Flex Ltd Q1 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Strong print here, maybe and strong margins as well, maybe if I can start with the margin outlook for the year. You did a 6% in 1Q. You're guiding to hold that level. I'm a bit surprised along with the increase in the midpoint of the revenue, you're not seeing more leverage on the margin side for the full year outlook. Maybe you can clarify that as to why the margin outlook doesn't -- isn't improving along with the revenue guide? And then I have a quick follow-up.

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Okay. Got it. And for my follow-up, I see for the data center revenue, you're outlining the target of 35% year-over-year. Maybe you can sort of give us a bit more details on what the trends were in 1Q itself? And if you can break it out between cloud and power? And are your expectations still consistent for power to maybe have a stronger year than cloud this year?

Question: Mark Delaney - Goldman Sachs Group Inc - Analyst : Flex's products assembly and services capabilities has allowed it to do very well in the data center. I'm hoping to better understand how the market for products may be evolving. Amazon recently announced it plans to use some of its own internally designed [cooling] products going forward. So do you think this may be a trend of hyperscaler is doing more power on [clean] products in-house more generally long term? And if so, how may Flex fit into those plans?

Question: Mark Delaney - Goldman Sachs Group Inc - Analyst : That's helpful. My other question was just to better contextualize the full year guidance compared to 1Q results. The 1Q earnings results were very strong. Earnings were $0.10 above the midpoint of your prior guidance. You only raised the full year outlook for earnings at the midpoint by $0.05. I'm hoping to better understand is the implied lower level of earnings for the balance of the year compared to your previous guidance. Is that just a question of timing and some conservatism? Or are there any businesses that are weakening more than you had previously expected?

Question: Mark Delaney - Goldman Sachs Group Inc - Analyst : Congratulations again on the good results.

Question: Steven Fox - Fox Advisors LLC - Analyst : I had a couple of questions as well. First off, I was wondering if you can give us a sense for where you stand on some of the capacity constraints you had 90 days ago. I know you just mentioned you're making investments in the second half. You bought a plant in Poland. But how constrained are you now versus 90 days ago? When do you think you sort of catch up with demand, if that's the right terminology? And then I have a follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 12:30PM, FLEX.OQ - Q1 2026 Flex Ltd Earnings Call

Question: Steven Fox - Fox Advisors LLC - Analyst : That's helpful. And then I know you just said there wasn't much change in some of your non-data center markets versus 90 days ago. But I was curious if there's any green shoots, especially in like automotive, industrial, for example, where maybe some companies are seeing some better cyclical trends.

Question: Ruplu Bhattacharya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : I have one for Kevin, one for Revathi. Maybe I'll start with Kevin. Can you give us a little bit more detail in terms of what you factored in, in terms of tariff impact to the full year guide on the top line operating margin and EPS? Are you assuming any impact to the USMCA exceptions? What do you think about the 232 tariff impact? And I think you said to an earlier question that there is some impact on the interest and expense line that's impacting EPS guide or the increase of $0.05. Can you clarify how much that is? And then I have a follow-up for Revathi. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 24, 2025 / 12:30PM, FLEX.OQ - Q1 2026 Flex Ltd Earnings Call

Question: Ruplu Bhattacharya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Okay. Revathi, can I ask when we look at the two segments, reliability and agility, can you help us rank order for each of those segments? How -- like which end markets you expect to grow stronger, which ones grow weaker? And how does that impact your decision to invest in different end markets? So I mean, I'm sure you're going to be investing in cloud and power. But beyond that, as you think about investing for growth, I mean, which end markets or which segments should we expect more spend from Flex on?

Question: Steve Barger - KeyBanc Capital Markets Inc - Analyst : Revathi, for data centers, what percentage of customers engage with the entire suite of IT integration and power products? And for customers that are partial users, how successful have you been at converting them to more content?

Question: Steve Barger - KeyBanc Capital Markets Inc - Analyst : Yes, I agree. To your earlier comment on hyperscalers making some internal investments, are you seeing customers standardizing on solutions? Or is each DC still more custom even if it's the same owner?