Sign in
FL

FLEX LTD. (FLEX)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered a clean beat on revenue and EPS versus consensus, with net sales at $6.40B and adjusted EPS at $0.73; gross margin reached a record 9.4% and operating margin 6.2% on mix improvements, services, and data center strength .
  • Data center momentum continued: cloud integration and power portfolios drove growth, with management reiterating Flex’s unique “grid-to-chip” positioning and highlighting tailored solutions for hyperscalers and colos .
  • Initial FY2026 guidance issued at Q4 was subsequently raised in Q1 FY2026 for revenue and adjusted EPS (and Q1 revenue/EPS), reflecting confidence in data center demand and acquisitions; GAAP EPS ranges moved modestly lower on updated assumptions .
  • Near-term watch items: tariff pass-through dynamics (low-margin “revenue” impact), automotive softness, and customer-sourced inventory mix effects that mute reported revenue growth but support operating profit and EPS dollar growth .

What Went Well and What Went Wrong

  • What Went Well

    • Record profitability: gross margin 9.4% and operating margin 6.2% in Q4; adjusted EPS up 28% YoY to $0.73, driven by favorable mix and operational efficiency .
    • Strategic differentiation: “only provider with a comprehensive portfolio spanning the data center from grid to chip,” enabling tailored cloud racks and power solutions at scale .
    • Positive guidance trajectory: FY2026 adjusted operating margin target of 6%–6.1% (achieving FY2027 target a year early), and raised FY2026 revenue and adjusted EPS in Q1 FY2026 .

  • What Went Wrong

    • EBITDA undershot consensus in Q4 and Q1 FY2026 despite EPS/revenue beats, suggesting cost absorption/timing and non-GAAP adjustments temper EBITDA optics* [GetEstimates].
    • Automotive headwinds: sequential step-down expected into Q1 FY2026 due to tariff-related disruptions and cost structure drag; management called out Q1 margin compression from lower fixed cost absorption and auto mix .
    • Tariffs: pass-through nature creates “low-calorie revenue” and slight margin drag if sustained; Flex excluded direct tariff impacts from guidance due to high uncertainty .

Financial Results

MetricQ2 2025Q3 2025Q4 2025Consensus (Q4 2025)
Revenue ($USD Billions)$6.545 $6.556 $6.398 $6.229*
GAAP EPS ($)$0.54 $0.67 $0.57 —
Adjusted EPS ($)$0.64 $0.77 $0.73 $0.694*
Gross Margin (%)8.5% 9.3% 9.4% —
Adjusted Operating Margin (%)5.5% 6.1% 6.2% —

Notes: Asterisks indicate values retrieved from S&P Global.

Segment breakdown (Q4 FY2025):

SegmentRevenue ($USD Billions)YoY GrowthOperating Margin (%)
Reliability Solutions$2.9 -1.3% 6.2
Agility Solutions$3.5 +8.2% 6.6

KPIs:

KPIQ3 2025Q4 2025
Free Cash Flow ($USD Millions)$306 $325
Inventory Days (Net of Advances)~56 days 56 days
Share Repurchases ($USD Millions)~$200 ~$300

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)Q1 FY2026$6.0–$6.5 $6.5–$6.8 Raised
GAAP EPS ($)Q1 FY2026$0.46–$0.54 $0.58–$0.66 Raised
Adjusted EPS ($)Q1 FY2026$0.58–$0.66 $0.70–$0.78 Raised
Adjusted Operating Income ($USD Millions)Q1 FY2026$330–$370 $375–$415 Raised
Revenue ($USD Billions)FY2026$25.0–$26.8 $25.9–$27.1 Raised
GAAP EPS ($)FY2026$2.35–$2.55 $2.27–$2.47 Lowered
Adjusted EPS ($)FY2026$2.81–$3.01 $2.86–$3.06 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2025)Previous Mentions (Q3 FY2025)Current Period (Q4 FY2025)Trend
AI/Data Center growthData center +40% YoY; portfolio expands; JetCool partnership; Crown acquisition pipeline Data center +45% YoY; tailored hyperscaler solutions; multiyear ~20% CAGR view Record margins; unique “grid-to-chip” suite; mid-30% FY26 power growth expectation Strengthening; sustained high growth with portfolio advantages
Liquid coolingJetCool partnership; reference design at OCP Liquid cooling shift expected; JetCool to help share/pipeline, early stage JetCool closed; direct-to-chip capabilities integrated into offering Scaling; integration ongoing
Tariffs/macroPass-through; prior “tariff 1.0” experience; footprint resiliency Pass-through; regionalization; low recovery lag risk Pass-through cost; slight margin drag; guidance excludes direct impacts Dynamic; manageable with footprint and contracts
Regionalization/FootprintBuilding NA capabilities; selective capacity Largest NA footprint; operational agility; manufacturing shift readiness 48M sq ft global; 7M sq ft U.S., 9M Mexico; selective North America programs Expanding; capacity aligned to high-value programs
Customer-sourced inventoryNoted model impact Muting reported revenue growth; supports OP/EPS dollar growth FY25 ~17% of revenue; FY26 +$1B to ~20% Increasing adoption
AutomotiveRamps; macro slowness offset by power content Weaker macro; content gains intact Q1 FY26 sequential step-down; margin drag from cost structure Near-term headwind
Services (value-add)Vertical integration aiding margins Margin accretive; growth expected Continues to grow in FY26; helps portfolio mix Consistent accretive contribution

Management Commentary

  • “We had a very strong finish to the year… adjusted operating margin… above 6%… adjusted EPS of $0.73, up 28% over last year.”
  • “Flex is the only provider… comprehensive portfolio spanning the data center from grid to chip.”
  • “Our FY2026 guidance indicates… 6% adjusted operating margin reaching our fiscal 2027 target a full year ahead of schedule.”
  • “Tariffs… pass-through cost… could have slight margin drag… we excluded these direct tariff factors from our guidance.”
  • “Customer-sourced inventory… muting our reported growth rate… both drive operating profit dollar growth.”

Q&A Highlights

  • Margin drivers: Continued favorable mix from cloud and power, services growth, and productivity leverage underpin FY2026 6%+ margin ambition .
  • Capacity/regionalization: Phones “ringing off the hook” on tariff/footprint transitions; Flex has available capacity in U.S./Mexico and is prioritizing high-value programs .
  • Seasonality/margin step-down: Q1 FY26 margins step down on lower sequential revenue (fixed cost absorption) and auto softness, consistent with prior-year pattern .
  • Tariff impact quantification: Sustained tariffs imply basis points margin drag but should not impact OP profit dollars or EPS dollars; pass-through pricing in place .
  • Networking share gains: Growth with large networking customers across regions; specifics withheld .

Estimates Context

  • Q4 FY2025 vs Consensus: Revenue $6.398B vs $6.229B*, Adjusted EPS $0.73 vs $0.694*, EBITDA $466M vs $514M* (beat on revenue/EPS, miss on EBITDA)*.
  • FY2026 Consensus: Revenue $27.107B*, EPS $3.152*; Flex’s updated FY2026 guidance (Revenue $25.9–$27.1B; Adjusted EPS $2.86–$3.06) implies outcomes more conservative than consensus on EPS midpoint but in-line on revenue upper bound .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-led margin expansion continues: Two consecutive quarters above 6% adjusted operating margin with structural tailwinds from data center power/cloud and services .
  • Data center remains the core growth engine: Flex’s “grid-to-chip” capabilities and tailored hyperscaler solutions are durable differentiators; watch JetCool and Crown integration .
  • Revenue optics vs economics: Rising customer-sourced inventory adoption will mute reported revenue growth but support operating profit/EPS dollars; model accordingly .
  • Tariff dynamics: Expect low-margin pass-through “revenue” and slight margin drag; Flex’s footprint/regionalization strategy mitigates execution risk .
  • Automotive is a near-term headwind: Q1 FY26 margin step-down expected; medium-term thesis intact with content gains and power electronics exposure .
  • Guidance and consensus: Flex raised FY2026 revenue and adjusted EPS in Q1 FY2026; consensus still expects higher EBITDA/EPS—monitor upside from portfolio mix and cost execution .
  • Trading lens: Narrative favors margin durability and data center seculars; short-term volatility around tariffs/auto is likely transitory, with catalysts from services scaling and power product capacity expansions .