Flex is spinning off its high-growth Cloud and Power Infrastructure (CPI) business, which serves data centers and utilities, to unlock its value as a pure-play on the AI infrastructure build-out.
The CPI business is experiencing explosive growth, with guidance of 65-75% growth this fiscal year and over 80% next year, in stark contrast to the low-to-mid single-digit growth of the remaining contract manufacturing business.
The CEO argues that the massive power requirements of AI data centers are forcing a generational technological revolution in power delivery, from the chip level to the electrical grid, creating a long-term growth runway.
The spinoff is expected to be completed in early calendar year 2025, following a similar successful strategy to the previous spinoff of solar company NextTracker, which now has a $17 billion market cap.
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Concerns Raised
The electrical grid's inability to keep pace with soaring power demand from data centers.
Rising short-term electricity prices for consumers due to the supply/demand imbalance.
Slow growth prospects for the legacy contract manufacturing business that will remain post-spinoff.
Opportunities Identified
Capturing explosive growth from the AI data center build-out through the new spinoff company.
Leading the technological shift in power delivery systems for data centers and utilities.
Long-term growth from the necessary, large-scale modernization of the entire electrical grid.