FLEX Q3 Deep Dive: Data Center Growth, AI Infrastructure, and Margin Expansion

Global manufacturing solutions provider Flex (NASDAQ:FLEX) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 4% year on year to $6.80 billion. Guidance for next quarter’s revenue was better than expected at $6.8 billion at the midpoint, 0.7% above analysts’ estimates. Its non-GAAP profit of $0.79 per share was 4.3% above analysts’ consensus estimates.

Is now the time to buy FLEX? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Flex’s third quarter results were shaped by strong demand in its data center segment and continued execution on higher-margin, technology-driven business lines. Management credited robust growth in both cloud and power infrastructure solutions as key factors supporting revenue gains, while also noting steady contributions from Health Solutions and stabilization in automotive. CEO Revathi Advaithi highlighted Flex’s ability to outperform industry growth rates, stating, “We are outperforming industry growth rates and continuing to strategically shift our portfolio towards higher-margin critical technology-driven businesses, shaping today’s market evolution.”

Looking ahead, Flex’s raised guidance is underpinned by sustained momentum in data center infrastructure, growing partnerships with major cloud providers, and a favorable product mix shift. Management sees expanding opportunities driven by AI-related infrastructure build-outs, ongoing investments to support regional manufacturing, and increasing demand in medical devices. CFO Kevin Krumm emphasized that margin improvements are expected to continue, driven by the growing contribution of products and services that outperform the company average. Advaithi added that the company’s long-term outlook reflects “bullishness” in cloud and power, promising more detailed projections at the upcoming Investor Day.

Key Insights from Management’s Remarks

Flex’s management attributed third quarter performance to surging AI-driven demand in data center infrastructure, successful execution in health and industrial segments, and disciplined cost management despite external disruptions.

• Data center expansion: Flex’s data center business saw continued strength, driven by large-scale AI infrastructure projects and new platform launches, including collaboration with NVIDIA and Amazon. Management expects the sector to maintain at least 35% growth for the year, outperforming broader industry trends.
• AI demand fueling growth: As AI accelerates global data center investments, Flex is providing integrated power, cooling, and compute infrastructure, positioning itself as a key supplier for hyperscale and colocation customers. The recently introduced AI infrastructure platform aims to deliver faster deployment and operational efficiencies for clients.
• Health solutions resilience: Flex reported steady demand in medical devices and anticipates further improvement in medical equipment later this year. The company’s diversified portfolio helped offset headwinds from the temporary shutdown of its Ukraine facility.
• Automotive stabilization: The automotive segment showed signs of stabilization following prior quarters of market softness, with new compute deals supporting growth across internal combustion, hybrid, and electric vehicle platforms.
• Margin and mix improvement: Management emphasized the growing share of products and services businesses, which carry higher margins than the company average. This mix shift, along with ongoing cost controls, contributed to sequential margin gains and supports future margin expansion.

Drivers of Future Performance

Flex’s forward outlook is driven by sustained AI infrastructure investments, expanding customer partnerships, and a continued focus on margin-accretive business segments.

• Ongoing AI infrastructure wave: Management sees continued investment in AI-related data center projects as a long-term growth engine, with new customer wins and partnerships—such as those with Amazon and NVIDIA—expected to drive further demand for Flex’s integrated solutions.
• Health and medical device momentum: The company anticipates ongoing growth in health solutions, particularly in medical devices and capital equipment, helping to diversify revenue streams and reduce reliance on any single end market.
• Margin expansion focus: CFO Kevin Krumm expects margin gains to persist, citing the rising contribution from higher-margin products and services and consistent execution on cost efficiency. However, management acknowledged that macroeconomic conditions and supply chain regionalization could present ongoing challenges.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will closely watch (1) the pace of new customer wins and project ramps in Flex’s data center infrastructure segment; (2) evidence of sustained margin improvement as the product and services mix continues to evolve; and (3) the recovery trajectory in automotive and the medical device markets. Additionally, progress on regionalization strategies and execution on AI infrastructure partnerships will be important markers of success.

Flex currently trades at $65.60, up from $64.24 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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