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    SANM
    Earnings call· Jun 2026(Q3 FY26)

    SANMINA Q3 FY26 earnings call SANM

    Jul 27, 2026 Source

    Executive summary

    Sanmina Q3 FY26 — Strong Performance Driven by AI and Core Business Growth

    Sanmina delivered a strong Q3 FY26, exceeding expectations for revenue, operating margin, and EPS, driven by robust performance in both its core business and the ZT Systems AI Group. Strategic investments in capabilities and capacity are underway to support future growth, particularly in AI-driven segments. The company is confident in achieving over $16 billion in revenue for FY27, with a focus on expanding customer partnerships and vertical integration.

    Highlights

    5

    • Revenue came in at the high end of outlook at $3.46 billion, up 69.7% year-over-year.

    • Non-GAAP operating margin of 8.0% and non-GAAP diluted EPS of $3.31 both exceeded outlook, with EPS up 116.0% year-over-year.

    • Core Sanmina business revenue grew 17.0% year-over-year to $2.4 billion, exceeding its outlook with broad-based strength.

    • Bookings in Q3 FY26 were strong, with a book-to-bill ratio better than 1.1.

    • Secured more customer orders for next-generation accelerated compute, expanding the overall customer base.

    Concerns

    4

    • ZT Systems Q4 FY26 revenue guidance is lower than implied due to variability in legacy programs, ranging from $0.8 billion to $1.0 billion.

    • Working capital is expected to build in advance of business growth, which will impact cash flow from operations.

    • Inventory turns decreased to 5.6x from 6.3x in the prior year period, driven by the ZT Systems acquisition.

    • Component shortages continue to constrain core Sanmina's ability to fully meet demand.

    Guidance & targets

    15
    CategoryTargetConfidence
    Q4 FY26 Revenue
    $3.3 billion to $3.6 billion
    high materiality
    High
    Q4 FY26 Core Sanmina Revenue
    $2.5 billion to $2.6 billion
    medium materiality
    High
    Q4 FY26 ZT Systems Revenue
    $0.8 billion to $1.0 billion
    medium materiality
    High
    Q4 FY26 Non-GAAP Operating Margin
    7.5% to 8.0%
    high materiality
    High
    Q4 FY26 Non-GAAP Other Income and Expense
    Net expense of approximately $30 million
    low materiality
    High
    Q4 FY26 Non-GAAP Effective Tax Rate
    21% to 23%
    medium materiality
    High
    Q4 FY26 Non-GAAP Diluted EPS
    $3.05 to $3.35
    high materiality
    High
    Q4 FY26 Capital Expenditures
    $135 million
    medium materiality
    High
    FY26 Full-Year Revenue
    $14.0 billion to $14.3 billion
    high materiality
    High
    FY26 Full-Year Core Sanmina Revenue
    $9.1 billion to $9.2 billion
    medium materiality
    High
    FY26 Full-Year ZT Systems Revenue
    $4.8 billion to $5.0 billion
    medium materiality
    High
    FY26 Full-Year Non-GAAP Operating Margin
    6.85% to 7.25%
    high materiality
    High
    FY26 Full-Year Non-GAAP Diluted EPS
    $11.90 to $12.20
    high materiality
    High
    FY27 Revenue
    $16 billion plus
    high materiality
    High
    Next-Generation Accelerated Compute Revenue Contribution
    Begin contributing in Q1 fiscal 2027 and ramp over time
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Integrated Manufacturing Services (IMS)
    Driven by growth in all end markets and strong contribution from the ZT Systems business. Core Sanmina IMS exceeded outlook.
    Core Sanmina IMS Revenue: $1.9 billionCore Sanmina IMS Growth YoY: 14.1%ZT Systems Revenue: $1.1 billionNon-GAAP Gross Margin: 10.2%Non-GAAP Gross Margin YoY Change: +270 bps
    		$2.96 billion79.4%—10.2%
    Components, Products and Services (CPS)
    Driven by strong growth in metal fabrication for AI system racks and high-technology printed circuit boards for aerospace and defense. Decrease year-over-year in gross margin due to depreciation and expenses from investments, but sequential increase shows investments paying off.
    Non-GAAP Gross Margin: 12.8%Non-GAAP Gross Margin YoY Change: -190 bpsNon-GAAP Gross Margin Sequential Change: +120 bps
    		$546 million29.2%—12.8%

    Operational metrics

    21
    Non-GAAP Gross Profit
    $370 million+160 bps of revenue YoY
    Q3 FY26

    Driven by favorable mix and nonrecurring engineering services.

    Non-GAAP Operating Expenses
    $94.7 million
    Q3 FY26

    In line with expectations.

    Non-GAAP Operating Profit
    $275.8 million+230 bps of revenue YoY
    Q3 FY26

    Enabled by strong revenue, non-GAAP gross profit, cost discipline, and operating leverage.

    Non-GAAP Other Income and Expense
    $29.5 million
    Q3 FY26

    In line with outlook.

    Non-GAAP Diluted EPS
    $3.31116.0% increase YoY
    Q3 FY26

    Showcases high potential of combined core Sanmina and ZT Systems businesses.

    Cash and investments balance
    $1.84 billion
    Q3 FY26

    Includes final net working capital adjustment associated with ZT Systems acquisition.

    Available Liquidity
    $4.0 billion
    Q3 FY26

    No outstanding borrowings on revolver, providing substantial liquidity for future growth.

    Inventory
    $2.2 billion87.2% up YoY
    Q3 FY26

    Driven by the ZT Systems acquisition.

    Inventory Turns
    5.6xdown from 6.3x YoY
    Q3 FY26

    Comparison to the same period a year ago.

    Non-GAAP Pretax ROIC
    39.1%up from 24.8% YoY
    Q3 FY26

    Well above weighted average cost of capital.

    Net Leverage Ratio
    0.29x
    Q3 FY26

    Calculated conservatively, expected to increase into long-term range over time.

    Capital Expenditures
    $100.9 million
    Q3 FY26

    In line with outlook, for strategic investments.

    Share Repurchase Authorization
    $600 million
    Q3 FY26

    No shares repurchased in the quarter.

    Depreciation
    $50 million
    Q4 FY26

    Outlook for Q4 FY26.

    Core Sanmina Revenue Growth
    12.6%exceeds high single-digit expectation
    FY26

    Exceeds expectations set at the beginning of the year.

    ZT Systems Annualized Run Rate
    $5 billion to $6 billion
    FY26

    Range communicated when the acquisition was announced, for the 11 months of FY26.

    India Joint Venture Noncash Reduction
    $6 million
    Q4 FY26

    Estimated noncash reduction to net income to reflect joint venture partners' equity interest.

    Communication Networks, Cloud & AI Infrastructure Revenue
    $2.148 billion173.2% YoY
    Q3 FY26

    AI is driving growth in this entire end market.

    Industrial, Energy, Medical, Defense, Aerospace, Automotive and Transportation Revenue
    $1.316 billion4.8% up YoY
    Q3 FY26

    Diversified end markets.

    Core Sanmina Communication Networks and Cloud Infrastructure Growth
    33%YoY
    Q3 FY26

    Acceleration driven by incremental programs and new customers, without ZT Systems included.

    Legacy Platforms Annual Run Rate
    $3 billion to $4 billion
    Annual

    Refers to legacy general purpose compute and storage platforms, which can vary quarter-to-quarter.

    Industry KPIs

    7
    MetricValueDetails
    M a contribution$1.1 billionUSD
    Orders book to billbetter than 1.1
    Segment revenue growth$2.96B / $546MUSD
    Design wins product cycle rampsSecured more customer orders
    Supply demand imbalance lead timesconstrained
    Capacity expansion internal sourcingInvestments underway
    End market revenue mix organic growth62% / 38%%

    Orderbook & backlog

    2
    Book-to-bill ratiobetter than 1.1Q3 FY26

    Bookings were strong in the third quarter.

    Next-generation accelerated compute customer orderssecured moreQ3 FY26

    Expanding overall customer base; preproduction activities going well with AMD and joint customers.

    Deals & partnerships

    4
    ZT SystemsIntegration of ZT Systems business into Sanmina

    3-phase integration plan focused on streamlining processes, improving work methods, and driving efficiencies. Realizing synergies through vertical integration and expanding engineering capabilities.

    AMDCollaboration on next-generation accelerated compute programs

    Working in close collaboration with AMD and joint customers to support almost all preproduction activities, providing quality, delivery, and services.

    CerebrasNew platform business win

    This win is part of Sanmina's broader focus on the cloud and AI infrastructure end market, expanding beyond existing partnerships.

    RelianceJoint venture in India

    Working closely with Reliance and local India team; expanding footprint with a new building in Q1 FY26. Significant area of opportunity across multiple end markets.

    Capital programs

    4
    Metal Fabrication Capacity Expansionunderway
    Start: since end of last fiscal year

    Benefit: capacity for AI system racks

    Investments made in core Sanmina business to support growth.

    High-Technology Printed Circuit Board Capabilitiesunderway
    Start: since end of last fiscal year

    Benefit: new capabilities for AI and aerospace and defense-related products

    Investments made in core Sanmina business to support growth.

    Medium Voltage Transformer Business Equipmentunderway

    Benefit: new equipment

    Investments made in core Sanmina business to support growth.

    ZT Systems Accelerated Compute Capacity Expansionunderway

    Benefit: incremental power, liquid cooling, test cell capacity and automation for next generation of accelerated compute

    Investments made in ZT Systems business to be production ready.

    Risks & headwinds

    4
    Market Uncertainties and Geopolitical EnvironmentQ4 FY26

    Not quantified

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

    Legacy Program Variability in ZT SystemsQ4 FY26

    Q4 FY26 ZT Systems revenue range of $0.8 billion to $1.0 billion, lower than implied guidance

    Mitigation: Management notes this can vary quarter-to-quarter based on customer timing needs; focus is shifting to next-generation programs.

    Working Capital Build Impact on Cash FlowQ4 FY26 and beginning of next year

    Expected to pressure overall working capital numbers

    Mitigation: Viewed as a positive investment in the business; final operating model details with customers are still being sorted out.

    Component ShortagesOngoing

    Still a little bit constrained

    Mitigation: New program wins and new customers are helping to accelerate growth despite constraints.

    What to watch in Q4 FY26

    5

    ZT Systems Next-Gen Accelerated Compute Revenue Ramp

    Q1 FY27 and beyond
    CurrentNot included in Q4 FY26 outlook
    TargetBegin contributing to revenue in Q1 FY27 and ramp over time

    Why it matters

    This is a key driver for future growth and the company's ability to meet its FY27 revenue target.

    We expect it to begin contributing to revenue in Q1 fiscal 2027 and to ramp over time⏳.

    Q&A highlights

    7

    Why was Q3 operating margin much higher than expected, and what was the margin impact of nonrecurring engineering (NRE) services? How should we think about future operating margins as ZT-related AI revenues become a higher mix?

    Q3 margin beat was due to favorable mix from core Sanmina (IMS and CPS) and ZT Systems, plus significant contribution from NRE services for preproduction work on new accelerated compute programs. NRE services have high labor charges and less revenue, boosting margins. Long-term operating margins are still expected to be in the 6% to 7% range, with more details to come in the FY27 guide.

    “And this is a great thing for us because it basically means that we're doing a lot -- almost all of the preproduction work for the new accelerated compute program. And the way that works, just to help explain, is there's not a whole lot of revenue associated with it, but a lot of labor charges. So that drove the margin profile.”

    asked by Ruplu Bhattacharya · answered by Jonathan Faust

    2 min read6 chapters

    Detailed Narrative

    01

    AI-Driven Growth and Strategic Investments

    Sanmina is experiencing significant growth driven by AI, particularly in the Communication Networks, Cloud & AI Infrastructure segment, which was up 173.2% year-over-year. The company is making strategic investments in capabilities and capacity across both core Sanmina and ZT Systems. These include metal fabrication for AI system racks, high-technology printed circuit boards for AI and aerospace/defense, new medium voltage transformer business equipment, and incremental power, liquid cooling, test cell capacity, and automation for next-generation accelerated compute. These investments are expected to drive profitable growth and attractive ROI.

    02

    ZT Systems Integration and Expansion

    The integration of ZT Systems is progressing well through a 3-phase plan focused on streamlining processes, improving efficiency, and realizing synergies. Sanmina has continued to secure new customer orders for next-generation accelerated compute, expanding its customer base. Close collaboration with AMD and joint customers on preproduction activities is on track. The broader focus on cloud and AI infrastructure has also led to incremental program wins in the core Sanmina business, including with new customers and platforms like Cerebras.

    03

    Core Sanmina Business Performance

    The core Sanmina business delivered strong results, with revenue growing 17.0% year-over-year to $2.4 billion, exceeding its outlook. This growth was broad-based across all end markets, with particular strength in the cloud and AI infrastructure segment, which saw a 33% year-over-year growth excluding ZT Systems. The company's diverse capabilities and end-to-end solutions, from system architecture to global fulfillment, are key to expanding existing partnerships and adding new projects.

    04

    End Market Trends and Diversification

    Sanmina sees very positive trends across its end markets. Communication Networks, Cloud & AI Infrastructure (62% of revenue) is driven by AI, with strong bookings and a pipeline for FY27 and FY28. Industrial & Energy (38% of revenue) is expected to accelerate growth in FY27, expanding energy business for AI data centers. Medical remains stable with expected growth acceleration in FY27. Defense & Aerospace anticipates continued growth, especially in satellite markets. Automotive & Transportation is stable with growth from new programs.

    05

    Strong Balance Sheet and Capital Allocation

    The company maintains a very strong balance sheet with $1.84 billion in cash and cash equivalents and substantial liquidity of approximately $4.0 billion. The net leverage ratio is low at 0.29x, well below the long-term target range of 1.0x to 2.0x. While working capital is expected to build to support growth, Sanmina remains committed to a healthy balance sheet. Capital expenditures were $100.9 million in Q3, and the company has approximately $600 million remaining in its share repurchase authorization.

    06

    Impact of Nonrecurring Engineering Services

    Nonrecurring engineering (NRE) services contributed significantly to the Q3 FY26 margin beat. These services, primarily related to preproduction work for the new accelerated compute program, involve high labor charges and less associated revenue, driving a favorable margin profile. This contribution is expected to continue into Q4 FY26, though it will ramp down over time⏳ as production scales.

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