SANM — Sanmina Corporation

Summary of Sanmina's Q2 Fiscal 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $4.01 billion, up 102% year-over-year, exceeding expectations.
• Non-GAAP Operating Margin: 6.4%, an increase of 80 basis points from the prior year.
• Non-GAAP Diluted EPS: $3.16, representing a 125% increase year-over-year.
• Cash Flow from Operations: $399 million, with free cash flow at $342 million.
• Balance Sheet: Cash and cash equivalents totaled $1.58 billion, with no outstanding borrowings on a $1.5 billion revolver, resulting in liquidity of approximately $3.7 billion.

2. Strategic Updates and Business Highlights

• ZT Systems Performance: Revenue from ZT Systems was $1.88 billion, driven by strong customer demand and accelerated compute shipments.
• Core Sanmina Growth: Revenue from the Core Sanmina business grew 7.3% year-over-year, contributing $1.70 billion.
• Market Segments: Strong performance in Communication Networks and Cloud AI Infrastructure, with revenue of $2.77 billion, reflecting nearly 280% growth.
• Integration Progress: Successful integration of ZT Systems is underway, with a three-phase plan focusing on immediate integration, securing customer business, and driving future growth.
• Book-to-Bill Ratio: Exceeded 1.1, indicating strong demand and positive trends in end markets.

3. Forward Guidance and Outlook

• Q3 Fiscal 2026 Guidance: Expected revenue between $3.2 billion and $3.5 billion, with non-GAAP diluted EPS projected between $2.55 and $2.85.
• Full Year Fiscal 2026 Guidance: Anticipated revenue of $13.7 billion to $14.3 billion, with a non-GAAP operating margin of 6.3% to 6.6%. ZT Systems expected to contribute $5 billion to $6 billion.
• Fiscal Year 2027 Outlook: Confident in achieving over $16 billion in revenue, driven by strong demand and new customer acquisitions.

4. Bad News, Challenges, or Points of Concern

• Supply Chain Issues: Ongoing material shortages, particularly in memory and custom ASICs, could impact production and revenue potential.
• Dependence on Customer Scheduling: Future revenue from ZT Systems is contingent on customer schedules and the timing of product shipments, creating uncertainty.
• Margin Sustainability: While current margins are strong, future performance may depend on product mix and customer agreements.

5. Notable Q&A Insights

• ZT Systems Outperformance: The strong performance was attributed to accelerated shipments driven by customer demand, particularly for AMD-based products, rather than NVIDIA products.
• Customer Base Expansion: Sanmina aims to diversify its customer base beyond existing relationships, targeting more hyperscalers and OEMs.
• R&D Investment: As the company transitions to a value-add ODM service provider, there may be increased R&D spending to support growth and innovation.
• Material Shortages: While supply chain challenges exist, management is confident in their ability to manage these issues without significant revenue risk, citing strong relationships with suppliers and effective planning.

Overall, Sanmina reported strong financial performance in Q2 2026, with promising growth prospects, particularly in the ZT Systems segment, despite facing supply chain challenges and the need for continued investment in R&D.