FLEX LTD. Q4 FY2025 earnings call

• Fiscal Q4 2025 revenue was $6.4 billion, up nearly 4% y-o-y, with adjusted operating margin at 6.2% (quarterly record) and adjusted EPS $0.73 (up 28% y-o-y).
• FY 2025 had record annual adjusted operating margins at 5.7%, record adjusted EPS of $2.65 (fifth consecutive year of double-digit growth), and over $1 billion in free cash flow.
• Focused on Flex Forward strategy, shifting to higher value businesses, with growth in data center, medical devices, and automotive power electronics.
• Executed acquisitions, won PACE awards in automotive, and maintained operational efficiency.
• Addressed tariff challenges, leveraging global footprint and supply chain expertise for tariff mitigation.

In Q4 2025, Reliability revenue was $2.9 billion, down 1.3%, with operating income $180 million and segment operating margin at 6.2%. Agility revenue totaled $3.5 billion, up 8.2%, with operating income $230 million and operating margin improving to 6.6%. For FY 2025, Reliability revenue was $11.7 billion with an operating margin of 5.8%, and Agility revenue was $14.1 billion with a 6.1% operating margin. Data center revenue in FY 2025 was approximately $4.8 billion, with cloud programs generating about $3.5 billion and power products generating about $1.3 billion.

• Fiscal 2026 revenue expected to be between $25 billion and $26.8 billion.
• Adjusted operating margin expected to be between 6% and 6.1%, reaching FY 2027 target a year ahead of schedule.
• Adjusted EPS expected to be between $2.81 to $3.01 per share.
• Reliability Solutions revenue expected flat at midpoint, Agility Solutions revenue flat to slightly up.
• Q1 2026 expected Reliability Solutions flat to down high single digits, Agility Solutions down low single to up mid single digits, total revenue $6B-$6.5B, adjusted operating income $330M-$370M.

• Tariffs as pass-through costs, with potential lag in tariff recoveries affecting cash flow.
• Macro-economic headwinds affecting core industrial, renewables, and medical equipment markets.
• Evolving tariff situation with potential material impacts on some Flex One power products if not offset by pricing actions.

Q: How to think about margin drivers for fiscal '26 beyond cloud mix?

A: Continued growth in cloud, data center product business, power business, service business, and mix improvement through operational efficiency.

Q: What's the lay of the land on customer demand for US and Mexico footprint?

A: Customers are actively discussing tariffs and footprints, Flex has strong global footprint, with capacity in North America to support customers through regionalization.

Q: Expand on data center scale advantages and inventory impact on cash flows?

A: Data center has vertically integrated capability, power engineering design scale; inventory improved with working capital management, expecting margin improvement and CapEx normalization in FY '26.

Q: Details on customer sourced inventory impact on revenues and margins?

A: Customer sourced inventory contracts are not isolated to cloud, margins get a bump, and FY '26 margins expected to grow without this specific impact.

Q: Drivers of margin step down from Q4 to Q1 '26?

A: Sequential revenue drop, lower fixed cost absorption, and automotive business step down with cost structure drag.