Flex at Goldman Sachs Conference: Strategic Growth and Market Insights

On Tuesday, 09 September 2025, Flex Ltd. (NASDAQ:FLEX) participated in the Goldman Sachs Communicopia + Technology Conference 2025, showcasing its strategic positioning and growth prospects. The company’s leadership highlighted significant achievements in the data center sector and discussed challenges in automotive markets. Flex is focusing on value-added services to enhance margins and expanding its global manufacturing footprint to mitigate trade risks.

Key Takeaways

• Flex’s data center business is projected to reach $6.5 billion this year, marking a 35% growth.
• The company has achieved 6% margins ahead of schedule, with a shift towards higher-margin businesses.
• Strategic investments are being made in Mexico, the U.S., Europe, and India to strengthen the manufacturing footprint.
• Flex is expanding its product and service model to include value-added services with attractive margins.
• The company is optimistic about future growth in drug delivery within the health solutions sector.

Financial Results

Flex’s data center business is expected to achieve $6.5 billion in revenue this year, a 35% increase from the previous year, following a 50% growth rate last year. The power business within this segment is anticipated to grow slightly better than 35%, while the integration business may see a slightly lower growth rate. Flex aims for a 20% compound annual growth rate (CAGR) over the next 4-5 years.

Flex has successfully reached 6% margins earlier than planned, with a continued focus on shifting its portfolio to higher-margin businesses. The Agility Solutions business improved margins by replacing $2 billion in consumer business with higher-value data center business. Additionally, the services segment operates at a margin profile greater than the company average.

Operational Updates

Data Center:

• Flex is diversified across the grid-to-chip spectrum, collaborating with hyperscalers, colocation providers, and silicon vendors.
• The acquisition of JetCool enhances Flex’s enterprise relationships.

Automotive:

• Flex has developed a power platform agnostic to hybrid or electric vehicles and a centralized compute platform for software-defined vehicles.
• The automotive opportunities are primarily in North America and Europe, with China focusing on local markets.

Manufacturing Footprint:

• Investments are being made in Mexico, the U.S., the UK, and Poland to enhance capability and capacity.
• India remains a vital component of Flex’s manufacturing strategy.

Health Solutions:

• Although there is softness in equipment, there is strength in devices and optimism for drug delivery growth.
• Continuous glucose monitoring shows promising strength.

Future Outlook

Data Center:

• Continued strength is expected in the power and IT rack integration businesses.
• Flex’s relationship with Amazon is strengthened through a warrant agreement.

Health Solutions:

• An upcoming Investor Day in May will provide a refreshed outlook, with optimism in the health solutions space.

Automotive:

• Flex’s platform allows automotive customers to apply their software and market customized solutions.

Manufacturing:

• The company is harmonizing data from manufacturing equipment to leverage AI and increase automation with regionalization.

Q&A Highlights

• The Amazon warrant agreement is seen as a strong endorsement of Flex’s relationship with Amazon, covering the entire products and services portfolio.
• Flex differentiates itself in the data center market by focusing on custom applications rather than standard platforms.
• The company’s acquisition strategy involves capital deployment through buybacks, organic, or inorganic growth.
• The Crown Technical deal provides Flex entry into the utility market, supporting both data center and utility growth.

In conclusion, Flex Ltd. presented a positive outlook at the conference, emphasizing strategic growth across multiple sectors. For more detailed insights, readers are encouraged to refer to the full transcript.

Full transcript - Goldman Sachs Communicopia + Technology Conference 2025:

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Mark Delaney, Analyst, Goldman Sachs: Okay, great. Thank you, everybody, for joining us. My name is Mark Delaney, and I have the pleasure of covering Flex for Goldman Sachs. I’m very pleased to have with me today Michael Hartung, the Chief Commercial Officer of Flex, as well as Michelle Simmons, who heads up the IR function. Thank you both for joining.

Michael Hartung, Chief Commercial Officer, Flex: Glad to be here.

Mark Delaney, Analyst, Goldman Sachs: I thought we could start off with some questions by end markets, and certainly one of the bigger ones we’ve been hearing a lot this week at the Community Copia and Technology Conferences on the data center market for Flex. Last year, a $4.8 billion business. Now, nearly 20% of your revenue, I think $3.5 billion of that $4.8 billion was tied to assembly, and then $1.3 billion in power. Maybe you can speak a bit more to the breadth of your data center customer base, what’s driving it to that size, and what do you think is positioning Flex well in the data center sector?

Michael Hartung, Chief Commercial Officer, Flex: For sure. First, maybe an update on the business itself. We talked about, to your point earlier, starting the year off at that $4.8 billion number, and we’re going to end this year at $6.5 billion. Growing that business about 35% year over year on the heels of a growth rate of 50% the prior year. Still really strong growth in a really exciting market. I would point out that of that $4.8 billion, $1.3 billion was power, and the balance was the integration business. Of that 35% growth rate, we think the power business will probably grow a little bit better than 35%, and the integration business may be a little bit lower, but also the sizes of the businesses are different too. In terms of the composition of the customer base and so on, probably easiest to answer first by reiterating the nature of the portfolio.

As you may or may not know, Flex Ltd. provides both products and services to the data center. On the product side, we have two different power businesses that leverage Flex-created IP to bring products to market. The first business is around critical power, and in that space, we tend to compete against some well-known companies like the ABBs, Eatons, Schneiders, and Vertivs. That critical power infrastructure, we provide things like low-voltage switch gear, medium-voltage switch gear, busways, bus bar, all the power infrastructure that goes into the four walls of the data center itself. In addition to that, we have a second product business that’s really focused around embedded power, and that business takes that power from the infrastructure into the board level and at the rack level. Both critical power and embedded power from a product perspective.

On the other side, we have a services business where we focus on IT rack integration and tend to vertically integrate those racks. We can assemble that rack, but we can also vertically integrate that with our own sheet metal fabrication capability, with our CoreWorks product line, which is essentially electronic and mechanical components. We can even bring the aforementioned embedded power group into that product as well. Really well diversified across that grid-to-chip sort of spectrum, which gives us access to three distinct categories of customers, which I think is also relatively unique. Obviously, hyperscalers, big part of the business. The good news in that space for us is we don’t have a heavy concentration. We have multiple hyperscaler relationships, and also within those hyperscaler relationships, we tend to sell multiple products and services. Great diversity amongst hyperscalers and in the portfolio that we offer.

Unique and new to us is that as we’ve built this critical power space, we’ve also created engagements with the largest colocation providers, hyperscalers and colocation providers, and obviously the silicon vendors. We engage the silicon vendors in two ways. One, when those silicon vendors develop their next-generation ASICs or GPUs or TPUs, they need to address power consumption. Our embedded power group jointly designs a lot of those applications, gives us access into that space, and we also work with those same companies to build the boards, integrate the racks, and the like.

Mark Delaney, Analyst, Goldman Sachs: Yeah, Michael, in your role as Chief Commercial Officer, you’re engaged with a lot of the customers, have a lot of conversations. As you look at the things that are driving that mid-30% range growth rate for fiscal 2026 in the data center business, talk a little bit more around the breadth of that and to what extent you’re starting to see either NeoCloud customers or even sovereigns, enterprises starting to do some AI data center. Where is that strength coming from?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, you know, the interesting part is that it tends to continue to broaden, and it depends on the product or service offering that we’re providing. When you think about the IT rack integration space, certainly the hyperscalers drive the vast majority of that demand. We’re seeing more and more applications at the enterprise level, somewhat due to the fact that we recently announced an acquisition of JetCool, which is our liquid cooling platform. In that space, it’s actually given us a nice entry into more enterprise type of relationships that prior we really didn’t have a lot of exposure to. The breadth of the portfolio really does help broaden that.

We also have a really intentional effort to get beyond hyperscalers to talk about and work with the Neo scalers as well and see more opportunities with them because they tend to want more integrated turnkey solutions across a broad spectrum of products and services. Because we offer this really unique portfolio that goes from critical power to embedded power to IT rack integration, we can provide more through one supplier versus them having to go to multiple people.

Mark Delaney, Analyst, Goldman Sachs: Very helpful. The company recently announced a warrant agreement with Amazon. Help us better understand that, if you could please. Why now? What does it add to the financial outlook for your data center business?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, I wish I could share a ton of detail around that because I really believe it’s an exciting relationship that we’ve built here with Amazon. We’re really limited on what we can say, and I’ll defer to Michelle on maybe some of the specifics, but some of the key takeaways that I would think about. One, I would see it as a really strong endorsement of what the opportunity is with Amazon. I would reiterate that it’s for the entirety of Amazon, not any one particular business, and it applies to our entire products and services portfolio. Thirdly, I’d say it provides incentive to grow the business. Even though I can’t get into the specifics of what we’re going to win, when it’s going to come, there’s certainly incentive to make those things happen.

What I would say is I would look back to really what we said two years ago at Investor Day, when I think we first said we wanted to grow this business about 20% CAGR for the next four or five years, ended up doing 50% last year, 35% this year. This agreement wasn’t in place when we made those commitments. We’re really excited about the possibilities.

Mark Delaney, Analyst, Goldman Sachs: Michelle, do you want to add anything?

Michelle Simmons, Head of IR function, Flex: No, I think I would just say it’s a long-term partnership that we’re super excited about.

Mark Delaney, Analyst, Goldman Sachs: Do you think this kind of structure could be something you would do with other hyperscalers?

Michael Hartung, Chief Commercial Officer, Flex: I would say that we have a wide variety of models in place with all of our customers today. Some customers prefer to really do more of a turnkey relationship and put that burden on Flex. Some customers prefer an asset-light model where they do a lot of that investment. We’re open to any variety of financial relationship that makes sense, that provides the return that we expect and the value to the customer. The agreement doesn’t prevent us from doing anything. Whether it catches on or comes into play with other relationships, really hard to say.

Mark Delaney, Analyst, Goldman Sachs: The very strong growth in the data center market is also attracting competition. To what extent are you seeing more competitors come into this space? If so, what does that mean for margins and how you manage your margin structure for the data center space?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, great question. I would start with where we’re tending to focus on our business because it’s a really broad market landscape that we’re talking about here. The first distinction I would make is that we tend to focus on custom applications, not standard platforms. That’s important because the standard platform space really tends to be dominated by ODMs. We just don’t see that market opportunity being margin-rich. It’s high volume, tends to be lower margin, it tends to be movable more easily. We tend to focus on custom. Because of that, we tend to focus on, for instance, hyperscalers that bring to market their own silicon. They tend to require more custom applications. I’d also say that next level of distinction is, from a competitive standpoint, how we compete today. Think about EMS.

We’ve been in the EMS industry for 50 years, I think, and we’ve built this network of 150,000 people and over 100 different facilities in 35 or more different countries over that 50-year time period. That’s the foundation of what we do. We’re very different today from EMS in the data center. How is that? A lot of EMS providers can integrate a rack. That’s not necessarily differentiated. We could argue that we do it at scale, but maybe some others don’t. Where we become differentiated compared to an EMS provider is we can vertically integrate that rack with our own sheet metal. We can vertically integrate that rack with our own embedded power, with our own CoreWorks product line. What EMS providers don’t have is a power product portfolio at all. Even if an EMS provider says they’re in the power business, they’re build-to-print. They’re building someone else’s design.

We’re actually investing in and creating Flex IP to bring products to market. We can compete in just EMS, but we’re very different across the portfolio. From a power perspective, kind of a similar situation. In the critical power space, I mentioned that we compete with some pretty big names, the ABBs, Eatons, Vertivs of the world. Those critical power providers don’t provide embedded power solutions. They don’t provide IT rack integration at the scale in which we do. Similarly, with embedded power, we tend to compete with companies like Delta. Delta is a good company in the embedded power space, good competitor, market leader. They don’t provide critical power solutions. They don’t provide IT rack integration at maybe the level and the scale that we do. I think we’ve got three different categories of opportunity.

We’re able to compete in each category, but the more we’re able to provide an integrated solution that requires two or more, we become really different than the other alternatives out there.

Mark Delaney, Analyst, Goldman Sachs: You just mentioned the importance of the whole portfolio and that full solution that you can bring to the customer set. You’ve done some deals to get to that level. You already mentioned JetCool. You’ve done Crown Technical. As you think about what you have in the portfolio today, how comfortable are you with this current product capabilities that you have in-house? Would you look to add more either with R&D or inorganic actions?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, as you’ve seen, we’ve been pretty active in the market, and we’re deploying capital against those things that provide the greatest return. We’ll continue. If you look back, you’ll continue to see the same level of discipline, whether that’s through buybacks, whether that’s through organic growth or inorganic growth. When you think about the question around the data center itself, we’ve mapped out the ecosystem there. We’ve come out and said, we think our products and services portfolio covers about 80% of the available spend. The question becomes, how do you penetrate that 80% to a greater extent? How do you get after the 20%? Do you even want to? I’d say that we think about pursuing that through three different lenses. The first lens is make. Is there a way that organically we can create that capacity and that capability on our own?

I think to a certain degree, the answer is yes. You’ve seen some announcements from us where we’ve announced a new factory in Dallas to support our critical power business. We’ve announced a new factory in Poland, a new factory in the UK, all to develop and support the growth in those areas. In terms of acquisitions, we’ll continue to look for opportunities to scale that. If it provides a capacity benefit, it provides a capability benefit. We’ll be thoughtful if it provides us with the right return. The other area, the third area that we’re mindful of is you don’t necessarily have to make or buy everything. Partnerships are going to become a really more important part of that overall portfolio as customers are looking for a one-stop shop for an integrated solution. We’re looking at it from a make-buy and partnership perspective.

Mark Delaney, Analyst, Goldman Sachs: One of the near adjacencies for your power product set is the utility market. I think it’s an area that Revathi and Chris Butler, who are really important senior leaders in your company, have a lot of experience with. As you think about the products you have, some of the management knowledge of some of these close adjacent markets like utility and grid, to what extent do you think you can expand into some of these areas, especially now that you have something like Crown Technical?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, we’re excited about what the options are here. When you think about the Crown Technical deal, first, you have to step back maybe earlier in time and talk about the Ainur Martix deal, right? The acquisition of our Ainur Martix business really provided us an entree into the critical power space. It was focused, however, in Europe primarily. Low-voltage switch gear, power pods, busways, bus bars really focused on the European market and focused around data center. When you think about the Crown Technical piece, we’ve got a number of things from that deal. One was we got medium-voltage switch gear to the portfolio. Two, we had an ability to extend that offering of power pods from Europe into the U.S. Thirdly, we had access into the utility market.

I would expect us to continue to pursue that opportunity, especially when you consider that power is the constraining item when it comes to the growth of the data center. You’ll see us support both the data center side and the utility side.

Mark Delaney, Analyst, Goldman Sachs: Maybe we could shift gears a little bit to the automotive market. It was one of the areas that the company articulated as being a key growth driver for it at your last Investor Day. I think as of that point, you were expecting that 10% CAGR. There’s obviously been some volatility in terms of the policy environment, macroeconomic conditions. Can you level set us on what you’ve been seeing in the auto space and how investors should think about growth here going forward?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, the first is the obvious statement. It’s a far different world today than it was when we made that commitment, for sure. I don’t think we’re alone in that. Whether it be macro, whether it be policy, it’s been a pretty tough road for the automotive business. We’ve been upfront about that. Nothing new since our earnings, but still, you know, in the same challenging spot that maybe it was. Maybe the more important piece of that is where do we go from here in that space? A couple of developments I would point to. One is, first, there’s been a lot of talk about the false start into EV and now the pivot back into hybrid or ICE type applications. The first thing that we like to reiterate is that we’ve come to market with a power platform that is agnostic to either hybrid or EV.

Once the companies that we support finish the retooling of their factories from EV back to hybrid, we’re in a really good position to sell our power platform into that space. The second area I’d say is, from an automotive standpoint, consumers in that space are transitioning from buying automobiles based on, say, mechanical performance or engine performance into user experience. Right now, the big impetus for our customers is around the software-defined vehicle. The software-defined vehicle really suggests that software is becoming the core competency, the next secret sauce of the automotive makers. That’s creating an opportunity from our perspective. Up to this point in time, think about the market being served in two ways. One, from a build-to-print standpoint, where EMS played build-to-print, whatever the automotive maker wanted, that’s what the EMS provider could build. On the other end of the spectrum, we had the tier ones.

The tier ones have been continually investing in a software capability to marry with a hardware capability to provide a complete product to the automotive makers. That worked for a number of years until software became the next secret sauce. That’s created a bit of a problem because I don’t know that tier ones are too enthusiastic about not selling software to go with their hardware, given the investments that they’ve made. We decided to grab that middle ground. We don’t intend to be a software provider in the space, but we also don’t intend to be purely EMS. We’ve actually created our own product platforms, centralized compute, to support the trend towards software-defined vehicles. Our automotive customers can take that platform, apply their own software, and go to market with their own customized solution.

Mark Delaney, Analyst, Goldman Sachs: You mentioned power. You just brought up compute. Any other key content drivers for you in the automotive space? Anything around ADAS sensors, actuators, other important drivers we should have in mind?

Michael Hartung, Chief Commercial Officer, Flex: I’d say that what’s driving that compute platform, that compute platform is going to be centralized, and it’s going to support all of those adjacencies that you talked about. One of the big transformations taking place in automotive today is it used to be a very mechanically driven distributed architecture and how an automotive and how a car was built. What the automakers have learned is that there’s a better, faster way to do this when you look at the pure-play EV providers who have come to market without the constraints of how we used to build cars. Right? They’re native online computer-driven sort of vehicles, and they’re very centralized and very simplistic. Automakers are transitioning hard into that way of thinking. Having this ruggedized centralized compute capability is going to play into a lot of those applications.

Mark Delaney, Analyst, Goldman Sachs: You mentioned something interesting I wanted to follow up on about having product capabilities in the auto space. We were just talking about the data center market and having products and the margin profile of selling that product on your own to some of those customers. As you think about autos, is that that same kind of an opportunity, or do you mean more you’ve got some reference designs that can speed development if customers choose, but still a little bit more in line with the past model?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, I’d say it’s closer to the reference design end of the spectrum. On the power side, there’s an opportunity to have that more be a product offering because that’s what automakers are looking for. They’re looking for a more turnkey solution on the power side because they don’t see a DC to DC converter as being core competency, like they do on the software side. In the compute space, you’ll continue to see that be a platform where they can integrate our hardware with their software, but it won’t be a complete product platform because, again, software-defined vehicle is their new secret sauce.

Mark Delaney, Analyst, Goldman Sachs: Where are you seeing the most traction with customers in the automotive space? I think historically, Flex has skewed a little bit more to some of the traditional auto OEMs for revenue in this area. Are you having any momentum with some of the Chinese auto OEMs or EV pure plays? Just help us understand where you stand at that point.

Michael Hartung, Chief Commercial Officer, Flex: Yeah, what we’ve said is still true today, and that is our largest customer base is North American-focused, followed by Europe and then followed by China. We stay, we’re engaged in China for a couple of reasons. One, it’s hard to argue that there’s not a massive amount of innovation taking place in that marketplace, especially around EV. We want to participate in that innovation, for sure. Most of our business, if not all of it, is in China, for China, when it comes to that geography. We are being pretty thoughtful, though, because in China, you also have hundreds of automotive OEMs, and there will be consolidation. Who the winners are beyond BYD is probably hard to predict, but for sure, we know there will be consolidation in that space. We want to be thoughtful about it.

We want to have exposure to it, but we’ll be thoughtful about China. I’d say that North America and Europe continue to be the vast majority of our opportunity. It’s both ICE and whatever EV is the choice of the marketplace, whether it be EV purely played or hybrid. I would say, though, that more of our opportunity is starting to look a less like pure play EMS and more around these platform plays around power and compute.

Mark Delaney, Analyst, Goldman Sachs: Very helpful. Maybe we could talk about a couple of other end markets that Flex has exposure to. I wanted to touch on networking, talk about what you’re seeing from an end market perspective, but also some of the share opportunity, because I think you alluded to some potential share gains on your last earnings call.

Michael Hartung, Chief Commercial Officer, Flex: Yeah, networking has been an area of improvement for us, which is pretty exciting. First, step back, and if you think about our data center business, we talk about that business being about a $6.5 billion business by the end of the year. We’ve narrowly defined what goes in that data center business. It’s hyperscalers, it’s colocation providers, and it’s silicon vendors. It’s not networking, right? What we all know is that more and more networking has exposure to AI-driven demand. A couple of things are happening in that space. One is the complexity of the programs that are being asked to manufacture is continuing to increase, and the places that they’re asking for these things to be manufactured are shifting. For years and years and years, low-cost supply chains were put in place in Asia, in China, that were hardened over 20, 25 years.

Now, they want to take more complex technologies and transition from areas of, call it, higher risk into areas of lower risk that are closer to point of use. We’re shifting that production. As we’re going up the complexity curve, we’re shifting that production to areas like Mexico, Europe, and India.

Mark Delaney, Analyst, Goldman Sachs: Is that just kind of traditional switching and routing, or are you like optical or both?

Michael Hartung, Chief Commercial Officer, Flex: The whole spectrum. We’re a large manufacturer of high-end switch gear. We’re not a product company when it comes to optical, but we’re a large manufacturer of optical equipment for our customers. When you think about that spectrum of products, I would say what shifted is an ongoing trend towards the higher end of the complexity spectrum and more regionalized manufacturing of those applications.

Mark Delaney, Analyst, Goldman Sachs: Okay, very helpful. I want to talk on health solutions. That market’s been a little flatter over the last few years, especially post some of the work you all did for COVID and some of the respiratory products. You know, been in the $2.6 to $2.7 billion range. You talked about an expectation for some recovery in medical equipment toward the end of this fiscal year. What drives that and what should investors think about growth over the medium to longer term in medical?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, I’d say when you think about the health solutions business, think about it through three different lenses. We’ve got our medical equipment business, our devices business, and our drug delivery business. If you think about sort of the performance of the recent past and the expected growth of the future, it’s probably easiest to say that the softness in the equipment space is being offset by strengthening the devices space with hope on the horizon for drug delivery. Let me peel that apart a little bit. First, on the equipment side, CapEx spending is still pretty tough in the capital equipment space. Interest rates are still high. I don’t think that spending is recovering at a really rapid rate from that perspective. I’d also say that OEMs in that space are facing increasing competition from Chinese medical equipment companies that are doing very well in that space.

We’re not seeing a big bounce in that space. We are seeing strength in our device business. We are a big provider into the continuous glucose monitoring space. That business is continuing to grow for us. We’d expect that to continue. Real simply, softness in equipment offset by strength in devices. That leaves us with drug delivery. We’ve announced some recent wins in that space, in the GLP space, and we’re excited about that. Also, wins in that space take a few years to ramp to production. That’s why I say on the horizon, we expect growth in that space. That’s how I’d characterize the health solutions business for us.

Mark Delaney, Analyst, Goldman Sachs: I think it has the potential to grow at least mid-single digits, if not even something a little bit better than that as you think over three, five, ten years.

Michael Hartung, Chief Commercial Officer, Flex: Yeah, we haven’t updated our guidance on that. I think we have Investor Day coming up in May where we’ll refresh the outlook. We would certainly have a lot more optimism around the health solutions space and maybe some of the other businesses.

Mark Delaney, Analyst, Goldman Sachs: Okay. You mentioned services previously in our conversation. You spoke on some of the capabilities Flex brings to that area around metal bending, but I think it’s a broader capability set that Flex brings. Talk a bit more on what you do in services.

Michael Hartung, Chief Commercial Officer, Flex: Sure. I’ll just remind everyone to step back first. EMS was what we had been known for, that we’ve built over the past 50 years. Now we’re a products and services business. Think about that lens first. Take away the product business. Right now, you’re left with services. Within services, you have two different areas. One is traditional EMS, and the rest is the value-added services piece that you’re talking about. What does that mean? It starts with the front end. We’ve created a design capability separate from the design and engineering that’s focused on creating Flex IP and products. This is to bring products to market for manufacturability, bring products to market faster, more reliably, more cost-effectively based on what we know about the manufacturing environment. That’s one piece. Secondly, think about the products that we’re manufacturing. We vertically integrate that with things like sheet metal.

We vertically integrate with plastics with our CoreWorks product line. That’s another piece of it, the vertical integration. The third piece is around aftermarket. We have a global services business that operates post-production that’s really operating at scale already that we don’t talk a lot about, but it’s operating in over 25 factories today. It’s really two different categories of services. One is on the forward side where we provide value-added fulfillment capability. We can do late-stage configuration, and we can land product on time, on cost, on quality, either to another business or even to a home address, depending on the business that we’re providing that service to. Alternatively, once it goes out, some of it might have to come back.

Through our circular economy suite of services, we can repair, refurbish, or recycle those products that we’ve put into the market and either repurpose those for resale, but for sure limit the amount that goes into landfill.

Mark Delaney, Analyst, Goldman Sachs: I think the services business, if I’m not mistaken, has pretty attractive margins.

Michael Hartung, Chief Commercial Officer, Flex: The services business I think is important for a number of reasons. The first of which is it does operate at a margin profile that’s greater than the company average. The second is it provides a more sticky relationship with our customers. We talk about competition a lot. You have to differentiate to earn the right to keep a customer. The more products and services we can do with each relationship, the stickier we get. It is much easier to keep a customer if you’re not just, say, integrating a product, but you’re vertically integrating it, you’re fulfilling it, you’re taking it back for service. It is much harder to disassociate that relationship than just purely building.

Mark Delaney, Analyst, Goldman Sachs: I wanted to talk a bit more on manufacturing and your global footprint. Flex has, I think, about 100 sites across something like 30 countries. You already spoke around the networking and optical space and seen some of the customers want to do more close to where they’re ultimately shipping their product. Talk a bit more on what you’re seeing from geographic trends and to what extent, especially with tariffs in place. You’re seeing more of a shift to your Mexico and U.S. sites.

Michael Hartung, Chief Commercial Officer, Flex: Yeah, I think the first principle in all this is expect the unexpected, right? Although that sounds like that’s something you can’t plan for, it’s actually a really important principle from which to design your supply chain because you have to design for unpredictability. Long gone are the days where you can rely on one single site in location to optimize for cost. You now have to optimize for business continuity as much as cost and for customer experience, bringing production as close to the customer as you possibly can. To your point, to mitigate whatever the trade policy ends up being whenever it actually happens. I’d say that you’ve seen the investments reflect this trend for us. I’d say these trends have been occurring over the past five years. This isn’t a recent phenomenon.

I’d say it dates back, I’ll call it Trump 1.0, for the first administration when trade wars really started, followed by a global pandemic, followed by massive material constraints, followed by real wars in multiple geographies, and now call it Trump 2.0. We’ve been in this environment shifting the supply chain for a number of years now. What it’s resulted in is a growing capability and capacity in Mexico, knowing that we’ve had the benefit of hosting you down in Mexico to show you that capability before, and that’s been a great success for us. We’re also investing considerably in the U.S. today across multiple businesses. We talked about our investment in Dallas. We talked about our investments in South Carolina, among other places. The U.S. footprint, North America is one of our fastest growing footprint in the portfolio today.

You look at Europe, we talked about investments in the UK, talked about investments in Poland, another recipient of capital when it comes to the portfolio. Thirdly, one we haven’t talked about today is India. India is still a really important capability for us, depending on what that opportunity might be. From our perspective, we’re going from this low-cost single-site solution into a more regional operation and climbing the complexity curve at the same time.

Mark Delaney, Analyst, Goldman Sachs: How important is automation in your manufacturing, especially as you do more in the U.S.? Do you need to do incremental automation? If so, are you seeing anything interesting on the technology front that is allowing for that?

Michael Hartung, Chief Commercial Officer, Flex: The more you shift into these new regions and geographies, the more automation will play a role. First, you have to talk about the data because everyone really is interested in how you’re utilizing AI to optimize your efficiency and your productivity. The first thing you have to sort of address is the data. Right now, that’s one of the biggest challenges to applying AI to a manufacturing environment. All of these different equipment platforms don’t provide data in the same format to make it usable and leverageable. One area that we’re really focused on is to harmonize the data from which we can apply AI. While we’re doing that in parallel, we’re obviously not waiting for that. We’ve invested in our own Flextronic standard equipment platform.

Right now, today, inside of Flex, we have a standard platform that applies to, last I counted, over a dozen formerly manual processes in our manufacturing environment. Now we can automate with our own platform on any factory to get to that automation more quickly and more cost-effectively and get the data in a harmonized way so that we can then apply AI. Doing a lot of work around data harmonization, a lot of work around deploying the standard automation footprint. I would say the more that regionalization impetus takes hold, the more we’re going to rely on automation.

Mark Delaney, Analyst, Goldman Sachs: Are humanoids something that you guys think you’ll be using? If so, is that next couple of years or five plus years?

Michael Hartung, Chief Commercial Officer, Flex: For sure, everyone has to contemplate the use of humanoids in a factory. I don’t see that as being a near-term opportunity at present. I always get a little reluctant to doubt the rate of innovation that takes place. I never say never. I’m not locked in on a timeframe. Near-term, we’re focused on data and standard platforms. If humanoids become a good use of capital, we’ll be one of the first implementers of that.

Mark Delaney, Analyst, Goldman Sachs: Always interesting to see all the things you guys are working on, given all the different products and regions that you manufacture in. I did want to ask another one on end markets. We spoke a lot already around some of the different end market trends, especially over a medium to long-term perspective. Coming out of the most recent earnings report, has anything surprised you in terms of what you’re seeing in terms of market conditions?

Michael Hartung, Chief Commercial Officer, Flex: No, I don’t think there’s any. I don’t see any real change since earnings. Anything I say isn’t intended to communicate a change at all. The good news is we’re seeing continued strength in the data center. We’re seeing the power businesses perform really well. The IT rack integration business is running really well. We’ve seen the ongoing sort of challenges that we’ve talked about in automotive. We’ve talked about renewables. The thing about a portfolio is it’s built to withstand the variances that happen by market. I’ve been in the company for 20 years now. I don’t think I’ve ever been here at a time when every single business is operating at peak performance at any given point in time. I think it’s periods like this where the macro is, relatively speaking, a challenging place to be.

Still, being able to put numbers on the board, improving margin, improving profit dollars, delivering value to our shareholders is in some way, shape, or form a result of the strength of that portfolio.

Mark Delaney, Analyst, Goldman Sachs: On a margin question, I mean, because you guys are at 6% margins, even with some of the tariffs and roughly double what you would have been doing 5 to 10 years ago, it’s been a remarkable journey. Is 6% sort of a peak margin level as you guys think about the profitability potential of this business, or is this something that you can build off over the longer term?

Michael Hartung, Chief Commercial Officer, Flex: Yeah, so, can’t refresh our guidance yet on what the long-term views of the margin is. Thrilled that we’re able to get to that 6% level almost a year in advance of when we thought we could. If you look back, you probably get the answer to where we’re going in the future. First, we’ve been very intense about shifting the portfolio to higher margin businesses. When I was running the Agility Solutions business, we talked about really methodically taking down our consumer business and replacing that with higher value, more stable business. Sure enough, you look back, we took our consumer devices business down by $2 billion. We replaced that with high-calorie data center business, improved margins from a two-handle to a six-handle over that time period. Right? You’ve seen our Reliability business, even in the last year, improve to that 6%. We have both segments operating at 6%.

When you look at the growth rates in our higher margin business, the data center, and you look at how that portfolio could shift, you’ll naturally get some blended margin improvement as a result of that expectation.

Mark Delaney, Analyst, Goldman Sachs: It has been really great to see, and we look forward to what you have coming ahead. Unfortunately, we are out of time, so we’ll have to end it there. Michelle, Michael, really appreciate you joining us.

Michael Hartung, Chief Commercial Officer, Flex: Real pleasure. Thanks for having us.

Michelle Simmons, Head of IR function, Flex: Thank you.

Mark Delaney, Analyst, Goldman Sachs: Thanks a lot.

Michael Hartung, Chief Commercial Officer, Flex: Thanks for coming here.

Mark Delaney, Analyst, Goldman Sachs: Thanks, Michelle.

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