Flex Ltd. Exceeds EPS Estimates, Reports Growth Amid Industry Challenges
Flex Ltd. (FLEX) posted adjusted earnings per share (EPS) of 73 cents for the fourth quarter of fiscal 2025, surpassing the Zacks Consensus Estimate by 5.8%. This marks an increase from the 57 cents recorded in the same quarter last year.
Revenues rose 3.7% year over year to $6.4 billion, exceeding the consensus estimate by 2.7%. This growth stems from robust demand across its data center, networking, and automotive power electronics sectors.
Fiscal 2026 Expectations
Looking ahead to fiscal 2026, Flex expects continued strong demand from its data center clients as it shifts its focus towards higher-margin businesses.
In light of these positive results, shares increased by 3.2%, closing at $37.95 on May 7, 2025. Over the past year, Flex’s stock has surged 32.2%, contrasting with a 52.5% decline in the Zacks Electronics – Miscellaneous Products industry.
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Segment Performance Overview
The Flex Reliability Solutions Group, which includes Health Solutions, Automotive, and Industrial businesses, saw revenues decline by 1.3% to $2.9 billion. This decline resulted from challenges in core industrial and renewable areas, partially mitigated by sustained strength in power.
In contrast, the Flex Agility Solutions Group, comprising Communications & Enterprise Compute (CEC) and Lifestyle and Consumer Devices, reported an 8.2% revenue increase to $3.5 billion. This growth was fueled by strong gains in cloud and networking, despite weaknesses in enterprise IT and consumer markets.
Operational Insights
Management highlighted ongoing margin expansion due to a favorable mix and improved efficiency across its business units. Non-GAAP gross margin increased by 80 basis points (bps) year over year, reaching 9.4% in the current quarter.
Non-GAAP operating income was $396 million, a 19% increase year over year, with an operating margin improvement of 80 bps to 6.2%, driven by strong gross margin performance and cost efficiency.
Flex Ltd. Price, Consensus and EPS Surprise
Flex Ltd. price-consensus-eps-surprise-chart | Flex Ltd. Quote
The adjusted operating margins for the Flex Reliability Solutions Group were 6.2%, up 40 bps from the prior year, while the Flex Agility Solutions Group saw a 100 bps improvement to 6.6%.
Financial Position and Cash Flow
As of March 31, 2025, cash and cash equivalents totaled $2.29 billion, while long-term debt (net of current portion) stood at $2.48 billion, showing improvements from $2.47 billion and $3.26 billion a year ago.
Flex generated $433 million in cash flow from operating activities during the fourth quarter, with an adjusted free cash flow of $325 million. Additionally, the company repurchased $299 million worth of stock, totaling nearly 8 million shares, bringing the total share repurchases to $1.3 billion as of March 31, 2025.
Future Projections
For the first quarter of fiscal 2026, Flex expects revenues between $6 billion and $6.5 billion. Management anticipates adjusted earnings in the range of 58-66 cents per share, excluding 7 cents for net stock-based compensation and 5 cents for net intangible amortization. Adjusted operating income is projected between $330 million and $370 million.
The Reliability Solutions business is expected to face flat to high single-digit declines due to weaknesses in the automotive sector, impacted by tariff-related disruptions. Conversely, Agility Solutions is projected to see revenues decline by low-single digits to grow by mid-single digits, with strong demand in cloud markets offset by weaker enterprise IT and consumer-related sectors.
For the entire fiscal 2026, overall revenues are anticipated to range from $25 billion to $26.8 billion, following fiscal 2025 revenues of $25.8 billion, which represented a 2.3% year-over-year decline. Adjusted earnings are expected to be between $2.81 and $3.01 per share, up from $2.65 per share in fiscal 2025, which was a 23.3% increase year over year.
Reliability Solutions is projected to range from flat to mid-single-digit revenue growth. Strong demand for data center power continues to support industrial growth, despite the softness in renewables and core industrial markets. Health Solutions is expected to maintain steady demand, with a projected recovery in medical equipment towards the end of fiscal 2026. Automotive sector demand trends will remain uncertain due to ongoing tariff developments.
For Agility Solutions, revenues are expected to range from low-single-digit declines to mid-single-digit increases, driven by solid cloud demand. Lifestyle Solutions will benefit from a new manufacturing partnership, while indirect tariff exposures may affect consumer sentiment. Consumer Devices may experience weaker demand due to ongoing tariff uncertainties.
Flex’s Current Zacks Rank
Flex carries a Zacks Rank #3 (Hold).
Recent Results in the Broader Industry
Infosys (INFY) reported mixed results for fiscal 2025, with fourth-quarter earnings of 20 cents per share exceeding expectations, though revenues fell short. Despite a year-over-year decline of 15.3%, shares are up 3.7% over the past year.
Microsoft (MSFT) released third-quarter earnings of $3.46 per share, beating estimates and showing a 17.7% year-over-year increase. Revenues of $70.06 billion rose 13.3%, surpassing the Zacks consensus estimate.
ServiceNow (NOW) announced first-quarter adjusted earnings of $4.04 per share, exceeding estimates and rising 18.5% year over year. Revenues of $3.09 billion also surpassed estimates, increasing 18.6% year over year.
