Flex Ltd Earnings Call Highlights Growth And Spin-Off

Flex Ltd ((FLEX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Flex Ltd’s latest earnings call struck an optimistic tone, as management showcased strong Q4 and full-year results, record margins, and powerful momentum in its Cloud & Power Infrastructure business. Executives balanced this upbeat narrative with caution around near-term margin pressure, heavier capital spending, and uncertainty tied to the planned spin-off, but reiterated confidence in a stronger earnings profile by fiscal 2028.

Strong Quarterly Revenue Growth

Flex delivered a robust finish to the year, with Q4 revenue reaching $7.5 billion, up 17% from a year ago on broad-based strength. Adjusted earnings per share climbed 27% to $0.93, underscoring operating leverage and disciplined execution despite mixed demand in certain end markets.

Record Margins and Profitability

The company reported record profitability, with Q4 adjusted gross margin of 9.9% and operating margin of 6.7%, each 50 basis points higher year over year. For the full year, adjusted EPS rose 25% to $3.30 as gross margin reached 9.5% and operating margin 6.3%, both improving 70 basis points and reflecting better mix and cost control.

CPI Segment Acceleration

Cloud & Power Infrastructure was the standout performer, with Q4 revenue of $1.8 billion, up 31% year over year. Full-year CPI revenue surged 38% to $6.6 billion, beating the company’s 35% target and setting the stage for ambitious growth of 65%–75% in fiscal 2027 and over 80% in fiscal 2028.

Major Customer Wins and Backlog

Flex underscored the durability of CPI growth by highlighting a multiyear contract win with Google and additional business from multiple hyperscalers, colocation providers, and newer cloud players. Management said these wins support a multi-year capacity build and backlog, giving greater visibility into future revenue and utilization.

Spin Announcement to Unlock Value

To sharpen strategic focus, Flex plans to spin off its Cloud & Power Infrastructure unit into a separate publicly traded company around the first quarter of calendar 2027. Management argued the separation should unlock value, allow more tailored capital allocation, and better highlight the distinct growth and margin profiles of the remaining portfolio.

Strategic M&A to Strengthen Power Portfolio

The acquisition of EP2 was flagged as a key step in deepening Flex’s power capabilities, particularly in utility-grade and grid-modernization projects. Management described EP2 as a fit for long-cycle, margin-accretive programs that should complement CPI’s cloud-related growth and support the power side of the business over time.

Strong Cash Generation and Capital Return

Flex continued to generate solid cash, producing $212 million of free cash flow in Q4 and about $1.1 billion for the year. The company was active on buybacks, repurchasing $200 million of stock in Q4 and $944 million for the full year, equivalent to roughly 19 million shares, signaling confidence in long-term value.

CPI Margin Impacted by Investment and Ramp Costs

Despite CPI’s growth, its full-year adjusted operating margin slipped 100 basis points to 9.2% due to heavy infrastructure investments and cloud ramp costs. Management stressed that cloud carries structurally lower margins than power and that recent cloud ramps weighed on Q4, but they expect margin recovery as scale improves.

Consumer and Lifestyle Softness

The ITS segment faced ongoing headwinds, with full-year revenue down 2% as lifestyle and consumer demand remained sluggish. Q4 ITS margin held at 5.0%, flat year over year, suggesting Flex is managing profitability even as volumes lag in these more discretionary categories.

Elevated CapEx and Near-Term Investment Intensity

Capital intensity is rising as Flex funds CPI expansion, with fiscal 2026 net CapEx at $625 million, or 2.2% of revenue, and fiscal 2027 CapEx expected to jump to $1.4–$1.6 billion. Management framed this as a temporary but necessary build-out to support future growth, with spending expected to normalize after the heavy investment phase.

Inventory Build to Support Growth

Inventory levels increased 5% sequentially and 15% year over year in Q4, with inventory days at 55, only one day lower than a year ago. The company attributed the build largely to supporting CPI and RMS growth, indicating it is leaning into supply readiness for continued demand rather than aggressively tightening working capital.

Spin-Related Uncertainty and Costs

While bullish on the strategic merits of the spin, management acknowledged the transaction will bring incremental costs and some investor uncertainty during the transition. Some free cash flow metrics will exclude these spin-related expenses, and a previously planned Investor Day has been postponed until more details can be shared.

Cloud Ramp Risk and Margin Convergence

Flex highlighted that cloud revenue currently carries lower margins than its power business, creating near-term pressure as cloud ramps faster. The company expects fiscal 2027 ramp costs to weigh on profitability but believes fiscal 2028 scale will drive margin expansion and greater convergence between cloud and power returns.

Guidance Signals Strong Growth with Investment Overhang

For fiscal 2027, Flex guided revenue to $32.3–$33.8 billion, up about 18% at the midpoint, with adjusted EPS forecast at $4.21–$4.51, roughly 32% higher. The outlook calls for operating margin of 7.0%–7.1%, elevated CapEx of $1.4–$1.6 billion, roughly 60% free cash flow conversion excluding spin costs, and particularly rapid CPI growth of 65%–75% with further acceleration expected in fiscal 2028.

Flex’s earnings call painted a picture of a company leaning into high-growth infrastructure markets while managing a complex spin and heavy near-term investment cycle. Investors are being asked to tolerate CPI-driven margin pressure, higher CapEx, and spin-related noise in exchange for stronger growth, improving margins, and a clearer portfolio story as the company moves into fiscal 2028 and beyond.