FLEX LTD. Annual Report - How They Did This Year

Flex just released its scorecard for the year ending March 31, 2026. The numbers show a company riding the artificial intelligence (AI) wave, even as its traditional business areas slow down.

1. What Does Flex Actually Do?

Think of Flex as the giant behind-the-scenes engine making physical products for other brands. They handle design, engineering, and supply chain solutions. Based in Austin, Texas, they have 150,000 employees and 27 million square feet of factory space in 30 countries. Mexico is their biggest hub (25% of sales), followed by the U.S. (19%) and China (16%). This global footprint helps prevent supply chain disruptions.

They report numbers in three segments:

• Integrated Technology Solutions (ITS): High-volume consumer tech, smart home devices, and satellites.
• Regulated Manufacturing Solutions (RMS): High-stakes gear like medical devices and car electronics requiring strict quality standards and longer lifecycles.
• Cloud Power Infrastructure (CPI): Power and liquid cooling systems that keep massive AI data centers from overheating.

2. Major Moves: The Big Corporate Split

Flex plans to spin off its booming CPI (AI and data center) segment into a separate public company by early 2027. This split aims to boost stock value by creating two distinct businesses: a high-growth AI infrastructure player and a steady, cash-generating manufacturer. CEO Revathi Advaithi will leave to run the new AI spin-off. Flex will keep the core manufacturing business (ITS and RMS), which must now find a new leadership team to guide its mature operations.

3. The Financial Scorecard: Powered by AI

Flex had a highly successful year. The AI boom drove profits up faster than sales:

• Sales: Hit $27.9 billion, up 8% (or $2.1 billion) from last year. Giant data centers drove most of this growth.
• Profit: Net profit rose 5% to $0.9 billion, a profit margin of about 3.2%.
• Gross Profit (what's left after paying for materials): Jumped 19% to $2.6 billion, boosting margins to 9.3% (up from 8.5%). Flex kept more of each sale by selling higher-margin AI products and running factories efficiently.
• The AI Engine (CPI): CPI sales skyrocketed 38% (up $1.8 billion) on massive demand for data center cooling and power systems. Meanwhile, RMS grew 5% on steady medical and car demand, but ITS fell 2% as consumer tech slowed.
• Cash Flow: They generated $1.1 billion in cash left over after running the business and upgrading factories. This matches last year's figure, leaving plenty of money to buy back stock, pay down debt, or expand factories.

4. Risks to Watch

• A Growing Mountain of Debt: Flex has $3.8 billion in debt and borrowed another $1.45 billion after the year ended. Higher interest payments could limit flexibility, make refinancing harder, and hurt profits if rates stay high.
• Putting Too Many Eggs in One Basket: Flex's top 10 customers account for 45% of sales (up from 37% in 2024). This concentration is risky. If a major client cuts orders, faces trouble, or makes products themselves, Flex's sales will suffer.
• War and Tariffs: Global conflict is a real threat. An August 2025 missile strike on their Ukraine facility cost them $51 million in lost assets and cleanup. A recent Supreme Court ruling striking down certain tariffs might bring minor refunds, but Flex expects little impact.

The Investor's Takeaway

Flex is performing incredibly well in AI. However, the 2027 split means you are buying two very different future companies: a high-growth AI cooling business (CPI) and a steady, traditional manufacturer (ITS and RMS). This split is the main event to watch. It lets the market value the fast-growing AI business separately from the slower manufacturing business. Still, the split brings risks, including leadership changes and transition hiccups.