Electronics manufacturing services company Sanmina (NASDAQ: SANM) reported Q2 CY2026 results beating Wall Street’s revenue expectations, with sales up 69.7% year on year to $3.46 billion. On the other hand, next quarter’s revenue guidance of $3.45 billion was less impressive, coming in 2.1% below analysts’ estimates. Its non-GAAP profit of $3.31 per share was 18.5% above analysts’ consensus estimates.

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StockStory’s Take

Sanmina’s second quarter results reflected robust demand across its core and acquired businesses, with both the core Sanmina and ZT Systems units contributing to notable year-on-year growth. Management credited the broad-based strength in end markets, particularly the communications networks, cloud, and AI infrastructure segments, as primary drivers. CEO Jure Sola pointed to strong bookings and a healthy backlog, emphasizing, “AI is driving growth in this entire end market.” Non-recurring engineering services also provided a boost to operating margins, supported by disciplined cost management and strategic investments in capacity, especially for high-technology printed circuit boards and AI system racks.

Looking ahead, Sanmina’s outlook is shaped by continued investment in next-generation compute programs and an expectation of ongoing demand from AI data center customers. Management noted that while the new accelerated compute program is on track, its revenue contribution will begin in the next quarter and ramp up over time. CFO Jonathan Faust explained the focus on securing customer orders and expanding the addressable market, particularly in cloud and AI infrastructure, stating, “We are exactly where we expected to be at this point in the process.” The company remains confident in its long-term growth trajectory, but also acknowledged that working capital requirements and timing of program ramps will affect near-term cash flow and margins.

Key Insights from Management’s Remarks

Management attributed quarterly outperformance to strong execution in core Sanmina and ZT Systems, product mix, and expanded engineering capabilities, along with a focus on new customer wins and vertical integration.

• AI infrastructure demand surge: Management cited robust demand for AI-related products as a key growth engine, with accelerated compute, general purpose compute, and storage solutions driving strong bookings and new project wins. The communications networks, cloud, and AI infrastructure segment was particularly highlighted for its rapid expansion.

• Non-recurring engineering services: The quarter benefited from significant pre-production and engineering services for next-generation compute programs. These activities, though lower in direct revenue, contributed disproportionately to margin expansion by leveraging labor-intensive work supporting future product launches.

• ZT Systems integration progress: The integration of ZT Systems continued to deliver operational efficiencies and expanded the addressable market. Management outlined a three-phase integration plan, reporting successful milestones in process streamlining, capacity investments, and customer validation, positioning the business to win new programs.

• Strategic capital investments: Sanmina emphasized continued investment in manufacturing capacity—including metal fabrication for AI racks, printed circuit boards, and new transformer capabilities—aimed at supporting growth in both core and acquired businesses. These investments are expected to yield higher returns as facilities ramp up utilization.

• Customer and end-market diversification: The company is broadening its customer base across markets such as defense, aerospace, medical, and automotive, citing new program wins and stable or accelerating demand in these segments. Management noted ongoing expansion in the energy business for AI data centers and increased focus on high-technology solutions.

Drivers of Future Performance

Sanmina’s guidance reflects ongoing investments in next-generation platforms, a strong AI infrastructure pipeline, and expectations for margin stability despite potential timing and working capital headwinds.

• Next-generation compute ramp: Management expects revenue growth to be driven by the launch and scaling of new accelerated compute programs for AI data centers, with revenue recognition from these projects beginning in the next quarter. The company is focused on finalizing production schedules and customer ramps, which may cause variability in near-term results.

• Working capital and margin dynamics: The ramp-up of new programs will require increased working capital, leading to some near-term cash flow pressure. Management believes these investments are necessary for long-term growth, but they acknowledged that operating margins may fluctuate depending on product mix and timing of customer launches.

• Broader customer wins and market expansion: Sanmina is targeting growth through expanded engineering capabilities and new program wins across multiple platforms, including partnerships with leading chip designers and rack manufacturers. The company is leveraging vertical integration and diversified end-market exposure to mitigate cyclical risks and support sustained growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace of revenue ramp from new accelerated compute programs, (2) progress on ZT Systems integration and the realization of operational synergies, and (3) the effectiveness of ongoing investments in capacity and engineering capabilities. Additional signposts include traction with new customer wins in AI infrastructure and the impact of working capital dynamics on free cash flow.

Sanmina currently trades at $208.02, in line with $208.90 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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