Flex Ltd. (FLEX) saw its shares jump 28.4% in premarket trading on Wednesday, reaching $123.84, after the company announced plans to spin off its Cloud and Power Infrastructure unit into a new publicly traded entity. The move is designed to give investors a more direct stake in the rapidly expanding AI data center and power equipment market.
The spinoff, currently referred to as SpinCo, will be led by Flex's current CEO Revathi Advaithi, while Michael Hartung, the company's president, will step in as CEO of the remaining Flex operations. Flex reported fiscal fourth-quarter net sales of $7.5 billion, up 17% year-over-year, and full-year net sales of $27.9 billion, an 8% increase. For fiscal 2027, the company projects revenue between $32.3 billion and $33.8 billion, excluding the pending separation.
SpinCo's product lineup includes power distribution systems, thermal management solutions such as cooling systems and controls, and integrated infrastructure for AI data centers and other mission-critical facilities. Flex is targeting revenue growth of 65% to 75% for SpinCo in fiscal 2027, with expectations of exceeding 80% growth in fiscal 2028. This aggressive outlook underscores the surging demand for AI data center infrastructure, which requires significantly more power and cooling capacity than traditional server sites.
After the spinoff, Flex's remaining operations will focus on advanced manufacturing services for healthcare, industrial, automotive, communications, and lifestyle segments. The company expects the post-spin business to achieve low-to-mid-single-digit revenue growth, improved margins, and stronger cash flow generation.
Advaithi described the split as a key milestone in Flex's "deliberate transformation" toward a technology-centered industrial strategy. Hartung, a Flex veteran with over 20 years at the company, expressed his honor at leading the next phase of the business.
Flex is also deepening its push into power infrastructure with the acquisition of Electrical Power Products (EP²), completed on Monday. The deal adds custom-built electrical power control and protection systems targeting utility, power generation, and data center customers.
The move positions Flex to compete more directly with established players like Schneider Electric (SBGSY) and Johnson Controls (JCI), both of which have been gaining investor attention in the AI power space. Schneider recently announced plans for a Southeast Asia training center in Malaysia to address surging AI-related power needs, while Johnson Controls raised its annual profit outlook on Wednesday, citing stronger demand for data center cooling solutions.
Several key details of the spinoff remain undisclosed, including SpinCo's current revenue, profit margins, debt allocation, and how much of the new company Flex might retain. The transaction is subject to regulatory approvals, market conditions, and is intended to be tax-free for shareholders, meaning investors would receive SpinCo shares without immediate U.S. federal tax implications. However, Flex cautioned that the tax-free status is not guaranteed.
Flex has engaged Citi, PJT Partners, and BofA Securities to advise on the deal, which is expected to close in the first quarter of 2027. In the meantime, investors are left to value a higher-growth AI infrastructure unit that Flex believes can operate successfully as an independent company.
