Flex opened fiscal 2026 with a record first quarter, delivering $6.6 billion in revenue (up 4%), 6% operating margin, and adjusted EPS of $0.72 (up more than 40%), led by strong data center growth across cloud and power. Agility Solutions grew 10% on cloud and AI demand while Reliability declined 2% on automotive and renewables weakness. Management raised full-year FY2026 guidance, lifting the revenue midpoint by roughly $600 million, and incorporated tariffs as a largely pass-through item.
Thank you. Good morning, and thank you for joining us today for Flex's First Quarter Fiscal 2026 Earnings Conference Call. With me today is our Chief Executive Officer, Revathi Advaithi, and Chief Financial Officer, Kevin Krumm. We'll give brief remarks followed by Q&A. Slides for today's call, as well as a copy of the earnings press release, are available on the Investor Relations section at flex.com. This call is being recorded and will be available for replay on our corporate website. Today's call contains forward-looking statements, which are based on our current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release, or in the risk factor section in our most recent filings with the SEC.
Note, this information is subject to change, and we undertake no obligation to update these forward-looking statements. Please note, all growth metrics will be on a year-over-year basis unless stated otherwise. Additionally, all results will be on a non-GAAP basis unless we specifically state it's a GAAP result. The full non-GAAP to GAAP reconciliations can be found in the appendix slides of today's presentation, as well as in the summary financials posted on our Investor Relations website. Now I'd like to turn the call over to our CEO, Revathi.
Thank you, Michelle. Good morning, and thank you for joining us today. Starting on slide four, Flex just wrapped up an exceptional quarter delivering positive results against our guidance. The groundwork we've laid out over the last several years continues to position us well in driving profitable growth with a growing data center business, as well as serving as a manufacturer of choice for our partners. The benefits we're seeing from our global footprint are a result of our actions that started years ago as we focused on being able to meet the needs of our customers wherever they are in the world. Our revenues were $6.6 billion, up 4%. Our adjusted operating margin was 6%, and we delivered adjusted EPS of $0.72, a record Q1 number for Flex.
Our great start to fiscal year 2026 gives us improved confidence in our ability to hit our fiscal year commitments, which has been reflected in our improved FY26 guidance. We're not done. Let's turn to slide five. Our portfolio mix continues to shift as data center becomes a larger and more strategic contributor, and this quarter was no exception. We delivered strong performance across both our cloud and power portfolios, and we continue to expect this business to deliver approximately $6.5 billion in revenue, growing at least 35% year-over-year and representing 25% of our total revenue. What makes this business truly compelling isn't just the size or the growth; it's the architecture and integration behind it. Let's take a moment to unpack what this means. On the cloud side, we deliver vertically integrated IT hardware and infrastructure solutions, including metal fabrication, custom rack assembly, and direct-to-chip liquid cooling technology.
On the power side, our solutions span the full stack, from board-level modules managing power to the chip, all the way to the facility level with modular power pods. Flex is the only provider providing both end-to-end cloud IT integration and a full power and cooling portfolio at scale. That matters because customers today are in an arms race to scale. They don't just need custom rack solutions, but they also need power for their chips. They need to cool it, and they need to deploy it quickly. Delivering integrated, scalable solutions from grid to chip is essential, and it's a key reason why Flex continues to be a strategic partner of choice. That brings me to our broader geographic footprint and scale on slide six. Our global operational scale remains one of Flex's most significant competitive advantages, not just in data center, but across all our end markets.
It's not just the size of our footprint, but our ability to shift and scale complex production across regions to meet evolving customer needs. We o.perate more than 49 million sq ft globally, including 7 million sq ft in the U.S. and 9 million in Mexico, giving us one of the largest advanced manufacturing footprints in North America. What truly sets us apart is how we operate. Across our sites, we have embedded AI-enabled systems, advanced automation, and localized supply chains designed for speed, flexibility, and resilience. These capabilities are critical not only in data center, but also across our other end markets, including automotive, healthcare, industrials, and more, which account for 75% of total Flex revenue. These are highly regulated, complex products that require global design and delivery.
This scale, paired with deep supply chain expertise, enables Flex to help customers navigate challenges like tariffs, regional regulations, and supply disruptions. We have led the shift towards regionalization, and the impact is clear. America's revenue for us rose to 49% in fiscal year 2025, up from 38% in fiscal year 2020, while Asia declined to 30%, down from 41% over the same period. These shifts reflect evolving customer needs and Flex's ability to execute. Looking ahead, we're especially bullish on our advanced manufacturing capabilities, where we see continued productivity gains from deploying AI and intelligence systems across our factories. You can see by bringing together advanced manufacturing services and Flex IP products, all supported by advanced automation and AI capabilities, we are powering transformation across industries and geographies. While there is no shortage of news flow around uncertainty in the markets, we remain confident in our positioning.
The Flex you see today is not the same company it was 10 years ago, from the people to the portfolio of businesses. We have positioned ourselves to lead in our markets, focusing on profitability and transformational acquisitions that continue to evolve who we are as a company. We were early to focus on high-growth end markets such as data center and power, build a scaled and regionalized footprint, and integrate services in a way that transforms Flex from a contract manufacturer to a strategic end-to-end partner. I remain deeply confident in our strategy and the unique value we deliver. The solutions we provide and capabilities we have built have positioned us for one of the most compelling opportunities in Flex's history. With that, I'll turn it over to Kevin to walk through the financials. Kevin.
Thank you, Revathi. Good morning, everyone. I'll start with our key financials on slide eight. First quarter revenue came in at $6.6 billion, up 4%, driven by strong data center growth across both cloud and power end markets. Gross profit totaled $596 million, and gross margin improved to 9.1%, up 130 basis points. Operating profit was $395 million, with operating margins at 6%, up 120 basis points. Finally, earnings per share for the quarter increased more than 40% to $0.72 per share. Turning to our quarterly segment results on the next slide, in Reliability Solutions, revenue was $2.9 billion, down 2% year over year, in line with our expectations. Results reflected continued macro-related pressure in automotive and renewables, which was partially offset by strength in power.
While all three reporting units saw modest declines, operating income improved to $172 million, and segment margin expanded 100 basis points to 6%, demonstrating strong execution, continued focus on mix, and disciplined cost management. Agility Solutions revenue totaled $3.7 billion, up a strong 10% year over year, driven by robust cloud and AI demand that more than offset continued softness in traditional telecom and consumer-facing end markets. Operating income was $240 million, with operating margin expanding 120 basis points to 6.5%, supported by effective cost management and favorable mix shift, including increased penetration of value-added services. Moving to cash flow on slide 10, free cash flow in the quarter was $268 million, representing conversion of 98%. Net inventory was up 3% sequentially, driven by increased volumes, and down 11% year over year. Inventory, net of working capital advances, was 55 days, a reduction of 7 days versus the prior year.
Net CapEx totaled $131 million, or approximately 2% of revenue, and we purchased around $247 million of stock, which was approximately 7 million shares. Our capital allocation priorities remain unchanged. We are committed to maintaining our investment-grade balance sheet, funding strategic investments to support organic growth, pursuing accretive M&A opportunities, and returning capital to our shareholders through opportunistic share repurchases. In the quarter, we acquired a new manufacturing site in Poland, which will produce low- and medium-voltage switchgear, power pods, and busways. This doubles our power capacity in Europe, allowing us to meet the rising global demand for reliable data center power. It is also a great example of Flex deploying capital in a margin-accretive way to grow our capabilities and our products portfolio.
Looking at our full-year guidance on slide 11, as we head into the second quarter and we look out to the rest of the year, the macro environment remains dynamic. That said, we're continuing to execute well, and the steps we've taken to focus Flex on high growth, strategically important end markets, are delivering results. One of the key enablers of our performance is our global scale. It has allowed us to support customers in accelerating their regionalization strategies, bringing manufacturing closer to end markets to improve agility, reduce risk, and meet evolving trade requirements. While the situation continues to evolve, a few key points to keep in mind. We expect tariffs to remain largely pass-through costs with strong contractual protections in place. Importantly, while last quarter we did not incorporate the direct impact of tariffs into our revenue guidance, this quarter we're doing so.
With greater clarity around the scope and timing of the tariff impact, we believe this adjustment provides a more accurate view of expected revenue performance. That said, incorporating our current view to tariffs does not have a material impact on our full-year guided growth rates. With that context, our updated FY 2026 expectations are revenue between $25.9 billion and $27.1 billion, which increases our midpoint by approximately $600 million. Adjusted operating margin between 6% and 6.1%, adjusted EPS between $2.86 and $3.06 per share, adjusted tax rate of 21%, and we continue to expect strong cash generation and maintain our 80% plus free cash flow conversion target for FY 2026. We'll continue to monitor the tariff environment and adjust as needed. As it stands today, we're confident in our ability to navigate these shifts while delivering against our financial commitments.
Moving to our segment outlook for the year, our segment outlook remains largely consistent with last quarter's as end market demand trends continue to track in line with our expectations. For Reliability Solutions, we now expect revenue to be down low single digit to up mid-single digit, a marginal improvement from our prior view. Continued strength in data center power is helping offset macro-related softness in automotive, core industrial, and renewables. For Agility Solutions, we anticipate modest year-over-year growth in the low to mid-single digit range, reflecting a slight improvement from our prior year outlook. Growth will be driven by sustained demand in cloud, ongoing benefit from previously secured lifestyle wins, and strategic share gains in networking. These tailwinds are expected to be partially offset by continued softness in enterprise IT, telco, and consumer devices. Finishing off with our guidance for the second quarter on slide 13.
We expect Reliability Solutions revenue to be down low single digit to up low single digit, with continued weakness in automotive and parts of health offset by solid performance in our power business. We expect Agility Solutions revenue to be up low single digit to up mid-single digit, with strength in cloud and continued momentum in networking offset by ongoing softness in traditional telecom and consumer-facing end markets. For total Flex, we expect revenue in the range of $6.5 billion-$6.8 billion, with adjusted operating income between $375 million and $415 million. Interest and other expenses estimated to be around $38 million, and the adjusted tax rate to be approximately 21%. Lastly, we anticipate adjusted EPS to be between $0.70 and $0.78 per share based on approximately $381 million weighted average shares outstanding. With that. I'll now turn the call back over to the operator to begin Q&A.