Flex Ltd: F1Q27 Review: CPI Conservatism Tempers Enthusiasm Despite Beat and Raise on Broad-Based Strength

Research evidence excerpt

Flex Ltd: F1Q27 Review: CPI Conservatism Tempers Enthusiasm Despite Beat and Raise on Broad-Based Strength

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corporate margins), is also driving a lower flow-through to operating profit from Adj. EPS - 27E ($) 4.50 4.65 3.5%

the raised revenue guide, which in turn explains the unchanged full-year operating

margin guidance that disappointed investors looking for upside from the mix Quarterly Forecasts (FYE Mar)

benefits of CPI. Stepping away from the near-term trends, Flex noted an increase Adj. EPS ($)

in hyperscaler conversations shifting toward full modular deployment and the 2026A 2027E 2028E

Q1 0.72 1.00A 1.66

combined design of compute, cooling, and power, a directional shift that bodes Q2 0.79 1.04 1.74

well for the SpinCo assets as a "Digital and Electrical Infrastructure" company Q3 0.87 1.19 1.81

solving hyperscaler challenges across the compute, cooling and power stack. To Q4 0.93 1.43 1.94

FY 3.30 4.65 7.15

that end, we are updating our model to reflect the latest guidance, which drives a

modest upward revision to our out-year earnings forecast, and remain Overweight Style Exposure

on FLEX, given its strong exposure to AI infrastructure builds and the margin

upside from a mix shift toward Power, while trimming our Dec-27 price target to

$160 (vs. $175 prior) on a modestly lower multiple, in line with the target we

ascribe to peers.

• F1Q27 (Jun-end) Results: Robust EPS beat driven mostly by revenue

upside and to a lesser extent by the operating margins. Revenues tracked

to $7,928 mn (vs. JPMe of $7,607 mn, consensus of $7,528 mn and guidance

of $7.35-$7.65 bn), or a growth of +21% y/y, with strength across all three

segments, including CPI growth of +35% y/y, ITS of +20% y/y and RMS of

+12% y/y. Gross margins tracked to 9.6% (vs.