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    SANM
    Earnings call· Mar 2026(Q2 FY26)

    SANMINA Q2 FY26 earnings call SANM

    Apr 27, 2026 Source

    Executive summary

    Sanmina Q2 FY26 — Strong ZT Systems Performance Drives Revenue Beat

    Sanmina delivered strong Q2 FY26 results, exceeding revenue and earnings outlooks, primarily driven by accelerated compute shipments from the ZT Systems business. The company is increasingly confident in achieving over $16 billion in revenue for FY27, supported by new program wins and strategic investments, despite some near-term component shortages and a temporary sequential dip in ZT Systems revenue.

    Highlights

    5

    • Revenue came in at $4.01 billion, well above outlook.

    • Non-GAAP operating margin was strong at 6.4%, up 80 bps year-over-year.

    • Non-GAAP diluted EPS reached $3.16, representing a 125% increase year-over-year.

    • Cash flow from operations was robust at $399 million.

    • Core Sanmina's book-to-bill was better than 1.1, indicating strong bookings.

    Concerns

    3

    • CPS non-GAAP gross margin decreased 230 bps year-over-year to 11.6%, due to depreciation from new program investments and component shortages.

    • ZT Systems revenue is expected to be down sequentially to $1.0 billion-$1.2 billion in Q3 FY26, as accelerated compute shipments shifted into Q2.

    • Ongoing material shortages around memory and custom ASICs are expected to continue through the rest of the year and potentially into FY27.

    Guidance & targets

    13
    CategoryTargetConfidence
    Total Revenue
    $3.2 billion to $3.5 billion
    high materiality
    High
    Core Sanmina Revenue
    $2.2 billion to $2.3 billion
    medium materiality
    High
    ZT Systems Revenue
    $1.0 billion to $1.2 billion
    high materiality
    High
    Non-GAAP Operating Margin
    6.4% to 6.9%
    high materiality
    High
    Non-GAAP Effective Tax Rate
    21% to 23%
    medium materiality
    High
    Non-GAAP Diluted EPS
    $2.55 to $2.85
    high materiality
    High
    Capital Expenditures
    $95 million
    medium materiality
    High
    Total Revenue
    $13.7 billion to $14.3 billion
    high materiality
    High
    Core Sanmina Business Growth
    high single digits
    medium materiality
    High
    ZT Systems Business Revenue
    well within the $5 billion to $6 billion annualized range
    high materiality
    High
    Non-GAAP Operating Margin
    6.3% to 6.6%
    high materiality
    High
    Non-GAAP Diluted EPS
    $10.75 to $11.35
    high materiality
    High
    Total Revenue
    $16 billion plus
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    IMS (Integrated Manufacturing Services)
    Non-GAAP gross margin, up 80 bps year-over-year. Driven primarily by growth in the cloud and AI infrastructure end market, including strong contribution from the ZT Systems business. Core Sanmina IMS revenue was $1.70B, up 6.0% year-over-year. ZT revenue was $1.88B.
    		$3.58B123.5%—8.5%
    CPS (Components, Products and Services)
    Non-GAAP gross margin, down 230 bps year-over-year. Decrease primarily driven by depreciation and other expenses related to investments to support new programs, and component shortages impacting timing and profitability for one product business. Expect margin accretive growth in future quarters.
    		$461M12.2%—11.6%

    Operational metrics

    23
    Non-GAAP Operating Margin
    6.4%up 80 bps YoY
    Q2 FY26
    Non-GAAP Diluted EPS
    $3.16up 125% YoY
    Q2 FY26
    Capital Expenditures
    $57Mbelow outlook
    Q2 FY26

    primarily due to timing

    Cash and investments balance
    $1.58B
    Q2 FY26 end
    Outstanding borrowings on revolver
    $0
    Q2 FY26 end

    on our $1.5 billion revolver

    Available liquidity
    $3.7B
    Q2 FY26 end
    Inventory (net of customer advances)
    $2.1Bup 75% YoY
    Q2 FY26 end

    driven by the ZT Systems acquisition

    Inventory turns (net of customer advances)
    6.9xup from 5.9x YoY
    Q2 FY26
    Non-GAAP Pretax ROIC
    34.7%up from 23.0% YoY
    Q2 FY26

    well above our weighted average cost of capital

    Net Leverage Ratio
    0.56x
    Q2 FY26 end

    calculated by annualizing non-GAAP EBITDA results for H1, which includes 5 months for ZT Systems and some advanced shipments

    Share Repurchases
    $160M
    Q2 FY26

    to offset the remaining dilution for the year

    Share Repurchase Authorization
    $600M
    N/A

    additional authorization, no expiration date

    Core Sanmina Revenue Growth
    7.3%YoY
    Q2 FY26
    ZT Systems Revenue
    $1.88B
    Q2 FY26

    exceeding expectations

    Core Sanmina IMS Revenue
    $1.70Bup 6.0% YoY
    Q2 FY26
    Communication Networks & Cloud AI Infrastructure Revenue (Core Sanmina)
    $891Mup 22% YoY
    Q2 FY26
    Communication Networks & Cloud AI Infrastructure Revenue (Total)
    $2.77Bup almost 280% YoY
    Q2 FY26
    Industrial & Energy, Medical, Defense & Aerospace, Automotive & Transportation Revenue
    $1.24Bflat YoY
    Q2 FY26

    expected to be slightly down for industrial

    Non-GAAP Operating Expenses
    $103M
    Q2 FY26
    Non-GAAP Operating Profit
    $257M
    Q2 FY26
    Non-GAAP Other Income and Expense
    $25.9M
    Q2 FY26

    net expense

    Non-GAAP Gross Profit
    $360M
    Q2 FY26
    Depreciation
    $50M
    Q3 FY26

    guidance

    Industry KPIs

    8
    MetricValueDetails
    M a contribution$1.88BUSD
    Orders book to bill>1.1ratio
    Segment revenue growthIMS: $3.58B; CPS: $461MUSD
    Design wins product cycle rampsseveral new programs
    Supply demand imbalance lead timesmaterial shortages around memory, custom ASICs
    Capacity expansion internal sourcingmost of the necessary capital investments
    End market revenue mix organic growthCommunication Networks & Cloud AI Infrastructure: $2.77B; Industrial & Energy, Medical, Defense & Aerospace, Automotive & Transportation: $1.24BUSD
    Operating margin incremental leverage6.4%%

    Orderbook & backlog

    1
    Book-to-bill (Core Sanmina)>1.1Q2 FY26

    better than 1.1

    bookings for second quarter were strong

    Deals & partnerships

    1
    ZT SystemsIntegration of ZT Systems business to realize full value of combining the two companies.

    Integration is largely complete, following a 3-phase plan. Phase 1 (post-transaction actions) is largely complete. Phase 2 (securing customer business) is well underway, with new accelerated compute business won and shipped. Phase 3 (driving growth and expansion) has started, focusing on vertical integration and expanding engineering capabilities.

    Capital programs

    1
    Incremental power, liquid cooling and test cell capacity for next generation accelerated computelargely complete
    Spent to date: most of the necessary capital investments

    Benefit: production ready for the next generation of accelerated compute

    Part of the first phase of ZT Systems integration, focused on executing immediate post-transaction actions and making necessary capital investments.

    Risks & headwinds

    2
    Component shortagesExpected to be resolved in H2 FY26 for CPS product business; generally expected to continue through rest of FY26 and potentially into FY27.

    Impacted timing of revenue and profitability for one CPS product business. Could have shipped more in Q2.

    Mitigation: Working closely with suppliers and customers, planning ahead, leveraging strong IT system.

    Macroeconomic and geopolitical landscape uncertaintiesOngoing

    Not quantified

    Mitigation: Outlook based on current customer forecasts and takes into account these uncertainties.

    What to watch in Q3 FY26

    5

    ZT Systems revenue ramp

    Q4 FY26
    Current$1.0B-$1.2B (Q3 FY26 guide)
    TargetAt least $1.5B (implied for Q4 FY26 to meet FY26 target)

    Why it matters

    Verifies the company's ability to meet its FY26 ZT Systems revenue target after Q2 pull-ins and before the significant FY27 ramp.

    As a reminder, ZT Systems revenue is down compared to the prior quarter due to the accelerated compute orders that shifted from the second half into the second quarter.

    Q&A highlights

    7

    What drove ZT's strong Q2 performance (MI300 vs NVIDIA, pull-ins)? How confident are you in meeting the FY26 ZT guidance ($5B-$6B) given Q2 pull-ins and the implied Q4 ramp?

    Q2 outperformance was due to customer pull-ins of AMD-based accelerated compute products from H2 FY26; no NVIDIA products were shipped. Confidence in FY26 guidance is high due to new program wins with multiple hyperscalers and OEMs for next-gen platforms, with production schedules being finalized. The team is getting production-ready for these new platforms.

    “Whatever we shipped, it was all based on AMD technology. As we look at the future, I think there's a lot of exciting stuff going around the new products. We won multiple hyperscalers and ODMs for the future.”

    asked by Ruplu Bhattacharya · answered by Jure Sola

    2 min read6 chapters

    Detailed Narrative

    01

    ZT Systems Integration and Future Growth

    The integration of ZT Systems is largely complete, with immediate post-transaction actions finished and necessary capital investments made for next-generation accelerated compute. The company is now focused on securing new customer business, having won multiple hyperscale and OEM customers for next-generation platforms, and is finalizing production schedules for a significant ramp in FY27. This includes expanding vertical integration and engineering capabilities to drive additional synergies and market expansion.

    02

    Strong Q2 Performance and Pull-ins

    Sanmina's Q2 FY26 revenue of $4.01 billion significantly exceeded expectations, driven by strong execution and customer demand for ZT Systems. This included accelerated compute shipments (AMD-based) that were pulled into the quarter from the second half of the fiscal year. This performance serves as a proof point of customer confidence in Sanmina's ability to support their needs, showcasing the operating leverage in the business model.

    03

    Core Sanmina End Market Trends

    Core Sanmina revenue grew 7.3% year-over-year, supported by strong bookings with a book-to-bill ratio exceeding 1.1. The Communication Networks & Cloud AI Infrastructure segment saw 22% YoY growth in Core Sanmina, fueled by high-performance networks, optical systems, and 5G. While the Industrial & Energy, Medical, Defense & Aerospace, and Automotive & Transportation segments were flat overall, management anticipates accelerated growth in these areas during the second half of the fiscal year.

    04

    Capital Allocation Strategy

    Sanmina prioritizes capital allocation towards investing in organic growth and margin expansion, followed by strategic M&A that meets ROI expectations. The company maintains a strong balance sheet with a net leverage ratio of 0.56x, aiming for investment-grade ratings. An additional $600 million share repurchase authorization was announced, reflecting confidence in the stock's long-term value and commitment to returning capital to shareholders opportunistically.

    05

    Strategic Capabilities and Footprint

    Sanmina offers diverse, industry-leading capabilities providing end-to-end solutions, from engineering design to full system integration, across key markets including data centers and AI infrastructure. The company highlights its advanced printed circuit board technology, investments in liquid cooling, custom memory, and optical modules. Its global manufacturing footprint, strategically positioned with a strong USA presence, is supported by an agile IT system for efficient supply chain management.

    06

    FY27 Revenue Confidence

    Management expressed increasing confidence in achieving over $16 billion in revenue for fiscal year 2027. This target builds on the current year's strong trajectory and new program wins, particularly within the ZT Systems business, and aligns with the company's previously stated goal of doubling Sanmina's revenue within two years of the ZT acquisition.

    AI-generated summary of the company’s earnings call. Not investment advice.