Can Industrial Strength Keep FLEX's RMS Growth on a Steady Track?

Flex Ltd. FLEX is witnessing solid momentum in its Regulated Manufacturing Solutions (“RMS”) segment. Favorable secular trends across energy infrastructure, robotics and warehouse automation are likely to help the segment maintain a steady growth trajectory through fiscal 2027.

In the first quarter of fiscal 2027, RMS revenues increased 12% year over year to $2.7 billion, driven by strength in the industrial end market. Adjusted operating income totaled $176 million, while adjusted operating margin expanded 130 basis points year over year to 6.6%.

Momentum is expected to continue with management projecting RMS revenues to grow in the mid-single-digits to high-single-digits in fiscal 2027. The company expects a similar growth range for RMS in the fiscal second quarter.

Flex Ltd. Revenue (Quarterly)

 

 

Flex Ltd. revenue-quarterly | Flex Ltd. Quote

Flex expects its energy infrastructure operations to benefit from sustained demand tied to data center and utility-scale infrastructure investments. Following the planned spin-off of its power product portfolio, Flex will retain contract manufacturing exposure across power generation, transmission, distribution and storage verticals.

Robotics and warehouse automation provide another long-term growth opportunity. Management highlighted accelerating regionalization, wage inflation and labor scarcity as factors pushing companies toward productivity-enhancing automation solutions. Flex believes these trends should support sustained demand from its OEM partners.

Apart from industrial, stable performance in the automotive end market and growth in connected medical devices within Healthcare are likely to support RMS performance.

Flex raised its fiscal 2027 revenue guidance to $33.7-$35.2 billion from $32.3-$33.8 billion. The company now expects Cloud and Power Infrastructure revenues to grow 65-75%. However, free cash flow conversion is projected at roughly 40%, due to the inclusion of costs associated with the spin-off.

Taking a Look at FLEX’s Competitors' Top-Line Performance

Jabil Inc JBL is also benefiting from accelerating data-center infrastructure demand. Fiscal third-quarter 2026 revenues rose 12% year over year to $8.8 billion, while Intelligent Infrastructure revenues surged 21% to $4.2 billion.

The company now expects AI-related revenues in fiscal 2026 to be around $13.6 billion, up roughly 50% year over year, buoyed by compute, optics, storage, networking, power, cooling and rack-level integration capabilities, while maintaining an asset-light operating model. Management expects a similar AI-related growth rate in fiscal 2027 despite a considerably larger revenue base.

Celestica CLS is witnessing stronger top-line momentum amid accelerating AI infrastructure investments. Robust momentum in the Connectivity & Cloud Solutions (“CCS”) business is the primary growth driver. In the second quarter of 2026, CCS revenues surged 84% year over year, reflecting strength in communications and enterprise end markets

Communications revenues went up 62% on strong 800G and 400G networking demand.  Enterprise revenues rose 167% mainly due to the ramp of an AI/ML compute program with a hyperscaler. Management also now expects revenues of $20.5 billion for 2026, up from its previous outlook of $19 billion.

Flex Price Performance, Valuation and Estimates

Shares of FLEX have gained 8.4% in the past month compared with the Electronics - Miscellaneous Products industry’s growth of 6.1%.

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FLEX trades at a forward 12-month price-to-earnings (P/E) ratio of 23.91, below the industry’s 31.65.

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The Zacks Consensus Estimate for FLEX’s earnings for fiscal 2027 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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