Flex Ltd.’s FLEX expanding AI and data center exposure, global manufacturing scale, improving margin profile, steady cash generation and targeted acquisitions bode well.
Its stock performance over the past six months has been impressive, surging 129.6%. The company has outperformed the Zacks Electronics – Miscellaneous Products industry’s growth of 52.5%. During the same period, the Zacks Computer and Technology sector advanced 15.9%, while the S&P 500 composite rose 9.7%.
FLEX has also outperformed its peers, Cisco Systems, Inc. CSCO, Jabil Inc. JBL and Sanmina Corporation SANM. CSCO, JBL and SANM have climbed 55.5%, 52.6% and 45.9%, respectively, in the same time frame.
Let us take a closer look at FLEX’s fundamentals, key growth drivers, competitive strengths and potential risks to determine whether the stock remains an attractive investment.
Factors to Consider
Flex is gaining from strong demand across AI data centers, power infrastructure and other critical end markets. The company has spent several years reshaping its portfolio by focusing on higher-value markets, investing in power and thermal technologies, and strengthening its manufacturing capabilities. Management said these investments have positioned Flex to support the growing need for integrated data center infrastructure as AI workloads continue to increase power and cooling requirements.
One of the company’s biggest growth drivers is its Cloud and Power Infrastructure (CPI) business. Flex recently secured substantial incremental business with multiple hyperscaler and data center customers, including a multiyear contract with Google. These engagements cover power infrastructure, thermal systems and complex hardware manufacturing across Flex’s global footprint. Management noted that capital deployment for these projects is already underway and is expected to remain elevated through fiscal 2027 to support the expanding demand environment.
Flex is also benefiting from its ability to provide end-to-end solutions for AI data centers. The company said customers increasingly want a single partner that can deliver integrated power, thermal and compute infrastructure rather than relying on multiple vendors. Management believes this trend creates a significant opportunity for the planned SpinCo business, which is being positioned as a focused digital infrastructure company capable of delivering solutions from the grid to the chip.
Flex’s financial performance reflects this momentum. Fourth-quarter fiscal 2026 revenue rose 17% year over year to $7.5 billion, while adjusted gross margin reached a record 9.9%. Adjusted operating margin also improved to a company record of 6.7%, driven by operational efficiency and a favorable product mix. The CPI segment delivered 31% revenue growth in the quarter, with power growing faster than cloud, highlighting the strength of Flex’s power-related offerings.
Management expects the growth trajectory to accelerate further. Flex is targeting CPI revenue growth of 65% to 75% for fiscal 2027 and expects growth to exceed 80% in fiscal 2028. The company expects fiscal 2027 revenue between $32.3 billion and $33.8 billion, representing 18% growth at the midpoint, while adjusted EPS is expected to increase 32% at the midpoint. Management highlighted that these expectations are supported by strong demand from hyperscalers, colocation providers, neocloud customers and utility customers.
Moreover, Flex recently completed the acquisition of Electrical Power Products (EP2), adding utility-grade solutions that support grid modernization and electrification. Combined with its existing power distribution, switchgear and thermal management capabilities, the acquisition strengthens Flex’s ability to serve utility and infrastructure customers and increases its exposure to long-cycle, margin-accretive programs.
However, Flex continues to experience persistent softness in consumer-related and lifestyle end markets, and management is deliberately deemphasizing lower-value lifestyle businesses. In addition, CPI margins were temporarily affected by infrastructure investments in critical power and ramp costs in cloud programs, which weighed on profitability during fiscal 2026 even though management expects these investments to be recouped in future periods.
A Look at FLEX’s Valuation
The stock trades at a forward 12-month price-to-sales (P/S) ratio of 1.44, below the industry’s average of 8.31. CSCO, JBL and SANM trade at a forward 12-month P/S of 6.66X, 0.86X and 0.72X, respectively.
FLEX’s Upward Estimates
The Zacks Consensus Estimate for FLEX’s earnings for fiscal 2026 has been significantly revised upward over the past 60 days.
What Should You Do With FLEX Stock Now?
Sporting a Zacks Rank #1 (Strong Buy), Flex appears to be a compelling investment opportunity at the moment.
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This article originally published on Zacks Investment Research (zacks.com).
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