Flex Q3 Earnings Call Highlights

04 Feb 2026, 15:42 by Mitch Edgeman · The Markets Daily

Flex (NASDAQ:FLEX) reported third-quarter fiscal 2026 results that exceeded its guidance across all metrics, driven by continued strength in data center-related demand and improving momentum in industrial and health end markets. Management also raised its full-year revenue and earnings outlook at the midpoint and said it expects to exit the fiscal year with “very good momentum.”

Quarterly results topped guidance

For the quarter, Flex delivered revenue of $7.1 billion, up 8% year over year. Adjusted operating margin was 6.5%, marking another quarter above 6%, while adjusted earnings per share rose 13% to $0.87, which management described as another record for the company.

On profitability, adjusted gross profit was $690 million and adjusted gross margin improved to 9.8%, up 50 basis points year over year. Adjusted operating profit was $460 million, and adjusted operating margin expanded 40 basis points to 6.5%, which Flex said was a record level, reflecting cost discipline and a shift toward higher-value products and services.

Data center strategy centered on compute, cooling, and power

CEO Revathi Advaithi emphasized that the company’s data center growth is being driven by expanding compute and AI workloads, and argued that the complexity of deployments favors a systems-level approach. She said Flex’s data center portfolio is organized around three “tightly connected” capabilities: computer integration, cooling, and power.

During the quarter, Flex highlighted several initiatives and partnerships:

Development of modular data center systems with NVIDIA, aimed at deployment speed and scale.
A partnership with LG to advance thermal management solutions for gigawatt-scale data centers.
Deployment of a rack-level, vertically integrated liquid cooling solution at the Equinix co-innovation facility.
Introduction of an AI infrastructure platform described as the first globally manufactured data center platform integrating power, cooling, compute, and services into a modular design, which management said can accelerate deployment timelines by up to 30%.

In Q&A, Advaithi said both power and compute are growing “very, very strongly.” She noted that power capacity investments were heavier this year, while Flex expects to invest more in compute capacity over the next few years as additional AI programs come online. She also described capacity additions as an ongoing cycle of adding and digesting investments.

Segment performance: Reliability accelerated; Agility mixed by end market

Flex reported year-over-year revenue growth in both operating segments.

Reliability Solutions revenue rose 10% to $3.2 billion, with management citing Power as a key growth driver alongside Core Industrial and Health Solutions. Adjusted operating income increased to $233 million and adjusted operating margin expanded to 7.2%, up 50 basis points year over year.

Agility Solutions revenue increased 6% to $3.8 billion. Flex said data center-related end markets continued to drive strong growth, but results were partially offset by softness in consumer-related end markets. Adjusted operating income was $239 million and adjusted operating margin was 6.3%, unchanged from the prior-year quarter.

Addressing questions about sequential margin improvement, CFO Kevin Crum attributed the strong performance primarily to power and to margin improvement in Core Industrial, citing mix and underlying execution. He said the company expects those dynamics to continue into the fourth quarter.

Advaithi also noted that some AI-related momentum is showing up outside the company’s data center category, pointing to strength in high-performance networking and satellite communication products tied to next-generation infrastructure platforms. In response to an analyst question about Agility’s growth relative to compute expectations, she said data center growth remains on track for the year and added that Agility upside has been supported by high-speed networking and network interface card activity, which Flex does not include in its data center reporting, while consumer devices and lifestyle remain soft.

Cash flow, capital returns, and updated guidance

Flex generated $275 million in cash flow during the quarter, which Crum said was driven by efficient working capital management. Inventory was up 5% sequentially and 5% year over year; inventory net of working capital advances was 56 days, flat versus the prior year. Net CapEx was $145 million, about 2% of revenue, and the company repurchased roughly $200 million of stock, or about 3.3 million shares, during the quarter.

Management reiterated its capital allocation priorities: maintaining an investment-grade balance sheet, funding strategic investments for organic growth, pursuing accretive M&A, and returning capital via opportunistic buybacks.

For the full fiscal year, Flex raised its outlook at the midpoint:

Revenue of $27.2 billion to $27.5 billion (up $350 million at the midpoint versus the prior guide)
Adjusted operating margin of approximately 6.3%
Adjusted EPS of $3.21 to $3.27 (midpoint up $0.11)
Free cash flow conversion guidance maintained at 80%+

For the fourth quarter, Flex guided to continued strength in Reliability Solutions, expecting revenue up low double digits to mid-teens on strength in Power and further growth in Core Industrial and Health Solutions. For Agility Solutions, the company expects revenue up low- to mid-single digits, with cloud and networking growth offset by softer Consumer Devices and Lifestyle demand.

During Q&A, Crum said an Amazon-related warrant deal referenced by an analyst was not expected to be materially incremental to fiscal 2026 results, adding that deployments scale over time and the company would expect potential upside as the program progresses.

On margins, Crum and Advaithi said Flex expects underlying business units to continue to drive margin expansion year over year, alongside mix impacts. Advaithi said the company reached a 6% operating margin level a year ahead of its prior long-term guide and pointed to continued mix shift, productivity efforts, and planned AI implementation in its own facilities. She said the company would provide more detail on long-term margin expectations at its Investor Day on May 13 in Austin.

Separately, Advaithi said Flex is not seeing a retreat in U.S. manufacturing activity in its own business, noting continued inbound requests from customers for projects requiring U.S. manufacturing and stating that significant investments are being driven by expectations in the U.S. and Mexico.

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.