A month has gone by since the last earnings report for Flex (FLEX). Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Flex due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Flex Ltd. before we dive into how investors and analysts have reacted as of late.
Flex Q2 Earnings & Revenues Top
Flex reported second-quarter fiscal 2026 adjusted earnings per share (EPS) of 79 cents, which surpassed the Zacks Consensus Estimate by 5.3%. The bottom line compared favorably with 64 cents posted in the prior-year quarter.
Revenues increased 4% year over year to $6.8 billion. Also, it beat the consensus mark by 2%. The uptick was driven by strong data center growth in both the cloud and power end markets, despite a complex macroeconomic environment. The company’s diversified portfolio, spanning multiple industries—from cloud infrastructure and AI data centers to automotive and healthcare—continues to be a key strength.
Flex has incorporated the impact of tariffs into its revenue guidance, noting that tariffs remain largely a pass-through. Despite challenges from the Ukraine facility shutdown and unfavorable FX, the company remains confident in its growth outlook. With 4% revenue growth in the first half and stronger demand expected in Power and Cloud in the fiscal fourth quarter, Flex has revised its fiscal 2026 revenue guidance to $26.7–$27.3 billion, up $500 million from the prior midpoint. It expects an adjusted operating margin of 6.2% to 6.3%, reflecting consistent performance above 6%. Flex now adjusted EPS of $3.09 to $3.17, raising the midpoint by 17 cents per share.
For Reliability Solutions, revenue is expected to grow in the low- to mid-single digits, supported by strong demand in data center power and medical devices, partially offset by a soft but steady renewables and automotive market. For Agility Solutions, revenue is expected to increase in the mid- to high-single digits, fueled by continued cloud strength, partially offset by softer demand in consumer and lifestyle products and the temporary shutdown of the Mukachevo facility in Ukraine.
Segment Details
The Flex Reliability Solutions Group encompasses Health Solutions, Automotive and Industrial businesses. Revenues grew 3% to $3 billion, accounting for 45% of net sales. This was driven by strong Power growth and steady gains in Health Solutions and Core Industrial, partially offset by ongoing weakness in the automotive sector.
The Flex Agility Solutions Group comprises Communications & Enterprise Compute or CEC and Lifestyle and Consumer Devices businesses. Revenues were up 4% to $3.8 billion, accounting for the remaining 55% of net sales. Strong cloud demand that offset weaker performance in communications and consumer markets drove the upside.
Operating Details
Non-GAAP gross profit came in at $632 million, up from $554 million reported in the year-ago quarter. Non-GAAP gross margin expanded 80 basis points (bps) to 9.3% in the reported quarter.
Non-GAAP operating income came in at $409 million, up from $358 million reported a year ago. Non-GAAP operating margin expanded 55 bps to 6%.
The adjusted operating margins of the Flex Reliability Solutions Group were 6.5%, up 105 bps from the prior-year level. The adjusted operating margins of the Flex Agility Solutions Group declined 5 bps to 6%.
Selling, general & administrative expenses totaled $260 million, up 20.4% year over year.
Balance Sheet & Cash Flow
As of Sept. 26, 2025, cash & cash equivalents and long-term debt (net of current portion) were $2.25 billion and $3 billion, respectively, compared with $2.24 billion and $3 billion as of June 30.
The company generated a second-quarter fiscal 2026 cash flow from operating activities of $453 million and an adjusted free cash flow of $305 million.
In the quarter, the company repurchased $297 million worth of stock.
Q3 Guidance
For the third quarter of fiscal 2026, Flex expects revenues to be between $6.65 billion and $6.95 billion.
Management expects adjusted earnings of 74-80 cents per share. Adjusted operating income is projected to be between $405 million and $435 million.
Flex expects Reliability Solutions revenue to grow mid- to high-single digits, supported by strong power demand and accelerating growth in medical devices. Agility Solutions revenue is expected to range from slightly down to up low single digits, as continued cloud growth is offset by softer demand in consumer devices and lower expectations in Lifestyle.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 7.07% due to these changes.
VGM Scores
At this time, Flex has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a score of A on the value side, putting it in the top quintile for value investors.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Flex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Flex Ltd. (FLEX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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