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Flex's CPI Sales Surge 54%: Can AI Infrastructure Sustain Gains?
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Key Takeaways
Flex's CPI revenues jumped 54% to $2.5B in Q2, with adjusted operating margin rising to 10.7%.
Power margins climbed 550 bps to nearly 16%, driven by higher volumes, pricing and operating leverage.
Flex raised its fiscal 2027 CPI revenue growth outlook to 75-85%, supported by AI investments and buyouts.
Flex Ltd. (FLEX - Free Report) delivered strong growth in its Cloud and Power Infrastructure (CPI) segment during the second quarter of fiscal 2027, benefiting from robust demand for AI infrastructure. CPI revenues surged 54% year over year to $2.5 billion, driven by continued strength across power, cloud and cooling businesses. The segment's adjusted operating income reached $268 million, while adjusted operating margin expanded 240 basis points (bps) to 10.7%, reflecting improved profitability across its businesses and a favorable revenue mix.
The power business remained a key growth driver, with operating margin increasing approximately 550 bps year over year to nearly 16%. Strong volume growth and benefits from scaling investments made last year supported margin expansion. Favorable business mix, pricing and operating leverage also contributed to profitability. Management expects power to continue growing faster than cloud and cooling, supporting further margin improvement.
Flex is strengthening its AI infrastructure capabilities through investments in compute, power and cooling technologies. The recently completed acquisition of EPC Power enhances its end-to-end power solutions portfolio and complements ongoing developments in 800-volt architecture and solid-state transformers. Additionally, the company introduced prefabricated AI Modules designed to accelerate AI factory deployments by up to 50%. New cooling product launches planned over the next six months are expected to expand its capabilities further.
Flex expects CPI revenues to increase 105-115% year over year in the third quarter of fiscal 2027, supported by recent investments in cloud, cooling and power. For fiscal 2027, management raised its CPI revenue growth outlook to 75-85%, including contributions from acquisitions. Adjusted operating margin is projected at 11.5-11.7%, representing approximately 240 bps of expansion at the midpoint.
Management expects continued momentum from AI infrastructure investments, supported by capacity expansion, productivity improvements and EPC Power contributions. However, component shortages remain a challenge, although these constraints have been incorporated into guidance. The planned spin-off of CPI as Axiom in early 2027 is expected to create a focused business positioned to capitalize on growing AI infrastructure demand.
Taking a Look at Flex’s Competitors
Jabil Inc. (JBL - Free Report) continues to benefit from robust AI infrastructure investments across compute, networking, power and cooling solutions, supported by expanding hyperscale relationships and manufacturing capabilities. Management expects fiscal 2027 revenues to grow 24% to $44.5 billion, driven by 54% growth in AI-related revenues to $22.1 billion and 43% growth in Intelligent Infrastructure revenues to $25.6 billion. Diversification across healthcare, automotive and energy markets further supports growth. Its asset-light manufacturing model, improving operating efficiency and strong cash generation enhance profitability. Management projects core EPS of $17.55, core operating margin of 6.1% and adjusted free cash flow of approximately $1.6 billion for fiscal 2027.
Celestica (CLS - Free Report) is benefiting from robust AI infrastructure investments, rising hyperscaler demand and strong momentum in its Connectivity & Cloud Solutions segment. The company raised its 2026 revenue guidance to $21 billion from $20.5 billion and adjusted EPS outlook to $11.55 from $11.30. For 2027, management projects revenues of $40 billion and adjusted EPS of $21.50, reflecting sustained demand for networking and compute infrastructure. Strong cash generation, ample liquidity and expanding operating margins support capacity expansion and long-term investments. Product diversification and improving returns on invested capital further strengthen its growth prospects.
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Flex's CPI Sales Surge 54%: Can AI Infrastructure Sustain Gains?
Key Takeaways
Flex Ltd. (FLEX - Free Report) delivered strong growth in its Cloud and Power Infrastructure (CPI) segment during the second quarter of fiscal 2027, benefiting from robust demand for AI infrastructure. CPI revenues surged 54% year over year to $2.5 billion, driven by continued strength across power, cloud and cooling businesses. The segment's adjusted operating income reached $268 million, while adjusted operating margin expanded 240 basis points (bps) to 10.7%, reflecting improved profitability across its businesses and a favorable revenue mix.
The power business remained a key growth driver, with operating margin increasing approximately 550 bps year over year to nearly 16%. Strong volume growth and benefits from scaling investments made last year supported margin expansion. Favorable business mix, pricing and operating leverage also contributed to profitability. Management expects power to continue growing faster than cloud and cooling, supporting further margin improvement.
Flex is strengthening its AI infrastructure capabilities through investments in compute, power and cooling technologies. The recently completed acquisition of EPC Power enhances its end-to-end power solutions portfolio and complements ongoing developments in 800-volt architecture and solid-state transformers. Additionally, the company introduced prefabricated AI Modules designed to accelerate AI factory deployments by up to 50%. New cooling product launches planned over the next six months are expected to expand its capabilities further.
Flex expects CPI revenues to increase 105-115% year over year in the third quarter of fiscal 2027, supported by recent investments in cloud, cooling and power. For fiscal 2027, management raised its CPI revenue growth outlook to 75-85%, including contributions from acquisitions. Adjusted operating margin is projected at 11.5-11.7%, representing approximately 240 bps of expansion at the midpoint.
Management expects continued momentum from AI infrastructure investments, supported by capacity expansion, productivity improvements and EPC Power contributions. However, component shortages remain a challenge, although these constraints have been incorporated into guidance. The planned spin-off of CPI as Axiom in early 2027 is expected to create a focused business positioned to capitalize on growing AI infrastructure demand.
Taking a Look at Flex’s Competitors
Jabil Inc. (JBL - Free Report) continues to benefit from robust AI infrastructure investments across compute, networking, power and cooling solutions, supported by expanding hyperscale relationships and manufacturing capabilities. Management expects fiscal 2027 revenues to grow 24% to $44.5 billion, driven by 54% growth in AI-related revenues to $22.1 billion and 43% growth in Intelligent Infrastructure revenues to $25.6 billion. Diversification across healthcare, automotive and energy markets further supports growth. Its asset-light manufacturing model, improving operating efficiency and strong cash generation enhance profitability. Management projects core EPS of $17.55, core operating margin of 6.1% and adjusted free cash flow of approximately $1.6 billion for fiscal 2027.
Celestica (CLS - Free Report) is benefiting from robust AI infrastructure investments, rising hyperscaler demand and strong momentum in its Connectivity & Cloud Solutions segment. The company raised its 2026 revenue guidance to $21 billion from $20.5 billion and adjusted EPS outlook to $11.55 from $11.30. For 2027, management projects revenues of $40 billion and adjusted EPS of $21.50, reflecting sustained demand for networking and compute infrastructure. Strong cash generation, ample liquidity and expanding operating margins support capacity expansion and long-term investments. Product diversification and improving returns on invested capital further strengthen its growth prospects.
Flex Price Performance, Valuation and Estimates
Shares of FLEX have gained 36.2% in the past year compared with the Electronics - Miscellaneous Products industry’s growth of 10%.
Image Source: Zacks Investment Research
FLEX trades at a forward 12-month price-to-earnings (P/E) ratio of 14.24, below the industry’s 22.27.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for FLEX’s fiscal 2027 earnings 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.