Sanmina Corporation (SANM) - 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended March 28, 2026 (Fiscal Q2 2026). Sanmina Corporation is a global provider of integrated manufacturing solutions, components, and services. The reporting period is significantly impacted by the acquisition of ZT Systems, a manufacturer of AI and general-purpose computer infrastructure, which closed on October 27, 2025. ZT Systems' results are included in the Integrated Manufacturing Solutions (IMS) segment.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Sales | $4.01 billion | $1.98 billion | $7.20 billion | $3.99 billion |
| Gross Profit | $353.8 million | $176.2 million | $596.2 million | $344.2 million |
| Gross Margin | 8.8% | 8.9% | 8.3% | 8.6% |
| Operating Income | $157.0 million | $91.6 million | $230.6 million | $180.2 million |
| Net Income (Common Shareholders) | $93.6 million | $64.2 million | $142.9 million | $129.2 million |
| Diluted EPS | $1.70 | $1.16 | $2.58 | $2.32 |
| Cash from Operations (YTD) | $577.5 million | |||
| Free Cash Flow (YTD) | ~$434 million (Operating Cash Flow less $144M CapEx) | |||
| Total Debt (Outstanding) | $2.2 billion (Term Loan A & B) | |||
| Cash & Equivalents | $1.58 billion |
Material Changes vs. Prior Period
- Revenue Surge: Net sales increased 102% year-over-year for the quarter and 80.5% year-over-year for the six months. This growth is primarily driven by the ZT Systems acquisition, which contributed approximately $1.9 billion in revenue for the quarter and $3.0 billion for the six months.
- Segment Mix: The Communications Networks and Cloud and AI Infrastructure end market saw a 278% increase in sales for the quarter, largely due to ZT Systems. Conversely, the Industrial, Medical, Defense, and Automotive sectors saw a slight decline of 0.7%.
- Debt Structure: To finance the ZT acquisition, the company secured a new $3.5 billion credit facility (Term Loan A and Revolver) and an additional $800 million Term Loan B. Total debt outstanding increased from $300 million in the prior year to $2.2 billion.
- Acquisition Costs: The company incurred $73 million in acquisition, integration, and other costs for the quarter, primarily consisting of a $59 million fair value adjustment to contingent consideration related to the ZT deal.
- Balance Sheet: Total assets grew from $5.86 billion to $9.67 billion, driven by the acquisition of ZT Systems assets and increased inventory levels ($3.03 billion vs. $1.99 billion).
Guidance, Outlook, and Risks
- Outlook: Management expects to continue diversifying into mission-critical markets and optimizing the product mix toward higher-value opportunities. The strategic relationship with AMD positions Sanmina as a preferred manufacturing partner for AI rack and cluster-scale systems.
- Stock Repurchases: The Board authorized a new $600 million share repurchase program subsequent to the quarter end. During the six months ended March 28, 2026, the company repurchased 1.6 million shares for $239 million.
- Key Risks:
- Integration Risk: Success depends on integrating ZT Systems and executing the business plan for data center rack deployments.
- Tax Contingency: The IRS has asserted an $8 million underpayment for fiscal 2009 related to a $503 million worthless stock deduction. The company is contesting this, but an unfavorable resolution could materially impact financial statements.
- Legal Proceedings: Ongoing False Claims Act (Qui Tam) litigation regarding the SCI Technology subsidiary alleges fraud totaling approximately $100 million. The company intends to defend vigorously.
- Macroeconomic Factors: Exposure to tariffs, inflation, supply chain constraints, and geopolitical tensions (e.g., Middle East, Ukraine, U.S.-China relations).
Investor Verification Checklist
- ZT Systems Integration: Verify the timeline and progress of integrating ZT Systems' operations and the realization of anticipated synergies.
- Contingent Consideration: Monitor the $170 million contingent liability for the ZT acquisition, which could increase up to $450 million based on future performance metrics.
- IRS Audit Status: Track the resolution of the IRS Revenue Agent's Report regarding the 2009 tax deduction, as it poses a potential material liability.
- Customer Concentration: Note that the ten largest customers represent approximately 70% of net sales, with two customers individually representing over 10%.
- Debt Covenants: Confirm continued compliance with the new credit facility covenants, specifically the maximum consolidated total net leverage ratio of 4.00 to 1.00.