Flex Ltd.
Flex Ltd.
10/30/2026 | Press release | Distributed by Public on 10/30/2026 14:36
Quarterly Report for Quarter Ending September 25, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise specifically stated, references in this report to "Flex," "the Company," "we," "us," "our" and similar terms mean Flex Ltd. and its subsidiaries.
This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans" and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission, except as required by law. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those risks and uncertainties discussed in this section, as well as any risks and uncertainties discussed in Part I, Item 1A, "Risk Factors" and in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026. In addition, new risks emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
OVERVIEW
We are the advanced, end-to-end manufacturing partner of choice that helps a diverse customer base design, build, deliver and manage innovative products that improve the world. Through the collective strength of a global workforce across approximately 30 countries with responsible, sustainable operations, we deliver technology innovation, supply chain, and manufacturing solutions to diverse industries and end markets. Our full suite of specialized capabilities includes design and engineering, supply chain, manufacturing, and integrated services, plus a portfolio of power and cooling products. Over time, we have built differentiated scale and expertise across both technology-driven and regulated markets, enabling us to support customers with increasingly complex product, infrastructure, and compliance requirements. We partner with customers across a diverse set of industries including data center, communications, enterprise, consumer, automotive, industrial, healthcare, and power. As of September 25, 2026, our three operating and reportable segments were as follows:
•Integrated Technology Solutions ("ITS"), which is comprised of the following end markets:
◦Communications, high speed networking, enterprise, and satellite communications systems
◦Lifestyle, premium products across commercial, home and personal product categories
•Regulated Manufacturing Solutions ("RMS"), which is comprised of the following end markets:
◦Industrial, mission-critical automation, energy, and industrial infrastructure
◦Automotive, compute and power electronic platforms, and integrated systems
◦Healthcare, regulated manufacturing for medical devices, drug delivery and equipment
•Cloud and Power Infrastructure ("CPI"), which is comprised of the following end markets:
◦Cloud and Cooling, integrated compute systems supporting power-dense digital infrastructure deployments, and advanced liquid cooling solutions supporting higher-density, power-intensive rack architectures
◦Power, utility and facility-level electrical infrastructure enabling reliable, scalable power delivery and high-density rack and board-level power systems supporting power-intensive compute workloads
Our strategy is to provide customers with a full range of cost competitive, vertically-integrated global supply chain solutions through which we can design, build, ship and service a complete packaged product for our customers. This enables our customers to leverage our supply chain solutions to meet their product requirements throughout the entire product lifecycle.
In today's business landscape, we are witnessing greater product diversification by many companies, primarily in the technology sector, along with increased product complexity. These companies now require unique and customized manufacturing and supply chain solutions that meet their evolving requirements.
We use a portfolio approach to manage our extensive service offerings. As our customers change the way they go to market, we have the capability to reorganize and rebalance our business portfolio in order to align with our customers' needs and requirements in an effort to optimize operating results. The objective of our business model is to allow us to be flexible and
redeploy and reposition our assets and resources as necessary to meet specific customers' supply chain solution needs across all the markets we serve and earn a return on our invested capital above the weighted average cost of that capital.
We believe that our strategy has positioned us to take advantage of the long-term, future growth prospects for outsourcing of advanced manufacturing capabilities, design and engineering services and after-market services.
We are continuously evaluating our capital structure in response to the current environment and expect that our current financial condition, including our liquidity sources are adequate to fund future commitments. See additional discussion in the Liquidity and Capital Resources section below.
Russian Invasion of Ukraine and Middle East Conflicts
We continue to monitor and respond to the conflict in Ukraine and the associated sanctions and other restrictions. We also are monitoring and responding to the Israel-Hamas conflict and recent U.S. and Israeli military operations in Iran. The full impact of these conflicts on our business operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions. We will continue to monitor the conflicts and assess the related restrictions and other effects and pursue prudent decisions for our team members, customers, and business.
During the fiscal year ended March 31, 2026, we recognized $51 million in asset impairments, inventory write-downs and other charges as a result of a missile strike on our Mukachevo, Ukraine facility in Western Ukraine on August 21, 2025. The missile strike represents an unusual and infrequent event as hostilities related to the Russian invasion of Ukraine have been primarily focused in Eastern Ukraine. The missile strike caused substantial physical damage and disrupted normal operations at the facility. In response, we activated contingency manufacturing plans and transitioned production to alternative facilities. During the three-month period ended September 25, 2026, the site has continued to follow the management plan as restoration activities progress in Mukachevo. We expect to incur additional immaterial near-term inefficiencies. For further information, refer to Item 1A, "Risk Factors - Global economic conditions and geopolitical uncertainty have in the past adversely affected, and could in the future adversely affect, our business, results of operations, financial condition, and access to capital markets." in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
Tariffs
The U.S. tariffs initially announced in April 2025, which continue to evolve, and other countries' potential retaliatory tariffs and import/export restrictions may materially increase our product input costs and negatively affect global economic conditions, contracting customer demand. As a contract manufacturer, we expect to recover the cost of tariffs by passing tariff costs to our customers which would increase net sales, decrease operating income margins, and negatively affect operating cash flow timing as we recover paid tariffs from our customers. During the three and six-month periods ended September 25, 2026, tariff costs paid and recoveries from our customers impacted our revenues and costs of goods by less than one percent and had a negligible impact on our profitability. If, in the future, we are no longer able to fully pass through these tariffs, our results from operations and cash flows would be negatively impacted. On February 20, 2026, the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") and on April 20, 2026, the U.S. government opened a system to facilitate refunds for IEEPA tariffs paid. We have requested and received the majority of our requested IEEPA tariff refunds and do not expect refunds received will have a material effect on our financial performance. We will continue to monitor changes in global trade policy and employ measures to mitigate the impact of tariffs and leverage competitive opportunities. However, despite these efforts, the Company may not be able to fully mitigate the impact of changes in trade policies. For further information, refer to Item 1A, "Risk Factors - Tariffs, trade restrictions, export controls, and changes in trade policy, including heightened trade volatility and uncertainty regarding trade agreements, have in the past adversely affected, and could in the future adversely affect, our business, results of operations, and financial condition" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
Memory Pricing Environment
During the first half of fiscal year 2027, market prices for memory components, including DRAM and NAND products, remained elevated as industry supply continued to be constrained by strong demand from AI and data center applications. The Company generally expects to pass through increases in memory costs to its customers, where contractual mechanisms permit recovery of component cost increases, however, sustained increases in memory pricing could continue to favorably impact net sales, while unfavorably impacting our gross profit percentage and increasing inventory balances and working capital requirements. For further information, refer to "Risk Factors - Supply chain disruptions and demand forecasting failures have in the past adversely affected, and could in the future adversely affect, our ability to meet customer demand, and lead to higher costs, or result in excess or obsolete inventory." in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
Business Overview
We are one of the world's largest providers of global supply chain solutions, with revenues of $16.4 billion for the six-month period ended September 25, 2026, and $27.9 billion in the fiscal year ended March 31, 2026. We have established an extensive network of manufacturing facilities in the world's major markets (Asia, the Americas, and Europe) to serve the outsourcing needs of both multinational and regional customers. We design, build, ship, and service consumer and enterprise products for our customers through a network of more than 100 facilities across approximately 30 countries on four continents. The following tables set forth the relative percentages and dollar amounts of net sales by region and by country, and net property and equipment by country, based on the location of our manufacturing sites:
| Three-Month Periods Ended | Six-Month Periods Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 25, 2026 | September 26, 2025 | September 25, 2026 | September 26, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales by region: | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | $ | 4,420 | 52 | % | $ | 3,400 | 50 | % | $ | 8,591 | 52 | % | $ | 6,764 | 51 | % | |||||||||||||||||||||||||||||||
| Asia | 2,586 | 30 | % | 2,019 | 30 | % | 4,929 | 30 | % | 3,889 | 29 | % | |||||||||||||||||||||||||||||||||||
| Europe | 1,485 | 18 | % | 1,385 | 20 | % | 2,899 | 18 | % | 2,726 | 20 | % | |||||||||||||||||||||||||||||||||||
| $ | 8,491 | $ | 6,804 | $ | 16,419 | $ | 13,379 | ||||||||||||||||||||||||||||||||||||||||
| Net sales by country: | |||||||||||||||||||||||||||||||||||||||||||||||
| Mexico | $ | 2,457 | 29 | % | $ | 1,688 | 25 | % | $ | 4,658 | 28 | % | $ | 3,397 | 25 | % | |||||||||||||||||||||||||||||||
| U.S. | 1,471 | 17 | % | 1,336 | 20 | % | 2,960 | 18 | % | 2,619 | 20 | % | |||||||||||||||||||||||||||||||||||
| China | 1,254 | 15 | % | 1,123 | 17 | % | 2,372 | 14 | % | 2,195 | 16 | % | |||||||||||||||||||||||||||||||||||
| Malaysia | 1,055 | 12 | % | 656 | 10 | % | 2,006 | 12 | % | 1,253 | 9 | % | |||||||||||||||||||||||||||||||||||
| Brazil | 469 | 6 | % | 355 | 5 | % | 929 | 6 | % | 709 | 5 | % | |||||||||||||||||||||||||||||||||||
| Hungary | 329 | 4 | % | 342 | 5 | % | 623 | 4 | % | 688 | 5 | % | |||||||||||||||||||||||||||||||||||
| Other | 1,456 | 17 | % | 1,304 | 18 | % | 2,871 | 18 | % | 2,518 | 20 | % | |||||||||||||||||||||||||||||||||||
| $ | 8,491 | $ | 6,804 | $ | 16,419 | $ | 13,379 | ||||||||||||||||||||||||||||||||||||||||
| As of | As of | ||||||||||||||||||||||
| September 25, 2026 | March 31, 2026 | ||||||||||||||||||||||
| Property and equipment, net: | (In millions) | ||||||||||||||||||||||
| Mexico | $ | 1,048 | 37 | % | $ | 891 | 36 | % | |||||||||||||||
| U.S. | 559 | 20 | % | 443 | 18 | % | |||||||||||||||||
| China | 297 | 10 | % | 306 | 12 | % | |||||||||||||||||
| Malaysia | 236 | 8 | % | 191 | 8 | % | |||||||||||||||||
| Hungary | 171 | 6 | % | 165 | 7 | % | |||||||||||||||||
| Brazil | 78 | 3 | % | 79 | 3 | % | |||||||||||||||||
| Other | 460 | 16 | % | 430 | 16 | % | |||||||||||||||||
| $ | 2,849 | $ | 2,505 | ||||||||||||||||||||
We believe that the combination of our extensive open innovation platform solutions, design and engineering services, advanced supply chain management solutions and services, significant scale and global presence, and manufacturing campuses, including many in low-cost geographic areas, provide us with a competitive advantage and strong differentiation in the market for designing, manufacturing and servicing products for leading multinational and regional customers. Specifically, we offer our customers the ability to simplify their global product development, manufacturing process, and after-sales services, and enable them to meaningfully accelerate their time to market and cost savings.
Our operating results are affected by a number of factors, including the following:
•global economic conditions, including inflationary pressures, currency volatility, stagflation, slower economic growth or recession, high or rising interest rates, trade conflicts, tariffs, geopolitical uncertainty and instability in financial markets;
• the mix of the manufacturing services we are providing, the number, size, and complexity of new manufacturing programs, the degree to which we utilize our manufacturing capacity, seasonal demand, and other factors;
• the effects on our business when our customers are not successful in marketing their products, or when their products do not gain widespread commercial acceptance;
•our ability to achieve commercially viable production yields and to manufacture components in commercial quantities to the performance specifications demanded by our customers;
• the effects on our business due to certain customers' products having short product lifecycles, our customers' ability to cancel or delay orders or change production quantities or locations, the short-term nature of our customers' commitments and rapid changes in demand;
• the effects that current credit and market conditions could have on the liquidity and financial condition of our customers and suppliers, including any impact on their ability to meet their contractual obligations;
• the impacts on our business due to supply chain issues, including component shortages, disruptions in transportation or other supply chain related constraints including disruptions in international commerce as a result of disruptions in the Strait of Hormuz and the Red Sea, including as a result of attacks on shipping vessels;
• integration of acquired businesses and facilities;
• increased labor costs due to adverse labor conditions in the markets we operate;
• changes in tax legislation;
• changes in trade regulations and treaties; and
• exposure to infectious disease, epidemics and pandemics on our business operations in geographic locations impacted by an outbreak and on the business operations of our customers and suppliers.
We are also subject to other risks as outlined in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Due to global economic conditions, including the impact of ongoing trade conflicts and tariffs, and geopolitical conflicts (including the Russian invasion of Ukraine and recent U.S. and Israeli military operations in Iran), there has been and we expect there will continue to be uncertainty and disruption in the global economy and financial markets. We have made estimates and assumptions taking into consideration certain possible impacts due to the foregoing factors. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur.
Refer to the accounting policies under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026, where we discuss our more significant judgments and estimates used in the preparation of the condensed consolidated financial statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of operations data expressed as a percentage of net sales (amounts may not sum due to rounding). The financial information and the discussion below should be read together with the condensed consolidated financial statements and notes thereto included in this document. In addition, reference should be made to our audited consolidated financial statements and notes thereto and related Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
| Three-Month Periods Ended | Six-Month Periods Ended | ||||||||||||||||||||||
| September 25, 2026 | September 26, 2025 | September 25, 2026 | September 26, 2025 | ||||||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Cost of sales | 90.3 | 90.8 | 90.4 | 90.9 | |||||||||||||||||||
| Restructuring charges | 0.1 | 0.2 | 0.1 | 0.2 | |||||||||||||||||||
| Gross profit | 9.6 | 9.0 | 9.5 | 8.9 | |||||||||||||||||||
| Selling, general and administrative expenses | 4.4 | 3.8 | 4.3 | 3.7 | |||||||||||||||||||
| Restructuring and impairment charges (reversal) | - | 0.6 | - | 0.4 | |||||||||||||||||||
| Intangible amortization | 0.3 | 0.2 | 0.3 | 0.3 | |||||||||||||||||||
| Operating income | 4.9 | 4.4 | 4.9 | 4.5 | |||||||||||||||||||
| Interest expense | 0.8 | 0.8 | 0.8 | 0.8 | |||||||||||||||||||
| Interest income | 0.2 | 0.1 | 0.2 | 0.2 | |||||||||||||||||||
| Other charges (income), net | (0.1) | (0.1) | (0.2) | (0.1) | |||||||||||||||||||
| Equity in earnings (losses) of unconsolidated affiliates | - | (0.1) | 0.0 | (0.2) | |||||||||||||||||||
| Income before income taxes | 4.4 | 3.9 | 4.5 | 3.8 | |||||||||||||||||||
| Provision for income taxes | 1.3 | 1.0 | 1.2 | 0.9 | |||||||||||||||||||
| Net income | 3.1 | % | 2.9 | % | 3.3 | % | 2.9 | % | |||||||||||||||
Net sales
The following table sets forth our net sales by segment, and their relative percentages (the sum of the individual percentages may not equal 100% due to rounding):
| Three-Month Periods Ended | Six-Month Periods Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 25, 2026 | September 26, 2025 | September 25, 2026 | September 26, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||||||||||||||||||||||||
| Integrated Technology Solutions | $ | 3,306 | 38 | % | $ | 2,720 | 40 | % | $ | 6,362 | 39 | % | $ | 5,278 | 40 | % | |||||||||||||||||||||||||||||||
| Regulated Manufacturing Solutions | 2,677 | 32 | % | 2,454 | 36 | % | 5,347 | 32 | % | 4,845 | 36 | % | |||||||||||||||||||||||||||||||||||
| Cloud and Power Infrastructure | 2,508 | 30 | % | 1,630 | 24 | % | 4,710 | 29 | % | 3,256 | 24 | % | |||||||||||||||||||||||||||||||||||
| $ | 8,491 | $ | 6,804 | $ | 16,419 | $ | 13,379 | ||||||||||||||||||||||||||||||||||||||||
Net sales during the three-month period ended September 25, 2026 totaled $8.5 billion, representing an increase of $1.7 billion, or 25% from $6.8 billion during the three-month period ended September 26, 2025. Net sales for our ITS segment increased $0.6 billion, or 22% from the three-month period ended September 26, 2025, primarily driven by strong growth in Communications business due to increased demand and increased memory pricing in both Communications and our Lifestyle businesses. Net sales for our RMS segment increased $0.2 billion, or 9% from the three-month period ended September 26, 2025, which was primarily driven by strong growth in Industrial. Net sales for our CPI segment increased $0.9 billion, or 54% from the three-month period ended September 26, 2025, which was driven by continued strength in both Power and Cloud & Cooling and $0.1 billion in net sales related to the May 1, 2026 EPP acquisition. Net sales increased $1.0 billion in the Americas, $0.6 billion in Asia, and $0.1 billion in Europe for a total increase of $1.7 billion.
Net sales during the six-month period ended September 25, 2026, totaled $16.4 billion, representing an increase of $3.0 billion or 23% from $13.4 billion during the six-month period ended September 26, 2025. Net sales for our ITS segment increased $1.1 billion, or 21% from the six-month period ended September 26, 2025, primarily driven by strong growth in Communications business due to increased demand and increased memory pricing in both Communications and our Lifestyle
businesses. Net sales for our RMS segment increased $0.5 billion, or 10% from the six-month period ended September 26, 2025, primarily driven by strong growth in Industrial. Net sales for our CPI segment increased $1.5 billion or 45% from the six-month period ended September 26, 2025 primarily driven by continued strength in Power and Cloud & Cooling and $0.2 billion in net sales related to the May 1, 2026 EPP acquisition. Net sales increased $1.8 billion in the Americas, $1.0 billion in Asia, and $0.2 billion in Europe for a total increase of $3.0 billion.
Our ten largest customers during the three and six-month periods ended September 25, 2026, accounted for approximately 50% and 49%, respectively, of net sales. A significant customer accounted for 14% and 13% of net sales for the three and six-month periods ending September 25, 2026, respectively. The majority of the revenue with this customer is included within the CPI segment. No other customer accounted for more than 10% of net sales during the three and six-month periods ended September 25, 2026, or September 26, 2025.
Cost of sales
Cost of sales is affected by a number of factors, including the number and size of new manufacturing programs, product mix, labor cost fluctuations by region, component costs and availability and capacity utilization.
Cost of sales during the three-month period ended September 25, 2026, totaled $7.7 billion, representing an increase of $1.5 billion, or 24% from $6.2 billion during the three-month period ended September 26, 2025. The higher cost of sales for the three-month period ended September 25, 2026, was primarily driven by a $1.7 billion, or 25%, increase in consolidated sales. Cost of sales in our ITS segment for the three-month period ended September 25, 2026, increased by 22% from the three-month period ended September 26, 2025, in line with revenue growth. Cost of sales in our RMS segment for the three-month period ended September 25, 2026 increased by 9% from the three-month period ended September 26, 2025, in line with revenue growth. Cost of sales in our CPI segment for the three-month period ended September 25, 2026 increased by 51% from the three-month period ended September 26, 2025, below the 54% revenue growth for the segment. Lower CPI cost of sales was primarily attributed to margin expansion in both Power and Cloud & Cooling and favorable Power mix.
Cost of sales during the six-month period ended September 25, 2026 totaled $14.8 billion, representing an increase of $2.7 billion or 22% from the $12.2 billion during the six-month period ended September 26, 2025. The higher cost of sales for the six-month period ended September 25, 2026 was primarily driven by revenue growth. Cost of sales in our ITS segment for the six-month period ended September 25, 2026 increased by 21% from the six-month period ended September 26, 2025 in line with revenue growth. Cost of sales in our RMS segment for the six-month period ended September 25, 2026 increased by 9% from the six-month period ended September 26, 2025, in line with revenue growth. Cost of sales in our CPI segment for the six-month period ended September 25, 2026 increased by 43% from the six-month period ended September 26, 2025, compared to revenue growth of 45%. The improvement was driven by margin expansion in both Power and Cloud & Cooling and favorable Power mix.
Gross profit
Gross profit is affected by fluctuations in net sales and cost of sales elements as outlined above and further by a number of factors, including product lifecycles, unit volumes, product mix, pricing, competition, new product introductions, and the expansion or consolidation of manufacturing facilities, as well as specific restructuring activities initiated from time to time. The flexible design of our manufacturing processes allows us to manufacture a broad range of products in our facilities and better utilize our manufacturing capacity across our diverse geographic footprint and service customers from all markets. In the case of new programs, profitability normally lags revenue growth due to product start-up costs, lower manufacturing program volumes in the start-up phase, operational inefficiencies, and under-absorbed overhead. Gross margin for these programs often improves over time as manufacturing volumes increase, as our utilization rates and overhead absorption improve, and as we increase the level of manufacturing services content. As a result of these various factors, our gross margin varies from period to period.
Gross profit during the three-month period ended September 25, 2026 increased $0.2 billion to $0.8 billion, or 9.6% of net sales, from $0.6 billion, or 9.0% of net sales, during the three-month period ended September 26, 2025. Gross margin improved 60 basis points year over year primarily due to favorable mix and continued operational execution.
Gross profit during the six-month period ended September 25, 2026 increased $0.4 billion to $1.6 billion, or 9.5% of net sales from $1.2 billion, or 8.9% of net sales, during the six-month period ended September 26, 2025. Gross margin improved 60 basis points year over year primarily due to favorable mix and continued operational execution.
Segment income
An operating segment's performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, and segment selling, general and administrative expenses, and does not include
amortization of intangibles, stock-based compensation, certain restructuring and impairment charges, customer related asset impairment, legal and other, interest expense, interest income, other charges (income), net, and equity in earnings of unconsolidated affiliates. A portion of depreciation is allocated to the respective segments, together with other general corporate, research and development and administrative expenses.
The Company's Chief Executive Officer is our Chief Operating Decision Maker ("CODM") who compares actual segment income to budgeted financial performance in evaluating how we allocate resources, assess performance and make strategic and operational decisions.
The following table sets forth segment income and margins. Segment margins in the table below may not recalculate exactly due to rounding.
| Three-Month Periods Ended | Six-Month Periods Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 25, 2026 | September 26, 2025 | September 25, 2026 | September 26, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Segment income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Integrated Technology Solutions | $ | 181 | 5.5 | % | $ | 144 | 5.3 | % | $ | 339 | 5.3 | % | $ | 275 | 5.2 | % | |||||||||||||||||||||||||||||||
| Regulated Manufacturing Solutions | 172 | 6.4 | % | 144 | 5.9 | % | 348 | 6.5 | % | 270 | 5.6 | % | |||||||||||||||||||||||||||||||||||
| Cloud and Power Infrastructure | 268 | 10.7 | % | 136 | 8.3 | % | 482 | 10.2 | % | 291 | 8.9 | % | |||||||||||||||||||||||||||||||||||
ITS segment margin increased 20 basis points to 5.5% for the three-month period ended September 25, 2026, compared to 5.3% for the three-month period ended September 26, 2025, primarily driven by growth in the higher margin Communications business. ITS segment margin increased 10 basis points with segment income increasing to $339 million for the six-month period ended September 25, 2026, compared to $275 million for the six-month period ended September 26, 2025, also driven by the Communications business.
RMS segment margin increased 50 basis points to 6.4% for the three-month period ended September 25, 2026, compared to 5.9% for the three-month period ended September 26, 2025, primarily due to favorable product mix and higher demand within Industrial. RMS segment margin increased 90 basis points with segment income increasing to $348 million for the six-month period ended September 25, 2026, compared to $270 million for the six-month period ended September 26, 2025, also driven by Industrial.
CPI segment margin increased 240 basis points to 10.7% for the three-month period ended September 25, 2026, compared to 8.3% for the three-month period ended September 26, 2025, driven by continued strength in both Power and Cloud & Cooling and favorable Power mix. CPI segment margin increased 130 basis points with segment income increasing to $482 million for the six-month period ended September 25, 2026, compared to $291 million for the six-month period ended September 26, 2025, also driven by continued strength in both Power and Cloud & Cooling and favorable Power mix.
Restructuring and impairment charges
We undertook targeted restructuring activities to improve operational efficiencies by reducing excess workforce capacity. During the three and six-month periods ended September 25, 2026, we recognized $15 million and $17 million of restructuring charges primarily related to employee severance.
Selling, general and administrative expenses
Selling, general and administrative expenses ("SG&A") was $0.4 billion, or 4% of net sales, during the three-month period ended September 25, 2026, increasing by $111 million compared to the three-month period ended September 26, 2025. The increase was largely driven by $110 million of expenses related to the intended CPI spin-off and recent acquisitions. SG&A was $705 million, or 4% of net sales, during the six-month period ended September 25, 2026, increasing by $212 million compared to the six-month period ended September 26, 2025, primarily driven by $177 million of expenses related to the intended CPI spin-off and recent acquisitions, $23 million of increased stock-based compensation expense and growth of the business.
Intangible amortization
Amortization of intangible assets increased to $27 million for the three-month period ended September 25, 2026, compared to $16 million in the previous year due to the EPP acquisition in the first quarter of fiscal year 2027. Amortization increased to $50 million during the six-month period ended September 25, 2026, compared to $37 million in the previous year due to the EPP acquisition.
Interest expense
Interest expense increased to $69 million for the three-month period ended September 25, 2026, from $52 million during the three-month period ended September 26, 2025, primarily due to a full quarter of interest from the $1.45 billion credit facility loan. Interest expense increased to $129 million for the six-month period ended September 25, 2026, from $103 million during the six-month period ended September 26, 2025, primarily due to interest expense from the $1.45 billion credit facility loan, partially offset by a decrease in interest expense due to repayment of senior notes that matured in 2026.
Interest income
Interest income increased to $13 million for the three-month period ended September 25, 2026 from $10 million for the same period in fiscal year 2026, primarily due to higher interest rates and higher cash balances. Interest income increased to $26 million for the six-month period ended September 25, 2026, from the $23 million during the six-month period ended September 26, 2025, primarily due to higher interest rates and higher cash balances.
Other charges (income), net
Other charges (income), net was $(7) million during the three-month period ended September 25, 2026 compared to $(13) million during the three-month period ended September 26, 2025. The reduction in other charges (income) was primarily due to lower income from the tax receivable agreement related to fiscal year 2024's Nextracker spin-off.
Other charges (income), net increased to $(44) million during the six-month period ended September 25, 2026 compared to $(6) million during the six-month period ended September 26, 2025, primarily due to the sale of a non-strategic North American business, generating a gain on sale of $48 million. This was partially offset by losses related to foreign exchange.
Equity in earnings (losses) of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates was $5 million during the three-month period ended September 25, 2026, compared to equity in losses of $5 million in the three-month period ended September 26, 2025, primarily due to gains recorded in certain equity investments.
There was no equity in losses of unconsolidated affiliates during the six-month period ended September 25, 2026, compared to equity in losses of $25 million in the six-month period ended September 26, 2025, primarily due to a $17 million loss related to a specific venture capital fund in the three-month period ended June 27, 2025.
Income taxes
Certain of our subsidiaries, at various times, have been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. Refer to note 15, "Income Taxes" of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 for further discussion.
The consolidated effective tax rate was 29% and 27% for the three and six-month periods ended September 25, 2026, respectively, and 24% and 23% for the three and six month periods ended September 26, 2025, respectively. The effective tax rate varies from the Singapore statutory rate of 17% as a result of recognition of earnings in different jurisdictions (we generate most of our revenues and profits from operations outside of Singapore), operating loss carryforwards, income tax credits, release of previously established valuation allowances for deferred tax assets, liabilities for uncertain tax positions, as well as the effects of certain tax holidays and incentives granted to our subsidiaries primarily in China, Costa Rica, Malaysia, the Netherlands and Israel. The effective tax rate for the three-month period ended September 25, 2026 was higher than the effective tax rate for the three-month period ended September 26, 2025 for a variety of reasons, primarily due to the changing jurisdictional mix of income as well as the additional one-time tax impacts related to the previously announced expected spin-off transaction.
The OECD Pillar Two Global Anti-Base Erosion ("GloBE") model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million. As of September 25, 2026 the Company has reflected all estimated impacts of the Pillar Two GloBE minimum tax accordingly within its estimated annual effective tax rate for the year.
Net income
Net income was $263 million during the three-month period ended September 25, 2026, compared to $199 million during the three-month period ended September 26, 2025, and net income was $548 million during the six-month period ended September 25, 2026 compared to $391 million in the six-month period ended September 26, 2025, driven by the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
We continuously evaluate our ability to meet our obligations over the next 12 months and beyond and proactively reset our capital structure to improve maturities and liquidity. We expect that our current financial condition, including our liquidity sources are adequate to fund current and future commitments. As of September 25, 2026, we had cash and cash equivalents of approximately $3.1 billion, bank and other borrowings of approximately $5.2 billion and a $2.75 billion revolving credit facility under which we had no borrowings outstanding. As of September 25, 2026, we were in compliance with the covenants under all of our credit facilities and indentures; we also expect to remain in compliance with the covenants in the upcoming 12 months for our credit facilities and indentures.
Cash provided by operating activities was $0.8 billion during the six-month period ended September 25, 2026, primarily driven by $0.5 billion of net income for the period plus $0.3 billion of non-cash charges such as depreciation and amortization. Cash provided by operating activities for the six-month period ended September 25, 2026 was negatively impacted by $85 million of separation costs incurred in connection with the announced intention to spin-off Flex's CPI segment.
We believe net working capital is a key metric that measures our liquidity. Net working capital is calculated as current assets less current liabilities. Net working capital increased $0.8 billion to $5.1 billion as of September 25, 2026, from $4.3 billion as of March 31, 2026. The increase was primarily the result of a $1.5 billion increase in our inventory balance, a $1.1 billion increase in net accounts receivable, and a $0.7 billion increase in cash and cash equivalents, partially offset by increases of $1.7 billion in accounts payable and $1 billion in other current liabilities.
Net cash used in investing activities was $1.5 billion during the six-month period ended September 25, 2026. This was primarily driven by $1.1 billion paid for the EPP business acquisition during the period as well as $0.5 billion of capital expenditures, partially offset by $0.1 billion of proceeds from the divestiture of a non-core business.
Cash provided by financing activities was $1.4 billion during the six-month period ended September 25, 2026, which was primarily driven by $2.8 billion of net proceeds from borrowings under the $1.45 billion credit agreement and its syndication. This was offset by $1.4 billion of repayments on long term debts during the period. Refer to Note 6 to the condensed, consolidated financial statements in Item 1, "Financial Statements" for additional details.
We believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments, fund acquisitions, repurchase company shares and for certain other activities. Our free cash flow is defined as cash from operations, less net purchases of property and equipment allowing us to present adjusted cash flows on a consistent basis for investors. Our free cash flow for the six-month periods ended September 25, 2026 and September 26, 2025 were inflows of $302 million and $573 million, respectively. Free cash flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner. Free cash flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free cash flow reconciles to the most directly comparable GAAP financial measure of net cash provided by operations as follows:
| Six-Month Periods Ended | |||||||||||
| September 25, 2026 | September 26, 2025 | ||||||||||
| (In millions) | |||||||||||
| Net cash provided by operating activities | $ | 777 | $ | 852 | |||||||
| Purchases of property and equipment | (477) | (283) | |||||||||
| Proceeds from the disposition of property and equipment | 2 | 4 | |||||||||
| Free cash flow | $ | 302 | $ | 573 | |||||||
Our cash balances are generated and held in numerous locations throughout the world. Liquidity is affected by many factors, some of which are based on normal ongoing operations of the business and some of which arise from fluctuations related to global economics and markets. Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances; however, any current restrictions are not material. We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout the global organization. We believe that our existing cash balances, together with anticipated cash flows from operations and borrowings available under our credit facilities, will be sufficient to fund our operations through at least the next twelve-month period. As of September 25, 2026, and March 31, 2026, approximately 22% and 62%, respectively, of our cash and cash equivalents were held by foreign subsidiaries outside of Singapore. Although substantially all of the amounts held outside of Singapore could be repatriated under current laws, a significant amount could be subject to income tax withholdings. We provide for tax liabilities on these amounts for financial statement purposes, except for certain of our foreign earnings that are considered indefinitely reinvested outside of
Singapore (approximately $0.9 billion as of March 31, 2026). Repatriation could result in an additional income tax payment; however, for the majority of our foreign entities, our intent is to permanently reinvest these funds outside of Singapore and our current plans do not demonstrate a need to repatriate them to fund our operations in jurisdictions outside of where they are held. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is that cash balances would remain outside of Singapore and we would meet our liquidity needs through ongoing cash flows, external borrowings, or both.
Future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable, the timing of capital expenditures for new equipment, the extent to which we utilize operating leases for new facilities and equipment, and the levels of shipments and changes in the volumes of customer orders.
We maintain a commercial paper program which provides short-term financing under which there were no borrowings outstanding as of September 25, 2026.
Historically, we have funded operations from cash and cash equivalents generated from operations, proceeds from public offerings of equity and debt securities, bank debt and lease financings. We may enter into debt and equity financings, sales of accounts receivable and lease transactions to fund acquisitions and anticipated growth as needed.
The sale or issuance of equity or convertible debt securities could result in dilution to current shareholders. Further, we may issue debt securities that have rights and privileges senior to those of holders of ordinary shares, and the terms of this debt could impose restrictions on operations and could increase debt service obligations. This increased indebtedness could limit our flexibility as a result of debt service requirements and restrictive covenants, potentially affect our credit ratings, and may limit our ability to access additional capital or execute our business strategy. Any downgrades in credit ratings could adversely affect our ability to borrow as a result of more restrictive borrowing terms. We continue to assess our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or repurchase ordinary shares.
Under our current share repurchase program, our Board of Directors authorized repurchases of our outstanding ordinary shares for up to $2.0 billion in accordance with the share purchase mandate approved by our shareholders at the date of the most recent Annual General Meeting which was held on August 5, 2026. During the six-month period ended September 25, 2026, we did not repurchase any shares. As of September 25, 2026, shares in the aggregate amount of $2.0 billion were available to be repurchased under the current plan.
Warrant
On August 15, 2025, the Company issued a warrant (the "Warrant") to Amazon.com NV Investment Holdings LLC ("Warrantholder"), a wholly-owned subsidiary of Amazon.com, Inc. ("Parent") to purchase up to an aggregate of 3,859,851 ordinary shares of the Company ("Warrant Shares") at an exercise price of $51.29 per share. The Warrant allows for cashless exercise and expires on August 15, 2030. The Warrant Shares are subject to vesting based on qualifying payments (as defined in the Warrant) for the purchase of all products and services by or on behalf of Parent and its affiliates over the term of the Warrant. The expense associated with the Warrant Shares will be recorded as a deduction to revenue as the customer purchases products and services over the vesting period. The Company recorded charges of $6 million related to the Warrant during the six-month period ended September 25, 2026. Refer to Note 4, "Share-Based Compensation and Warrants Expense" for more detail.
Subsequent Liquidity and Capital Resources Events
On September 29, 2026, the Company entered into a Credit Agreement (the "Credit Agreement"), by and among the Company, as borrower, the lenders party thereto, and Citibank, N.A., as administrative agent, which provides a senior term loan credit facility (the "Credit Facility") in an aggregate committed amount of $3.3 billion. On October 14, 2026, the Company borrowed $3.3 billion under the Credit Facility in a single advance. The Credit Facility matures on October 13, 2027, the date that is 364 days after the date of which it is funded. On October 9, 2026, the Company entered into a $1.1 billion Bridge Credit Agreement (the "Bridge Credit Agreement") by and among the Company, as borrower, the lenders party thereto and Citibank, N.A. as administrative agent, which provides a senior bridge term loan credit facility (the "Bridge Credit Facility"). On October 14, 2026, the Company borrowed $1.1 billion under the Bridge Credit Facility in a single advance. The Bridge Credit Facility matures on October 13, 2027, the date that is 364 days after the date of which it was funded.
The $4.4 billion from the financing activities listed above were used to finance the $4.4 billion acquisition of EPC Power Corp. (EPC Power), that occurred on October 14, 2026.
On October 2, 2026, Axiom entered into a Series A Convertible Preferred Stock Investment Agreement (the "Preferred Investment Agreement") with certain third-party investors ("Investors"), pursuant to which the Investors have agreed to collectively purchase 200,000 shares of Axiom's to be issued Series A Convertible Preferred Stock (the "Convertible Preferred Stock"), for an aggregate purchase price of $2.0 billion in a private placement (the "Preferred Investment").
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Information regarding our long-term debt payments, operating lease payments, capital lease payments and other commitments is provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
In May 2026, the Company entered into a Senior Term Loan agreement borrowing $1.45 billion. Refer to note 6 "Bank Borrowings" for more details. Subsequent to September 25, 2026, the Company entered into a Credit Facility in an aggregate committed amount of $3.3 billion and a $1.1 billion Bridge Credit Agreement. Refer to note 17 "Subsequent Events" for additional information on these transactions.
Flex Ltd. published this content on October 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 30, 2026 at 20:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]