Third Point: Flex Ltd. ($FLEX) Investment Case

In their Second Quarter 2026 investor letter, Third Point LLC introduces a new position in Flex Ltd. ($FLEX), a global manufacturing services company, established following Flex’s announcement that it intends to separate its Cloud & Power Infrastructure (“CPI”) business into an independent public company. Third Point believes the market is underestimating the quality, growth profile, and strategic positioning of the business that will emerge from the separation, framing CPI as a core supplier of the electrical power, cooling, and rack infrastructure that sits at the center of AI datacenter buildouts.

Investment Highlight: Flex Ltd. ($FLEX)

Business Overview

• Third Point describes CPI as much more than a contract manufacturer, noting it designs and manufactures electrical power systems, liquid cooling products, and integrated server racks used in AI datacenter deployments
• The firm expects hyperscalers building increasingly power-dense clusters to simplify procurement by sourcing integrated power, cooling, and rack solutions from a single supplier
• In Third Point’s view, Flex occupies a unique position in the value chain, as traditional electrical equipment companies lack its rack integration capabilities while server rack manufacturers generally do not offer proprietary power or liquid cooling products

Growth Outlook and Margin Mix

• Third Point projects CPI revenue increasing from approximately $6 billion in 2025 to nearly $20 billion in 2027, which the firm believes would make it one of the largest providers of AI power infrastructure globally
• The firm believes the business mix is improving, with a growing share of earnings coming from branded electrical and liquid cooling products that carry substantially higher margins than traditional manufacturing services
• Third Point expects the industry’s migration toward 800-volt power architectures to meaningfully expand the company’s content opportunity as electrical infrastructure moves closer to the server rack

Customer Position

• The firm views CPI as benefiting from an “enviable customer position,” citing Google as one of its largest customers
• Third Point believes this relationship gives Flex meaningful exposure to Google’s TPU accelerator program, which the firm expects to be among the fastest-growing AI compute platforms over the next several years

Management and Track Record

• Third Point notes the separation will be led by Flex CEO Revathi Advaithi, who previously ran Eaton’s global electrical business and, in the firm’s view, has an established track record of creating shareholder value through portfolio simplification
• The firm points to the 2023 spin-off of Nextracker, which it notes has appreciated approximately fourfold and today carries a market value of roughly $13 billion, as evidence of that track record
• Third Point believes Advaithi’s decision to lead CPI underscores both the quality of the asset and the magnitude of the opportunity

Catalysts and Valuation

• Management intends to host an investor day this fall, which Third Point expects will provide greater visibility into the business, its product portfolio, and its long-term earnings power
• The firm’s own work suggests CPI has the potential to earn more than $7 per share by 2028
• Third Point believes that if the business ultimately commands a valuation consistent with other high-quality AI infrastructure companies, the separation has the potential to unlock significant shareholder value

Risks

• Third Point acknowledges that disclosure on CPI remains limited ahead of the planned investor day
• The firm notes that execution on the ambitious growth outlook it has laid out will be critical to the thesis playing out

Third Point views Flex’s planned separation of its Cloud & Power Infrastructure business as an underappreciated opportunity to unlock value from a company the firm believes is uniquely positioned across power, cooling, and rack integration for AI datacenters. The firm’s thesis rests on strong projected revenue growth toward $20 billion by 2027, an improving margin mix, deep customer exposure to Google’s TPU program, and experienced leadership under CEO Revathi Advaithi, with a fall investor day seen as a near-term catalyst for the market to better recognize the asset’s value.

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