Electronics manufacturing services company Sanmina (NASDAQ: SANM) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 102% year on year to $4.01 billion. Revenue guidance for the full year exceeded analysts’ estimates, but next quarter’s guidance of $3.35 billion was less impressive, coming in 4.7% below expectations. Its non-GAAP profit of $3.16 per share was 31.8% above analysts’ consensus estimates.

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StockStory’s Take

Sanmina’s second quarter results were marked by significant year-on-year revenue growth, outperforming market expectations. Management attributed this jump primarily to robust demand for AI infrastructure and accelerated compute systems, as well as successful integration of ZT Systems. CEO Jure Sola explained that the quarter’s strength was “driven by accelerated compute shipments” and noted that Sanmina’s core business also delivered steady growth across major end markets. The company’s strong operational discipline and ability to adapt to customer demand shifts were central to its performance, with CFO Jonathan Faust highlighting the role of “disciplined cost management” and “operating leverage” as key contributors to the non-GAAP profit outperformance.

Looking forward, management’s guidance reflects confidence in ongoing demand for both its core manufacturing operations and the ZT Systems business, particularly in the AI and data center segments. Sola emphasized that Sanmina is “positioning the company to be ready” for continued growth as hyperscale and OEM customers ramp up next-generation platform adoption. Faust added that while some accelerated compute shipments were pulled forward this quarter, the company’s pipeline remains strong, and new program launches are expected later in the year. Management acknowledged ongoing supply chain constraints but stated that these challenges have been incorporated into their outlook.

Key Insights from Management’s Remarks

Sanmina’s quarter was shaped by surging AI infrastructure orders, the integration of ZT Systems, and continued expansion in core segments outside of cloud. Management noted several factors that contributed to deviations from analysts’ expectations. The management team emphasized the scale and breadth of both the operational performance and strategic initiatives underpinning the quarter. The integration of ZT Systems not only expanded Sanmina’s customer base and market reach, but also provided the operational agility and capacity needed to respond to outsized demand in accelerated compute and AI infrastructure. The Core Sanmina business, spanning Industrial, Medical, Aerospace, and Automotive, maintained stability and is poised for further growth as supply constraints abate. Additionally, the team addressed how material shortages, particularly in memory and custom ASICs, limited some upside but were effectively managed through strong supplier relationships and agile IT systems. Sanmina also reinforced its commitment to returning capital to shareholders through an expanded share repurchase program. Overall, management’s remarks highlighted a blend of operational execution, strategic integration, and capital discipline as the key drivers of the quarter’s strong results and positive outlook.

• ZT Systems integration impact: The successful integration of ZT Systems accelerated Sanmina’s exposure to the AI and cloud infrastructure markets. Management credited the ZT team with executing large-scale, accelerated compute shipments, specifically emphasizing demand for AMD-based systems over legacy platforms. This integration facilitated a smoother ramp-up for next-generation compute products and expanded Sanmina's customer base among leading hyperscalers and OEMs.
• AI and cloud infrastructure demand: The surge in AI infrastructure and cloud compute orders drove outsized top-line growth. Sola highlighted that “AI is driving growth for entire end markets,” especially in high-performance communication networks and data centers, with bookings and the pipeline remaining robust for both new and existing customers.
• Core Sanmina steady across end markets: Outside of cloud and AI, core Sanmina businesses in Industrial, Medical, Defense & Aerospace, and Automotive & Transportation delivered stable results. The company cited continued momentum in power generation, semiconductor capital equipment, and medical disposables, with expectations for growth to accelerate in the second half as supply constraints ease.
• Supply chain and material shortages: Management acknowledged ongoing challenges sourcing components such as memory and custom ASICs. While these headwinds constrained some shipments, they were managed through close customer partnerships and agile IT systems. Faust noted, “We could have shipped a lot more…if there was more components available,” underscoring the tight supply environment.
• Expanded capital return program: Sanmina announced a $600 million increase in share repurchase authorization, reinforcing its capital allocation strategy. Management reiterated that investment in organic growth and strategic acquisitions remains the top priority, but opportunistic buybacks are considered when liquidity permits.
• Balance sheet and liquidity strength: Faust emphasized Sanmina’s strong balance sheet, ample liquidity, and prudent leverage, which provide the flexibility needed to invest in growth initiatives, support the integration of ZT Systems, and pursue further strategic opportunities. The company ended the quarter with $1.58 billion in cash and no outstanding borrowings on its $1.5 billion revolver, giving it substantial liquidity to support future expansion.
• Operational leverage and margin discipline: The company’s non-GAAP operating margin held at 6.4%, in line with expectations and reflecting ongoing cost discipline and effective execution amid strong revenue growth. This margin performance, combined with the 125% year-over-year increase in non-GAAP diluted EPS, showcased Sanmina’s ability to drive operating leverage as the business scales.
• Customer wins and pipeline visibility: Management highlighted multiple new program wins with hyperscalers and OEMs for next-generation AI platforms, with production schedules being finalized for later this year and into 2027. The pipeline “remains strong,” supporting management’s confidence in achieving both near-term and long-term growth targets.

Drivers of Future Performance

Sanmina’s outlook is driven by sustained AI and cloud infrastructure demand, ongoing expansion of ZT Systems, and a focus on vertical integration and capacity investment. Management is also preparing for a future in which supply chain agility and customer diversification will be increasingly important as the company scales its operations further across both existing and emerging markets.

• Next-generation AI platforms: Management expects new program launches for accelerated compute and next-generation AI hardware to be key revenue drivers, especially as hyperscale and OEM customers finalize production schedules later in the year. Faust noted that the majority of new revenue from these platforms is anticipated in the following year, with early shipments already underway.
• Core segment growth and diversification: The company anticipates continued high-single-digit growth in core segments, with particular strength in power management, medical devices, and aerospace. Sola emphasized investments in engineering and design for vertical integration, aiming to capture more value from complex subassemblies and custom components.
• Supply chain and input risks: Management warned that material shortages—particularly for memory and ASICs—remain a risk for the remainder of the year and possibly into next year. However, these challenges have been factored into current guidance, and Sanmina’s integrated IT and supplier relationships are expected to help mitigate disruptions.
• Capacity investments and vertical integration: Sanmina continues to invest in power, liquid cooling, and test cell capacity, enabling readiness for next-generation AI and data center programs. Management is prioritizing vertical integration, leveraging engineering capabilities to expand into subassemblies and custom components that add value and strengthen customer relationships.
• Capital allocation flexibility: The company’s strong balance sheet and liquidity position provide the flexibility to invest in organic growth, pursue strategic acquisitions, and return capital to shareholders. Ongoing share repurchases will be balanced against future investment needs and market opportunities.
• Customer and end-market diversification: Management is focused on expanding the customer base within both ZT Systems and core Sanmina, targeting hyperscalers, OEMs, and emerging “neo-cloud” providers. This diversification strategy is expected to underpin revenue stability and position Sanmina to capitalize on industry trends across multiple end markets.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the ramp of next-generation AI and accelerated compute platforms as customer production schedules are finalized, (2) the pace of diversification and vertical integration in Sanmina’s core and ZT Systems businesses, and (3) Sanmina’s ability to manage ongoing component shortages without impacting revenue targets. Execution on new program wins and capital allocation will also be critical markers of progress.

Sanmina currently trades at $216, up from $188.08 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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