Can Flex Maintain Its Advanced Networking Momentum in FY27?
Flex Ltd. FLEX is seeing continued strength in its communications business, with advanced networking identified as one of the company’s high-value growth markets. On the lastearnings call management stated that the business is expected to drive growth over a sustained period, supported by pull-through demand from data centers. Communications remain one of the largest businesses within Flex’s post-separation portfolio, with advanced networking spanning high-speed switches, optical switches and network interface cards.
The advanced networking business has contributed to Flex’s recent performance. On the lastearnings call management highlighted that it was a significant driver of the company’s fiscal fourth- and first-quarter results, with its strength expected to continue into the fiscal second quarter and fiscal 2027. The company is seeing increased demand from customers it has worked with for several years, while also winning share in certain product segments. The business has exposure across a number of large original equipment manufacturers and multiple product categories, including high-speed switching, optical products and interface technologies.
Flex also highlighted the diversity of its advanced networking business across both customers and product segments. Management stated this combination of sustained customer demand, customer diversity and product diversity supports the continued strength of the business. The company expects communications to remain an important part of its business following the planned separation of its Cloud and Power Infrastructure segment.
Looking ahead, management expressed confidence in the durability of advanced networking into fiscal 2028, linking the business to continued AI infrastructure spending. As data center demand continues, Flex expects the advanced networking business to continue to ramp alongside that spending. The company’s focus on high-value growth markets is also part of its strategy for the business following the separation.
Overall, Flex’s comments indicate that advanced networking is expected to remain a sustained growth market within its communications business, supported by data center demand and broad exposure across customers and networking technologies.
Taking a Look at FLEX’s Competitors
Sanmina Corporation SANM continues to benefit from expanding cloud and AI infrastructure demand, supported by its vertically integrated manufacturing model and broader systems capabilities following the ZT Systems acquisition. New accelerated compute programs and deeper customer relationships improve revenue visibility and support growth beyond the current fiscal year. A diversified end-market mix and healthy liquidity provide flexibility to fund capacity and future programs. Favorable business mix and disciplined execution also support earnings growth. Fourth-quarter fiscal 2026 revenues are expected to be in the range of $3.3-$3.6 billion. The company also raised its fiscal 2026 outlook, expecting revenue of $14-$14.3 billion, up from the previous $13.7-$14.3 billion range.
Plexus Corp. PLXS is benefiting from increasing program ramps. It recorded 31 manufacturing wins totaling $255 million of annualized revenue in the third quarter of fiscal 2026, driven by the Industrial and Aerospace and Defense market sectors. The funnel of qualified manufacturing opportunities is $4.5 billion, indicating a strong growth pipeline. Strategic investments in capacity and emerging areas like data centers strengthen growth prospects. Fiscal fourth-quarter revenues are projected between $1.33 billion and $1.38 billion. At the midpoint, the revenue outlook implies a 4% sequential rise and 28% year-over-year growth. Management now expects fiscal 2026 revenue growth above 20% and adjusted operating margin greater than 6%. Plexus expects fiscal 2027 revenue growth to exceed the 9-12% goal, alongside further margin expansion.
Flex Price Performance, Valuation and Estimates
Shares of FLEX have gained 99.2% in the past year compared with the Electronics - Miscellaneous Products industry’s growth of 45%.
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FLEX trades at a forward 12-month price-to-earnings (P/E) ratio of 22.05, below the industry’s 29.14.
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The Zacks Consensus Estimate for FLEX’s fiscal 2027 earnings has been revised upward over the past 60 days.
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FLEX currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
