Flex sales are surging on AI power demand, but cash flow has collapsed and the split adds debt and preferred claims. I see 18% downside to $94.50 as the $37.5 billion Axiom tag proves too rich.
Key points
- $7.93B sales in the June 2026 quarter grew 20.6% from a year ago on cloud and power demand.
- $40M free cash in the June 2026 quarter collapsed as equipment spending consumed operating cash.
- $37.5B Axiom value tag in October 2026 implies 30 times profit with no room for deal or split delay.
The call
The market is too optimistic. At $114.75 a share, Flex trades at 25 times profit (earnings per share). That math needs $4.58 per share for fiscal 2027. It also needs 18 times operating profit (sales minus costs) for that year.
Quarterly revenue shows CPI-led acceleration ($ billions)SEC XBRL filings to June 26 2026; forecasts from July 29 FY27 guidance midpoint, as of Oct 8 2026.
Cash and the split tell a harder story. Free cash (cash after equipment spending) fell to $40M for last quarter on high spending. That spending was $240M for equipment in that quarter. I see $5.25 per share for next fiscal year at 18 times earnings (price divided by profit).
Cash flow fades as investment jumps ($ billions)SEC XBRL company facts, gross capex basis; Q1 FY27 FCF $40M on $280M operating cash flow, as of Oct 8 2026.
Valuation
| Measure in period | Value |
|---|
| Adjusted profit in FY28 | $5.25 per share |
| Fair multiple in FY28 | 18 times earnings |
| Combined equity in Oct 2027 | $34.91B |
| Shares in Jul 2026 | 369.4M shares |
| Target in Oct 2027 | $94.50 a share |
| I use 18 times earnings for a cyclical assembler with power growth. That is below 25 times paid today but above 12 times for legacy manufacturing. At $94.50 the downside is 18% from $114.75, so the risk points down. | |
Risks
- Power orders fade in FY27 if hyperscalers pause, which you would see in CPI booked coverage below 90% in coming quarters.
- EPC Power at $4.4B cash in late 2026 strains debt, which you would see in draws on bridge loans in filings in coming quarters.
- Split costs linger past early 2027, which you would see in separation charges above $53M per quarter in coming quarters.
What would change my mind
A cash backed CPI backlog in FY27 with free cash above $250M per quarter would prove durable growth.