Flex (NASDAQ:FLEX) reported first-quarter fiscal 2027 results that included 21% revenue growth, expanding margins and record adjusted earnings per share, while management said the company remains on track to separate its Cloud and Power Infrastructure business into an independent company in the first quarter of calendar 2027.
First-quarter revenue totaled $7.9 billion, up 21% from a year earlier. Adjusted operating profit rose 35% to $534 million, while adjusted operating margin increased 70 basis points to 6.7%. Adjusted earnings per share increased 39% year over year to $1.
Segment Growth Led by Cloud and Power Infrastructure
The Cloud and Power Infrastructure, or CPI, segment posted the fastest growth among Flex’s operating units. Revenue in the segment reached $2.2 billion, up 35% year over year, driven by growth in power products as cloud and cooling programs ramped. Adjusted operating income was $214 million, and the segment’s adjusted operating margin rose 20 basis points to 9.7%.
Advaithi said AI infrastructure demand continues to extend beyond computing chips into power, thermal management, electrical systems and grid capacity. She described the planned SpinCo as a digital and electrical infrastructure company rather than a data-center component supplier.
“As AI scales, the constraint is no longer just the chip. It’s everything around the chip: power, cooling, electrical systems, and ultimately, the grid capacity,” Advaithi said.
The company said it is investing in capacity to support CPI’s growth and expects its investments to contribute to accelerated revenue growth and margin expansion in the second half of fiscal 2027. CFO Kevin Krumm said more than 90% of the next three quarters of business in the segment is booked, supporting the company’s visibility into the expected second-half ramp.
Flex expects CPI revenue to increase 65% to 75% for the full fiscal year, with power growing faster than cloud. Management said the prior framework calling for CPI growth of more than 80% in fiscal 2028 remains intact.
Management also said the CPI segment is expected to deliver at least 100 basis points of year-over-year margin improvement during fiscal 2027. Advaithi said new program ramps can initially require investment, while the power business is continuing to absorb investment needs following acquisitions and amid growth of more than 70%.
Remaining Businesses Benefit From Industrial and Networking Demand
Revenue from the Regulated Manufacturing Solutions, or RMS, segment rose 12% to $2.7 billion, led by industrial demand. Adjusted operating income was $176 million, while adjusted operating margin expanded 130 basis points to 6.6%.
Integrated Technology Solutions, or ITS, generated revenue of $3.1 billion, up 20% from the prior-year period. The increase was driven by communications, though management said weakness in consumer-related markets partly offset that performance. ITS adjusted operating income was $158 million, and its adjusted operating margin improved 10 basis points to 5.2%.
Chief Commercial Officer Michael Hartung said advanced networking remains a high-value growth market within communications and is benefiting from data-center-related pull-through demand. He said Flex is seeing sustained customer demand and share gains across products including high-speed switches, optical products and network interface technologies.
For the business that will remain with Flex after the separation, Hartung said the company plans to emphasize high-value, longer-cycle markets while continuing to optimize its portfolio and reduce emphasis on lower-value markets. He pointed to energy infrastructure, robotics and warehouse automation as areas supported by longer-term trends.
In industrial, management said its energy infrastructure manufacturing business is seeing demand from data-center and utility-scale infrastructure. The company also cited regionalization, labor scarcity and wage inflation as factors supporting warehouse automation demand.
Spin-Off Preparation and Technology Initiatives
Flex said its separation management office and cross-functional teams are progressing toward a tax-free spin-off of CPI in the first quarter of calendar 2027. The company also announced leadership appointments for both Flex and SpinCo that will take effect when the separation is completed.
Advaithi said the separation is intended to give each company a sharper strategic focus and capital-allocation approach tailored to its opportunities. SpinCo is expected to pursue rapid growth in AI-related infrastructure, while Flex will retain its global manufacturing platform and exposure to healthcare, automation, advanced networking and energy infrastructure.
During the quarter, Flex expanded its partnership with Cerebras to scale U.S. manufacturing of the CS-3 AI accelerator system. Advaithi said the relationship includes manufacturing and cooling work and could involve next-generation power technology over time. Flex also introduced a liquid-cooling solution through JetCool and showcased power and infrastructure technologies at Computex.
Management said liquid cooling remains a nascent but potentially important growth area within the cloud portion of CPI. Flex acquired cold-plate capabilities through JetCool and is qualifying coolant distribution units with customers, according to Advaithi.
Updated Fiscal 2027 Outlook
Flex raised its full-year fiscal 2027 outlook to revenue of $33.7 billion to $35.2 billion, representing 23% growth at the midpoint. The company expects adjusted operating margin of 7% to 7.2%, about 80 basis points higher at the midpoint than the prior year, and adjusted EPS of $4.42 to $4.74, up 39% at the midpoint.
- RMS revenue is expected to rise mid-single digits to high single digits.
- ITS revenue is expected to increase high single digits to low double digits.
- CPI revenue is expected to grow 65% to 75% for the full year.
- Capital expenditures are projected at $1.5 billion to $1.6 billion.
- Free-cash-flow conversion is now expected to be about 40%, including spin-off costs, compared with the prior 60% expectation that excluded those costs.
For the second quarter, Flex forecast total revenue of $7.95 billion to $8.25 billion, representing 19% growth at the midpoint, and adjusted operating income of $535 million to $565 million. The company expects CPI revenue growth of 45% to 55% as new cloud and power programs continue to ramp.
First-quarter free cash flow was $41 million, including $24 million of one-time cash costs tied to spin-off activities. Net capital expenditures totaled $235 million, or about 3% of revenue.
About Flex (NASDAQ:FLEX)
Flex (NASDAQ: FLEX), formerly known as Flextronics, is a global provider of electronics manufacturing services (EMS) and original design manufacturing (ODM). The company offers end-to-end product lifecycle solutions including product design and engineering, prototyping, volume manufacturing, testing, and aftermarket services. Its offerings extend into supply chain management, component sourcing, logistics and distribution, and advanced manufacturing capabilities such as automation and digital manufacturing to support customers from concept through end-of-life.
Flex serves a broad range of industries, including automotive, healthcare, industrial, communications, and consumer electronics, working with original equipment manufacturers (OEMs) and technology companies to accelerate time to market and manage complex supply chains.
