Flex Ltd Q2 2025 Earnings Call Transcript

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

Question: Ruplu Bhattacharya - Bank of America - Analyst : Revathi, I wanted to ask you about the power business, strong growth this quarter of 40% year-on-year. Is that sustainable? And how do you plan to grow this business? Is it going to be through more M&A? Or is there organic growth possible and who is the target customer? And just on that, I think you said you wanted to create long-term shareholder value. So should investors think that this power business is integral to Flex? Or can this be thought of as a stand-alone business that over time could be a candidate for a spin-off like Nextracker?

Question: Ruplu Bhattacharya - Bank of America - Analyst : And just on the issue of whether this is an integral part of Flex and -- or can we think of this as a business that is a stand-alone unit and that could potentially be spun off?

Question: Ruplu Bhattacharya - Bank of America - Analyst : Got it. And just for my follow-up if I can ask a question on margins. So even though revenues are challenged in the near term, you seem to be pretty confident on full year operating margin, which is -- the range is kept at 5.4% to 5.5%. So Jaime, can I ask what is giving you that confidence, for example, you said you have ramps happening in automotive, but if the volumes are lower, I mean, how -- are you concerned about under-absorption of cost or -- and what is basically -- what is giving you confidence on margins?

Question: George Wang - Barclays - Analyst : Revathi, just double-click on this cloud ramp, obviously very impressive 40% strong double-digit versus the long-term 20% growth. And just high level, obviously, you guys don't guide quarter-to-quarter kind of full run rate. Just how to think about the cadence for the double-digit growth for the next couple of quarters, especially kind of as you think about opportunity, whether it's a new logos within the hyperscale rack integration or whether that's colocation. And maybe you can address some of the potential new logos you guys could be working on or still kind of a bigger-sized opportunity and wallet share within existing kind of top two hyperscales? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 12:30PM, FLEX.OQ - Q2 2025 Flex Ltd Earnings Call

Question: George Wang - Barclays - Analyst : Great. Yeah. Just a quick follow-up if I can. I just want to kind of double-click on the owned IT product kind of much higher margin, could be double-digit margin. And especially kind of the liquid cooling side. At OCP, you guys build this reference design with the liquid cooling kind of partnership with JetCool, maybe putting some of your design as well in the data center side, aside from obviously, the power that you guys talked about. So maybe you can talk high-level a little bit more just on the outlook in terms of embedding some of your own design into the data center -- traditional data center rack integration and kind of how to think about the margin profile in terms of the accretion versus corporate average?

Question: George Wang - Barclays - Analyst : Great. Congrats again on the strong growth in the AI side.

Question: Christian Zyla - KeyBanc Capital Markets Inc - Analyst : This is Christian Zyla on for Steve Barger. First question, you guys haven't differentiated yourself from your EMS peers with M&A. Thanks for the earlier comments on the data center portfolio. But as you think about other subsegments outside of data center, are there capabilities that you would be interested in adding specifically thinking about maybe the next-gen mobility portfolio but others as well.

Question: Christian Zyla - KeyBanc Capital Markets Inc - Analyst : Great. And then, I guess, going on the margin side. So operating margin expansion has been pretty steady on its upward trend for you guys. And some peers in the industry have hinted at goals of 6% plus. If your reliability subsegments begin to recover, do you think that target is reasonable? And what are the puts and takes that you think about that could get you there?