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.