Plexus (PLXS) Q1 2026: Aerospace & Defense Wins Hit $220M, Lifting Growth Outlook Above 12%
Plexus delivered a sharp acceleration in revenue momentum, fueled by record aerospace and defense program wins and broad-based market share gains. The company now expects to exceed its prior high-end growth targets, supported by robust demand and operational leverage from new facilities and automation. Investors should monitor working capital intensity and execution on margin expansion as management pursues aggressive scale and efficiency initiatives.
Summary
- Aerospace and Defense Surge: Record $220M in quarterly wins signals deepening customer traction and new program ramps.
- Operational Leverage: Automation and facility investments are driving margin resilience despite cost headwinds.
- Growth Outlook Raised: Management now targets revenue growth above the prior 12% ceiling for fiscal 2026.
Performance Analysis
Plexus began fiscal 2026 with double-digit revenue growth and its fourth consecutive quarter of sequential gains, propelled by new program ramps and stronger end-market demand across all major sectors. The standout was aerospace and defense, where a record $220 million in new manufacturing wins nearly matched prior full-year highs, reflecting a wave of customer expansion and disruptive technology adoption. Healthcare and life sciences delivered a 10% sequential revenue increase, while the industrial segment saw expected declines but is positioned for a rebound on semi-capital equipment strength.
Gross margin held steady at 9.9%, absorbing the initial costs of new facility ramp-ups in Malaysia, while SG&A leverage improved on higher volumes. Free cash flow was negative in the quarter due to working capital investments, yet management reaffirmed a $100 million full-year target. The company maintained a net cash position and continued its share repurchase program, signaling confidence in ongoing cash generation as revenues scale.
- Sector Diversification: Growth was broad-based, with aerospace and defense and healthcare leading, and industrial poised for recovery.
- Margin Stability: Fixed cost leverage and productivity gains offset seasonal compensation and facility ramp headwinds.
- Cash Cycle Management: Inventory investments increased the cash cycle, but net cash cycle days remained within guidance.
The quarter’s results demonstrate Plexus’s ability to convert program wins into tangible revenue and margin expansion, setting up a strong foundation for the remainder of the year.
Executive Commentary
"Our consistent strategy and focus on delivering customer success continues to enable share gains and is facilitating our leadership in growth markets. We've seen strong year-over-year revenue growth to begin our fiscal 2026 as we ramp programs across all of our market sectors. In addition, we are now seeing pockets of stronger end market demand. Our ongoing market share gains are amplifying this revenue growth tailwind."
Todd Kelsey, President and Chief Executive Officer
"Gross margin of 9.9% was consistent with our guidance and consistent with the last quarter, despite a slight margin impact from the opening of our new Malaysia facility... For the fiscal first quarter, we delivered a return on invested capital of 13.2%, which was 420 basis points of overweighted average cost of capital and a strong result to be in fiscal 2026."
Pat Germain, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Aerospace and Defense as a Growth Engine
The aerospace and defense segment, now generating record program wins, is positioned as Plexus’s primary growth lever. The funnel for both manufacturing and engineering solutions in this sector is at or near all-time highs, reflecting strong demand for operational excellence and technical depth. New wins span commercial space, security detection, and unmanned systems, broadening the customer base and increasing exposure to disruptive technologies.
2. Automation and AI-Driven Efficiency
Plexus is aggressively deploying automation and artificial intelligence (AI) across its global footprint, from warehouse robotics to AI-enabled quoting and production optimization. Initiatives like auto-store 3D cubes and AI-driven work order management are delivering tangible labor and space savings, with ROI under 12 months. These investments are designed to lift margins and enable capacity expansion without significant new footprint, supporting scalable growth.
3. Facility Ramp and Regional Diversification
Recent expansions in Malaysia and Thailand are ramping toward corporate margin averages, with Thailand expected to add 25 to 30 basis points to overall margins in 2026. Plexus’s global footprint can support up to $6 billion in revenue, with ample capacity across regions. This positions the company to flexibly accommodate new program ramps and shifting customer requirements.
4. Working Capital and Cash Discipline
Management is balancing aggressive growth with disciplined working capital management, as inventory investments rise to support program ramps and longer lead times. The cash cycle is expected to improve sequentially, and free cash flow guidance remains intact despite temporary outflows.
5. End-Market and Program Ramp Visibility
Healthcare, industrial (especially semi-cap), and energy subsectors are showing renewed momentum, with program ramps and new wins driving visibility into the second half. Notably, the full benefit of commercial aerospace production increases (e.g., from Boeing) is not yet reflected, representing potential upside.
Key Considerations
Plexus’s revised growth outlook is underpinned by both structural and cyclical tailwinds. The company’s ability to win and ramp large, complex programs is now matched by investments in automation and operational agility, positioning it to outperform in a tightening supply and demand environment.
Key Considerations:
- Record Aerospace & Defense Pipeline: The sector’s $220M in wins and robust funnel signal durable demand and customer stickiness.
- Automation ROI: AI and robotics initiatives are yielding rapid payback and margin expansion, reducing reliance on labor and footprint additions.
- Capacity Flexibility: The existing global footprint can support substantial growth, minimizing the need for near-term major CapEx on new sites.
- Working Capital Vigilance: Inventory build is necessary for program ramps, but cash cycle discipline will be critical if growth assumptions are not met.
- Sector Rotation Risk: While semi-cap and healthcare are accelerating, other industrial and communications subsectors remain muted, requiring ongoing portfolio balancing.
Risks
Execution risk remains elevated as Plexus ramps multiple large programs simultaneously and invests heavily in automation and working capital. Supply chain pressures, particularly in semiconductors and printed circuit boards, could extend lead times and strain inventory management. Margin expansion depends on the successful scaling of new facilities and the realization of AI-driven productivity gains. End-market volatility, especially in aerospace and defense and semi-cap, could impact demand visibility and program timing.
Forward Outlook
For Q2 2026, Plexus guided to:
- Revenue of $1.11 to $1.15 billion (up 15% YoY at midpoint)
- Non-GAAP operating margin of 5.6% to 6.0%
- Non-GAAP EPS of $1.80 to $1.95
For full-year 2026, management raised guidance:
- Potential to meet or exceed the high end of the 9% to 12% revenue growth goal
- Free cash flow target of approximately $100 million reaffirmed
Management highlighted several factors that drive confidence in the outlook:
- Ongoing program ramps and market share gains across sectors
- Operational efficiency and automation investments expected to offset seasonal and compensation headwinds
Takeaways
Plexus’s Q1 2026 results mark a clear inflection in growth trajectory, with aerospace and defense leading the charge and automation underpinning margin resilience.
- Record Program Wins: The $220M aerospace and defense win haul validates Plexus’s competitive positioning and supports a raised growth outlook.
- Margin Expansion Path: Automation, AI, and new facility ramp-ups are set to drive operating leverage as revenue scales.
- Execution Watchpoint: Investors should monitor working capital trends and the pace of margin improvement as program ramps accelerate and sector demand shifts.
Conclusion
Plexus enters fiscal 2026 with significant momentum, robust program win visibility, and a clear path to exceeding prior growth targets. The company’s commitment to automation and operational discipline will be tested as it scales, but current execution supports optimism for continued outperformance.
Industry Read-Through
Plexus’s results offer a bullish signal for the broader electronics manufacturing services (EMS) sector, especially in aerospace, defense, and semi-cap equipment verticals. The surge in program wins and rapid adoption of automation and AI highlight a shift toward higher-value, technology-driven manufacturing partnerships. Supply chain and working capital management remain critical across EMS peers, while those with robust automation and regional capacity are best positioned to capture market share as demand rebounds. The strong funnel in defense and healthcare also signals durable secular tailwinds for advanced contract manufacturers serving regulated and innovation-driven end markets.