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Is FLEX a Buy Now as AI Growth Collides With Higher Spending Risks?
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Key Takeaways
Flex's AI-driven CPI revenues surged 54% in the fiscal second quarter, with operating margin reaching 10.7%.
Flex expects 75%-85% CPI revenue growth in fiscal 2027, supported by AI demand and acquisitions.
Flex trades at 14.6X forward earnings, above its five-year median, amid rising debt and capital spending.
Flex Ltd. (FLEX - Free Report) is posting rapid AI infrastructure growth, stronger profitability and sharply higher earnings, but those gains are arriving alongside heavier investment and more debt. That combination makes the stock’s current valuation especially important for investors deciding whether to buy now or wait.
The case is not one-sided. Flex has multiple growth engines and improving margins, yet its capital demands and acquisition financing reduce near-term financial flexibility.
FLEX Has a Powerful AI Growth Driver
Cloud and Power Infrastructure is the clearest growth engine. In second-quarter fiscal 2027, CPI revenues increased 54% year over year to $2.51 billion, while adjusted operating margin expanded 240 basis points to 10.7%.
Management now expects fiscal 2027 CPI revenues to rise 75%-85%, with acquisitions contributing about 10 percentage points of that growth. The platform spans compute integration, liquid cooling and critical power, giving Flex exposure to several physical bottlenecks created by AI data-center expansion.
Jabil Inc. (JBL - Free Report) is also expanding around AI and data-center infrastructure, including racks, networking, power and cooling systems. Celestica Inc. (CLS - Free Report) is pushing deeper into AI data-center networking, including liquid-cooled switching systems, underscoring how competitive this infrastructure opportunity has become.
Flex’s Broader Business Is Also Growing
Growth is not limited to CPI. Regulated Manufacturing Solutions and Integrated Technology Solutions together grew 16% in the second quarter, marking their fourth consecutive quarter of year-over-year growth.
Management expects combined RMS and ITS revenues to increase 8%-11% in fiscal 2027. Industrial demand, including energy infrastructure, warehouse automation and robotics, is supporting RMS, while Communications remains the main growth driver within ITS despite softness in consumer-related markets.
FLEX Valuation Offers a Mixed Signal
Flex trades at 14.6X forward 12-month earnings, below the Zacks sub-industry’s 23.2X, the Zacks sector’s 17.8X and the S&P 500’s 18.8X. On those comparisons, the shares carry a clear discount.
The discount is less striking against Flex’s own history. The stock’s five-year median forward multiple is 13.2X, meaning the current valuation sits above its longer-term midpoint. Investors are therefore paying less than broader benchmarks, but not at an unusually low level for Flex itself.
Flex's Investment Cycle Raises the Stakes
Flex’s expansion is requiring substantial capital. Long-term debt stood at $5.21 billion as of Sept. 25, 2026, up from $3.75 billion at fiscal 2026-end, while cash totaled $3.08 billion.
Management projects fiscal 2027 capital expenditures of $1.5-$1.6 billion and free cash flow conversion of approximately 40%. The EPC Power transaction also involved $4.4 billion of acquisition debt, although Flex expects proceeds from a planned $2 billion Axiom preferred stock sale to repay part of that amount. Heavy spending can support future capacity, but it also raises the execution bar and limits near-term financial flexibility.
FLEX’s Ratings Favor a Balanced View
The bottom line is that FLEX offers unusually fast AI-related growth and improving operating performance, but the shares do not present a clean buy-now setup given elevated capital needs, rising leverage and a valuation above the stock’s five-year median.
Its Value Score of B, Growth Score of B and VGM Score of B support the stock’s fundamental appeal, while the Momentum Score of C points to a less favorable near-term timing profile. Style Scores are designed to complement the Zacks Rank, and a #3 Rank supports holding rather than making an aggressive new purchase. For investors attracted to the AI infrastructure story, waiting for better valuation support or clearer evidence that heavy spending is translating into stronger cash generation may offer a more balanced entry point.
View the Zacks #1 Rank List
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Is FLEX a Buy Now as AI Growth Collides With Higher Spending Risks?
Key Takeaways
Flex Ltd. (FLEX - Free Report) is posting rapid AI infrastructure growth, stronger profitability and sharply higher earnings, but those gains are arriving alongside heavier investment and more debt. That combination makes the stock’s current valuation especially important for investors deciding whether to buy now or wait.
The case is not one-sided. Flex has multiple growth engines and improving margins, yet its capital demands and acquisition financing reduce near-term financial flexibility.
FLEX Has a Powerful AI Growth Driver
Cloud and Power Infrastructure is the clearest growth engine. In second-quarter fiscal 2027, CPI revenues increased 54% year over year to $2.51 billion, while adjusted operating margin expanded 240 basis points to 10.7%.
Management now expects fiscal 2027 CPI revenues to rise 75%-85%, with acquisitions contributing about 10 percentage points of that growth. The platform spans compute integration, liquid cooling and critical power, giving Flex exposure to several physical bottlenecks created by AI data-center expansion.
Jabil Inc. (JBL - Free Report) is also expanding around AI and data-center infrastructure, including racks, networking, power and cooling systems. Celestica Inc. (CLS - Free Report) is pushing deeper into AI data-center networking, including liquid-cooled switching systems, underscoring how competitive this infrastructure opportunity has become.
Flex’s Broader Business Is Also Growing
Growth is not limited to CPI. Regulated Manufacturing Solutions and Integrated Technology Solutions together grew 16% in the second quarter, marking their fourth consecutive quarter of year-over-year growth.
Management expects combined RMS and ITS revenues to increase 8%-11% in fiscal 2027. Industrial demand, including energy infrastructure, warehouse automation and robotics, is supporting RMS, while Communications remains the main growth driver within ITS despite softness in consumer-related markets.
FLEX Valuation Offers a Mixed Signal
Flex trades at 14.6X forward 12-month earnings, below the Zacks sub-industry’s 23.2X, the Zacks sector’s 17.8X and the S&P 500’s 18.8X. On those comparisons, the shares carry a clear discount.
The discount is less striking against Flex’s own history. The stock’s five-year median forward multiple is 13.2X, meaning the current valuation sits above its longer-term midpoint. Investors are therefore paying less than broader benchmarks, but not at an unusually low level for Flex itself.
Flex's Investment Cycle Raises the Stakes
Flex’s expansion is requiring substantial capital. Long-term debt stood at $5.21 billion as of Sept. 25, 2026, up from $3.75 billion at fiscal 2026-end, while cash totaled $3.08 billion.
Management projects fiscal 2027 capital expenditures of $1.5-$1.6 billion and free cash flow conversion of approximately 40%. The EPC Power transaction also involved $4.4 billion of acquisition debt, although Flex expects proceeds from a planned $2 billion Axiom preferred stock sale to repay part of that amount. Heavy spending can support future capacity, but it also raises the execution bar and limits near-term financial flexibility.
FLEX’s Ratings Favor a Balanced View
The bottom line is that FLEX offers unusually fast AI-related growth and improving operating performance, but the shares do not present a clean buy-now setup given elevated capital needs, rising leverage and a valuation above the stock’s five-year median.
FLEX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its Value Score of B, Growth Score of B and VGM Score of B support the stock’s fundamental appeal, while the Momentum Score of C points to a less favorable near-term timing profile. Style Scores are designed to complement the Zacks Rank, and a #3 Rank supports holding rather than making an aggressive new purchase. For investors attracted to the AI infrastructure story, waiting for better valuation support or clearer evidence that heavy spending is translating into stronger cash generation may offer a more balanced entry point.