Flex announced on May 5 that its board of directors has unanimously approved a plan to spin off its Cloud and Power Infrastructure segment into a separate publicly traded company, targeting a tax-free separation that closes in the first quarter of calendar 2027. The new entity, currently referred to as SpinCo, will focus on electrical and digital infrastructure including thermal management and power systems designed for high-density AI workloads. Current Flex CEO Revathi Advaithi will lead SpinCo, while Michael Hartung, the company’s president, will become CEO of the remaining Flex manufacturing business. Flex shares surged 28.4% in premarket trading following the announcement, reflecting investor enthusiasm for a cleaner, dedicated AI infrastructure play.

The spinoff arrives alongside strong Flex fiscal 2026 results. The company reported full-year net sales of $27.9 billion, up 8%, with Q4 net sales of $7.5 billion marking a 17% year-on-year increase. SpinCo is targeting 65% to 75% revenue growth in fiscal 2027 and above 80% in fiscal 2028, reflecting the accelerating demand for power, cooling, and integrated systems from hyperscale AI data center operators. The new entity will operate 22 engineering and manufacturing centres globally and will carry Flex’s existing customer relationships in the AI infrastructure supply chain. Flex, excluding SpinCo, will continue as a global advanced manufacturing company across healthcare, industrial, automotive, communications, and lifestyle end markets, targeting low-to-mid-single-digit revenue growth.

Why the Spinoff Makes Strategic Sense Now

The separation reflects a structural trend across the technology supply chain. Specifically, it recognises that AI data center infrastructure is a high-growth, capital-intensive business with a fundamentally different investor profile from diversified manufacturing. Consequently, SpinCo will compete directly with Vertiv, Schneider Electric, and Eaton in the power and cooling systems market. That market is expanding rapidly as AI GPU rack densities push from 30 kilowatts toward 100 kilowatts and beyond. As a standalone public company, SpinCo will moreover be able to raise capital specifically for AI infrastructure opportunities. It can also pursue acquisitions within the sector without competing for resources against Flex’s broader manufacturing priorities. Additionally, it will attract investors seeking direct exposure to the AI infrastructure buildout rather than a blended manufacturing conglomerate.

What It Signals for the Broader Market

The Flex spinoff is the latest in a series of moves by major industrial and technology companies to isolate their AI infrastructure exposure into dedicated entities that can be valued independently of their parent businesses. As covered in our analysis of the transformer and substation supply chain as an AI infrastructure bottleneck, the suppliers of power, cooling, and electrical infrastructure for AI data centers are operating in a market where demand is structurally outpacing supply across every major component category. SpinCo will enter the public markets as a pure-play beneficiary of that dynamic, with an existing revenue base, established customer relationships, and a leadership team with direct experience in the AI data center supply chain.