Spin-Off Proposed: Generational AI Demand Fuels Record Margins (FLEX Q4 2026 Earnings Call)

By Dr. Graph | Updated on May 26, 2026 | earnings

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FLEX has proposed a strategic plan to spin off its Cloud and Power Infrastructure business into a stand-alone public company to capitalise on surging artificial intelligence demand. This structural realignment follows record fourth-quarter profit margins and massive long-term hyperscaler commitments.

Strong Infrastructure Deployments Drive Record Profitability and Volume Growth

FLEX achieved robust fourth-quarter revenue of $7.5 billion, representing a 17% year-over-year expansion driven by strong infrastructure deployments. This increased volume and favorable product mix translated to a record adjusted gross margin of 9.9%.

Efficient factory execution drove a record quarterly adjusted operating margin of 6.7%. Strong profitability across business units boosted adjusted earnings per share by 27% year-over-year to $0.93.

Midpoint Guidance Projects Significant Revenue Step-up and Investment Allocation

To support its ongoing transitions, management guided for fiscal year 2027 revenue between $32.3 billion and $33.8 billion. This revenue target represents an 18% expansion at the midpoint.

Kevin Krumm stated: "We expect CapEx to be in the range of $1.4 billion to $1.6 billion." This elevated capital deployment will fund power and cooling infrastructure to support secured programs before normalizing in fiscal year 2028.

Segment Restructuring Highlights Growth in Regulated and Technology Portfolios

During the fourth quarter, the Regulated Manufacturing Solutions segment achieved revenue of $2.7 billion. The Integrated Technology Solutions segment recorded revenue of $2.9 billion. Meanwhile, the Cloud and Power Infrastructure segment recorded revenue of $1.8 billion, driven by strong growth in power and cloud business units. FLEX recently closed the acquisition of Electrical Power Products, also known as EP2, to modernise utilities and strengthen its power portfolio. Revathi Advaithi emphasized that acquiring EP2 "enhances our ability to deliver end-to-end solutions for utility and infrastructure customers".

Executives Address Long-Term Capacity Backlog and Margin Synergies

In response to Samik Chatterjee of JPMorgan, Revathi Advaithi highlighted that SpinCo is purpose-built to address a generational shift in power architecture. Kevin Krumm answered Sahej Singh of Stifel, explaining that power margins will continue to exceed cloud margins within the CPI segment. Answering Mark Delaney of Goldman Sachs, Kevin Krumm added that CPI secured programs are expected to expand beyond fiscal year 2028 into the next fiscal year.

Frequently Asked Questions

What were the full-year results for FLEX in fiscal year 2026?

On a full-year basis, FLEX achieved revenue of $27.9 billion, which represents an 8% increase compared to the prior year. The company's adjusted operating income increased to $1.8 billion, which is a 21% expansion driven by operational efficiency.

What are the projected growth rates for the upcoming SpinCo spin-off?

SpinCo is targeting revenue growth of 65% to 75% for fiscal year 2027. For the following fiscal year of 2028, the company projects further acceleration to over 80%.

How did the individual segments perform on a full-year basis in fiscal year 2026?

On a full-year basis, the Regulated Manufacturing Solutions segment generated revenue of $10.2 billion with a 6% adjusted operating margin. The Integrated Technology Solutions segment achieved revenue of $11.1 billion with a 5.4% adjusted operating margin. The Cloud and Power Infrastructure segment recorded revenue of $6.6 billion, though operating margins were compressed to 9.2%.