Snapshot
Plexus Corp reported $1.16B of revenue in Q2 2026, up 18.7% year over year, with diluted EPS of $1.82 and an operating margin of 5.3%.
- Revenue
- $1.16B
- YoY growth
- +18.7%
- Diluted EPS
- $1.82
- Operating margin
- 5.3%
What management said
- •With today's earnings call, Todd will provide summary comments before turning the call over to Oliver, Pat, and David for further details.
- •Second, I'm excited to announce that Todd will be appearing on CNBC's Fast Money this evening to discuss Plexus and our fantastic results and outlook.
- •Pat has been instrumental in our growth journey, fostering, and cultivating a high-performing finance team that has played a significant role in Plexus's tremendous financial results over the years.
- •I'm confident that as we continue our growth journey, David's extensive financial expertise, global perspective, and strategic mindset will position him to be an exceptional CFO.
- •We now expect to deliver mid-teens or greater fiscal 2026 revenue growth from the contribution of numerous program ramps, ongoing market share gains, and improving end market demand.
- •Our team generated a record $355 million in new manufacturing program wins with broad-based contributions across our market sectors.
- •We're delivering non-GAAP operating margin expansion while increasing our already significant investments focused on expanding operational efficiency and capitalizing on continuing revenue growth momentum.
- •We are sustaining strong financial discipline, delivering better than expected working capital performance amid substantial acceleration in revenue growth and tightening supply chain conditions.
- •Fiscal second quarter revenue of $1.164 billion exceeded our guidance range, representing our fifth consecutive quarter of sequential revenue growth and a robust 19% year-over-year increase.
- •We delivered a robust 6% non-GAAP operating margin while continuing to heavily invest in program ramps, operational efficiency initiatives, and technologies.
- •For the fiscal second quarter, we secured 30 new manufacturing programs with a record $355 million in annualized revenue when fully ramped into production.
- •We produced particularly notable growth in our industrial market sector, where we are generating significant interest in automation and robotics, data center and energy solutions, and our aerospace and defense market sector.
What went well
- •Fiscal second quarter revenue of $1.164 billion exceeded the guidance range, marking the fifth consecutive quarter of sequential growth and a robust 19% year-over-year increase.
- •Non-GAAP EPS of $2.05 exceeded guidance, and the company delivered a 6% non-GAAP operating margin at the top end of guidance while continuing to invest heavily in program ramps and efficiency initiatives.
- •The team generated a record $355 million in new manufacturing program wins across 30 programs, with broad-based contributions across all market sectors.
- •Management raised the fiscal 2026 outlook to mid-teens or greater revenue growth, a substantial increase from the initial expectation last October, with double-digit growth anticipated in every market sector.
- •Free cash flow of $16 million exceeded the forecast of break-even to a slight usage, and cash cycle improved five days to 64 days, better than expected.
- •The funnel of qualified manufacturing opportunities expanded 11% sequentially to $4 billion, with record-high aerospace and defense and industrial funnels up over 45% year-over-year.
What went wrong
- •Healthcare Life Sciences revenue was up only 1% sequentially and is guided flat for fiscal Q3, lagging other sectors ahead of an anticipated return to sequential growth in fiscal Q4.
- •The new Malaysia facility ran a little behind break-even in the quarter because revenue is ramping faster, requiring additional early investments, though it remains on track to exit the fiscal year profitable.
- •Tightening supply chain conditions are present, with allocation or lead-time extension in portions of semiconductors, passives, memory, raw PCB fabs, magnetics, and microcontrollers.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Revenue | Fiscal Q3 2026 | None | $1.2 billion - $1.25 billion | 5% sequential and 20% year-over-year growth at midpoint |
| Non-GAAP operating margin | Fiscal Q3 2026 | 6.0% (Q2 actual) | 5.9% - 6.3% | None |
| Non-GAAP EPS | Fiscal Q3 2026 | $2.05 (Q2 actual) | $2.02 - $2.18 | None |
| Gross margin | Fiscal Q3 2026 | 10.2% (Q2 actual) | 9.9% - 10.2% | slightly below last quarter at midpoint |
| Selling and administrative expense | Fiscal Q3 2026 | $57.3 million (Q2 actual) | $69 million - $70 million | higher including additional stock-based compensation from executive retirement |
| Non-operating expense | Fiscal Q3 2026 | $4 million (Q2 actual) | approximately $5.4 million | up on higher interest expense and FX comparisons |
| Cash cycle days | Fiscal Q3 2026 | 64 days (Q2 actual) | 67 - 71 days | higher to support accelerating revenue growth |
| Effective tax rate | Fiscal Q3 2026 and fiscal 2026 | None | 16% - 18% | unchanged |
| Capital spending | Fiscal 2026 | None | $100 million - $120 million | reconfirmed |
| Free cash flow | Fiscal 2026 | approximately $100 million (prior outlook) | $50 million - $75 million | lowered on increased working capital investment for accelerating growth |
| Revenue growth | Fiscal 2026 | meet or exceed high end of 9%-12% goal | mid-teens or greater | raised |
| Non-GAAP operating margin | Fiscal 2026 | None | 6% or greater | None |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total revenue | +19% | Strong growth across all sectors with specific strength in aerospace and defense from increasing demand and supportive disruptive technologies, and in semi-cap from share gains amplifying surging market demand. |
| Aerospace and Defense revenue | None | Up 19% sequentially, significantly outperforming the mid-single-digit expectation, on improved end-market demand across all subsectors and expanded component availability. |
| Healthcare Life Sciences revenue | None | Up 1% sequentially, aligned to flat to low-single-digit expectation. |
| Industrial revenue | None | Up 12% sequentially, in line with forecast, on semi-cap and industrial equipment strength. |
| Gross margin | None | 10.2%, at the top end of guidance, from favorable service mix, fixed cost leverage, and productivity improvements offsetting seasonal compensation increases. |
| Return on invested capital | None | 13.8%, 480 basis points above weighted average cost of capital, healthy despite higher invested capital to support revenue growth. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Fiscal 2026 revenue growth | meet or exceed high end of 9%-12% goal | mid-teens or greater, with double-digit growth in every market sector and particularly strong A&D and industrial/semi-cap | accelerating |
| Semi-cap / industrial | well into double-digit growth | ongoing share gains amplifying surging market demand; industrial outlook now well in excess of the 9%-12% goal | accelerating |
| Aerospace and defense | exceed 9%-12% goal | growth well into double digits with exceptional defense subsector growth; record funnel up over 45% year-over-year | accelerating |
| Supply chain conditions | lead times ticking up | tightening with allocation in portions of semiconductors, passives, memory, raw PCB fabs; proactive sourcing and AI tools mitigating; no undue risk in the forecast | tightening |
| CFO transition | None | Patrick Jermain retiring after 12 years; David Abuhl, who joined last fall, becoming CFO | transitioning |
| Operating leverage / margin target | 6% goal | 6% or greater for fiscal 2026; 10-12% drop-through on revenue growth; management likely to set a new margin target after the new CFO settles in | improving |
| Free cash flow | approximately $100 million | $50-$75 million for fiscal 2026 due to increased working capital investment for accelerating growth | lowered |
Q&A summary
How should we think about working capital investment longer term to support this level of growth?
Patrick Jermain said cash cycle in the low to mid-60s is a good range carrying into fiscal 2027, with roughly 10-15% additional working capital dollars per dollar of revenue growth; David Abuhl added efficiency gains have improved asset throughput by 10%, avoiding about $20 million of capital investment.
How are you looking at near-term demand in industrial energy storage and power applications?
Oliver Mihm said Plexus is excited about energy infrastructure customers, citing nuclear power control system differentiation at Boise and a strong active funnel across data center power management, storage, thermal cooling, and edge AI applications.
How should we think about the operating margin structure beyond fiscal 2026?
Patrick Jermain said margin differences between sectors are small now, with fixed cost leverage overriding ramp costs to support 6% or above; Todd Kelsey added margins should increase with leverage and efficiency, and a new target is likely after the new CFO settles in.
Is supply chain tightening a gating factor for program ramps in the guidance?
Todd Kelsey said the forecast accounts for supply chain realities with no undue risk and upside potential, working proactively with customers on hard-to-obtain parts; Oliver Mihm detailed allocation in semiconductors, passives, memory, and PCB fabs being mitigated via early PO placement and AI tools.
Can you keep up with demand on efficiency efforts, or will you need greenfield capacity expansion?
David Abuhl said capacity is well-balanced and can service well in excess of $5 billion in annualized revenue, sticking to current guidance while driving efficiency; Oliver Mihm added newer building deployments allow adding incremental capacity without substantial CapEx.
How much of the defense and semi-cap strength is share gains versus a strong market backdrop?
Todd Kelsey said there are large components from both, with significant share gains in semiconductor capital equipment and aerospace and defense (especially defense) occurring within strong markets, producing a double benefit and growth far exceeding market growth.