Executive Summary

Flex delivered a solid Q1 FY26: Net sales $6.58B (+4% YoY), GAAP EPS $0.50, and non-GAAP EPS $0.72; non-GAAP operating margin was 6.0% as mix shift and disciplined cost execution continued to support profitability .
Results beat S&P Global consensus on revenue ($6.58B vs $6.31B*) and EPS ($0.72 vs $0.64*), driven by strong data center demand across both cloud and power; segment margins expanded in both Reliability (6.0%) and Agility (6.5%) . Values retrieved from S&P Global.
Guidance moved up: FY26 revenue to $25.9–$27.1B and adjusted EPS to $2.86–$3.06 (from $25.0–$26.8B and $2.81–$3.01), with Q2 FY26 revenue guided to $6.5–$6.8B and adjusted EPS to $0.70–$0.78; margin guide held at 6.0–6.1% as tariff pass-through (“low calorie” revenue) and back-half investments temper flow-through .
Near-term stock catalysts: continued AI/data-center momentum (targeting ~35% YoY growth and ~$6.5B in FY26 data-center revenue, ~25% of total), incremental wins in power and cooling, and execution on capacity additions (Dallas ramp, new Poland facility) offset by tariff noise and auto softness .

What Went Well and What Went Wrong

What Went Well
- Data center strength across cloud and power underpinned the beat; management reiterated ~35% FY26 data center growth to ~$6.5B (~25% of revenue) with continued margin accretion: “Flex is the only provider providing both end-to-end cloud IT integration and a full power and cooling portfolio at scale.”
- Segment execution: Agility revenue +10% YoY to $3.7B with 6.5% margin; Reliability margin improved to 6.0% despite modest revenue declines, reflecting favorable mix and cost discipline .
- Free cash flow discipline: FCF $268M (98% conversion), inventory days reduced to 55, and $247M in buybacks (~7M shares) while investing in capacity (Poland power facility) .
What Went Wrong
- Margin leverage constrained despite higher revenue outlook: company held adjusted operating margin guide at 6.0–6.1% due to tariff pass-through (low/no margin) and back-half investments .
- Auto and parts of renewables/core industrial remain macro-soft; Reliability revenue down ~2% YoY in Q1, with management still expecting a mixed outlook near term .
- Non-core investment drag on GAAP: equity losses of ~$17M were excluded in non-GAAP; management adopted a normalized tax rate for non-GAAP adjustments in FY26 .

Financial Results

Metric	Q3 FY25	Q4 FY25	Q1 FY26
Revenue (GAAP Net Sales, $B)	$6.56	$6.40	$6.58
GAAP Operating Income ($M)	$334	$305	$311
Non-GAAP Operating Income ($M)	$399	$396	$395
GAAP EPS ($)	$0.67	$0.57	$0.50
Non-GAAP EPS ($)	$0.77	$0.73	$0.72
Gross Margin % (non-GAAP)	9.3%	9.4%	9.1%
Adjusted Operating Margin %	6.1%	6.2%	6.0%

Segment performance

Segment (non-GAAP)	Q3 FY25	Q4 FY25	Q1 FY26
Reliability Revenue ($B)	$3.0	$2.9	$2.9
Reliability Operating Income ($M)	$198	$180	$172
Reliability Margin %	6.7%	6.2%	6.0%
Agility Revenue ($B)	$3.6	$3.5	$3.7
Agility Operating Income ($M)	$227	$230	$240
Agility Margin %	6.3%	6.6%	6.5%

KPIs and capital allocation

KPI	Q3 FY25	Q4 FY25	Q1 FY26
Free Cash Flow ($M)	$306	$325	$268
FCF Conversion (%)	—	—	98%
Net CapEx ($M)	$107	$108	$131
Share Repurchases ($M)	$200	$300	$247
Inventory Days (net of advances)	~56	56	55
Cash & Equivalents ($B)	$2.33	$2.29	$2.24
Total Debt ($B)	—	$3.69 (1.209+2.483)	$3.68 (0.677+3.004)

Non-GAAP adjustments (Q1 FY26): add-backs include $34M stock-based comp, $21M intangible amortization, $23M restructuring, $6M legal/other, and $17M equity in losses; non-GAAP tax uses a normalized rate from FY26 .

Guidance Changes

Metric	Period	Previous Guidance (Q4 FY25)	Current Guidance (Q1 FY26)	Change
Revenue ($B)	FY26	$25.0–$26.8	$25.9–$27.1	Raised
Adjusted EPS ($)	FY26	$2.81–$3.01	$2.86–$3.06	Raised
Adjusted Operating Margin (%)	FY26	6.0–6.1	6.0–6.1	Maintained
Adjusted Tax Rate (%)	FY26	~21	~21	Maintained
Revenue ($B)	Q2 FY26	—	$6.5–$6.8	New
Adjusted Operating Income ($M)	Q2 FY26	—	$375–$415	New
Adjusted EPS ($)	Q2 FY26	—	$0.70–$0.78	New
GAAP EPS ($)	Q2 FY26	—	$0.58–$0.66	New
Interest & Other ($M)	Q2 FY26	—	~38	New

Management clarified margin guide was not raised due to tariff pass-through and planned back-half investments despite higher revenue and OP dollar outlook .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3–Q4 FY25)	Current Period (Q1 FY26)	Trend
AI/data center growth	Data center +45% YoY; FY26 growth mid-30% expected; unique “grid-to-chip” portfolio bolstered by JetCool/Crown	Tracking ~35% FY26 growth to ~$6.5B (~25% of revenue); strength in cloud and power; margin accretive	Sustained strength, higher visibility
Tariffs & regionalization	Tariffs pass-through; large NA/EMEA footprint enables mitigation; FY26 guide initially excluded direct tariff impacts	Tariffs now incorporated; low-calorie revenue dilutes margin; no USMCA impact seen; guidance still confident	Tariffs integrated, manageable
Segment mix & margins	Record adj op margins; Agility mix improved; Reliability resilient despite auto softness	Agility +10% YoY, 6.5% margin; Reliability 6.0% margin despite macro; both executing	Mix tailwinds continue
Capacity & supply	Added Dallas capacity; footprint ~48–49M sq ft; end-to-end capabilities	New Poland site doubles power capacity in Europe; balancing capacity with demand	Expanding to meet AI demand
Health/auto/industrial	Med devices strong; auto macro-challenged; core industrial/renewables soft	Similar setup; networking share gains; med devices strong; auto mixed	Mixed but as expected
Cooling & power roadmap	JetCool direct-to-chip cooling; Crown expands critical power	Modular rack-level CDU launched (up to 1.8MW); 800V DC power shelf for NVIDIA GB300 NVL72	Portfolio deepening

Management Commentary

“Flex is the only provider providing both end-to-end cloud IT integration and a full power and cooling portfolio at scale.” — Revathi Advaithi, CEO .
“With greater clarity around the scope and timing of the tariff impact… incorporating our current view to tariffs does not have a material impact on our full-year guided growth rates… adjusted EPS between $2.86–$3.06… adjusted tax rate of 21%.” — Kevin Krumm, CFO .
“We bought a plant in Poland… doubles our power capacity in Europe… a great example of Flex deploying capital in a margin-accretive way to grow our capabilities.” — CFO .
On margin guide: “Tariffs… are largely low-calorie revenue and actually… a headwind to our margin performance… we are making a few investments in the back half of the year.” — CFO .

Q&A Highlights

Margin outlook vs higher revenue: Guide held at 6.0–6.1% due to tariff pass-through diluting margin and planned H2 investments despite stronger OP dollars .
Data center split and durability: Confident in ~35% FY26 growth; power expected to be stronger than cloud this year after a softer base last year; both accretive .
Hyperscalers’ in-house cooling: Amazon’s move viewed as validation; Flex’s tech + manufacturing positioning enables integration across cooling/power/IT .
Capacity constraints: Dallas ramp proceeding; new Poland facility added; aim for “just enough” capacity to shorten lead times as AI infra demand accelerates .
Tariffs/USMCA/interest line: No USMCA impact assumed; tariffs pass-through; higher interest/FX costs partly explain limited EPS raise guide-to-guide .

Estimates Context

Q1 FY26 – actuals vs S&P Global consensus (beat/miss)

Metric	Consensus	Actual	Result
Revenue ($B)	$6.314*	$6.575	Beat
EPS ($)	$0.6409*	$0.72	Beat
Values retrieved from S&P Global.

Q2 FY26 – guidance vs S&P Global consensus

Metric	Company Guidance	Consensus	Context
Revenue ($B)	$6.5–$6.8	$6.706*	In-range
EPS ($)	$0.70–$0.78 (adj)	$0.7571*	In-range
Values retrieved from S&P Global.

FY26 – guidance vs S&P Global consensus

Metric	Company Guidance	Consensus	Context
Revenue ($B)	$25.9–$27.1	$27.107*	Near high end
EPS ($)	$2.86–$3.06 (adj)	$3.1516*	Above guide (mgmt conservative)
Values retrieved from S&P Global.

Key Takeaways for Investors

AI/data center remains the principal growth engine with integration across grid-to-chip enabling share gains; FY26 data center ~$6.5B (~25% mix) and ~35% growth supports above-market trajectory .
Expect OP dollar growth with margin discipline; margin guide unchanged as tariff pass-through dilutes % margins but not profit dollars; H2 investments build future capacity .
Segment execution is broad-based: Agility’s cloud/networking strength offsets telecom/consumer softness; Reliability margins holding despite auto/industrial headwinds .
Strong cash generation and buybacks continue alongside targeted M&A/CapEx (e.g., Poland power site), reinforcing an invest-and-return capital framework .
Product roadmap advances (800V DC, high-efficiency power shelves, modular liquid cooling up to 1.8MW) strengthen Flex’s moat in next-gen AI infrastructure .
Watch catalysts: continued AI rack/power ramps, networking share wins, tariff/regionalization policy clarity, and any stabilization in auto/industrial .
Risk checks: tariff timing/mix effects on margins, macro softness in auto/renewables, and potential volatility in non-core investment marks (GAAP vs non-GAAP deltas) .

Appendix: Other Relevant Disclosures Since Q1

Ukraine facility strike (consumer/lifestyle site, ~1% of revenue), BCP activated; injuries treated; no defense production at site .
Cooling/power portfolio expansion: New 800V DC power shelf for NVIDIA GB300 NVL72 and modular rack-level CDU up to 1.8MW launched post-Q1, reinforcing AI data-center positioning .

FLEX LTD. (FLEX)·Q1 2026 Earnings Summary