Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
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.
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.
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.
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%.
Share Repurchase: We repurchased around $200 million of stock in the quarter, which was approximately 3.3 million shares.
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.
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