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Flex (FLEX) will sell $2 billion of convertible preferred stock in Axiom to General Catalyst and Koch at a $37.5 billion valuation ahead of a 2027 spin-off.
- Flex agreed to sell $2.0 billion of Series A convertible preferred stock in Axiom at a $37.5 billion initial enterprise value.
- The preferred pays a 10% cash dividend before separation and steps down to 6% cash or 7% in kind afterward.
- Proceeds will help fund the $4.4 billion EPC Power acquisition. Axiom's spin-off is targeted for the first quarter of 2027.
Lead
Flex (NASDAQ: FLEX) announced on October 5, 2026 that it will sell $2.0 billion of Series A convertible preferred stock in Axiom, its Cloud and Power Infrastructure unit, to funds affiliated with General Catalyst, Koch Equity Development and co-investors. The investment values Axiom at an initial enterprise value of $37.5 billion. Flex plans to separate Axiom into an independent, publicly traded company in the first quarter of 2027. Flex shares rose 0.9% to $117.77, for a market capitalization of about $43.5 billion.What Are the Terms of the Axiom Preferred Investment?
The investors receive convertible preferred stock with a 10% annual cash dividend until the separation. After the spin-off, the dividend falls to 6% if paid in cash or 7% if paid in kind, with potential increases after the fifth anniversary of the separation. General Catalyst gains a board nomination right once Axiom is independent. Closing depends on regulatory approvals and customary conditions.
The $2.0 billion equals roughly 5% of Axiom's headline enterprise value. The size is modest against the valuation, but it brings in outside capital before the business reaches public markets and sets a reference price for the new shares.
How Will Flex Use the Proceeds?
The money will go toward Axiom's previously announced purchase of EPC Power, a power conversion company Flex agreed on September 3 to acquire for $4.4 billion. That deal is financed with $3.3 billion of term loan borrowings and $1.1 billion under a bridge facility, and it is expected to close in the fourth quarter of 2026. Proceeds from the preferred will cover part of the purchase price, repay the bridge or intermediate financing, pay preferred dividends and fund general corporate purposes.
EPC Power is expected to generate about $800 million of revenue in calendar 2026. Flex projects organic growth of roughly 40% in 2027 and an EBITDA margin near 30%.
"This investment provides equity funding for our recently announced acquisition of EPC Power and will allow Axiom to have a strong balance sheet," said Revathi Advaithi, Flex's chief executive and the expected chief executive of Axiom. Hemant Taneja, chief executive of General Catalyst, said Axiom "sits at the center of the power and infrastructure buildout that AI demands."
Why Is Axiom Attracting a $37.5 Billion Valuation?
Axiom sells power, cooling and compute infrastructure to operators of AI data centers. Its embedded and critical power systems, electrical infrastructure and thermal management are designed to be delivered as coordinated system architectures. The business reported net sales of $6.614 billion in the fiscal year ended March 31, 2026, so the valuation equals about 5.7 times trailing revenue.
The pricing places Axiom among the AI stocks that investors value on data center spending rather than on traditional contract manufacturing multiples. Flex's whole-company market capitalization of $43.5 billion is only slightly above Axiom's headline valuation. That leaves the remaining electronics manufacturing operations carrying a small share of the group's implied value.
Strategic Context
Outlook
The investment ties Axiom's separation to a defined valuation and a funded acquisition. The next milestones are the EPC Power closing in the fourth quarter of 2026, the November Innovation Day and the first-quarter 2027 listing. The 10% pre-spin dividend and conversion features will become clearer as Axiom's registration statement is finalized.
Mentioned tickers: FLEX
