Flex Ltd ((FLEX)) has held its Q4 earnings call. Read on for the main highlights of the call.
Flex Ltd’s recent earnings call painted a picture of robust growth and strategic positioning, despite some challenges on the horizon. The company reported significant growth in its data center segment and record annual results, bolstered by strategic acquisitions. However, uncertainties in the automotive sector and potential tariff impacts were noted as areas of concern. Nonetheless, Flex’s guidance and strategic outlook suggest a confident trajectory towards continued margin improvement and growth.
Strong Revenue and Margin Growth
Flex Ltd reported fiscal Q4 revenue of $6.4 billion, marking a nearly 4% increase year-over-year. The company also achieved an adjusted operating margin of 6.2%, setting a new quarterly record. Adjusted earnings per share (EPS) rose by 28% from the previous year, reaching $0.73. These figures underscore Flex’s ability to drive revenue growth while maintaining strong margins.
Record Annual Performance
The company celebrated a record annual performance with adjusted operating margins reaching 5.7% and achieving double-digit adjusted EPS growth for the fifth consecutive year, culminating in $2.65 per share. Flex also reported free cash flow exceeding $1 billion for the second consecutive year, highlighting its strong cash generation capabilities.
Data Center Segment Surge
A significant highlight was the surge in the data center segment, with total revenue growing approximately 50% year-over-year. This growth propelled the segment to reach around $4.8 billion in fiscal ’25, driven by strong demand in cloud operations and power solutions, contributing positively to the company’s margins.
Strategic Acquisitions and Awards
Flex completed several strategic acquisitions and received two PACE awards in the automotive sector. These awards were for their NVIDIA Drive AGX powered Jupyter compute platform and backup DC/DC converter, showcasing Flex’s innovation and leadership in automotive technology.
Positive Outlook and Guidance
Looking ahead, Flex expects to achieve a 6% adjusted operating margin in fiscal 2026, reaching its fiscal 2027 target a year ahead of schedule. The company anticipates continued strong free cash flow conversion, reflecting its confidence in sustaining growth despite potential challenges.
Automotive Sector Weakness
Despite overall growth, Flex anticipates flat revenue in the automotive sector due to macroeconomic softness, with further weakness expected in fiscal Q1 2026. This sector remains a concern amidst broader economic uncertainties.
Potential Impact of Tariffs
The evolving tariff situation poses risks, particularly in the automotive sector, where potential demand impacts and higher costs for raw materials sourced from China could affect performance. Flex is monitoring these developments closely.
Challenges in Core Industrial and Renewables
The industrial and renewables sectors experienced revenue softness, though Flex expects these headwinds to be temporary. The company remains optimistic about overcoming these challenges as market conditions stabilize.
Forward-Looking Guidance
In its forward-looking guidance, Flex anticipates revenue between $25 billion and $26.8 billion for fiscal 2026, with an operating margin of 6% to 6.1%. The company is on track to achieve its FY 2027 margin target ahead of schedule, despite potential tariff impacts and macroeconomic uncertainties. This outlook reflects Flex’s strategic confidence and resilience.
In summary, Flex Ltd’s earnings call highlighted a strong performance driven by strategic growth in key segments and record annual results. While challenges such as automotive sector weakness and potential tariff impacts present uncertainties, the company’s forward-looking guidance and strategic positioning suggest continued confidence in achieving its growth and margin targets.