Plexus delivered a record fiscal third quarter of 2026 with revenue of $1.305 billion, up 28% year over year and 12% sequentially and above the guidance range, as all three market sectors beat expectations. Non-GAAP operating margin of 6.3% hit the high end of guidance (up 30 basis points) and non-GAAP EPS of $2.32 exceeded guidance, while on a GAAP basis operating margin was 4.7% and diluted EPS was $1.58 (the gap reflecting stock-based compensation and executive-retirement costs). Bookings were strong — 31 new programs worth $255 million annualized, including a data-center battery-energy-storage win and $135 million of aerospace and defense wins ($400 million year to date, more than double the combined prior two years) — and the qualified-opportunity funnel hit a record $4.5 billion. Working capital was excellent, with a 62-day cash cycle (best in over five years) and return on invested capital of 14.9%, though free cash flow was a slight usage as the company invests in working capital to support accelerating growth. Management raised the fiscal 2026 outlook to greater than 20% revenue growth with non-GAAP operating margin above 6%, guided fiscal Q4 revenue to $1.33-1.38 billion, and signaled fiscal 2027 revenue growth exceeding its 9-12% goal alongside operating-margin expansion and a return to free cash flow above $100 million. Growth is being led by aerospace/defense (defense, unmanned, security, space) and industrial (semi-cap outgrowing WFE plus a deliberate data-center power and thermal strategy), with healthcare moderating after a high-teens fiscal 2026. To support the demand, Plexus is expanding a Penang, Malaysia site (adding north of $500 million of capacity via its efficient campus model, keeping capex at 2-3% of revenue) and managing a tightening, customer-funded pre-placed supply chain. The COO was absent due to illness, and a tornado struck near headquarters with no material operational impact.
Good morning. Thank you for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements, including, without limitation, those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, and future business outlook. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company's periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended September 27, 2025, and the safe harbor and fair disclosure statement in our press release.
We encourage participants on the call this morning to access the live webcast and supporting materials at plexus.com, clicking on Investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer, and David Abuhl, Senior Vice President, Chief Financial Officer. Unfortunately, Oliver Mihm, our Executive Vice President and Chief Operating Officer, is unexpectedly feeling unwell and could not make the call today. Oliver will rejoin us on our fiscal fourth quarter call. With today's earnings call, Todd Kelsey will provide summary comments before turning the call over to me and David Abuhl for further details. With that, let me now turn the call over to Todd Kelsey. Todd Kelsey?
Thank you, Shawn Harrison. Good morning, everyone. Earlier this week, a devastating tornado struck near our corporate headquarters, causing significant damage to our local community. Our thoughts and prayers go out to all of those impacted. Thankfully, no fatalities or missing persons were reported. There was no material impact to Plexus's operations or our headquarters. Please advance to slide three. Our differentiated value proposition, focused on unmatched quality and delivery, is creating customer success. Plexus generated record revenue in the fiscal third quarter by capturing strengthening end market demand and successfully launching numerous new programs. As a result, we see Plexus positioned to deliver more than 20% revenue growth for fiscal 2026. We anticipate Plexus will sustain this momentum and currently see the potential to generate fiscal 2027 revenue growth in excess of our 9%-12% goal.
We expanded our funnel of qualified manufacturing opportunities to a record level, creating the potential to sustain strong long-term revenue growth. We delivered solid operating performance with a robust 6.3% non-GAAP operating margin for our fiscal third quarter. We anticipate further strong operating results for our fiscal fourth quarter. Consequently, we expect our fiscal 2026 non-GAAP operating margin to exceed 6% and see the potential for continued operating margin expansion in fiscal 2027. Finally, our working capital efficiency remains robust while supporting accelerated revenue growth. Fiscal third quarter cash cycle exceeded our expectations and was the best in more than five years. We expect to sustain this performance into fiscal 2027 and anticipate a return to meaningful free cash flow generation. Please advance to slide four.
With all three of our market sectors contributing better than expected performance, fiscal third quarter revenue of $1.305 billion exceeded our guidance range, representing a 12% sequential and a 28% year-over-year increase. Additionally, non-GAAP operating margin of 6.3% met the high end of guidance, increasing 30 basis points year-over-year on continued efficiency gains and revenue leverage. Finally, non-GAAP EPS of $2.32 exceeded our guidance range. Please advance to slide five. Our go-to-market team continued to drive strong performance. For the third quarter, we secured 31 new manufacturing programs with $255 million in annualized revenue when fully ramped into production. This result included an exciting new partnership in our industrial market sector supporting battery energy storage systems for data centers, as well as another robust contribution from our aerospace and defense market sector of $135 million.
Year to date, our $400 million of aerospace and defense wins represents a result more than two times our combined fiscal 2024 and 2025 performance. This positions us for long-term secular market outgrowth. Furthermore, aerospace and defense engineering solutions wins were significant. Finally, our funnel of qualified manufacturing opportunities expanded to a record $4.5 billion in support of sustaining robust long-term revenue growth. Please advance to slide six. At Plexus, we are committed to advancing sustainability through our value of innovating responsibly. Our customer partnerships are central to our strategy. During our fiscal third quarter, ASM honored Plexus with its Supplier Performance Award for overall supplier excellence and PRISM Sustainability Award for circularity. These recognitions underscore our commitment to deep customer collaboration and advancing sustainable practices across our value chain. We also continue to take proactive steps to reduce our environmental footprint.
Earlier in July, we were thrilled to receive the Gold Award for renewable energy at the Positive Impact Awards in Malaysia, highlighting our dedication to renewable energy adoption and sustainable manufacturing. As of fiscal 2026, all of our Penang facilities operate on 100% renewable energy through a combination of on-site generation and purchased renewable energy. Finally, we continue to build trust through transparency. In June, we released our annual sustainability report that showcases our commitment to innovating responsibly and establishes our formal greenhouse gas emission reduction targets. I'm grateful for the continued recognition by our customers and our communities of our global team members' efforts to live our values, deliver excellence, and create a lasting positive impact. Please advance to slide seven. For our fiscal fourth quarter, we forecast continued revenue strength led by our industrial market sector.
We are guiding revenue of $1.33 billion-$1.38 billion, representing 4% sequential and 28% year-over-year growth at the guidance midpoint. We are also guiding non-GAAP operating margin of 6.1%-6.5% and non-GAAP EPS of $2.47-$2.63. Due to success in launching numerous new programs, market share gains, and supportive disruptive technologies, we are driving sustained momentum and revenue growth in excess of market growth. As a result, we now anticipate generating greater than 20% revenue growth for fiscal 2026, with greater than 6% non-GAAP operating margin and disciplined working capital efficiency. Finally, our differentiated value proposition, focused on providing unmatched quality and delivery, is resulting in robust performance. This focus has positioned Plexus to sustain momentum for fiscal 2027 and beyond. For fiscal 2027, we currently see the potential to maintain quarterly sequential revenue expansion and generate revenue growth in excess of our 9%-12% goal.
Supporting our bullish outlook is continued strong growth from our aerospace and defense and industrial markets, including semiconductor capital equipment, with continued growth in Healthcare Life Sciences. Finally, during fiscal 2027, we anticipate delivering operating margin expansion while continuing to make important investments in talent and technology, and support future growth and operational efficiency. We also expect disciplined working capital efficiency, prudent capital expenditures, and a return to meaningful free cash flow generation. I will now turn the call over to Shawn Harrison for additional analysis of the performance of our market sectors. Shawn Harrison.
Thank you, Todd Kelsey. For each of our market sectors, I will discuss our fiscal third quarter performance and our expectations for our fiscal fourth quarter, provide an updated fiscal 2026 growth outlook, review the annualized revenue contribution of our quarterly wins performance, and offer preliminary growth commentary for fiscal 2027. I will also provide an overview of our record funnel of qualified manufacturing opportunities. Beginning with our Aerospace Defense sector on Slide 8, following robust 19% sequential growth last quarter, fiscal third quarter revenue increased 10% sequentially. Growth was better than our expectation of a mid-single-digit increase. The common theme for this quarter, outstanding execution from our supply chain and operation teams, helped to accelerate the capture of robust demand from multiple customers.
For our fiscal fourth quarter, following three consecutive quarters of strong sequential revenue growth, we expect revenue to be approximately flat versus our fiscal third quarter and to increase more than 30% year-over-year. We anticipate a return to sequential revenue growth in our fiscal first quarter of 2027. Finally, for fiscal 2026, we now expect our Aerospace Defense sector to deliver outstanding revenue growth of more than 20%, led by our defense and unmanned subsectors. Fiscal third quarter wins for the sector were a very strong $135 million. Our teams in Boise, Idaho, and Oradea, Romania, won a secure wireless communication system with a new defense and security customer. Our ability to provide dual-region support will ensure U.S. and EU regulatory compliance for the customer. Furthermore, the win helps in establishing our Oradea, Romania, site as our center of defense excellence in continental Europe.
Our focus on superior customer service also led an existing customer to award our Boise team a naval submarine electronics program. As we look ahead to our fiscal 2027, we see the potential for continued robust revenue growth for our Aerospace Defense sector that should well exceed our 9%-12% goal. We anticipate exceptional growth from our defense, unmanned, security, and space subsectors associated with program ramps, market share gains, and robust end market demand, as well as continued commercial aerospace demand improvement. Please advance to Slide 9. Healthcare Life Sciences market sector revenue increased 2% sequentially for our fiscal third quarter. The result exceeded our flat revenue growth forecast due to our successful support of program ramps and improved customer demand. For the fiscal fourth quarter, we expect approximately flat sequential revenue, with delays in program ramps offsetting stronger customer demand.
For fiscal 2026, we now anticipate revenue to increase in the high teens year-over-year, an excellent result and well ahead of our estimate of mid-single-digit healthcare life sciences market growth. We generated fiscal third-quarter wins of $53 million. Our team in Neenah, Wisconsin, won a prototype build of instruments utilized in a customer's surgical robotics platform that Plexus currently supports. Our teams in Haining, China, and Oradea, Romania, won the production of a next-generation ultrasound platform. Our long-standing relationship with this leading healthcare customer and our ability to provide global support drove the market share gain. Our strong engineering relationship and long-term record of superior execution resulted in a follow-on award for our team in Penang, Malaysia, to produce a market-leading patient monitoring device.
As we consider fiscal 2027 for our healthcare life sciences sector, we see the potential to achieve at least mid-single-digit revenue growth against a market estimated to again grow in the mid-single digits. We expect to continue to benefit from program ramps and strong demand for surgical robotics and therapeutic and monitoring solutions. We expect short-term growth moderation as activity normalizes following a year of tremendous success in helping numerous customers launch new products. Advancing to the industrial sector on slide 10, fiscal third-quarter revenue increased 23% sequentially, well ahead of our forecast for low-double-digit growth. Our team's ongoing delivery of operational and supply chain excellence in support of expanding demand in our semi-cap and other industrial sub-sectors drove the outperformance. For the fiscal fourth quarter, we expect high-single-digit to low-double-digit sequential revenue growth associated with strengthening end-market demand and program ramps.
We now anticipate revenue for fiscal 2026 to increase by a very strong 20+%. The market sector generated $67 million in wins for the fiscal third quarter. The wins included a new partnership to build battery energy storage systems used by data centers. In awarding the program to our Bangkok, Thailand team, the customer valued engagement by Plexus leadership, our transparent communication, and expert technical insights. Initial production for this program is already underway. Our team in Guadalajara, Mexico also won a follow-on award for an innovative vehicle imaging and inspection system. We see the potential for a very strong fiscal 2027 for our industrial sector, with revenue growth that should well exceed our 9%-12% goal.
We expect another year of robust growth from our semi-cap sub-sector, along with strong demand for industrial automation and robotics, test and measurement, and energy management and storage solutions. Please advance to slide 11 for a review of our funnel of qualified manufacturing opportunities. The funnel reached another record this quarter. For our fiscal third quarter, our funnel was $4.5 billion, an increase of 12% sequentially and 23% year-over-year, or growth of more than $800 million. Within this performance, our aerospace, defense, and industrial market sectors also achieved record funnels. Our differentiated value proposition, which is focused on providing unmatched quality and delivery, continues to create opportunities in support of sustaining a strong and durable long-term revenue growth trajectory. I will now turn the call over to David Abuhl. David Abuhl?
Thank you, Shawn Harrison, and good morning, everyone. Our fiscal third quarter results are summarized on slide 12. Gross margin of 10.1% was in line with our guidance. Benefits from revenue leverage and continued operational productivity gains more than offset inflationary pressures and other cost increases. Selling and administrative expense of $70.1 million was in line with guidance and included typical stock-based compensation expenses, as well as those related to executive retirement. Excluding these expenses, we gained nearly 50 basis points of leverage compared to our fiscal second quarter. Our non-GAAP operating margin of 6.3% met the top end of our guidance, benefiting from leverage on revenue growth, operational efficiencies, and continued cost discipline. Non-operating expense of $4.8 million was favorable to expectations, driven by additional interest income.
Non-GAAP diluted EPS of $2.32 exceeded the top end of our guidance due to higher revenue and the other items mentioned, partially offset by a tax rate at the upper end of our guidance. Turning to our cash flow and balance sheet on slide 13. For the fiscal third quarter, we delivered $25.9 million in cash from operations and spent $26.6 million on capital expenditures, resulting in a better-than-expected free cash flow usage of just under $1 million. We repurchased $20.6 million of our stock in the quarter, and we have approximately $21 million remaining on the current repurchase authorization. As we continue to invest in our growth trajectory, we will also return cash to shareholders through our repurchase program. We will discuss our next share repurchase authorization with our board in August.
We ended the third quarter in a net cash position, and we had $172 million outstanding under our revolving credit facility, with over $320 million available to borrow. Return on invested capital was 14.9% in the fiscal third quarter, which was the highest in several years, and 590 basis points above our weighted average cost of capital. Despite an increase in invested capital to support our robust revenue growth, we continue to generate healthy ROIC. Turning to cash cycle days on slide 14. We delivered a 62-day cash cycle in the fiscal third quarter, which is the best quarterly result in over five years. Our team continues to drive improvements across all areas of working capital, including notable progress in days of inventory. Let me turn to our guidance for the fiscal fourth quarter, summarized on slide 15.
As Todd Kelsey has already provided the revenue and EPS guidance, I will review some additional details. Fiscal fourth quarter gross margin is expected to be in the range of 10%-10.3%. At the midpoint, gross margin will be modestly higher than the fiscal third quarter, as we expect ongoing productivity improvements and leverage from higher revenue to offset investments in capabilities and IT, as well as other cost increases. Our outlook for selling and administrative expense for the fiscal fourth quarter is in the range of $57.5 million-$58.5 million. We expect to gain leverage versus the prior quarter on higher revenue. Fiscal fourth quarter non-GAAP operating margin is expected to be in the range of 6.1%-6.5%, exclusive of stock-based compensation expense. At the midpoint, Plexus would demonstrate another quarter of good progress toward our goal of consistently delivering non-GAAP operating margin at or above 6%.
We also anticipate meeting this goal for fiscal 2026. As we consider fiscal 2027, we anticipate expansion in operating margin to accompany our robust revenue growth outlook. We continue to benefit from leverage on higher revenue and our prior investments in operational efficiency, while concurrently making strategic investments in incremental operational efficiency, expanding our competitive moat, especially in aerospace and defense, and investing in our people. We will discuss more about our fiscal 2027 outlook, including future expectations for operating margin, with our fiscal fourth quarter earnings call. Non-operating expense in the fiscal fourth quarter is anticipated to be approximately $6.3 million, up sequentially primarily due to higher interest expense. For fiscal 2027, we would expect the quarterly run rate to be slightly higher due to higher interest expense.
We are estimating a non-GAAP effective tax rate of between 12% and 14% for the fiscal fourth quarter, bringing the full fiscal year 2026 rate to between 15% and 17%. For our fiscal 2027, our preliminary view is a non-GAAP effective tax rate between 16% and 18%. In support of our accelerating revenue momentum, we continue to strategically increase our working capital investments. Yet through our focus on working capital efficiency, we still expect to end the fiscal year with cash cycle days in the low to mid-60s. We would expect to sustain this performance during fiscal 2027. Additionally, given our robust revenue outlook, we've made the decision to expand production capacity at one of our sites in Malaysia.
Because of our ability to expand existing facilities, we expect to be able to deliver incremental capacity and maintain fiscal 2027 capital expenditures in a range of 2%-3% of revenue. For fiscal 2026, our capital expenditures forecast is unchanged at $100 million-$120 million. As a result of these factors and the timing of our working capital investments, we are now forecasting free cash flow in the fiscal fourth quarter to be break even or a slight usage of cash. However, we would expect to return to meaningful free cash flow generation in excess of $100 million for fiscal 2027, benefiting from our sustained robust profitability, prudent capital expenditures, and our focus on working capital efficiency. With that, Dara, let's open the call for questions.