Plexus (PLXS) Q4 2026 earnings review
Plexus raises its 2027 sales plan, while inventory absorbs cash
Plexus, which builds complex electronics for industrial, medical, and defense brands, grew revenue fast while its inventory expansion consumed cash. Fourth-quarter sales jumped 35% from a year ago, and operating margin excluding one-offs hit 6.7%, prompting finance chief David Abuhl to set a new 6.5% to 7.0% margin target. Chief executive Todd Kelsey raised the fiscal 2027 revenue forecast to mid- to upper-teens growth, which by our math leaves about 12% growth for the last three quarters after a 34% jump in the first quarter.
| Revenue | $1.427B +35% from a year ago |
|---|---|
| Operating margin, excluding one-offs | 6.7% new 6.5–7.0% target introduced |
| FY26 free cash flow | -$28.9M $154M generated in FY25 |
| FY27 revenue outlook | Raised mid- to upper-teens growth (prior: >12%) |
⚖️ Verdict: 🟢 Bullish
The story got better because the company paired a higher full-year sales plan with a formal step-up in its operating margin goal and a record $4.9 billion opportunity funnel. Quarterly manufacturing program wins also turned back up to $290 million after dipping last quarter. One caution: the industrial sector now makes up 48% of sales, the top 10 clients account for 56%, and funding that growth burned $29 million of free cash flow across the fiscal year.
The question now is whether the electronics maker can convert its mid-to-upper-teens sales growth into its promised $100 million of free cash flow in fiscal 2027. Either working capital stabilizes as new factories hit full stride, or another year of rapid industrial growth absorbs cash and requires more short-term borrowing. First-quarter operating cash flow and inventory days will tell.
🐂 Bull Case
Plexus Raised Its Full-Year Sales Plan Again
Plexus designs and manufactures complex electronics for industrial, medical, and defense companies. After lifting its fiscal 2026 revenue forecast three times, chief executive Todd Kelsey raised the fiscal 2027 outlook before the year even began. He attributed the momentum to "market sector strength, program ramps and share gains" across its customer base.
Fourth-quarter sales jumped 34.8% from a year ago to $1.43 billion, beating the top of the company's plan by $47 million. For fiscal 2027, Kelsey now plans for "mid- to upper-teens revenue growth", up from his prior forecast of more than 12%. The first-quarter outlook calls for $1.41 billion to $1.46 billion, or 34.1% growth at the middle of the range.
Because the first quarter compares against a softer period from a year ago, the full-year plan points to about 11.7% growth across the remaining three quarters by our math. That still clears the electronics manufacturer's historical 9% to 12% target against much harder comparisons. What to watch: first-quarter revenue against the $1.46 billion ceiling. Another beat above the range would force a second raise to the fiscal 2027 plan.
New Program Wins Rebounded as the Funnel Hit $4.9 Billion
The electronics maker tracks future demand through two measures: new manufacturing program wins, which measure expected yearly sales once factories reach full production, and its funnel of qualified opportunities, which tracks potential contracts in discussion. In the third quarter, program wins had dropped from $355 million to $255 million, raising the question of whether customer signings were cooling.
Signings turned back up in the fourth quarter as the sales team won 36 programs worth $290 million in yearly revenue. That brought full-year wins to $1.18 billion, up 25.7% from fiscal 2025 by our math. Meanwhile, Kelsey noted that "our funnel of qualified opportunities expanded significantly by $1.2 billion year over year, or 33%, to reach another record of $4.9 billion".
The company added $446 million to the funnel in the fourth quarter alone, more than six times the $72 million it added in the same quarter last year by our math. That backlog of prospective work supports growth into fiscal 2028. What to watch: sector win breakdowns on the conference call. A rebound in industrial wins would show demand extends beyond defense contracts.
Cost Discipline Drove a Higher Operating Margin Target
Finance chief David Abuhl fulfilled his promise from last quarter to update the company's profitability goal. "Having consistently exceeded our previous 6% goal, we are introducing a new non-GAAP operating margin goal of 6.5% to 7.0%," Abuhl said. The new target comes after fourth-quarter operating margin excluding stock-based compensation rose 0.9 percentage points from a year ago to 6.7%, while the reported operating margin rose 1.0 percentage point to 6.0%.
Both cost lines improved as factories handled higher volume. Cost of sales, which is the direct cost of making the products, fell 0.3 percentage points of revenue from a year ago to 89.8%. Selling and administrative overhead fell 0.7 percentage points of revenue to 4.2%, even with $1.1 million of accelerated retirement stock compensation.
In prior quarters, the change in operating profit excluding one-offs divided by the change in sales ran below 9%. In the fourth quarter, that incremental margin reached 9.5% from a year ago and 11.0% from last quarter by our math. Capital spending also stayed low at 2.0% of fiscal 2026 sales. What to watch: second-quarter operating margin after the seasonal first-quarter dip to 6.0%–6.4%. Returning to 6.5% would validate Abuhl's new target.
🐻 Bear Case
Inventory Growth Left Full-Year Cash Flow Negative
Abuhl said that "working capital discipline was outstanding" and reiterated that "we continue to expect to generate at least $100 million in fiscal 2027 free cash flow". Yet the cash flow statement shows how much cash the revenue ramp is absorbing. After starting fiscal 2026 with a $100 million free cash flow forecast and cutting it twice, the manufacturer ended the year burning $28.9 million of cash.
- Fourth-quarter free cash flow: $6.4 million, down from $97.2 million a year ago
- Full-year inventory cash drain: $447.7 million, as balance sheet inventory rose 36.2% to $1.67 billion
- Full-year accounts receivable cash drain: $285.4 million, as receivables rose 43.0% to $939.0 million
- Total debt and finance leases: $260.8 million, up 89.3% from $137.8 million a year ago by our math
Plexus kept its cash cycle at 62 days only by stretching supplier payments to 81 days, up from 70 days a year ago, while customer advance payment days shrank from 55 to 49. Because the group spent $85.0 million on share buybacks while burning cash, it funded those repurchases with short-term debt. What to watch: first-quarter operating cash flow. Another mid-teens revenue ramp may absorb cash just like fiscal 2026 did.
Industrial and Top Customers Carry More of the Business
Kelsey said the team "effectively captured stronger end-market demand and continued to support new program ramps", and bulls view the industrial surge as lasting market-share gains in semiconductor equipment and data-center power. However, that boom is making the manufacturer much more reliant on its largest clients and its most cyclical sector.
Industrial sales jumped 49.9% from a year ago and 17.3% from last quarter to $691 million, well above the company's plan for high-single to low-double-digit sequential growth. As a result, the industrial sector rose to 48% of total revenue, up from 44% a year ago and 40% in the first quarter. Meanwhile, Aerospace and Defense sales dipped 3.9% from last quarter to $224 million, missing the forecast for flat sales, while Healthcare grew 6.0% sequentially to $512 million.
At the same time, the top 10 customers generated 56% of fourth-quarter revenue, up from 49% a year ago. That 7-point jump leaves the business more exposed if a major semiconductor equipment customer delays orders. What to watch: top-10 customer concentration and industrial sequential guidance on the call. Further concentration above 56% would heighten cyclical risk.
Risks this quarter didn't answer
Three standing operational and macro concerns received no update in the earnings release and depend on the conference call or annual filing.
- Component shortages: allocation of memory, circuit boards, and semiconductors was not mentioned in the release; first-quarter sector commentary on the call will show if supply still caps shipments.
- Commercial aircraft production: Aerospace and Defense revenue fell 3.9% from last quarter to $224 million; call commentary will clarify whether Boeing and Airbus order rates are improving.
- Asia-Pacific trade and tax exposure: Asia-Pacific revenue jumped 42.3% from a year ago to $861 million (60% of sales) and the full-year adjusted tax rate rose from 8% to 17%; the annual report will detail regional tax and tariff exposure.
👓 Other Themes
Board Approved a New $100 Million Buyback Plan
Plexus bought back $21.4 million of its stock at an average price of $254.32 per share during the fourth quarter. That completed the $100 million 2026 repurchase program, under which the company bought $85.0 million of shares in fiscal 2026 at an average price of $199.68. In August 2026, the board approved a new $100 million program for fiscal 2027, with the entire amount available starting in the first quarter.
💲 Other KPIs
Return on invested capital — after-tax operating profit divided by the debt and equity tied up in the business — rose to 15.8% from 14.9% in the third quarter and 14.6% a year ago. It cleared the company's 15% target and beat its 9.0% cost of capital by 6.8 percentage points as faster inventory turnover lifted returns.
Cash cycle days — the time it takes to turn inventory and customer bills into cash after paying suppliers — held steady at 62 days, down from 69 days in the first quarter and 63 days a year ago. That landed at the favorable bottom of the 62 to 66 day plan because 81 days of accounts payable offset 119 days of inventory.
Diluted shares fell 0.7% from 27.44 million a year ago and 0.2% from 27.29 million in the third quarter, matching the 27.2 million forecast. Steady buybacks of $85.0 million across fiscal 2026 reduced the share count slightly, though higher stock prices meant each repurchase dollar retired fewer shares than in fiscal 2025.
🔮 Guidance
New. The plan calls for revenue to grow 0.6% from the fourth quarter and 34.1% from a year ago at the middle of the range. Plexus beat the top of its quarterly revenue range in each of the last three quarters, by an average of 4.9%.
New. The outlook points to a reported operating margin of 5.7% at the middle of the range, down from 6.0% in the fourth quarter but up from 5.1% a year ago. It includes about 0.5 percentage points of stock-based compensation expense.
New. The plan puts operating margin excluding stock-based compensation at 6.2% at the middle of the range, down 0.5 percentage points from the fourth quarter on seasonal payroll resets but up from 5.8% a year ago.
New. Reported profit per share is set to rise 48.3% from a year ago at the middle of the range ($2.24 vs $1.51), though it steps down from $2.51 in the fourth quarter alongside the seasonal margin dip.
New. Excluding $0.30 of stock-based compensation, the outlook calls for profit per share to rise 42.7% from a year ago at the middle of the range ($2.54 vs $1.78), stepping down from $2.84 in the fourth quarter.
Raised. Management lifted the full-year sales plan from above 12% to mid- to upper-teens growth (about 16.5% at the middle of the range). After the 34.1% first-quarter plan, that leaves about 11.7% growth for the rest of the year by our math, against tougher comparisons.
Unchanged. The US group still expects at least $100 million of free cash flow in fiscal 2027, reversing the $28.9 million cash burn in fiscal 2026. Hitting this target requires inventory growth to slow even as revenue grows in the mid-to-upper teens.
Unchanged. Following a typical seasonal increase in the first quarter, Abuhl plans to keep the full-year cash cycle in the low to mid 60s, in line with the 62 days delivered in the fourth quarter.
❓ Key Questions
Which customers pushed top-10 concentration up to 56%?
The top 10 customers generated 56% of fourth-quarter revenue, up 7 percentage points from a year ago, while the Industrial sector reached 48% of sales. Investors need to know how much of that concentration sits in cyclical semiconductor equipment accounts.
How will Plexus generate $100 million of cash during a teens ramp?
Growing revenue 23% in fiscal 2026 absorbed $448 million in inventory and left free cash flow at negative $28.9 million. With fiscal 2027 revenue now planned to grow in the mid-to-upper teens, what keeps working capital from absorbing cash again?
Why are customer advance payment days falling as inventory rises?
Days in advanced payments from customers fell to 49 days from 55 days a year ago, while accounts payable stretched from 70 days to 81 days. Are new industrial and defense programs requiring less upfront customer cash?
What drove the fourth-quarter program wins by sector?
The press release reported $290 million in total manufacturing wins and a $4.9 billion opportunity funnel, but did not give the sector breakdown. How much of the fourth-quarter wins and funnel came from data-center power versus semiconductor equipment and defense?