Plexus Q2 Earnings Surge Amid Margin Gains, Strong Q3 Outlook

Plexus Corp. (NASDAQ: PLXS) delivered a standout fiscal Q2 2025 performance, with adjusted earnings soaring 143% year-over-year despite modest revenue growth. The electronics manufacturing services (EMS) provider’s focus on operational efficiency and strategic new business wins propelled profitability, while its Q3 guidance signals further momentum ahead. Here’s what investors need to know.

Profitability Soars as Margins Expand

Plexus reported Q2 revenue of $980 million, a mere 1.4% rise from the same period in 2024 but in line with its own guidance. However, the real story lies in its bottom-line performance. Non-GAAP diluted EPS jumped to $1.66, exceeding the guided range of $1.46–$1.61, marking a dramatic improvement from $0.58 in Q2 2024. This surge was driven by cost-saving initiatives, including a 68-day cash cycle (down from 91 days a year earlier), reduced inventory levels for five straight quarters, and a 13.7% return on invested capital (ROIC), outpacing its weighted average cost of capital by 480 basis points.

New Business Fuels Future Growth

The company secured 42 new manufacturing programs in Q2, valued at $205 million in annualized revenue when fully ramped. Notably, it landed its largest-ever sustaining services contract with a healthcare customer and its strongest engineering solutions wins in five years. These wins highlight Plexus’ ability to attract high-margin, complex projects in regulated industries—particularly healthcare, which now accounts for 42% of revenue, up from 39% in Q1.

Sector Performance and Risks

Plexus’ sector diversification remains a key strength:
- Healthcare/Life Sciences: Grew 10% sequentially in Q2, benefiting from new program ramps and a recovering market. Management now sees this segment as a “key driver” for full-year EPS growth.
- Aerospace/Defense: Increased 8% sequentially, buoyed by defense and space demand, with Q3 expected to see further gains.
- Industrial: dipped 10% sequentially due to broader sector softness but is projected to rebound in Q3, driven by semiconductor capital equipment (SemiCap) demand and “early green shoots” in industrial markets.

However, customer concentration rose to 51% of revenue (up 3 percentage points from Q2 2024), a risk if key clients face supply chain or demand challenges.

Q3 Guidance Signals Continued Strength

Plexus guided Q3 revenue to $1.00–$1.04 billion, a 2–6% sequential increase, with non-GAAP EPS projected at $1.65–$1.80. Operating margins are expected to hold at 5.7–6.1%, reflecting sustained efficiency. Full-year free cash flow is now targeted at $100 million, up from prior expectations, as the company repurchased $12.2 million of shares in Q2, with $25 million remaining under its $50 million buyback program.

Conclusion: A Resilient Play in a Challenging Market

Plexus’ Q2 results and Q3 guidance underscore its transition from a volume-driven EMS provider to a high-margin, solutions-focused partner for complex industries. The 143% YoY EPS surge, $100 million free cash flow target, and disciplined capital allocation make it a compelling investment despite macroeconomic headwinds like tariffs and customer concentration.

While the Industrial segment’s recovery is critical to full-year revenue growth, the healthcare and aerospace sectors’ resilience—and their long-term tailwinds—provide a sturdy foundation. With ROIC comfortably above its cost of capital and a global footprint of 26 facilities, Plexus is positioned to capitalize on demand for specialized manufacturing services. Investors should monitor SemiCap recovery and tariff developments, but the stock’s 5.0% dividend yield and strong balance sheet (net debt of just $23 million) offer comfort in volatile markets.

In short, Plexus has turned operational discipline into shareholder value—making it a standout name in the EMS space.