Global manufacturing solutions provider Flex (NASDAQ: FLEX) reported revenue ahead of Wall Street’s expectations in Q4 CY2025, with sales up 7.7% year on year to $7.06 billion. The company expects next quarter’s revenue to be around $6.9 billion, close to analysts’ estimates. Its non-GAAP profit of $0.87 per share was 10.5% above analysts’ consensus estimates.

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StockStory’s Take

Flex’s fourth quarter saw management highlight robust demand in data center and industrial segments, offsetting continued softness in consumer-facing businesses. CEO Revathi Advaithi attributed revenue momentum to execution in data center solutions, including compute integration and power systems, as well as growing demand for health solutions and automation. The company also cited technology shifts in embedded power and strong performance in high-speed networking as key factors. CFO Kevin Krumm noted that operational discipline and a strategic product mix shift toward higher-value offerings drove margin improvement, even as challenges remained in the consumer device market.

For the coming quarters, Flex’s guidance is shaped by ongoing investments in AI-driven infrastructure and capacity expansions in both power and compute segments. Management emphasized the need to support large-scale data center deployments and adapt to evolving technology requirements, with Advaithi stating, “Our investments are focused on areas with the highest returns and growth potential.” The company also expects continued growth in industrial automation and medical devices, while acknowledging risks related to consumer demand and cost pressures. Krumm underscored the company’s focus on “disciplined execution and margin expansion through deliberate portfolio management.”

Key Insights from Management’s Remarks

Flex’s management linked Q4’s performance to strong data center and industrial demand, margin improvement from mix shift, and selective investment in growth opportunities.

• Data center expansion: Management highlighted that rapid growth in AI and compute workloads spurred customer demand for integrated data center solutions, with Flex’s modular systems and new partnerships (notably with NVIDIA and LG) positioning the company for further scale.
• Shift toward higher-value products: The company’s margin improvements reflected a portfolio shift into complex, higher-value categories such as industrial automation, robotics, and medical devices, which benefit from long-term industry trends.
• Embedded power technology transition: Flex noted a significant technology shift in embedded power—particularly around 800-volt DC and large-scale deployments—where the company faces limited competition and expects accelerated growth from hyperscale customers.
• Industrial and health segment growth: Beyond data centers, management emphasized momentum in warehouse automation, semiconductor equipment, and medical devices, which contributed to overall top-line growth and segment-level profitability.
• Consumer market softness: The Agility Solutions segment faced ongoing headwinds in consumer devices and lifestyle products, partially offset by networking and infrastructure-related businesses that are not counted within the core data center segment.

Drivers of Future Performance

Flex’s forward outlook is anchored by continued AI-driven demand in data centers, investments in power and compute capacity, and persistent consumer market headwinds.

• AI infrastructure investments: Management expects ongoing AI and data center capital spending to drive demand for compute integration, cooling, and power, with future capacity expansions in both embedded and critical power segments.
• Industrial and healthcare diversification: Continued secular growth in industrial automation and health solutions is expected to support revenue stability, even if consumer-facing businesses remain soft.
• Margin management and mix shift: The company believes that a sustained focus on higher-value segments and operational discipline will support margin expansion, but acknowledges risks from consumer demand volatility and potential supply allocation challenges, such as rising memory prices.

Catalysts in Upcoming Quarters

In the upcoming quarters, our team will closely watch (1) the scale and pace of new AI-driven data center deployments and the ramp of modular infrastructure platforms, (2) continued margin improvement from portfolio shifts into higher-value segments like automation, health, and embedded power, and (3) Flex’s ability to mitigate ongoing consumer market softness. Progress on capacity investments and strategic partnerships will also be important signposts for future growth.

Flex currently trades at $59.30, down from $65.99 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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