Flex CEO On Axiom Customer Concentration: Avoid Hyperscalers And 'You're Going To Be Losing Market Share'
Asked whether two customers could be 60% to 70% of Axiom's sales, Flex's CEO said hyperscaler exposure comes with the territory.
Flex CEO Revathi Advaithi, answering an analyst on the company's second-quarter earnings call Wednesday, said heavy hyperscaler exposure at Axiom, the planned spinoff of Flex's cloud and power infrastructure segment, is the price of competing for AI data center spending. "If you're not concentrated towards hyperscalers, you're going to be losing market share in this space," she said.
A 60% To 70% Question
An analyst asked how diversified Axiom's top two customers are, and how holders should get comfortable with the idea that two customers could be 60% to 70% of sales after the spin. Advaithi did not give customer percentages.
She said a significant portion of the "$1 trillion expansion" in the build-out comes from a few hyperscalers, the giant cloud operators, and that growing share means growing with them. "Customer concentration can't walk away from the fact that hyperscalers are spending the most amount of money," she said, in her words as transcribed.
Even very traditional electrical players, she added, are ending up with more concentration around hyperscalers, because power spending is also more concentrated there.
Breadth Inside Each Customer
Her answer to concentration was depth within each account. Axiom wants to do more than cloud compute integration, she said: power modules, custom embedded power, the 800-volt rack, distributed power and equipment beyond the meter, through its Crown, EP2 and EPC Power capabilities.
Each business unit, she said, must run multiple programs for each hyperscaler rather than a single one.
The Business Being Spun
Flex is a contract manufacturer that designs and builds products for other companies and also sells power and cooling products. Axiom is the new name for its cloud and power infrastructure segment, which management said Axiom filed a Form 10 registration statement for last month. Management said the spinoff is planned for early 2027.
That segment's revenue rose 54% from a year earlier to $2.5 billion last quarter, with adjusted operating margin of 10.7%. For the fiscal year, Flex guides segment revenue growth of 75% to 85%, and about 10 percentage points of that comes from acquisitions, CFO Kevin Krumm said. The company closed its EPC Power purchase on October 14.
Innovation Day On November 10
Advaithi said leadership of both Flex and Axiom will present at an Innovation Day on November 10, where strategy and market opportunities will be laid out in more detail. Flex's market value was $30.8 billion in Wednesday morning trading.
Investors will hear from the expected leadership teams of both companies on November 10.
Sources
- flex-20261028 — sec.gov
- Flex Fiscal Q2 Adjusted Earnings, Sales Rise; Fiscal Q3 Outlook Set; Fiscal 2026 Guidance Increased — Yahoo Finance
- Flex to Report Q2 Earnings: What's in the Cards for the Stock? — Yahoo Finance
- FLEX REPORTS SECOND QUARTER FISCAL 2027 RESULTS — prnewswire.com
