Last Update 18 Dec 25
Fair value Increased 22%FLEX: AI And Data Center Demand Will Drive Multi-Year Earnings Upside
The analyst price target for Flex has been raised from $64 to $78 per share, reflecting analysts' increased conviction in faster revenue growth, stronger margins, and higher future earnings multiples supported by robust Q2 results, upgraded AI and data center expectations, and a sustained mix shift toward higher-value power, cloud, and auto end markets.
Analyst Commentary
Bullish analysts are broadly revising their models higher following Flex's fiscal Q2 beat, pointing to a combination of stronger execution, higher quality revenue mix, and increasing visibility into key secular growth drivers such as AI, data centers, and autos.
Multiple firms have lifted price targets into the mid 70 dollar range while maintaining positive ratings, underscoring growing confidence that Flex can sustain elevated margins and compound earnings faster than previously expected.
Post earnings commentary emphasizes that better than expected guidance for the coming quarters, particularly Q3 and implied strength into Q4, supports the view that Flex is still early in its monetization of higher value power and cloud programs and AI related applications.
Bullish analysts also highlight that the market is beginning to ascribe a higher earnings multiple to Flex as the business mix shifts away from lower margin legacy operations and toward durable, secularly growing end markets, which they see as underappreciated in prior valuation frameworks.
Recent research notes further point out that Flex is already tracking ahead of its long term data center revenue growth targets, suggesting upside risk to consensus assumptions and reinforcing the case for continued estimate revisions and multiple expansion.
On the auto side, improved U.S. industry forecasts and healthier demand indicators support expectations for sustained growth in Flex's automotive portfolio, even as assumptions for battery electric vehicle penetration are tempered, which analysts view as reducing risk while preserving volume and content opportunities.
Overall, the tone across recent updates is that Flex's execution, particularly on operating margins and disciplined capital allocation, is validating the bullish thesis that the company is evolving into a structurally higher growth, higher return platform.
Bullish Takeaways
- Raised price targets into the 70 dollar plus range reflect increased confidence that Flex can sustain faster revenue growth and structurally higher margins, supporting a higher valuation multiple.
- Upward revisions to AI and data center estimates signal that analysts see Flex as a key beneficiary of long duration secular demand, creating upside to consensus earnings and cash flow forecasts.
- Stronger than expected near term guidance, including Q3 and implied Q4 strength, reinforces the view that Flex is executing well on its shift toward higher value power, cloud, and AI related programs.
- Improved U.S. auto demand projections from major firms like Goldman Sachs contribute to a more constructive outlook for Flex's auto business, adding another pillar to the multi year growth and re rating story.
What's in the News
- Raised full year 2026 net sales guidance to between $26.7 billion and $27.3 billion, citing strong data center demand in Power and Cloud and continued disciplined execution (corporate guidance).
- Issued net sales guidance of $6.65 billion to $6.95 billion for the third quarter of fiscal 2026, providing increased visibility into near term growth (corporate guidance).
- Announced deployment of a vertically integrated liquid cooling solution at Equinix's Co Innovation Facility in Ashburn, integrating JetCool single phase DLC and Flex power products in an OCP ORv3 rack to address high density data center cooling and energy efficiency (client announcement).
- Unveiled an industry first, fully integrated, globally manufactured platform for gigawatt scale AI and HPC data centers, enabling up to 30% faster infrastructure deployment and introducing 1MW racks, capacitor energy storage, modular CDUs, and prefabricated power pods (product related announcement).
- Launched a new Modular Rack Level Cooling Distribution Unit developed by JetCool, providing scalable liquid cooling from 600 kW to 1.8 MW per rack to support growing AI, HPC, and hyperscale workloads while optimizing space and energy use (product related announcement).
Valuation Changes
- Fair Value: increased meaningfully from $64.00 to $78.00 per share, reflecting higher expected earnings power and an improved business mix.
- Discount Rate: risen slightly from 8.15% to approximately 8.88%, implying a modestly higher required return and risk premium in the valuation framework.
- Revenue Growth: raised significantly from about 4.8% to roughly 7.4%, signaling stronger expected top line expansion compared with prior assumptions.
- Net Profit Margin: increased modestly from approximately 4.55% to about 4.97%, indicating incremental operating leverage and margin improvement.
- Future P/E: moved higher from roughly 18.5x to about 20.6x, suggesting a somewhat richer valuation multiple on forward earnings.
Key Takeaways
- Unique integration, global expansion, and operational efficiency position Flex for sustained segment growth, robust margins, and outperformance versus market expectations.
- Strategic regionalization, supply chain agility, and expanding digital service offerings drive structural revenue upside, durable customer relationships, and enhanced profitability.
- Rising protectionism, customer concentration, and industry shifts toward localization threaten Flex's cost structure, revenue growth, and profitability amid increasing operational and compliance risks.
Catalysts
About Flex- Provides technology innovation, supply chain, and manufacturing solutions to data center, communications, enterprise, consumer, automotive, industrial, healthcare, industrial, and power industries.
- Analyst consensus sees Flex's data center business growing approximately 30 percent, but with significant hyperscaler diversification, unique integration of compute and power solutions, and continuous share gains globally, Flex could see sustained data center and power segment growth at rates above 35 percent annually for multiple years, compounding higher-than-expected revenue and driving robust operating leverage.
- While analysts broadly expect margins to benefit from higher value mix and vertical integration, Flex's relentless push for operational efficiency, record free cash flow, and accelerating value-added and service offerings could drive adjusted operating margins materially beyond 6.5 percent in the next two years, supporting EPS growth well above current forecasts.
- The company's uniquely extensive North American and EMEA manufacturing footprint, combined with proven expertise in supply chain agility, position Flex as the prime beneficiary of accelerating regionalization and tariff-driven supply chain shifts, opening new long-term contract opportunities and broadening the customer base, which is likely to deliver structural upside to revenue and margin stability.
- Flex is ideally situated to capture multi-year demand from global electrification, the EV and renewable energy wave, and large-scale IoT deployment, which-combined with increased outsourcing of complex electronics-should drive outpaced, durable growth in its automotive, health, and industrial segments, with meaningful expansion to sub-segments such as grid modernization and infrastructure, all supporting topline growth and higher net margins.
- The ongoing shift to outsourcing complex design, engineering, and lifecycle management services (beyond manufacturing) is accelerating, and Flex's early investment in digital platforms, automation, and lifecycle services is creating deeper customer relationships, more recurring revenue, and enhanced pricing power, directly translating to growing profitability, stickier revenue streams, and rising free cash flow.
Flex Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- This narrative explores a more optimistic perspective on Flex compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
- The bullish analysts are assuming Flex's revenue will grow by 4.8% annually over the next 3 years.
- The bullish analysts assume that profit margins will increase from 3.2% today to 4.6% in 3 years time.
- The bullish analysts expect earnings to reach $1.4 billion (and earnings per share of $4.01) by about July 2028, up from $838.0 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.5x on those 2028 earnings, down from 23.4x today. This future PE is lower than the current PE for the US Electronic industry at 23.8x.
- Analysts expect the number of shares outstanding to decline by 5.98% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.15%, as per the Simply Wall St company report.
Flex Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Deglobalization and rising protectionism, including tariffs and localization requirements, are increasing operational complexity and costs for Flex, potentially eroding its historical cost advantages and putting sustained pressure on net margins and operating profits in the long term.
- Flex faces customer concentration risk, with a heavy reliance on a small number of large cloud and hyperscaler customers; if any key customer reduces business, vertically integrates, or switches suppliers, revenue volatility may increase and long-term top-line growth may be negatively impacted.
- Broad industry trends toward localized, automated, and reshored manufacturing, particularly in North America and Europe, could reduce demand for outsourced manufacturing services, narrowing Flex's addressable market and further constraining revenue growth over time.
- Persistent commoditization of contract manufacturing and intensified price competition within the electronics manufacturing services industry threaten to squeeze profitability for Flex, which could hinder future net margin expansion and sustainable earnings growth.
- Increasing global labor and ESG compliance requirements are likely to lift costs and operational risks for Flex, introducing ongoing margin pressure and potentially increasing capital needs for compliance, with adverse effects on net earnings and return on invested capital.
Valuation
How have all the factors above been brought together to estimate a fair value?- The assumed bullish price target for Flex is $64.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Flex's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $64.0, and the most bearish reporting a price target of just $45.0.
- In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $29.7 billion, earnings will come to $1.4 billion, and it would be trading on a PE ratio of 18.5x, assuming you use a discount rate of 8.1%.
- Given the current share price of $52.45, the bullish analyst price target of $64.0 is 18.0% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
