Snapshot
Flex Ltd. reported $6.80B of revenue in Q2 2026, up 4.0% year over year, with diluted EPS of $0.52 and an operating margin of 4.4%.
- Revenue
- $6.80B
- YoY growth
- +4.0%
- Diluted EPS
- $0.52
- Operating margin
- 4.4%
What management said
- •Slides for today's call as well as a copy of the earnings press release are available on the Investor Relations section at flex.com.
- •Please note all growth metrics will be on a year-over-year basis unless stated otherwise.
- •We remain bullish in our outlook and continue to expect our data center revenue to grow at least 35% this year.
- •Sustaining this level of growth at our scale validates the value we're delivering to the world's leading technology companies and the strength of our execution in a dynamic market.
- •We are outperforming industry growth rates and continuing to strategically shift our portfolio towards higher margin, critical technology-driven businesses shaping today's market evolution.
- •Our data center offerings span from the grid to chip, combining our product portfolio with advanced manufacturing capabilities and global scale to meet unprecedented demand for performance and efficiency.
- •The platform helps data center operators deploy up to 30% faster, reduce execution risk, and scale reliably.
- •To meet the pace of AI demand, we partnered with Nvidia as part of their ecosystem on next gen 800V DC AI factories.
- •The data center opportunity continues to expand and we're executing remarkably well as we support our customers through this next wave of growth.
- •In health solutions, we see steady medical device demand and anticipate improvement in medical equipment later this year.
- •In the first half of FY2026, we added compute deals with new logos, validating our continued investment and focus on software defined vehicles.
- •Despite this backdrop, we've been able to exceed our expectations and raise our guidance.
What went well
- •Second quarter revenue came in at $6.8 billion, growing 4% over last year, driven by strong data center growth across both power and cloud.
- •Adjusted EPS was $0.79, up 23% year over year, another record for Flex, with operating margin at 6%, the fourth consecutive quarter at or above that level.
- •Gross margin improved 80 basis points to 9.3%, and Reliability segment margin expanded 105 basis points to 6.5% on favorable power mix and strong execution.
- •Free cash flow increased to $305 million despite sequential CapEx investments to support growth.
- •Flex raised its full-year FY2026 guidance across all key metrics, improving the revenue midpoint by $500 million and the adjusted EPS midpoint by $0.17.
- •Flex unveiled a new AI infrastructure platform at the OCP Global Summit and partnered with Nvidia on next-gen 800V DC AI factories to help operators deploy up to 30% faster.
What went wrong
- •The Mukachevo facility in Ukraine was damaged during a missile strike, temporarily halting operations and creating a revenue headwind of slightly north of $100 million (approximately 1% of Flex revenue) in the back half.
- •Agility segment operating margin declined 5 basis points to 6%, comparing against a very strong quarter last year.
- •Communications and consumer end markets remained soft, with weakening trends in consumer devices and lifestyle.
- •Unfavorable FX impacts across the business weighed on results versus the prior Q1 guidance.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Revenue | FY2026 | $25.9 billion to $27.1 billion | $26.7 billion to $27.3 billion | midpoint raised by $500 million |
| Adjusted operating margin | FY2026 | 6% to 6.1% | 6.2% to 6.3% | raised |
| Adjusted EPS | FY2026 | $2.86 to $3.06 | $3.09 to $3.17 | midpoint raised by $0.17 |
| Revenue | Q3 FY2026 | $6.65 billion to $6.95 billion | ||
| Adjusted operating income | Q3 FY2026 | $405 million to $435 million | ||
| Adjusted EPS | Q3 FY2026 | $0.74 to $0.80 | ||
| Data center revenue growth | FY2026 | at least 35% | at least 35% | unchanged |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total revenue | up 4% | Strong data center growth across both power and cloud. |
| Reliability revenue | up 3% | Strong growth in power and moderate growth in health solutions and core industrial, slightly offset by continued pressure in auto. |
| Agility revenue | up 4% | Robust cloud demand more than offset softness in communications and consumer end markets. |
| Adjusted EPS | up 23% | Strength of the model anchored in disciplined execution and a continued shift toward higher-value technology-driven businesses. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Operating margin consistency | at or above 6% in prior quarters | fourth consecutive quarter at or above 6% | sustained above 6% |
| Data center economics | described as margin accretive | increasingly margin accretive as power and own-IP products grow, behaving more like a products/OEM business | improving margin mix |
| Ukraine operations | facility operating normally | Mukachevo facility damaged by missile strike, operations temporarily halted | near-term headwind, focused on rebuilding |
| Back-half growth | acceleration expected in Q4 driven by power and cloud demand | accelerating into year-end |
Q&A summary
Why wasn't the data center revenue guide raised even though cloud and power commentary was strong, and how was the $500 million full-year raise composed?
Flex gives only a full-year data center guide at the start of the year and does not update it quarterly; data center is not a reporting segment. The at-least 35% figure is obviously trending better and will be updated at year-end. The full-year raise comes from data center and health solutions, with stabilizing automotive.
How is the cloud mix evolving between custom and merchant silicon, and would Flex bid for new GPU rack programs?
Flex is benefiting from both hyperscale and new cloud players, driving the at-least 35% growth. It participates in both custom and merchant silicon and tends to do better where there is more specialization and customization. Updated forward-looking cloud guidance will be provided at the May investor day.
What is driving the second-half operating margin improvement and how are cloud/data center economics evolving?
The primary driver is mix from the products and services businesses, both of which perform above the Flex average and become a bigger share of revenue into Q3 and Q4. Cloud and power are very accretive because Flex integrates compute, power, and cooling and owns IP/products that run more like an OEM play.
How much of the $500 million guidance raise is data center versus other end markets, and how big is the Ukraine headwind?
The raise comes from data center and health solutions, with stabilizing automotive also helping. The Ukraine Mukachevo shutdown represents approximately 1% of Flex revenue, slightly north of $100 million of revenue headwind in the back half as it goes from its prior level to zero.
Does the accelerating Q4 growth provide a base for next fiscal year, and is AI driving it?
Yes, the guide implies an accelerating Q3-to-Q4 environment driven by data center, with power expected to grow above the data center average in the back half. Good growth is also seen in medical device and capital equipment, and Flex expects that exit momentum to continue into the first half of FY2027.
What is the revenue size and margin contribution of engineering and value-added services outside data center?
Flex previously shared a figure in the range of $1 billion for this space but has not updated it. Value-added services and vertical integration drive margin improvement and are an important focus across all end markets, and especially in data center where products must be serviced; specific figures were not disclosed.