Should Flex’s (FLEX) Data Center Pivot After a Solid Q3 Shape Long-Term Investor Expectations?

• In its recent Q3 update, Flex reported year-over-year revenue growth of 4% and beat analyst expectations by 1.6%, with CEO Revathi Advaithi emphasizing disciplined execution and confidence in the company’s data center positioning.
• The company’s ongoing pivot toward higher-margin areas, particularly data center-related solutions, underscores a shift in business mix that could be important for longer-term profitability and resilience.
• With Flex’s latest quarter highlighting stronger data center momentum and a tilt toward higher-margin business, we’ll examine how this shapes its investment narrative.

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Flex Investment Narrative Recap

To own Flex, you need to believe its shift toward higher margin, data center oriented solutions will offset thin margins and customer concentration risk. The latest Q3 beat reinforces that data center momentum remains the key near term catalyst, while the stock’s 4.5% pullback since results does not materially change the central risk that a few large hyperscaler and colo customers still drive a significant share of future revenue.

The recent announcement of Flex’s rack level liquid cooling deployment at Equinix’s Co-Innovation Facility in Ashburn feels especially relevant here, because it showcases Flex’s integrated power and cooling capabilities right where AI and high density compute demand is growing fastest. This kind of visible, reference grade deployment can support the data center growth story, but it does not remove the underlying risk of large customers bringing similar capabilities in house.

Yet even with Flex’s data center wins, investors should be aware that its reliance on a concentrated group of hyperscaler and colo clients...

Read the full narrative on Flex (it's free!)

Flex's narrative projects $29.1 billion revenue and $1.3 billion earnings by 2028. This requires 3.7% yearly revenue growth and about a $0.4 billion earnings increase from $891.0 million today.

Uncover how Flex's forecasts yield a $73.51 fair value, a 15% upside to its current price.

Exploring Other Perspectives

Five Simply Wall St Community members currently see Flex’s fair value between US$45 and US$78, highlighting how far apart individual views can be. Against that backdrop, the company’s growing data center exposure and ongoing customer concentration risk give you concrete issues to compare across these different perspectives on Flex’s future performance.

Explore 5 other fair value estimates on Flex - why the stock might be worth as much as 22% more than the current price!

Build Your Own Flex Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Flex research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Flex research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Flex's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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