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Flex Aggressively Scaling Investments: Is Fiscal 2027 a Turning Point?
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Key Takeaways
FLEX plans $1.4B-$1.6B FY27 capex, up sharply, to support AI-driven data center programs.
Flex expects near-term margin pressure but sees FY27 recovery and further expansion into FY28.
FLEX cites strong backlog and multi-year visibility, aligning investments with secured demand.
Flex Ltd. (FLEX - Free Report) is entering a phase of elevated investment, with fiscal 2027 capex expected to be between $1.4 billion and $1.6 billion, a sharp increase from $625 million in fiscal 2026.
The company is scaling investments to capture increasing demand for AI-driven data center infrastructure, particularly within its Cloud and Power Infrastructure (CPI) segment. Management noted that the spending was tied to multi-year customer programs, including agreements with hyperscalers and data center clients such as Google.
These projects span power infrastructure, thermal systems and complex hardware manufacturing, necessitating considerable upfront capital deployment. FLEX noted that capex will remain elevated in fiscal 2027 but will normalize in fiscal 2028.
The company highlighted that it has strong visibility, with backlog and capacity effectively booked out over the next couple of years. This implies that the current capex surge is aligned with tangible revenue opportunities rather than speculative expansion.
Image Source: Zacks Investment Research
Flex expects these investments to weigh on near-term margins but ultimately drive expansion. The company noted that infrastructure investments temporarily pressured adjusted operating margins (100 bps) in fiscal 2026 but are expected to be fully recovered in fiscal 2027. It expects additional margin expansion of 50 to 100 bps in fiscal 2028.
To conclude, Flex’s aggressive investment strategy reflects confidence. While fiscal 2027 may see higher capex spending and execution risks, it also appears to mark a turning point as the company positions itself for growth, stronger margins and long-term value creation.
A Look at Capex Plan for Competitors
Sanmina Corporation (SANM - Free Report) is also ramping up investments, focusing on capitalizing on accelerated demand in the cloud and AI infrastructure vertical. The company reported capital expenditures of $57 million in the second quarter of 2026, lower than expectations due to timing, but guided this higher to $95 million for the current quarter as it continues to invest in capabilities aligned with long-term growth.
Sanmina noted that the CPS segment's non-GAAP gross margin declined 230 bps year over year due to depreciation and expenses tied to investments for new programs, which it expects to be margin accretive in the coming quarters.
For Celestica (CLS - Free Report) , capex has surged meaningfully, with capital expenditures reaching $230 million in the first quarter of 2026, up sharply both sequentially and year over year. The company reaffirmed full-year 2026 capex of nearly $1 billion, highlighting a marked acceleration in spending to drive growth in its Connectivity & Cloud Solutions segment.
Management noted that these investments are backed by awarded programs and higher visibility into multiyear capacity needs with major customers. Celestica amended and upsized its senior secured credit agreement to approximately $2.5 billion, including an increase in revolver commitments to $1.75 billion and an extension of maturity to April 2031.
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Flex Aggressively Scaling Investments: Is Fiscal 2027 a Turning Point?
Key Takeaways
Flex Ltd. (FLEX - Free Report) is entering a phase of elevated investment, with fiscal 2027 capex expected to be between $1.4 billion and $1.6 billion, a sharp increase from $625 million in fiscal 2026.
The company is scaling investments to capture increasing demand for AI-driven data center infrastructure, particularly within its Cloud and Power Infrastructure (CPI) segment. Management noted that the spending was tied to multi-year customer programs, including agreements with hyperscalers and data center clients such as Google.
These projects span power infrastructure, thermal systems and complex hardware manufacturing, necessitating considerable upfront capital deployment. FLEX noted that capex will remain elevated in fiscal 2027 but will normalize in fiscal 2028.
The company highlighted that it has strong visibility, with backlog and capacity effectively booked out over the next couple of years. This implies that the current capex surge is aligned with tangible revenue opportunities rather than speculative expansion.
Image Source: Zacks Investment Research
Flex expects these investments to weigh on near-term margins but ultimately drive expansion. The company noted that infrastructure investments temporarily pressured adjusted operating margins (100 bps) in fiscal 2026 but are expected to be fully recovered in fiscal 2027. It expects additional margin expansion of 50 to 100 bps in fiscal 2028.
To conclude, Flex’s aggressive investment strategy reflects confidence. While fiscal 2027 may see higher capex spending and execution risks, it also appears to mark a turning point as the company positions itself for growth, stronger margins and long-term value creation.
A Look at Capex Plan for Competitors
Sanmina Corporation (SANM - Free Report) is also ramping up investments, focusing on capitalizing on accelerated demand in the cloud and AI infrastructure vertical. The company reported capital expenditures of $57 million in the second quarter of 2026, lower than expectations due to timing, but guided this higher to $95 million for the current quarter as it continues to invest in capabilities aligned with long-term growth.
Sanmina noted that the CPS segment's non-GAAP gross margin declined 230 bps year over year due to depreciation and expenses tied to investments for new programs, which it expects to be margin accretive in the coming quarters.
For Celestica (CLS - Free Report) , capex has surged meaningfully, with capital expenditures reaching $230 million in the first quarter of 2026, up sharply both sequentially and year over year. The company reaffirmed full-year 2026 capex of nearly $1 billion, highlighting a marked acceleration in spending to drive growth in its Connectivity & Cloud Solutions segment.
Management noted that these investments are backed by awarded programs and higher visibility into multiyear capacity needs with major customers. Celestica amended and upsized its senior secured credit agreement to approximately $2.5 billion, including an increase in revolver commitments to $1.75 billion and an extension of maturity to April 2031.
Flex Price Performance, Valuation and Estimates
Shares of FLEX have edged down 0.2% in the past month against the Electronics - Miscellaneous Products industry’s gain of 6.6%.
Image Source: Zacks Investment Research
FLEX trades at a forward 12-month price-to-earnings (P/E) ratio of 28.82, below the industry’s 32.08.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for FLEX earnings for fiscal 2026 has been revised upward over the past 60 days.
Image Source: Zacks Investment Research
FLEX currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.