Key Takeaways
Contract manufacturer Flex will spin off its cloud and power infrastructure business into a separate publicly traded company, a move designed to capitalize on the booming demand for artificial intelligence data centers that sent its shares up 13 percent.
"By creating two focused, independent companies, we are giving SpinCo the platform to build and scale the products and digital infrastructure that the world's most demanding AI workloads depend on," Flex Chief Executive Revathi Advaithi, who will become CEO of the new company, said in a statement.
The new entity, which is targeted to be separated in a tax-free transaction by the first quarter of calendar 2027, will focus on power and thermal management technologies for AI. Flex is targeting revenue growth for the spinoff of 65 to 75 percent in fiscal 2027, with an acceleration to over 80 percent in fiscal 2028. The announcement came as Flex reported fourth-quarter adjusted earnings of 93 cents a share on revenue of $7.48 billion, beating analyst estimates of 87 cents and $6.96 billion, respectively.
The spinoff sharpens the focus for both entities, creating a pure-play story for investors seeking exposure to the high-growth AI infrastructure market, which is currently dominated by firms like Nvidia. The remaining Flex business, to be led by Michael Hartung, will concentrate on its core design and manufacturing solutions across the healthcare, industrial and automotive sectors, and is expected to deliver low-to-mid-single-digit growth. Flex shares were up 60 percent this year through Tuesday's close, with the after-hours jump to $109 signaling strong investor support for the separation. The company's financial advisors on the transaction are Citi, PJT Partners and BofA Securities.
This article is for informational purposes only and does not constitute investment advice.
