Key points
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Flex plans to spin off its IPC segment in a new company focused on power, cooling and electrical infrastructure for data centers. Management says the business is large enough and growing fast enough to merit a different capital structure, similar to Flex’s previous Nextracker spinoff.
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The company described very strong growth targets For CPI, it forecasts revenue growth of 65% to 75% in fiscal 2027 and more than 80% in fiscal 2028, with much of that revenue already tied to awarded programs and visibility into customer demand.
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Flex says the remaining business will remain a Diversified platform of more than 22 billion dollarswhile the derivative structure is intended to keep debt low and support growth, even as capital spending peaks between $1.4 billion and $1.6 billion in fiscal 2027.
Flex (NASDAQ:FLEX) executives used a fireside chat with JP Morgan to outline the rationale for the company’s latest planned spinoff, outline growth expectations for the business being spun off, and frame the remaining Flex as a large, diversified manufacturing and services platform.
Revathi Advaithi, CEO of Flex, said the company’s portfolio strategy over the last seven years has focused on improving business mix, productivity and financial returns. He noted Flex’s exit from several end-consumer markets, the earlier spinoff of Nextracker and reinvestment in areas tied to computing, energy and data center infrastructure.
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Advaithi said the latest spin-off reflects the scale and growth profile of the company’s CPI segment, which he described as requiring a different capital framework than the rest of Flex.
“We know how to pivot. We’ve done it well,” Advaithi said, noting that Nextracker has reached a market capitalization of around $17 billion.
SpinCo to focus on data center power, cooling and electrical infrastructure
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Advaithi said the new company, referred to during the discussion as SpinCo, will position itself as an industrial company focused on data center thermal architecture, electrical infrastructure and cooling infrastructure. He said Flex began investing in the area before the recent surge in demand for artificial intelligence, building on an energy business acquired from Ericsson and combining it with IT integration capabilities.
He said customers are increasingly looking for integrated solutions in computing, power and cooling, rather than addressing those areas separately. Flex targets hyperscalers, colocation providers, neoclouds and silicon providers with products including mechanical components, IT integration, cooling distribution units, cold plates, power modules, custom power, switchgear and embedded modules.
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Advaithi said the company’s differentiation is its ability to address the entire “thermal architecture” at scale and speed. He also said SpinCo’s focus will be on diversifying within electrical and utility-related infrastructure rather than pursuing another spinoff.
Executives reiterate strong growth goals
Flex executives said the company is confident in its CPI growth prospects because a large portion of expected revenue is already tied to awarded programs. The company expects CPI growth of 65% to 75% in fiscal 2027 and 80% or more in fiscal 2028. A company speaker said about 90% of expected fiscal 2027 revenue is booked, while Flex envisions about 70% of fiscal 2028 revenue through awarded programs and customer demand visibility.
The company also discussed the role of its partnership with Amazon and its warranty agreement. A Flex representative said the deal has provided incentives for both companies to grow together and that the benefits of the relationship are built into guidance for fiscal years 2027 and 2028.
As for power, Flex said growth is expected to outpace the overall CPI growth rate in fiscal 2027, about 75% or more, and around the CPI growth rate in fiscal 2028. Executives said both critical power and integrated power are expected to grow at very similar rates over time, although the timing may vary by year.
Energy architecture and margin expansion remain key issues
Advaithi said data center power infrastructure is undergoing major changes as customers seek greater power density and efficiency. He cited the evolution from power racks to fully integrated 1-megawatt racks, as well as industry discussions around 400- and 800-volt architectures and potential solid-state transformers.
He said the 400- and 800-volt programs are “very mature” and are being launched, while solid-state transformers are also being developed, but may take longer to mature as standards evolve. Advaithi cautioned that high-voltage architectures require more than product development because safety, regulatory requirements, infrastructure, training and workforce availability must also be addressed.
Flex executives said the energy business is currently targeting 20- to 20-year margins and that the company aims to reach the level of its industry peers established over time. They said current margins reflect recent investment and expansion costs. In overall CPI, the company said margins ended fiscal 2026 at 9.2%, including about 100 basis points of investment, and that Flex expects to recover those 100 basis points in fiscal 2027.
RemainCo positions itself as a $22 billion platform
Michael Hartung, Flex’s chief commercial officer, said Flex’s remaining business after the spin-off will remain a manufacturing and services platform with more than $22 billion in revenue and a diversified set of end markets, including healthcare, industrial, automotive, communications and lifestyle.
Hartung said the company will continue to apply the same operating framework it has used in recent years, emphasizing financial rigor, high-quality earnings, cash generation, margin improvement and portfolio optimization. He said Flex will deploy capital into higher-value markets, including medical devices, drug delivery, robotics, warehouse automation, satellite communications and data center-related networking products.
Hartung said Flex will also maintain exposure to data center infrastructure across networking, switches, optical products, network interface cards, power generation, transmission, distribution, storage and semiconductor capital equipment manufacturing.
Capital, debt and CapEx allocation
Flex executives said the planned transaction is designed for Flex to retain a stake in SpinCo of up to 20%, which can then be used in a debt-for-equity swap to help reduce debt. They said the structure aims to leave both companies with low levels of debt and flexibility to pursue growth opportunities.
The company also addressed its elevated capital spending plan. Flex guided for peak capex of $1.4 billion to $1.6 billion in fiscal 2027, compared to a typical capex level of around 2% of revenue. Executives said spending in fiscal 2027 is expected to be around 5% of revenue, with incremental investment focused on securing power, capacity, footprint and cooling infrastructure for awarded businesses, primarily within CPI.
Executives said the company views fiscal 2027 as the peak year for CapEx based on currently awarded programs and demand visibility through fiscal 2028. Advaithi added that some infrastructure investments, such as on-premises power and cooling circuits, are critical and that further growth should not require the same level of capital intensity.
About Flex (NASDAQ:FLEX)
Flex (NASDAQ: FLEX), formerly known as Flextronics, is a global provider of electronics manufacturing (EMS) and original design manufacturing (ODM) services. The company offers comprehensive product lifecycle solutions, including product design and engineering, prototyping, volume manufacturing, testing, and after-sales services. Its offerings extend to supply chain management, component sourcing, logistics and distribution, and advanced manufacturing capabilities such as automation and digital manufacturing to help customers from concept to end-of-life.
Flex serves a wide range of industries, including automotive, healthcare, industrial, communications and consumer electronics, and works with original equipment manufacturers (OEMs) and technology companies to accelerate time to market and manage complex supply chains.
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The article “Flex Launches AI Data Center Spinoff as Power and Cooling Growth Accelerates” was originally published by MarketBeat.
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