8-K: Plexus Reports Strong Q1, Raises Q2 Guidance on Growth

Plexus Corp. announced fiscal first quarter 2026 financial results, meeting revenue guidance and exceeding non-GAAP EPS expectations, while providing optimistic guidance for the second quarter.

Summary

• Fiscal first quarter 2026 revenue was $1.070 billion, meeting the guidance midpoint of $1.050 billion to $1.090 billion.
• GAAP operating margin for Q1F26 was 5.1%, within the guidance range of 4.9% to 5.3%.
• GAAP diluted EPS for Q1F26 was $1.51, within the guidance range of $1.40 to $1.55.
• Non-GAAP operating margin for Q1F26 was 5.8%, within the guidance range of 5.6% to 6.0%.
• Non-GAAP diluted EPS for Q1F26 was $1.78, meeting the high end of the guidance range of $1.66 to $1.81.
• The company won 22 manufacturing programs during the quarter, representing $283 million in annualized revenue when fully ramped into production.
• The Aerospace/Defense market sector achieved a record quarterly performance with $220 million in annualized revenue wins.
• Plexus purchased $22.4 million of its shares at an average price of $146.36 per share under its 2026 Share Repurchase Program, with $62.6 million remaining under the $100.0 million authorization.
• Return on invested capital (ROIC) for Q1F26 was 13.2%, which was 420 basis points above the weighted average cost of capital of 9.0%.
• The fiscal first quarter cash cycle was 69 days, meeting guidance.
• Cash flows used in operations for the three months ended January 3, 2026, were $15.4 million, with capital expenditures of $35.2 million, resulting in negative free cash flow of $50.6 million.
• Plexus reconfirmed its fiscal 2026 expectation for free cash flow of approximately $100 million.
• Top 10 customers comprised 52% of revenue during Q1F26, up 3 percentage points sequentially and 1 percentage point year-over-year.
• Revenue by market sector for Q1F26: Healthcare/Life Sciences at 43% ($466 million), Industrial at 40% ($426 million), and Aerospace/Defense at 17% ($178 million).

Sentiment

Score: 8

Explanation: The company delivered strong operational performance, meeting or exceeding key guidance metrics, and provided an optimistic future outlook with accelerating growth. Significant new program wins, particularly in high-growth sectors, and an active share repurchase program indicate strong positive momentum. While there was negative free cash flow for the quarter, it was attributed to working capital investments for growth, and the full fiscal year free cash flow target was reconfirmed.

Positives

• Q1F26 revenue of $1.070 billion met the guidance midpoint, increasing 1% sequentially and 10% year over year.
• Non-GAAP diluted EPS of $1.78 met the high end of guidance.
• Robust growth from Healthcare/Life Sciences and Aerospace/Defense market sectors.
• Won 22 manufacturing programs, representing $283 million in annualized revenue when fully ramped.
• Record quarterly performance from the Aerospace/Defense market sector with $220 million in annualized revenue wins.
• Return on invested capital (ROIC) of 13.2% was 420 basis points above the weighted average cost of capital.
• Cash cycle of 69 days met guidance.
• Forecasting accelerating sequential revenue growth for Q2F26, with guidance of $1.110 billion to $1.150 billion (6% sequential and 15% year-over-year growth at the midpoint).
• Management sees the potential to meet or exceed the high-end of the 9% to 12% revenue growth goal for fiscal 2026.
• Active share repurchase program, with $22.4 million of shares bought back in the quarter.

Negatives

• Cash usage for the fiscal first quarter due to working capital investments, resulting in negative free cash flow of $50.6 million.
• GAAP Net income decreased sequentially from $51.429 million in Q4F25 to $41.182 million in Q1F26.
• GAAP Diluted EPS decreased sequentially from $1.87 in Q4F25 to $1.51 in Q1F26.
• Industrial market sector revenue declined sequentially from $461 million in Q4F25 to $426 million in Q1F26, and year-over-year from $442 million in Q1F25.

Risks

• Effects of tariffs, trade disputes, trade agreements, and other trade protection measures.
• Effects of shortages, delays, and price fluctuations in obtaining components due to economic cycles, capacity constraints, or natural disasters.
• Risk of customer delays, changes, cancellations, or forecast inaccuracies in both ongoing and new programs.
• Particular risks relative to new or recent customers, programs, or services, including start-up costs, potential inability to execute, and lack of a track record of order volume and timing.
• Risk that new program wins and/or customer demand may not result in the expected revenue or profitability.
• Lack of visibility of future orders, particularly in view of changing economic conditions.
• The economic performance of the industries, sectors, and customers served.
• The effects of the volume of revenue from certain sectors or programs on margins in particular periods.
• Ability to secure new customers, maintain current customers, and deliver product on a timely basis.
• Risks of concentration of work for certain customers.
• Effects of start-up costs of new programs and facilities or costs associated with winding down programs or facility closures/consolidations.
• Possible unexpected costs and operating disruption in transitioning programs, including between Company facilities.
• Risks associated with excess and obsolete inventory, including the risk that inventory purchased for customers may not be consumed or paid for.
• The fact that customer orders may not lead to long-term relationships.
• Ability to successfully manage and execute a complex business model characterized by high product mix and demanding quality, regulatory, and other requirements.
• Outcome of litigation and regulatory investigations and proceedings.
• Ability to realize anticipated savings from restructuring or similar actions, and adequacy of related charges.
• Risks related to information technology systems and data security.
• Increasing regulatory and compliance requirements.
• Any tax law changes and related foreign jurisdiction tax developments.
• Current or potential future barriers to the repatriation of funds held outside of the United States.
• Potential effects of jurisdictional results on taxes, tax rates, and ability to use deferred tax assets and net operating losses.
• Weakness of the economy regionally or globally.
• Effect of changes in the pricing and margins of services.
• Raw materials and component cost fluctuations.
• Potential effect of fluctuations in the value of the currencies in which business is transacted.
• Effects of changes in economic conditions, political conditions, and regulatory matters in the United States and other countries of operation.
• Potential effect of other events outside control, such as geopolitical conflicts (Russia-Ukraine, Middle East, China-Taiwan/U.S. tensions), changes in energy prices, terrorism, global health epidemics, and weather events.
• Impact of increased competition.
• Inability to successfully manage human capital.
• Changes in financial accounting standards.

Future Outlook

Plexus is forecasting accelerating sequential revenue growth for its fiscal second quarter from continued new program ramps, market share gains, and improved end-market demand. The company is guiding Q2F26 revenue of $1.110 billion to $1.150 billion, representing 6% sequential and 15% year-over-year growth at the midpoint. Non-GAAP operating margin is guided at 5.6% to 6.0%, and non-GAAP EPS at $1.80 to $1.95. Management believes there is potential to meet or exceed the high-end of its 9% to 12% revenue growth goal for fiscal 2026 and reconfirmed the fiscal 2026 expectation for free cash flow of approximately $100 million.

Management Comments

• "We have achieved significant momentum from our consistent focus on delivering customer success and our ongoing investments in talent, technology, facilities and advanced capabilities." Todd Kelsey, President and Chief Executive Officer.
• "Fiscal first quarter revenue of $1.070 billion met our guidance midpoint, increasing 1% sequentially and 10% year over year on robust growth from our Healthcare/Life Sciences and Aerospace/Defense market sectors, while non-GAAP EPS of $1.78 met the high end of our guidance." Todd Kelsey.
• "Our team delivered 22 manufacturing wins for the fiscal first quarter, representing $283 million in annualized revenue. Included in these wins was a record quarterly performance from our Aerospace/Defense market sector of $220 million in annualized revenue." Todd Kelsey.
• "For the fiscal first quarter, we delivered return on invested capital of 13.2%, which was 420 basis points above our weighted average cost of capital." Patrick Jermain, Executive Vice President and Chief Financial Officer.
• "Our fiscal first quarter cash cycle of 69 days met our guidance and reflected working capital investments to support significant program ramps and increased customer demand. While these investments resulted in a cash usage for the fiscal first quarter, we reconfirm our fiscal 2026 expectation for free cash flow of approximately $100 million." Patrick Jermain.
• "We are forecasting accelerating sequential revenue growth for our fiscal second quarter from continued new program ramps, market share gains and improved end-market demand." Todd Kelsey.
• "With a strong start to the fiscal year, we now see the potential to meet or exceed the high-end of our 9% to 12% revenue growth goal." Todd Kelsey.

Industry Context

Plexus' strong performance in Healthcare/Life Sciences and Aerospace/Defense market sectors, including a record quarter for Aerospace/Defense wins, suggests robust demand and strategic positioning in high-growth, high-complexity segments of the electronics manufacturing services (EMS) industry. The focus on commercial space and disruptive technologies indicates an alignment with advanced industry trends. The sequential and year-over-year decline in the Industrial sector's revenue might reflect broader economic headwinds or specific customer dynamics within that segment, contrasting with the strength in other areas.

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, optimistic guidance, active share repurchase program, and high return on invested capital (ROIC).
• Employees: Positive impact from continued growth and ongoing investments in talent and capabilities, though previous restructuring activities (Q1F25) are noted in non-GAAP adjustments.
• Customers: Positive impact from the company's consistent focus on delivering customer success, new program wins, and strengthened partnerships, particularly in Aerospace/Defense.
• Suppliers: Potential for increased business volume due to accelerating revenue growth and new program ramps, but also exposure to risks like component shortages and price fluctuations.
• Creditors: Stable outlook with reconfirmed fiscal 2026 free cash flow expectations, despite temporary cash usage in the first quarter for working capital investments.

Next Steps

• Continued new program ramps to support accelerating sequential revenue growth.
• Focus on market share gains and improved end-market demand.
• Ongoing investments in talent, technology, facilities, and advanced capabilities to further industry-leading solutions and drive greater long-term operational efficiency.
• Achieve fiscal 2026 free cash flow of approximately $100 million as reconfirmed.

Key Dates

Recommendation

Plexus delivered solid Q1 results, meeting or exceeding key guidance metrics, and provided strong Q2 guidance indicating accelerating growth. Significant new program wins, particularly in high-growth sectors like Aerospace/Defense, demonstrate strong market positioning and future revenue potential. The active share repurchase program and high ROIC further enhance shareholder value. While there was negative free cash flow in the quarter due to working capital investments, management reconfirmed the full fiscal year free cash flow target, suggesting this is a temporary operational investment for growth. The overall outlook is very positive, indicating continued strong performance and potential for share price appreciation.

Keywords

Electronics Manufacturing Services, EMS, Plexus, PLXS, Fiscal Q1 2026, Earnings, Financial Results, Revenue, EPS, Operating Margin, Healthcare/Life Sciences, Aerospace/Defense, Industrial, Share Repurchase, ROIC, Cash Flow, Guidance