Plexus delivered a standout fiscal second quarter 2026 with revenue of $1.164 billion that beat guidance and grew 19% year-over-year, a 6% operating margin, and non-GAAP EPS of $2.05 above guidance, alongside a record $355 million in new program wins and a funnel that expanded to $4 billion. Management raised the full-year outlook to mid-teens or greater revenue growth with double-digit growth expected in every sector, led by aerospace and defense and semi-cap share gains. The company also announced the retirement of long-time CFO Patrick Jermain and the appointment of David Abuhl, and lowered its fiscal 2026 free cash flow outlook to $50-$75 million to fund working capital for accelerating growth.
Good morning, and thank you for joining us today. Some of the statements made and information provided during our call today will be forward-looking statements, including without limitation, those regarding revenue, gross margin, selling and administrative expense, operating margin, other income and expense, taxes, cash cycle, capital allocation, and future business outlook. Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company's periodic SEC filings, particularly the risk factors in our Form 10-K filing for the fiscal year ended September 27th, 2025, and the safe harbor and fair disclosure statement in our press release.
We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus's website at www.plexus.com, clicking on Investors at the top of that page. Joining me today are Todd Kelsey, President and Chief Executive Officer, Oliver Mihm, Executive Vice President and Chief Operating Officer, Patrick Jermain, Executive Vice President and Chief Financial Officer, and David Abuhl, Senior Vice President of Finance. With today's earnings call, Todd will provide summary comments before turning the call over to Oliver, Pat, and David for further details. Before I turn the call over to Todd, I would first like to express my gratitude to Pat for his partnership, mentorship, and friendship and offer my best wishes for an amazing retirement. Second, I'm excited to announce that Todd will be appearing on CNBC's Fast Money this evening to discuss Plexus and our fantastic results and outlook.
With that, let me now turn the call over to Todd Kelsey. Todd?
Thank you, Shawn. Good morning, everyone. Please advance to slide three. Before I begin my prepared remarks regarding the business, I want to celebrate Pat's incredible 12-year tenure as Plexus's CFO and wish him all the best during retirement. He's been an extraordinary business partner to me over the years. I also want to express my deep gratitude for Pat's leadership and integrity, establishing a strong tone from the top. Pat has been instrumental in our growth journey, fostering, and cultivating a high-performing finance team that has played a significant role in Plexus's tremendous financial results over the years. I'm also excited to welcome David Abuhl as our next CFO. Since joining Plexus last fall, David's impact on the organization has already been meaningful. I'm confident that as we continue our growth journey, David's extensive financial expertise, global perspective, and strategic mindset will position him to be an exceptional CFO.
Please advance to slide four. Plexus's momentum is accelerating broadly. We now expect to deliver mid-teens or greater fiscal 2026 revenue growth from the contribution of numerous program ramps, ongoing market share gains, and improving end market demand. Our team generated a record $355 million in new manufacturing program wins with broad-based contributions across our market sectors. Against this tremendous result, we also expanded our funnel of qualified manufacturing opportunities. We're delivering non-GAAP operating margin expansion while increasing our already significant investments focused on expanding operational efficiency and capitalizing on continuing revenue growth momentum. We are sustaining strong financial discipline, delivering better than expected working capital performance amid substantial acceleration in revenue growth and tightening supply chain conditions. Please advance to slide five.
Fiscal second quarter revenue of $1.164 billion exceeded our guidance range, representing our fifth consecutive quarter of sequential revenue growth and a robust 19% year-over-year increase. While growth was strong throughout all of our market sectors, we experienced specific strength in aerospace and defense as a result of increasing demand for our industry-leading solutions and supportive disruptive technologies, and in semi-cap, where our ongoing share gains are amplifying surging market demand. Non-GAAP EPS of $2.05 exceeded guidance. We delivered a robust 6% non-GAAP operating margin while continuing to heavily invest in program ramps, operational efficiency initiatives, and technologies. Please advance to slide six. For the fiscal second quarter, we secured 30 new manufacturing programs with a record $355 million in annualized revenue when fully ramped into production.
All market sectors contributed to this tremendous performance, which included broad-based opportunities in aerospace and defense, expanded relationships and share gains in surgical and imaging platforms, a new engagement in data center power solutions, and continued share gains in semiconductor capital equipment. Through expanded business development efforts, synergies with our engineering solutions and sustaining services, and our focus on providing unmatched quality and delivery, we're also seeing an increasing breadth of customer interest for our industry-leading solutions. As a result, for the second fiscal quarter, our funnel of qualified manufacturing opportunities expanded sequentially and year-over-year. We produced particularly notable growth in our industrial market sector, where we are generating significant interest in automation and robotics, data center and energy solutions, and our aerospace and defense market sector. Please advance to slide seven.
At Plexus, we're committed to advancing sustainability through our value of innovating responsibly as we boldly drive positive change and promote a sustainable future for and through our people, our solutions, and our operations, all of which is built on a foundation of trust and transparency. Critical to our success is our people, who are at the heart of who we are and what we do. Our second fiscal quarter was particularly memorable as we celebrated two major organizational milestones. I was honored to join members of our Plexus leadership team at Nasdaq's market site in Times Square to ring the closing bell in celebration of our 40th anniversary as a publicly listed Nasdaq company. This significant accomplishment was a celebration of the trust we've created with our customers and the unwavering dedication of our people. Our Kelso, Scotland site celebrated its 25th anniversary.
Since opening in 2001, the Kelso team has evolved from printed circuit board assembly to manufacturing complex life-impacting products, an evolution made possible by our team members, many of whom have been with us since day one. Our commitment to delivering excellence and innovating responsibly also continues to earn external recognition. We're proud to be named a finalist for the 2026 Manufacturing Leadership Awards in two categories: AI Vision and Strategy and Sustainability in the Circular Economy. The awards will be presented in June by the Manufacturing Leadership Council, which is part of the National Association of Manufacturers. These awards highlight our emphasis on innovation and delivering a positive environmental impact as we help create the products that build a better world. Finally, we are excited to announce the upcoming release of our annual sustainability report during our fiscal third quarter.
The fiscal 2025 report highlights our continued commitment to innovating responsibly, as we've always been driven to do something more for our customers, our team members, and the world. Please advance to slide eight. For our fiscal third quarter, we are guiding revenue of $1.2 billion-$1.25 billion, representing 5% sequential and 20% year-over-year growth at the midpoint. We are guiding non-GAAP operating margin of 5.9%-6.3% and non-GAAP EPS of $2.02-$2.18. We believe we are outgrowing our end markets, many of which are seeing improving demand by leveraging new program ramps, market share gains, and our support of disruptive technologies.
As a result, we anticipate double-digit revenue growth in each of our market sectors in fiscal 2026, with particularly strong performance in aerospace and defense and industrial, led by significant growth in our semi-cap subsector. Accordingly, for fiscal 2026, we now expect to deliver mid-teens or greater revenue growth overall, a substantially increased forecast from our initial expectations last October. We anticipate delivering this revenue growth performance with robust profitability, anticipating a 6% or greater non-GAAP operating margin for fiscal 2026 and continued strong working capital efficiencies. In closing, our consistent focus on redefining excellence through our unmatched quality and delivery is shaping our decision-making and sustaining our tremendous momentum. We are expanding and accelerating investments in technology, capabilities, and our people to enable customer success, drive greater long-term operational efficiency, and increase our revenue growth potential.
These efforts will position us to sustain our momentum well beyond fiscal 2026. We will now turn the call over to Oliver for additional analysis of the performance of our market sectors. Oliver.
Thank you, Todd. Good morning. I will begin with a review of the fiscal second quarter performance of each of our market sectors, our expectations for each sector for the fiscal third quarter, and directional sector commentary for fiscal 2026. I will also review the annualized revenue contribution of our wins performance for each market sector, and then provide an overview of our funnel of qualified manufacturing opportunities. Starting with our aerospace and defense sector on slide nine, revenue increased 19% sequentially in the fiscal second quarter, significantly outperforming our expectation of a mid-single-digit increase. Improved end market demand across all subsectors and our team's efforts to expand component availability drove the result. For the fiscal third quarter, we expect revenue for the aerospace and defense sector to be up mid-single digits as we see programs scaling up in our space and defense subsectors.
Our fiscal second quarter wins for the aerospace and defense sector were $44 million. Our Kelso, Scotland site won a follow-on share gain award from an existing customer in the defense subsector. The customer noted the strength of our partnership and our operational excellence as factors in their decision. Relationship strength and operational excellence were also factors in a significant follow-on award from an existing unmanned defense customer. This product is built in our Boise, Idaho facility. We anticipate fiscal 2026 revenue growth for the aerospace and defense sector to exceed our 9%-12% goal, with growth expected to be well into the double digits. The sector's growth continues to gain momentum, supported by new and existing customers with strong demand growth in the commercial aerospace and space sub-sectors, and exceptional growth in the defense sub-sector. Please advance to slide 10.
Fiscal second quarter revenue in our healthcare life sciences market sector was up 1% sequentially, aligned to our expectation of flat to low single-digit performance. For the fiscal third quarter, we expect the healthcare life sciences market sector to be flat ahead of an anticipated return to sequential revenue growth in our fiscal fourth quarter. Our fiscal second quarter wins were strong at $116 million. Our team in Xiamen, China won a next-generation point-of-care ultrasound system due to the strength of our new product launch capabilities. Our seamless engineering-to-production transition capabilities also contributed to a significant award for our Neenah, Wisconsin facility. The products support a robotic surgical platform.
We continue to have a robust fiscal 2026 outlook for the Healthcare Life Sciences sector, anticipating revenue growth to exceed our 9%-12% goal, supported by contributions from ongoing and new program ramps, share gains, and strong end market demand across our therapeutics and monitoring sub-sectors. Advancing to the Industrial sector on slide 11, fiscal second quarter revenue was up 12% sequentially, in line with our forecast. Our Industrial sector fiscal third quarter outlook of a low double-digit increase is supported by substantial growth within the semi-cap sub-sector and strength in the Industrial Equipment sub-sector from new program ramps and strengthening demand. The Industrial market sector had record high wins of $195 million for the fiscal second quarter. Wins included a substantial award from an existing customer that is launching a new product line for data center power solutions.
Our long-term strategic partnership and strength of value proposition contributed to the win. The product will be built in our Bangkok, Thailand facility. We also won a substantial follow-on award from an existing robotics customer. Our strength of execution and ability to quickly ramp to fulfill their demand supported the win. This product is assembled in our Guadalajara, Mexico campus. Our Guadalajara, Mexico campus is also welcoming a new customer to Plexus as we are selected to support production of an energy storage system for electric commercial vehicles. Our outlook for the industrial sector for fiscal 2026 continues to gain momentum. We are now anticipating growth well in excess of our 9%-12% growth goal.
Our growth outlook is supported by new program ramps and robust growth that's in excess of market for our semi-cap sub-sector and demand improvement and program ramps offsetting pockets of demand softness within other sub-sectors. Please advance to slide 12 for a review of our funnel of qualified manufacturing opportunities. In recognition of Plexus's industry-leading capabilities and focus on building partnerships, our customers are providing increasing opportunities to capture share and new program wins. As evidenced, our funnel of qualified manufacturing opportunities expanded 11% sequentially in the fiscal second quarter and is now $4 billion. This expansion is due in part to record high funnels in our aerospace and defense sector and our industrial sector. The funnel in those two sectors has expanded in excess of 45% as compared to the fiscal second quarter of 2025.
In summary, the revenue growth we are experiencing from ongoing and new program ramps, inclusive of share gains and improving end market demand, support our revised outlook for Plexus to now deliver mid-teens or greater fiscal 2026 revenue growth. Before I turn the call over to Pat, I'd also like to wish Pat well on his retirement. You've been an incredible partner and done a lot in support of the success of Plexus and the incredible journey that we are on. Congratulations. Now over to you, Pat.
Thank you, Oliver, and good morning, everyone. Our fiscal second quarter results are summarized on slide 13. Gross margin at 10.2% was at the top end of our guidance due to a favorable mix of service offerings and fixed cost leverage. In addition, productivity improvements associated with ongoing operational efficiency initiatives helped to offset the impact from our typical seasonal compensation cost increases. Selling and administrative expense of $57.3 million was slightly above our guidance due to additional incentive compensation expense driven by our robust revenue growth and strong ROIC performance. In addition, we expanded our technology and automation investments in support of future efficiencies and sustaining revenue growth momentum. The result was a non-GAAP operating margin of 6%, which was at the top end of our guidance.
Non-operating expense of $4 million was favorable to expectations due to foreign exchange gains and lower than anticipated interest expense. Non-GAAP diluted EPS of $2.05 exceeded the top end of our guidance due to the items mentioned and a favorable tax rate. Turning to our cash flow and balance sheet on slide 14. For the fiscal second quarter, we delivered $28.5 million in cash from operations and spent $12.5 million on capital expenditures, generating $16 million of free cash flow, which exceeded our forecast of break even to a slight usage of cash. For the fiscal second quarter, we acquired approximately 109,000 shares of our stock for $20.6 million. At the end of the quarter, we had approximately $42 million remaining on the current repurchase authorization.
Similar to last quarter, we ended the fiscal second quarter in a net cash position. We had $137 million outstanding under our revolving credit facility with over $350 million available to borrow. For the fiscal second quarter, we delivered a return on invested capital of 13.8%, which was 480 basis points above our weighted average cost of capital. Despite an increase in invested capital to support robust revenue growth, we continue to generate healthy ROIC given strong operational performance. Cash cycle at the end of the fiscal second quarter was 64 days, which was favorable to expectations and five days lower than last quarter. Please turn to slide 15 for additional details regarding this positive result. Sequentially, days and receivables improved three days due to exceptional collection efforts by our team.
Days and inventory sequentially improved four days from continued progress on working capital initiatives and increased revenue. Accounts payable days increased three days due to the timing of supplier payments and procuring inventory in anticipation of a significant revenue growth. Last, our days in advance payments experienced a six-day reduction with a net $15 million being returned to customers during the quarter. Before I hand the call to David, I'd like to make a few closing comments. It has been an absolute pleasure and honor to serve as CFO for Plexus under Todd's leadership and guided by our outstanding board of directors. I want to thank Todd, our board, and everyone at Plexus for your support and trust over the last 12 years. I especially want to thank our finance organization for maintaining the highest standards and integrity, something I'm confident will endure.
The company is in great hands with David moving into the CFO role, and I know the transition will be seamless over the coming months. It has been a true privilege to be part of this fantastic organization. I will now turn the call over to David to discuss additional details regarding our fiscal third quarter expectations, as well as some commentary regarding fiscal 2026. David.
Thank you, Pat, and good morning, everyone. Let me begin by offering my congratulations to Pat and wishing him all the best in this next chapter. I'm excited to step in and lead a tremendous team and carry on the legacy of a really strong finance organization. I'm also optimistic about Plexus' growth journey and confident that our consistent strategy will sustain our momentum as we help create the products that build a better world. Now, let me turn to our guidance for the fiscal third quarter, summarized on slide 16. As Todd has already provided the revenue and EPS guidance, I will review some additional details. Fiscal third quarter gross margin is expected to be in the range of 9.9%-10.2%.
At the midpoint, gross margin would be slightly below last quarter, impacted by the timing of program ramps, capability investments, and ongoing higher incentive compensation, given our robust revenue growth and strong financial returns. We anticipate ongoing productivity improvements and additional fixed cost leverage will serve as offsets. Our outlook for selling and administrative expense for the fiscal third quarter is in the range of $69 million-$70 million, including our typical stock-based compensation expense and additional stock-based compensation expense as a result of executive retirement. Excluding these expenses, we expect to gain leverage sequentially on higher revenue. Fiscal third quarter non-GAAP operating margin is expected to be in the range of 5.9%-6.3%, exclusive of stock-based compensation expense.
At the midpoint, this would demonstrate sequential improvement and good progress toward our goal of consistently delivering at or above 6% non-GAAP operating margin. Non-operating expense is anticipated to be approximately $5.4 million in the fiscal third quarter, up sequentially primarily due to higher interest expense and foreign exchange comparisons. We are estimating a non-GAAP effective tax rate of between 16% and 18% for the fiscal third quarter and the same range for fiscal 2026, unchanged from our previous outlook for the year. Now turning to the balance sheet. For the fiscal third quarter, we are expecting higher investments in working capital to support the accelerating revenue growth outlook. We anticipate cash cycle days will be in a range of 67-71 days. As a result, we expect a usage of cash, a free cash flow for the fiscal third quarter.
In support of our accelerating revenue momentum, we are strategically increasing our working capital investments in fiscal 2026. Through our focus on working capital efficiency, we continue to expect to end the fiscal year with cash cycle days in the low 60s. We also continue to expect fiscal 2026 capital expenditures in the range of $100 million-$120 million. Our focus on operational efficiency is creating tangible benefits by generating higher throughput on existing production lines, which is deferring new equipment purchases while also increasing site revenue capacity. We are now forecasting fiscal 2026 free cash flow of $50 million-$75 million.
Over the longer term, we remain confident that by leveraging our focus on working capital efficiency and our significant investments in operational efficiency, we will capitalize upon our substantial revenue growth opportunities and generate robust free cash flow. With that, Ben, let's now open the call for questions.