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FLEX Q2 Earnings Beat Estimates on CPI Strength, Outlook Raised
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Key Takeaways
Flex's Q2 adjusted EPS jumped 49.4% to $1.18, while revenues rose 24.8% to $8.49 billion, beating estimates.
Solid AI demand drove CPI revenues to $2.51 billion, with operating income up 97% and margin reaching 10.7%.
Flex raised its fiscal 2027 revenue outlook to $34.9-$35.9 billion and adjusted EPS guidance to $4.84-$5.16.
Flex Ltd. (FLEX - Free Report) reported second-quarter fiscal 2027 adjusted earnings of $1.18 per share, up 49.4% year over year. The figure beat the Zacks Consensus Estimate of $1.05 by 12.38%.
Revenues increased 24.8% year over year to $8.49 billion, surpassing the consensus mark of $8.18 billion by 3.85%. Strong AI-related demand across Cloud and Power Infrastructure (CPI), along with growth in high-value markets, supported the results. Adjusted operating margin expanded 110 basis points (bps) to 7.1%.
Shares of the company gained around 8% in the pre-market trading session today. In the past year, the stock has rallied 26.1% compared with the Zacks Electronics - Miscellaneous Products industry’s growth of 9.9%.
Image Source: Zacks Investment Research
FLEX Gains From Broad-Based Segment Growth
Regulated Manufacturing Solutions (RMS) revenues increased 9% year over year to $2.68 billion. Growth was supported by high-value markets, particularly Industrial, where energy infrastructure and robotics remained important demand drivers.
Integrated Technology Solutions (ITS) revenues climbed 22% to $3.31 billion. Communications benefited from strong AI-related demand for advanced networking infrastructure, while consumer-related Lifestyle markets experienced softness.
Cloud and Power Infrastructure revenues surged to $2.51 billion from $1.63 billion a year earlier. Growth across Power and Cloud & Cooling reflected continued data center investment and robust demand for critical infrastructure solutions.
Flex Sees Strong Profit Growth Across Segments
CPI-adjusted operating income jumped 97% year over year to $268 million. The segment's adjusted operating margin expanded 240 bps to 10.7%, reflecting favorable business mix and operating execution.
RMS adjusted operating income increased 19% to $172 million, with margin improving 50 bps to 6.4%. ITS adjusted operating income rose 26% to $181 million, while margin expanded 20 bps to 5.5%.
Corporate and Other expenses were $14 million compared with $15 million in the year-ago quarter. The improvements across all three operating segments supported consolidated profitability.
FLEX Expands Margins Despite Higher Expenses
Adjusted gross profit increased 33% year over year to $842 million. Adjusted gross margin expanded 60 bps to 9.9%, benefiting from productivity improvements and favorable business mix.
Adjusted operating income climbed 48% to $607 million from $409 million. GAAP operating income increased to $414 million from $296 million, while GAAP operating margin improved to 4.9% from 4.4%.
GAAP selling, general and administrative expenses rose to $371 million from $260 million. Legal and other adjustments totaled $110 million, including approximately $91 million related primarily to the planned CPI spin-off and $19 million in acquisition costs.
Cash provided by operating activities increased to $501 million from $453 million in the year-ago quarter. Changes in working capital and other items contributed $82 million compared with $98 million previously.
Net capital expenditures totaled $240 million, leaving free cash flow of $261 million, down from $305 million a year earlier. Free cash flow included a $61 million negative impact from separation costs associated with the CPI spin-off.
FLEX's Balance Sheet Reflects Expansion
Cash and cash equivalents reached $3.08 billion as of Sept. 25, 2026, compared with $2.39 billion at fiscal 2026-end. Long-term debt increased to $5.21 billion from $3.75 billion over the same period.
Total assets rose to $27.38 billion from $22.06 billion. Inventories increased to $7.32 billion from $5.85 billion, while accounts receivable climbed to $5.78 billion from $4.68 billion.
Flex Issues Upbeat Q3 Guidance
For the third quarter of fiscal 2027, Flex expects revenues between $8.87 billion and $9.17 billion. Adjusted operating income is projected at $685-$715 million, with adjusted earnings of $1.19-$1.25 per share.
Management expects CPI revenues to grow 105-115% year over year. RMS revenues are projected to increase in the low-single to mid-single digits, while ITS revenues are expected to grow in the mid-single to high-single digits.
FLEX Raises Fiscal 2027 Outlook
Flex raised its fiscal 2027 revenue guidance to $34.9-$35.9 billion from $33.7-$35.2 billion. The adjusted operating margin outlook was increased to 7.6-7.8% from 7-7.2%.
Adjusted earnings guidance was raised to $4.84-$5.16 per share from $4.42-$4.74. Management expects CPI revenues to increase 75-85%, while RMS and ITS combined revenues are projected to grow 8-11%.
The updated outlook incorporates recent acquisitions, including EPC Power, which was completed on Oct. 14, 2026. Management continues to target a tax-free spin-off of CPI, operating under the Axiom name, during the first quarter of calendar 2027.
Progress Software Corporation (PRGS - Free Report) reported third-quarter fiscal 2026 results wherein revenues came in at $246 million, down 2% year over year and on a constant currency (cc) basis. ARR of $873 million inched up 1% year over year on a cc basis. Progress Software Corporation reported a 13% year-over-year increase in non-GAAP earnings per share, which stood at $1.69.
Shares of Progress Software Corporation have increased 6.4% in the past year.
Synopsys, Inc (SNPS - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $3.91 per share, which increased 15.3% year over year and beat the Zacks Consensus Estimate by 6.5%. Broad-based strength, led by EDA and Ansys, supported the earnings outperformance.
Revenues for Synopsys rose 42.4% year over year to $2.48 billion, topping the consensus mark by 1.7%. Backlog remained strong at $10.9 billion, while Design IP returned to year-over-year growth.
Shares of Synopsys have gained 4.2% in the past year.
Oracle (ORCL - Free Report) reported first-quarter fiscal 2027 non-GAAP earnings of $1.92 per share, which beat the Zacks Consensus Estimate by 10.3% and increased 30% in dollar terms and 30% in cc on a year-over-year basis.
Total quarterly revenues increased 30% year over year to $19.3 billion, which beat the consensus mark by 1.11%, reflecting strong demand for Oracle's cloud infrastructure and applications suites, particularly from AI-focused enterprises.
Shares of Oracle have lost 52.6% in the past year.
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FLEX Q2 Earnings Beat Estimates on CPI Strength, Outlook Raised
Key Takeaways
Flex Ltd. (FLEX - Free Report) reported second-quarter fiscal 2027 adjusted earnings of $1.18 per share, up 49.4% year over year. The figure beat the Zacks Consensus Estimate of $1.05 by 12.38%.
Revenues increased 24.8% year over year to $8.49 billion, surpassing the consensus mark of $8.18 billion by 3.85%. Strong AI-related demand across Cloud and Power Infrastructure (CPI), along with growth in high-value markets, supported the results. Adjusted operating margin expanded 110 basis points (bps) to 7.1%.
Shares of the company gained around 8% in the pre-market trading session today. In the past year, the stock has rallied 26.1% compared with the Zacks Electronics - Miscellaneous Products industry’s growth of 9.9%.
Image Source: Zacks Investment Research
FLEX Gains From Broad-Based Segment Growth
Regulated Manufacturing Solutions (RMS) revenues increased 9% year over year to $2.68 billion. Growth was supported by high-value markets, particularly Industrial, where energy infrastructure and robotics remained important demand drivers.
Integrated Technology Solutions (ITS) revenues climbed 22% to $3.31 billion. Communications benefited from strong AI-related demand for advanced networking infrastructure, while consumer-related Lifestyle markets experienced softness.
Cloud and Power Infrastructure revenues surged to $2.51 billion from $1.63 billion a year earlier. Growth across Power and Cloud & Cooling reflected continued data center investment and robust demand for critical infrastructure solutions.
Flex Sees Strong Profit Growth Across Segments
CPI-adjusted operating income jumped 97% year over year to $268 million. The segment's adjusted operating margin expanded 240 bps to 10.7%, reflecting favorable business mix and operating execution.
RMS adjusted operating income increased 19% to $172 million, with margin improving 50 bps to 6.4%. ITS adjusted operating income rose 26% to $181 million, while margin expanded 20 bps to 5.5%.
Corporate and Other expenses were $14 million compared with $15 million in the year-ago quarter. The improvements across all three operating segments supported consolidated profitability.
FLEX Expands Margins Despite Higher Expenses
Adjusted gross profit increased 33% year over year to $842 million. Adjusted gross margin expanded 60 bps to 9.9%, benefiting from productivity improvements and favorable business mix.
Adjusted operating income climbed 48% to $607 million from $409 million. GAAP operating income increased to $414 million from $296 million, while GAAP operating margin improved to 4.9% from 4.4%.
GAAP selling, general and administrative expenses rose to $371 million from $260 million. Legal and other adjustments totaled $110 million, including approximately $91 million related primarily to the planned CPI spin-off and $19 million in acquisition costs.
Flex Ltd. Price, Consensus and EPS Surprise
Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote
Flex Generates Solid Operating Cash Flow
Cash provided by operating activities increased to $501 million from $453 million in the year-ago quarter. Changes in working capital and other items contributed $82 million compared with $98 million previously.
Net capital expenditures totaled $240 million, leaving free cash flow of $261 million, down from $305 million a year earlier. Free cash flow included a $61 million negative impact from separation costs associated with the CPI spin-off.
FLEX's Balance Sheet Reflects Expansion
Cash and cash equivalents reached $3.08 billion as of Sept. 25, 2026, compared with $2.39 billion at fiscal 2026-end. Long-term debt increased to $5.21 billion from $3.75 billion over the same period.
Total assets rose to $27.38 billion from $22.06 billion. Inventories increased to $7.32 billion from $5.85 billion, while accounts receivable climbed to $5.78 billion from $4.68 billion.
Flex Issues Upbeat Q3 Guidance
For the third quarter of fiscal 2027, Flex expects revenues between $8.87 billion and $9.17 billion. Adjusted operating income is projected at $685-$715 million, with adjusted earnings of $1.19-$1.25 per share.
Management expects CPI revenues to grow 105-115% year over year. RMS revenues are projected to increase in the low-single to mid-single digits, while ITS revenues are expected to grow in the mid-single to high-single digits.
FLEX Raises Fiscal 2027 Outlook
Flex raised its fiscal 2027 revenue guidance to $34.9-$35.9 billion from $33.7-$35.2 billion. The adjusted operating margin outlook was increased to 7.6-7.8% from 7-7.2%.
Adjusted earnings guidance was raised to $4.84-$5.16 per share from $4.42-$4.74. Management expects CPI revenues to increase 75-85%, while RMS and ITS combined revenues are projected to grow 8-11%.
The updated outlook incorporates recent acquisitions, including EPC Power, which was completed on Oct. 14, 2026. Management continues to target a tax-free spin-off of CPI, operating under the Axiom name, during the first quarter of calendar 2027.
FLEX’s Zacks Rank
Flex currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performances
Progress Software Corporation (PRGS - Free Report) reported third-quarter fiscal 2026 results wherein revenues came in at $246 million, down 2% year over year and on a constant currency (cc) basis. ARR of $873 million inched up 1% year over year on a cc basis. Progress Software Corporation reported a 13% year-over-year increase in non-GAAP earnings per share, which stood at $1.69.
Shares of Progress Software Corporation have increased 6.4% in the past year.
Synopsys, Inc (SNPS - Free Report) reported third-quarter fiscal 2026 non-GAAP earnings of $3.91 per share, which increased 15.3% year over year and beat the Zacks Consensus Estimate by 6.5%. Broad-based strength, led by EDA and Ansys, supported the earnings outperformance.
Revenues for Synopsys rose 42.4% year over year to $2.48 billion, topping the consensus mark by 1.7%. Backlog remained strong at $10.9 billion, while Design IP returned to year-over-year growth.
Shares of Synopsys have gained 4.2% in the past year.
Oracle (ORCL - Free Report) reported first-quarter fiscal 2027 non-GAAP earnings of $1.92 per share, which beat the Zacks Consensus Estimate by 10.3% and increased 30% in dollar terms and 30% in cc on a year-over-year basis.
Total quarterly revenues increased 30% year over year to $19.3 billion, which beat the consensus mark by 1.11%, reflecting strong demand for Oracle's cloud infrastructure and applications suites, particularly from AI-focused enterprises.
Shares of Oracle have lost 52.6% in the past year.