While the company has successfully reduced inventory levels, any future growth may require increased working capital investment, which could affect cash flow.

Economic Uncertainty: The company acknowledges the potential for economic factors to create uncertainty in customer demand and revenue guidance.

Competitive Pressures: The company faces competitive pressures in the data center and power markets, necessitating continuous innovation and operational efficiency to maintain margins.

Regulatory Issues: The evolving regulatory environment, particularly regarding tariffs and trade, poses risks that could impact operational costs and customer demand.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

FlexForward Strategy: Since 2020, Flex has executed its FlexForward strategy, focusing on aggressive portfolio management to shift towards higher value businesses, integrating organizational changes and operational innovations.

EMS Plus Products Plus Services Strategy: Unveiled at Investor Day, this strategy builds on advanced manufacturing and supply chain capabilities, adding proprietary products and expanded value-added services for greater vertical integration.

Data Center Business Growth: Data center revenue grew about 50% year over year, reaching approximately $4.8 billion in FY 2025, with expectations for mid-thirty percent growth in FY 2026.

Acquisitions: Flex completed several key acquisitions to enhance capabilities in data center power and cloud solutions, including JetCool and Crown Technical.

Operational Efficiency: Flex maintained a focus on operational efficiency, achieving record levels of adjusted operating margins and earnings per share.

FY 2026 Revenue Guidance: Flex expects revenue to be between $25 billion and $26.8 billion.

Adjusted Operating Margin Guidance: Guidance for FY 2026 is set at over 6%, reaching the FY 2027 target a year early.

Adjusted EPS Guidance: Expected adjusted EPS for FY 2026 is between $2.81 and $3.01 per share.

Free Cash Flow Conversion Target: Flex aims to maintain an 80% plus free cash flow conversion target.

Tariff Impact: Tariffs are expected to be a pass-through cost, with no significant impact on operating profit dollars or EPS.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

Share Repurchase Program: In FY 2025, Flex repurchased nearly $1,300,000,000 of stock, representing about 9% of its outstanding shares.

Free Cash Flow: Flex generated a record $1,100,000,000 in free cash flow for FY 2025.

Capital Allocation Priorities: Flex is focused on maintaining an investment-grade balance sheet, funding CapEx for organic growth, pursuing accretive M&A, and returning capital to shareholders through share repurchase.

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:How should we think about the drivers relative to fiscal ’twenty six outside of maybe mix on the cloud business?

A:A big driver of the mix year on year is going to be our continued growth in the cloud. Also, data center product business, as we are in our Power business, we should continue to see favorable mix impacts from that as well. I will point out our service business, we expect continued growth there year on year, which should have some favorable mix impacts.

Q:Can you give us a bit of sort of the lay of the land, what you’re hearing from customers in relation to demand for either U.S. footprint and Mexico?

A:We have worked through this in the whole tariff one point zero scenario, and we’ve been done a lot of work already in terms of moving footprint around for our customers over the last kind of five years. The good news for us is that our footprint is so strong in Europe and in North America that we have some available capacity.

Q:Can you expand on your comments you highlighted around data centers, your scale advantages?

A:We have the ability not only to have the footprint, but have the power availability for these IT integration and the equipment and the utilization capability for rack integration, unlike almost any other competitors in this region.

Q:Can you delve a little bit deeper into who the customer set is that you’re targeting now for both Cloud and Power?

A:We have multiple hyperscaler customers, right? So almost all large hyperscaler customers are part of our customer mix. We’re also growing with kind of the smaller cloud customers.

Q:Can you give some details on who the customer set is and which region do you see Power products growing?

A:We work with almost every large colo and almost every large hyperscaler, mainly in Europe and North America.

Q:Can you talk about the customer sourced inventory and the impact of that on both revenues and margins?

A:No, it is not isolated. Those contracting arrangements are not isolated to our cloud business, although I would say a majority of the contracts are in the cloud business.

Q:What kind of knock on effects tariffs are having to end demand?

A:We’re really not seeing anything in terms of outside of what we have talked about in automotive and any kind of significant weakness in terms of customers itself.

Q:Can you just give us some additional color on how the Husqvarna facility acquisition came about?

A:We constantly talk to customers and engage with them about kind of how we can help them with their supply chain. This was a really good opportunistic deal for us.

Q:Is the current operating environment across the globe getting more potential customers to the table to consider and pursue your entire suite of outsourcing capabilities?

A:We are getting a lot customer conversations with our teams in terms of regionalization, but also as you’re doing regionalization, taking on more end to end capability.

Q:If we were to see inflection sooner in say, core agility or auto markets, should we expect to see an equal uptick in inventories?

A:To the extent that we see a significant pivot and growth, you would see some investment in our working capital rate as we need that.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the specific impact of tariffs on margins, stating that while there would be a drag on operating margin, they do not expect it to significantly affect operating profit dollars or EPS. Additionally, there was vague language around the customer sourced inventory model's impact on margins, indicating that while margins get a bump, they expect margins to grow without this bump.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

FLEX Transcript

Flex Ltd. (FLEX) Presents at Barclays 23rd Annual Global Technology Conference Transcript

Neutral12-10

Flex Ltd. (FLEX) Presents at 53rd Annual Nasdaq Investor Conference Transcript

Neutral12-9

Flex Ltd. (FLEX) Presents at UBS Global Technology and AI Conference 2025 Transcript

Neutral12-4

Flex Ltd. (FLEX) Presents at Goldman Sachs Industrials and Materials Conference 2025 Transcript

Neutral12-4

FLEX Slides

Flex Q4 FY25 slides: Record margins and EPS growth despite revenue headwinds

2025-05-07

Flex Q1 FY26 slides: Record margins and 40% EPS growth, shares dip on outlook

2025-07-24

FLEX Report

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.