Snapshot
Plexus Corp reported $1.07B of revenue in Q1 2026, up 9.6% year over year, with diluted EPS of $1.51 and an operating margin of 5.1%.
- Revenue
- $1.07B
- YoY growth
- +9.6%
- Diluted EPS
- $1.51
- Operating margin
- 5.1%
What management said
- •With today's earnings call, Todd will provide summary comments before turning the call over to Oliver and Pat for further details.
- •Our consistent strategy and focus on delivering customer success continues to enable share gains and is facilitating our leadership in growth markets.
- •We've seen strong year-over-year revenue growth to begin our fiscal 2026 as we ramp programs across all of our market sectors.
- •As a result, Plexus now has the potential to meet or exceed the high end of our 9%-12% revenue growth goal for fiscal 2026.
- •In addition, we see significant opportunities to sustain our revenue growth momentum.
- •We will continue to deploy all excess cash to create additional shareholder value.
- •Revenue of $1.07 billion met the midpoint of our guidance range as we delivered our fourth consecutive quarter of sequential growth, representing a robust 10% increase year-over-year.
- •A significant expansion in our healthcare life sciences and aerospace and defense market sectors associated with multiple program ramps and stronger than anticipated demand from semi-cap and energy drove our performance.
- •For the fiscal first quarter, we secured 22 new manufacturing programs worth $283 million in annualized revenue when fully ramped into production.
- •Included in these wins was a record quarterly performance from our aerospace and defense market sector estimated at $220 million in annualized revenue.
- •Finally, I would note we continue to see significant opportunities to drive market share gain and sustained revenue growth from our aerospace and defense market sector.
- •For our fiscal second quarter, we are guiding revenue of $1.11-$1.15 billion, representing 6% sequential and 15% year-over-year revenue growth at the midpoint.
What went well
- •Revenue of $1.07 billion met the midpoint of guidance, delivering the fourth consecutive quarter of sequential growth and a robust 10% year-over-year increase.
- •Non-GAAP EPS of $1.78 met the high end of guidance, reflecting strong operating performance despite significant near-term investments in capacity, program ramps, and technology.
- •The company secured 22 new manufacturing programs worth $283 million in annualized revenue, including a record quarterly aerospace and defense wins performance estimated at $220 million.
- •Management raised the fiscal 2026 outlook, now seeing potential to meet or exceed the high end of the 9%-12% revenue growth goal, driven by program ramps, share gains, and signs of stronger end-market demand.
- •Return on invested capital of 13.2% was 420 basis points above weighted average cost of capital, and the company ended the quarter in a net cash position.
- •The funnel of qualified manufacturing opportunities remained robust at $3.6 billion, with the aerospace and defense engineering solutions funnel at a record high.
What went wrong
- •Aerospace and Defense revenue increased only 3% sequentially, slightly below the expectation of a mid-single-digit increase, due to customer end-of-year inventory management.
- •Industrial revenue declined 8% sequentially (in line with forecast), reflecting seasonality and generally muted near-term demand in certain subsectors.
- •Cash from operations consumed approximately $16 million and free cash flow was a cash outflow of about $51 million, as working capital and capital expenditures (including Malaysia carryover payments) supported planned ramps.
- •Cash cycle rose to 69 days, six days higher than last quarter, primarily from a six-day increase in inventory days to support anticipated revenue growth.
- •The company is still not seeing the full pull-through from Boeing for increasing commercial aerospace volumes.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Revenue | Fiscal Q2 2026 | None | $1.11 billion - $1.15 billion | 6% sequential and 15% year-over-year growth at midpoint |
| Non-GAAP operating margin | Fiscal Q2 2026 | 5.8% (Q1 actual) | 5.6% - 6.0% | None |
| Non-GAAP EPS | Fiscal Q2 2026 | $1.78 (Q1 actual) | $1.80 - $1.95 | None |
| Gross margin | Fiscal Q2 2026 | 9.9% (Q1 actual) | 9.9% - 10.2% | slightly above last quarter at midpoint |
| Selling and administrative expense | Fiscal Q2 2026 | $51.7 million (Q1 actual) | $54 million - $55 million | higher on seasonal and variable incentive compensation |
| Cash cycle days | Fiscal Q2 2026 | 69 days (Q1 actual) | 65 - 69 days | two-day improvement at midpoint |
| Effective tax rate | Fiscal Q2 2026 and fiscal 2026 | None | 16% - 18% | None |
| Capital spending | Fiscal 2026 | None | $100 million - $120 million | slightly higher than previous estimate |
| Free cash flow | Fiscal 2026 | None | approximately $100 million | reconfirmed |
| Revenue growth | Fiscal 2026 | toward 9%-12% goal | potential to meet or exceed the high end of 9%-12% goal | raised |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total revenue | +10% | Expansion in healthcare life sciences and aerospace and defense from multiple program ramps plus stronger than anticipated semi-cap and energy demand. |
| Aerospace and Defense revenue | None | Up 3% sequentially, slightly below mid-single-digit expectation, due to customer end-of-year inventory management. |
| Healthcare Life Sciences revenue | None | Up 10% sequentially, aligned to high-single to low-double-digit expectation, from program ramps. |
| Industrial revenue | None | Declined 8% sequentially, in line with forecast, from seasonality and muted near-term demand. |
| Gross margin | None | 9.9%, consistent with guidance and prior quarter, with a slight headwind from the new Malaysia facility (under 10 basis points). |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Fiscal 2026 revenue growth | accelerating toward 9%-12% goal | potential to meet or exceed the high end of 9%-12%, reflecting positive momentum and stronger end-market demand | improving |
| Semi-cap demand | low double-digit growth on share gains | major changes in the market with early-stage demand improvement starting about a month ago; outlook is well into double digits | improving |
| Commercial aerospace (Boeing/Airbus) | no Boeing/Airbus recovery assumed | still not seeing full Boeing pull-through; Boeing/Airbus production rate increases not in the outlook, representing potential upside | flat, potential upside |
| Component lead times / supply chain | tightening beginning | lead times ticking up in semiconductors and APAC printed circuit boards; pre-positioning inventory and extending PO coverage, better positioned than the post-COVID era | tightening |
| Malaysia and Thailand facilities | Malaysia startup drag | Malaysia near break-even in Q2 and approaching corporate average in the back half; Thailand expected to add ~25-30 basis points to overall margins | improving |
| Automation and AI initiatives | warehouse automation and SMT line consolidation | AutoStore and material robots deploying to all sites by spring 2026 (~1.5-2 FTEs each, sub-12-month ROI), AI/ML for work orders, standard work times, and quoting; over 30% daily AI tool usage by staff | expanding |
Q&A summary
What has changed over the last 3-6 months to drive the raised outlook?
Todd Kelsey called it a combination of strong, larger program wins ramping well (especially healthcare and semi-cap in industrial) and improving end markets, with major changes in semi-cap demand starting about a month ago, though still early and not yet reflecting full Boeing pull-through.
How long does early semi-cap demand take to translate into revenue?
Todd Kelsey said demand increases show up significantly faster, in the quarter to two-quarter range given materials pipeline and buffer stock, whereas capital or footprint needs would be a year-plus; ample capacity exists now.
Can you quantify the gross margin headwind from the new Malaysia facility, and does it ease?
Patrick Jermain said it was a little less than 10 basis points of headwind in Q1, near break-even in Q2, approaching corporate average in the back half, with Thailand adding about 25-30 basis points and helping reach 6% or above.
Are you seeing increasing component lead times affecting customer ramps or your working capital?
Oliver Mihm confirmed lead times ticking up in semiconductors and APAC printed circuit boards, with the company pre-positioning inventory and extending PO coverage; Patrick Jermain added Plexus is in a significantly better position than a few years ago.
How close are you to needing new capacity additions?
Patrick Jermain said the company could comfortably support about $6 billion in revenue with the existing footprint, with significant available capacity in all regions, and CapEx shifting from footprint to automation at around 2.5% of revenue or below.
Can you quantify the seasonal bonus pressure on Q2 margins?
Patrick Jermain said it is about 50-60 basis points of headwind being overcome through new facility profitability, revenue growth, fixed cost leverage, and productivity improvements.