Plexus (PLXS) Q2 2026 earnings review
Growth Engine Roars, But FCF Takes a Hit
Plexus delivered a blowout Q2, posting record revenue of $1.164B (+19% YoY) and decisively raising its full-year growth outlook from '9-12%' to 'mid-teens or greater.' The acceleration is broad-based, fueled by a staggering $355M in annualized manufacturing wins, with the Industrial (semicap) and Aerospace & Defense segments leading the charge. Adjusted operating margins hit the high end of guidance at 6.0%. However, this hyper-growth comes at a cost: management slashed its FY26 Free Cash Flow target from ~$100M down to $50-75M to fund necessary working capital investments. Additionally, a massive projected spike in Q3 stock-based compensation will crush GAAP margins next quarter. We view the trade-off of near-term cash for structural top-line acceleration as a net positive, but the margin quality gap requires monitoring.
🐂 Bull Case
Revenue growth accelerated to 19% YoY in Q2, with Q3 guidance implying ~20% YoY growth. Full-year FY26 guidance upgraded to 'mid-teens or greater,' blowing past the historical 9-12% target.
Secured $355M in annualized manufacturing wins in Q2, smashing previous records. This builds a highly visible foundation for sustained revenue conversion into late FY26 and FY27.
🐻 Bear Case
FY26 FCF guidance was cut by 25-50% (now $50-$75M vs prior ~$100M) to fund the working capital needed for these aggressive program ramps.
Q3 guidance implies a massive $0.77 per share hit from stock-based compensation (up from $0.23 in Q2), driving Q3 GAAP operating margin guidance down to an anemic 4.1%-4.5%.
⚖️ Verdict: 🟢
Bullish. The fundamental demand environment for Plexus is exceptionally strong. While the cut to FCF guidance and a spike in stock comp are real annoyances, the sheer magnitude of the $355M in program wins and accelerating revenue trajectory across all segments makes this a compelling growth story.
Key Themes
Record Manufacturing Wins Fuel the Engine
The single most important leading indicator for Plexus is its manufacturing wins, which hit an all-time record of $355M in annualized revenue this quarter. This represents a blistering acceleration from the $200-$250M levels seen throughout FY25. Management cited broad-based wins in A&D, new data center power solutions, and continued semiconductor capital equipment share gains.
Industrial and A&D Segments Surging
The revenue mix is firing on all cylinders. The Industrial segment (heavily weighted toward semi-cap) grew 20.6% YoY to $479M, proving the semi-cap rebound is translating directly into P&L results. Aerospace & Defense (A&D) grew an even faster 23.3% YoY to $212M, validating the massive $220M in wins reported in the previous quarter.
Working Capital Burn Forces FCF Cut
Growth consumes cash. To support the 'accelerating revenue growth,' management is deliberately increasing working capital investments. Consequently, the highly touted ~$100M FY26 Free Cash Flow goal was quietly revised down to $50-$75M. While the strategic rationale is sound, it effectively halves the company's expected cash generation capabilities for the year.
Ballooning Stock-Based Compensation
A severe red flag hides in the Q3 guidance: stock-based compensation (SBC) is projected to jump to $0.77 per share. To put this in perspective, SBC was only $0.23 in Q2 and $0.27 in Q1. This massive expense will compress Q3 GAAP operating margins to 4.1%-4.5% (down from 5.3% in Q2). Investors must scrutinize whether this is a one-time true-up or a structural inflation of executive comp.
CFO Transition
After 15 years with the company and 12 years as CFO, Pat Jermain is retiring, to be succeeded by current SVP of Finance David Abuhl in May 2026. Jermain is credited with establishing the company's rigorous FCF and ROIC focus. While internal successions are generally smooth, a change at the CFO seat during a period of massive working capital expansion warrants close observation.
Other KPIs
Accelerating. The segment posted solid 15.1% YoY growth, up sequentially from $466M. The prolonged inventory destocking phase in the broader medical device sector appears fully behind Plexus, replacing a historical headwind with stable, predictable growth.
Improving. Despite the working capital investments dragging down Free Cash Flow, the underlying operational cash cycle actually improved by 5 days sequentially (down from 69 days in Q1). This indicates that the cash drag is purely a function of volume scaling, not deteriorating operational discipline.
Stable. Up from 13.2% in Q1 and exceeding the company's 9.0% Weighted Average Cost of Capital by a healthy 480 basis points. The ability to maintain high ROIC while scaling the asset base violently is a testament to the profitability of the new contracts.
Guidance
Accelerating. At the midpoint ($1.225B), this implies ~20% YoY growth and 5% sequential growth. This confirms the Q2 breakout is not a one-off blip, but the start of a sustained high-growth phase.
Accelerating. Management explicitly abandoned their historical 9-12% target range, upgrading the full-year outlook based on overwhelming program ramps and end-market recovery.
Stable to Accelerating. The midpoint of $2.10 implies a ~10.5% YoY growth over 25Q3's $1.90. While top-line revenue is growing at ~20%, EPS growth lags slightly due to the mix of early-stage program ramps.
Decelerating. A sharp downward revision from the prior ~$100M target, driven entirely by deliberate working capital build-ups to support new program launches.
Key Questions
Q3 Stock-Based Compensation Spike
Q3 guidance incorporates $0.77 of stock-based compensation expense, more than triple the $0.23 reported in Q2. Is this a one-time true-up related to the CFO transition/executive performance targets, or a structural change to compensation?
Working Capital Ceilings
With the FY26 FCF guide cut to fund growth, at what revenue run-rate do you expect working capital ratios to stabilize and FCF conversion to return to historical norms?
Data Center Power Solutions
You noted a 'new engagement in data center power solutions.' Is this a one-off win, or the beginning of a broader strategic push to capture AI infrastructure market share outside of traditional semicap?