Flex spinoff plan boosts case for AI infrastructure upside

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Flex spinoff for AI growth

Highlights

Flex plans to spin off its Axiom Cloud and Power Infrastructure unit into an independent public company by March 31, 2027, targeting AI infrastructure growth.
Axiom's revenue is projected to rise at least 80% in fiscal 2028 with operating margins possibly increasing from about 10% currently to 15%–20% over time.
Flex shares have declined over 35% from a 52-week high of $166.86 to around $108 amid upcoming catalysts including Oct. 28 earnings and Nov. 10 Innovation Day.

Axiom separation and growth outlook

As reported by CNBC, investor Paul Meeks says Flex is entering a new phase as it prepares to separate Axiom, its Cloud and Power Infrastructure business, into an independent public company in the first quarter of 2027. He argues the move could unlock value by separating a higher-growth AI infrastructure operation from Flex's slower-growing manufacturing activities.

Axiom makes equipment used to power and cool AI data centers, an area drawing more attention as computing demand rises. Flex expects Axiom's revenue to grow at least 80% in fiscal 2028, while Meeks sees scope for operating margins to increase from about 10% currently to 15% to 20% over time.

Revathi Advaithi, who has led Flex since 2019, is expected to become Axiom's chief executive after the spinoff. Her previous leadership roles at Eaton's electrical sector and at Honeywell are seen as relevant as Axiom targets expanding demand for power solutions in AI data centers.

Investor catalysts and valuation implications

Meeks says Axiom could attract stronger interest as a standalone company because investors may assign a higher valuation to a business tied directly to AI infrastructure. He also says the remaining Flex operations could offer value if the market continues to treat the group mainly as a traditional manufacturer.

Flex expects to complete the Axiom spinoff by March 31, 2027. Meeks points to several nearer-term catalysts, including quarterly earnings on Oct. 28 and the company's Innovation Day on Nov. 10, when management is due to discuss strategy for both businesses.

Flex shares have fallen more than 35% from their 52-week high of $166.86 to around $108, according to the text. Meeks views that decline as a buying opportunity, though he flags risks including weaker sentiment on AI data center spending and the possibility that Axiom does not deliver the margin expansion investors expect.

Our earlier report on AI data center expansion highlighted how limits in the U.S. power grid are becoming a bottleneck for the next wave of AI investment, shifting attention from chips toward utilities, grid equipment, and on-site power infrastructure. We noted forecasts calling for a significant jump in data-center electricity demand alongside a projected shortfall, while multi-year lead times for high-voltage transformers and other connection hardware are delaying projects. The piece also pointed to infrastructure-themed exposure such as the Defiance AI & Power Infrastructure ETF (AIPO) as investors position for this power-and-cooling buildout.

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