Flex makes products for other companies. Big brands across data centers, healthcare, automotive, industrial, and consumer electronics hand their manufacturing problems to Flex, which then designs, builds, ships, and services those products through a network of more than 100 facilities across roughly 30 countries. Flex does not own the products it makes. It charges for the expertise, the factories, the supply chain, and the labor. Revenue arrives when customers need things built and shrinks when they do not, which makes the business deeply tied to the health of the global economy. The diagram below traces where the money goes.
How Flex Makes Money
flowchart LR
A["Diverse Customer Base
Across 7 Industries"] -->|"Design & Engineering
Supply Chain Services"| B["Three Operating Segments
ITS, RMS, CPI"]
B -->|"Manufacturing & Assembly
PCBA, Systems Integration"| C["Product & Service Delivery
$27.9B Revenue"]
C -->|"9.2% Gross Margin
$2.6B"| D["Operating Cash Flow
$1.7B"]
D -->|"Global Scale Investment
150K Employees
100+ Facilities"| E["Manufacturing Capability
Advanced Equipment & Automation"]
E -->|"Cost Efficiency
Supply Chain Resiliency"| B
C -->|"Aftermarket Services
Reverse Logistics Circular Economy"| F["Long-Term Customer Relationships
No Single Customer Over 10%"]
F -->|"Value Delivered
Quality & Responsiveness"| A
D -->|"Free Cash Flow $1.1B
Reinvestment"| E
Five years of data tell a clear story about where this business is heading. Revenue dipped from $26.4 billion in fiscal 2024 to $25.8 billion in fiscal 2025, then recovered to $27.9 billion in fiscal 2026. The more important change happened inside those numbers. The Cloud and Power Infrastructure segment, which handles data center compute systems, power delivery, and liquid cooling, grew 38% in fiscal 2026 and now represents 24% of total revenue, up from just 12% two years earlier. That shift matters because it pulled gross margin up meaningfully.
What gross margin means for a contract manufacturer
Gross margin is the share of revenue left after paying for materials, factory labor, and direct production costs. For contract manufacturers, gross margins are thin by design because customers are paying for efficiency, not a unique product. A rising gross margin usually means the company is doing more complex or specialized work that commands better pricing.
Gross Margin (%), Fiscal 2022 to 2026
Gross margin climbed from 6.9% in fiscal 2023 to 9.2% in fiscal 2026, reflecting a shift toward higher-margin cloud and power infrastructure work.
Cash generation improved alongside margins. Operating cash flow rose from $0.9 billion in fiscal 2023 to $1.7 billion in fiscal 2026. Free cash flow, what is left after capital spending on factories and equipment, reached $1.1 billion in fiscal 2026. Net debt fluctuated across the five years, ending at $1.4 billion in fiscal 2026 after sitting as high as $2.6 billion in fiscal 2025. The trend in profitability and cash is moving in the right direction, but the margin base is still thin in absolute terms.
$1.7B
Operating cash flow in fiscal 2026, up from $0.9B in fiscal 2023
2026
milestone
Flex announces plan to split into two companies
In May 2026, Flex announced it intends to spin off its Cloud and Power Infrastructure segment into a separate, publicly traded company. The remaining business, consisting of the Integrated Technology Solutions and Regulated Manufacturing Solutions segments, would continue as Flex. The spin-off is targeted for completion in the first quarter of calendar 2027, subject to board, shareholder, and regulatory approvals. There is no guarantee the transaction will happen on that timeline, or at all.
The planned split forces a real question about what each piece looks like on its own. The Cloud and Power Infrastructure segment is growing fast and carries better margins, driven by surging demand for data center power and cooling. The remaining manufacturing business, covering communications equipment, consumer products, automotive systems, healthcare devices, and industrial machinery, is larger by headcount and geography but grew more slowly and faces tougher pricing pressure. Separating them would let each unit tell a different story to a different set of investors.
Several documented risks sit directly in the path of that story playing out as planned. The ten largest customers account for 45% of net sales, and hyperscale cloud providers have real bargaining power. If any large customer pulls orders, shifts to a competitor, or decides to build its own manufacturing capacity, the revenue impact is immediate. Flex also buys components from a limited number of suppliers, which leaves it exposed when trade restrictions, geopolitical conflicts, or shipping disruptions cause shortages. In fiscal 2026, a missile strike on Flex's facility in Mukachevo, Ukraine caused $51 million in asset impairments and inventory write-downs, a concrete reminder that facilities in or near conflict zones carry physical risk.
What customer-specific equipment risk means
Flex sometimes buys or builds specialized factory equipment designed only for one customer's product. If that customer reduces orders or stops making that product, Flex may have to write off the value of that equipment entirely. This is different from generic factory machinery, which can be reused for other customers.
Customer-specific equipment write-offs are listed as a high-severity risk in Flex's own filings. The data center business makes this particularly sharp. Flex invests in specialized systems for large cloud customers whose orders can shift quickly if their own infrastructure plans change. Power and water scarcity at data center sites is also named as a direct threat. If cloud customers cannot secure reliable electricity or water for their facilities, they postpone or cancel orders, and Flex's revenue from those programs disappears with them.
45%
Share of fiscal 2026 net sales from the ten largest customers
Trade policy is another live variable. Flex operates manufacturing sites across roughly 30 countries and sells into every major region. US tariffs announced in April 2025 added cost pressure across its supply chain. Flex has generally passed tariff costs through to customers, which it says increased revenues and costs by roughly one percent in fiscal 2026 with a negligible effect on profit. But the company acknowledges it may not always be able to pass those costs through in full. If that ability breaks down, margins that have only recently improved would face direct pressure.
How tariff pass-through works
When governments charge import tariffs on components or finished goods, manufacturers like Flex pay those costs upfront and then try to recover the money by charging customers more. This works when customers agree to pay. When customers push back or when contracts do not allow price adjustments, the manufacturer absorbs the tariff cost directly, which cuts into profit.
In 2019, Flex held roughly $102 million of Huawei materials at a factory in China when the US government placed Huawei on a restricted trade list. Huawei eventually recovered about half through other companies. The episode illustrates how quickly a government trade decision can trap a contract manufacturer between two customers with competing interests.
The Bet
Flex's improving financial profile depends on the Cloud and Power Infrastructure segment continuing to grow fast enough to pull the overall margin mix higher, even as the traditional manufacturing segments grow more slowly or face demand softness. If data center buildout slows, if major cloud customers pull back orders, or if the planned spin-off stalls in regulatory approvals, the margin expansion story stops and Flex reverts to a lower-margin contract manufacturer with thin cash returns. The entire logic of splitting the company into two also assumes that each half is worth more independently than together, which will only become clear after the transaction is complete and both businesses operate on their own.
Open question
Flex is in the middle of the biggest structural change in its recent history. The fast-growing cloud and power business is being carved out just as it reaches meaningful scale. The remaining manufacturing business is steady but slower. Margin improvement over five years is real, but the absolute margin base is still thin, and the customer concentration in the top ten is significant. Can the Cloud and Power Infrastructure business sustain its growth rate as an independent company, and does the traditional manufacturing business that remains have enough pricing power and diversification to hold its improved margins without it?
Compiled · 10-K · FY2026
Customer Concentration
The company's ten largest customers account for 45% of sales, and hyperscale cloud providers have significant bargaining power. These major customers could reduce orders, shift to competitors, or build their own manufacturing capabilities, which would materially harm revenue and profitability.
Data Center Power and Water Constraints
The company's cloud and power infrastructure business depends on customers securing reliable and affordable electrical power and water for data centers. Limitations on power generation, water scarcity, regulatory restrictions, and infrastructure delays could force customers to postpone or cancel orders, reducing the company's revenue and margins.
Supply Chain Disruptions
The company relies on components from limited suppliers and is vulnerable to geopolitical conflicts, trade restrictions, and shipping disruptions. Shortages have caused production delays and forced the company to pay higher prices or redesign products, which reduces profits and can damage customer relationships.
Customer-Specific Equipment Obsolescence
The company invests in specialized equipment designed for specific customers. If those customers reduce orders, exit a product line, or go out of business, the company may have to write off these assets as worthless, resulting in significant financial losses.
Spin-off Execution Risk
The planned separation of the Cloud and Power Infrastructure business is complex and depends on multiple approvals, tax rulings, and regulatory clearances. Failure to complete the spin-off or significant delays would divert management attention and create uncertainty about the company's future direction and value.
10-K Item 1A · Risk Factors
