Flex Ltd. (FLEX) Q3 2026 Earnings Call Transcript

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

Overview

The earnings call reflects strong financial performance with record EPS, improved margins, and significant revenue growth in key segments like data centers and reliability. The Q&A highlights focus on AI and higher-growth opportunities, with sustainable margins and strategic investments in U.S. manufacturing. The cautious guidance for Agility is offset by optimistic trends in automotive and data centers. Overall, the company's strategic direction and financial health suggest a positive stock price movement in the near term.

Key Financial Performance

Revenue $7.1 billion, up 8% year-over-year, driven by strong performance in data center and improving momentum in Industrial and Health Solutions businesses.

Adjusted Operating Margin 6.5%, up 40 basis points year-over-year, reflecting disciplined cost management and a shift towards higher-value products and services.

Adjusted EPS $0.87, up 13% year-over-year, marking a record for Flex, driven by strong execution.

Adjusted Gross Margin 9.8%, up 50 basis points year-over-year, reflecting improved cost management and product mix.

Reliability Revenue $3.2 billion, up 10% year-over-year, driven by power, Core Industrial, and Health Solutions.

Agility Revenue $3.8 billion, up 6% year-over-year, driven by data center-related end markets, partially offset by softness in consumer-related end markets.

Cash Flow $275 million, driven by efficient working capital management.

Inventory Up 5% sequentially and year-over-year, with inventory net of working capital advances at 56 days, flat from the prior year.

Net CapEx $145 million, approximately 2% of revenue.

Stock Repurchase $200 million, approximately 3.3 million shares repurchased in the quarter.

You have reached the limit. Sign up to access full content

Get started

Operating Highlights

Data Center Portfolio: Flex announced the development of modular data center systems with NVIDIA, a partnership with LG for thermal management solutions, and deployed advanced rack-level liquid cooling solutions at Equinix. They also introduced a new AI infrastructure platform capable of accelerating deployment timelines by up to 30%.

Revenue Growth: Flex reported revenue of $7.1 billion, up 8% year-over-year, driven by strong performance in data centers and improving momentum in Industrial and Health Solutions.

Operational Efficiency: Adjusted operating margin improved to 6.5%, a record for Flex, reflecting disciplined cost management and a shift towards higher-value products and services.

Cash Flow: Cash flow in the quarter was $275 million, supported by efficient working capital management. Inventory was up 5% year-over-year.

Strategic Investments: Flex continues to expand and optimize its global footprint while investing in advanced technologies and capabilities to help customers manage complexity at scale.

You have reached the limit. Sign up to access full content

Get started

Risk or Challenges

Data Center Complexity: The increasing complexity in data center deployment, driven by expanding AI workloads, requires a system-level approach. Scaling IT infrastructure adds additional layers of complexity, including the need for integrated power, cooling, and IT infrastructure solutions.

Consumer End Markets: Softness in consumer-related end markets is partially offsetting growth in data center-related end markets, indicating a challenge in maintaining balanced growth across segments.

Inventory Management: Inventory levels increased by 5% year-over-year, which could indicate potential inefficiencies or challenges in inventory management.

Consumer Devices and Lifestyle Demand: Soft demand for consumer devices and lifestyle products is impacting revenue growth in the Agility Solutions segment.

Regulatory and Market Risks: Forward-looking statements highlight risks and uncertainties that could cause actual results to differ materially, including regulatory hurdles and market conditions.

You have reached the limit. Sign up to access full content

Get started

Guidance & Outlook

Revenue Expectations: For the fiscal year, revenue is expected to be between $27.2 billion and $27.5 billion, which is $350 million higher at the midpoint versus prior guidance. For the fourth quarter, total revenue is expected to be between $6.75 billion and $7.05 billion.

Adjusted Operating Margin: For the fiscal year, adjusted operating margin is expected to be approximately 6.3%. For the fourth quarter, adjusted operating income is expected to be between $445 million and $475 million.

Adjusted EPS: For the fiscal year, adjusted EPS is expected to be between $3.21 and $3.27 per share, a midpoint increase of $0.11 per share. For the fourth quarter, adjusted EPS is expected to be between $0.83 and $0.89 per share.

Segment Revenue Growth: Reliability Solutions revenue is expected to grow mid-single digits for the fiscal year, driven by strong data center power demand and growth in Core Industrial and Health Solutions. Agility Solutions revenue is also expected to grow mid-single digits, driven by strength in cloud, offset by softness in consumer devices and lifestyle. For the fourth quarter, Reliability Solutions revenue is expected to grow low double digits to mid-teens, while Agility Solutions revenue is expected to grow low to mid-single digits.

Cash Flow and Capital Allocation: The company anticipates strong cash generation with a guidance of 80%+ free cash flow conversion for the fiscal year. Capital allocation priorities include maintaining an investment-grade balance sheet, funding strategic investments, pursuing accretive M&A opportunities, and returning capital to shareholders through share repurchases.

Market Trends and Strategic Plans: The company is investing in advanced technologies and capabilities to support complexity at scale across industries. Growth is driven by long-term secular trends in diversified end markets, including data centers, health solutions, industrial automation, and AI-driven applications. Strategic initiatives include partnerships with NVIDIA and LG for data center solutions and the introduction of a new AI infrastructure platform to accelerate deployment timelines by up to 30%.

You have reached the limit. Sign up to access full content

Get started

Shareholder Return Plan

Share Repurchase: We repurchased around $200 million of stock in the quarter, which was approximately 3.3 million shares.

You have reached the limit. Sign up to access full content

Get started

Key Q&A

Q:Where does Flex see the bigger opportunity in the data center segment, and where are they focusing their investments?

A:Flex sees strong growth in both power and compute segments within data centers. This year, investments have been heavier in power, but due to the large AI infrastructure spend, they plan to invest more in compute capacity in the coming years. They expect to continue adding capacity in embedded power and compute due to AI programs.

Q:Is there a ceiling on how high Flex's operating margins can go, and should Flex focus more on AI and higher growth opportunities?

A:Flex believes their margins are sustainable and expects continued margin expansion driven by mix impacts and productivity improvements. They are comfortable with their current portfolio and continue to focus on shifting their mix towards higher-return and growth areas, including AI. More details will be shared during their Investor Day.

Q:What is the differentiation between embedded power and critical power, and where does Flex see more opportunities for share gains?

A:Embedded power is undergoing a significant technology shift with advancements in 800-volt DC and larger megawatt deployments, offering strong growth opportunities due to limited competition. Critical power focuses on lead times, installations, and schedule management. Both segments are growing strongly, but embedded power has a more significant technology-driven growth potential.

Q:Why was the full-year revenue guide for Agility walked down, and what is driving growth in this segment?

A:The revenue guide for Agility was adjusted due to softness in consumer-related end markets like lifestyle and consumer devices. However, strong growth in data centers and related infrastructure deployments, such as high-speed networking and network interface cards, is driving the segment's growth.

Q:Is Flex seeing material upside from the Amazon warrant deal, and when might it become additive to their business?

A:The Amazon warrant deal is not expected to be materially incremental to FY '26. The program is complex and scales over time, with growth expected in the coming years. Current growth with AWS is strong and aligned with expectations.

Q:What drove the strong margins in the Reliability segment, and are they sustainable?

A:The strong margins in the Reliability segment were driven by mix impacts from growth in the power business and improvements in Core Industrial. These factors are expected to continue into Q4, indicating sustainability.

Q:What is Flex's perspective on U.S. manufacturing trends?

A:Flex is not seeing a retreat in U.S. manufacturing. They are investing in U.S. capacity and receiving strong customer demand for U.S.-based projects. Most of their investments are focused on North America, including the U.S. and Mexico.

Q:What trends are driving growth in the automotive segment, and how does Flex view its future growth?

A:Growth in the automotive segment is driven by investments in software-defined compute platforms, which are agnostic to vehicle type (combustion, hybrid, or EV). Stabilization in platform clarity among auto OEMs is helping Flex forecast growth, which is not dependent on unit volume but on compute platform acceleration.

Q:How is Flex planning for the impact of rising memory prices?

A:Flex's customers procure most of the memory directly, so the impact on Flex is limited. Rising memory prices are not significantly affecting consumer end markets, which are already soft. Memory allocation trends are factored into Flex's forecasts.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing whether there is a ceiling on operating margins, providing a general response about sustainability and mix impacts without specific details. Additionally, they did not provide a clear timeline or specifics on when the Amazon warrant deal would become materially additive to their business.

You have reached the limit. Sign up 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) Q3 2026 Earnings Call Transcript

Positive2-4

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 Slides

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

2025-07-24

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

2025-05-07

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.