Flex Stock Down Post Q2 Earnings: Should You Buy, Hold or Offload? Shivangi Deora Mon, November 2, 2026 at 6:45 AM EST 5 min read CSCO -3.76% ^GSPC -1.82% JBL -5.23% FLEX -7.08% SANM -4.33% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Shares of Flex Ltd. FLEX have declined approximately 7% following second-quarter fiscal 2027 results reported on Oct. 28. The company's shares have plunged 25.9% compared with the Zacks Electronics – Miscellaneous Products industry's 21.4% decline over the past month. The stock also lagged the broader Zacks Computer and Technology sector and the S&P 500 composite, which decreased 12.5% and 3.4%, respectively, during the same period.
Flex's performance has also been disappointing relative to some of its industry peers. While Cisco Systems CSCO has declined 7.3%, Jabil JBL witnessed a fall of 9.3%. However, FLEX managed to outperform Sanmina SANM, whose shares fell 26.4% over the same timeframe.
Despite the recent weakness, Flex's strong operating momentum, accelerating AI infrastructure demand and improving profitability remain encouraging. Moreover, robust demand across its Cloud and Power Infrastructure (CPI) segment and the company's raised fiscal 2027 outlook underscore its solid growth prospects.
Against this backdrop, a closer examination of Flex's underlying fundamentals, growth opportunities, competitive positioning and potential headwinds is essential to assess whether the recent share price correction presents a buying opportunity or warrants a cautious stance.
Flex reported strong second-quarter fiscal 2027 results, with adjusted earnings surging 49.4% year over year to $1.18 per share, beating the Zacks Consensus Estimate of $1.05. Revenues climbed 24.8% to $8.49 billion, surpassing the consensus mark of $8.18 billion. Growth was driven by robust AI-related demand across CPI and strength in high-value markets.
CPI revenues surged to $2.51 billion from $1.63 billion, while Integrated Technology Solutions (ITS) and Regulated Manufacturing Solutions (RMS) revenues increased 22% and 9%, respectively. Adjusted operating margin expanded 110 basis points (bps) to 7.1%.
Flex expects third-quarter fiscal 2027 revenues of $8.87-$9.17 billion, adjusted operating income of $685-$715 million and adjusted earnings of $1.19-$1.25 per share. Management anticipates CPI revenues to grow 105-115% year over year, supported by sustained AI infrastructure investments. Despite strong operating performance, free cash flow declined to $261 million from $305 million, partly due to costs associated with the planned CPI spin-off.
Flex is grappling with persistent supply-chain constraints, which could impede its ability to capitalize fully on rising demand for AI infrastructure. Management indicated that component shortages, prevalent over the past 12 months, could persist for several more years as demand continues to outpace supply. These challenges could complicate production schedules, increase procurement costs and constrain the timely execution of high-growth programs. Moreover, supporting expanding operations has increased inventory requirements. In the second quarter of fiscal 2027, inventory rose 39% year over year and 13% sequentially, while inventory days, net of working capital advances, increased five days to 60. Sustained inventory accumulation could intensify working capital requirements and pressure cash generation.
The company is also facing substantial capital expenditure requirements to support its expanding CPI operations. Flex expects fiscal 2027 capital expenditures of $1.5-$1.6 billion, with approximately two-thirds allocated to CPI. These investments, primarily directed toward manufacturing capacity and power infrastructure, could constrain near-term free cash flow. Second-quarter free cash flow totaled $261 million, including a $61 million impact from one-time costs associated with the planned separation. Furthermore, the EPC Power acquisition involved $4.4 billion of debt financing, resulting in elevated near-term interest expenses. Although the planned $2 billion Axiom preferred stock transaction should partly alleviate this burden, financing costs remain a concern.
Flex is also grappling with weakness in consumer-related markets and increasing customer concentration risks. Management highlighted incremental softness in the lifestyle business, partially offsetting robust communications demand. Meanwhile, the CPI business is increasingly dependent on large hyperscale customers, reflecting concentrated AI infrastructure spending. Such exposure could increase vulnerability to shifts in customer investment priorities. Additionally, the planned separation of CPI into Axiom, targeted for early 2027, introduces execution risks, including potential operational disruptions and separation-related expenses. These uncertainties could weigh on financial flexibility and near-term performance.
Nevertheless, Flex is gaining from accelerating demand for AI infrastructure, particularly across power, cloud and cooling solutions. Second-quarter fiscal 2027 CPI revenues surged 54% year over year to $2.5 billion, while adjusted operating margin expanded 240 bps to 10.7%. Power operating margin reached approximately 16%, benefiting from higher volumes and improved capacity utilization. The acquisition of EPC Power further strengthens its end-to-end power capabilities, complementing investments in 800-volt architecture and solid-state transformers. Management expects CPI revenues to increase 75-85% in fiscal 2027, supported by sustained AI-related infrastructure investments.
The company is benefiting from healthy momentum across its RMS and ITS businesses. RMS revenues increased 9% year over year to $2.7 billion, supported by industrial demand, particularly energy infrastructure and robotics. ITS revenues climbed 22% to $3.3 billion, driven by advanced networking and communications. Together, these segments delivered their fourth consecutive quarter of year-over-year growth. Continued investments in health care, automation and communications should reinforce Flex's exposure to attractive, higher-value markets.
The stock trades at a forward 12-month price-to-sales (P/S) of 0.79X, below the industry's average of 7.29X. CSCO, JBL and SANM trade at a forward 12-month P/S of 5.63X, 0.61X and 0.52X, respectively.
The Zacks Consensus Estimate for FLEX's earnings for fiscal 2027 has been revised marginally upward over the past 60 days.
Flex's strong AI infrastructure demand, expanding margins, upwardly revised fiscal 2027 outlook and attractive valuation support its long-term growth prospects. However, persistent supply-chain constraints, elevated capital expenditures, rising customer concentration and execution risks surrounding the planned Axiom spin-off warrant caution.
Existing investors should hold, while new investors should wait for a better entry point.
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This article originally published on Zacks Investment Research (zacks.com).
