SANM - NASDAQ
Sanmina Corporation
SANM·NASDAQ
$282.72
+1.6%TechnologyHardware, Equipment & Parts
Sanmina Corporation provides integrated manufacturing solutions, components, products and repair, logistics, and after-market services worldwide. It operates in two businesses, Integrated Manufacturing Solutions; and Components, Products and Services. The company offers product design and engineering, including concept development, detailed design, prototyping, validation, preproduction, manufacturing design release, and product industrialization; assembly and test services; direct order fulfillment and logistics services; after-market product service and support; and supply chain management services, as well as engages in the manufacturing of components, subassemblies, and complete systems. In addition, the company provides interconnect systems, such as printed circuit board fabrication, backplane, cable assemblies, and plastic injection moldings; mechanical systems comprising enclosures and precision machining; memory, storage platforms, radio frequency, optical, and microelectronic solutions; defense and aerospace products; and cloud-based manufacturing execution software. It offers its products and services primarily to original equipment manufacturers in the industrial, medical, defense and aerospace, automotive, communications networks, and cloud solutions industries. Sanmina Corporation was founded in 1980 and is headquartered in San Jose, California.
At a Glance
Live SnapshotMarket Cap$15.15B
EPS4.5600
P/E Ratio62.00
Earnings Date07/27/2026
Earnings Call Transcript
SANM • 2026 • Q2
Operator
Good afternoon, ladies and gentlemen, and welcome to Sanmina's Second Quarter Fiscal 2026 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Monday, April 27, 2026. I would now like to turn the conference over to Paige Melching, Senior Vice President of Investor Communications. Please go ahead.
Paige Melching
Thank you, John. Good afternoon, ladies and gentlemen, and welcome to Sanmina's Second Quarter Fiscal 2026 Earnings Call. A copy of our press release and slides for today's discussion are available on our website at sanmina.com in the Investor Relations section. Joining me on today's call is Jure Sola, Chairman and Chief Executive Officer.
Jure Sola
Good afternoon.
Paige Melching
Jon Faust, Executive Vice President and Chief Financial Officer.
Jon Faust
Good afternoon.
Paige Melching
Before I turn the call over to Jure, let me remind everyone that today's call is being webcasted and recorded and will be available on our website. You can follow along with our prepared remarks in the slides provided on our website. Please turn to slide 3 of our presentation and take note of our safe harbor statement. During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution you that such statements are just projections. The company's actual results could differ materially from those projected in these statements as a result of factors set forth in the safe harbor statement.
Paige Melching
The company is under no obligation to, and expressly disclaims any such obligation to update or alter any of the forward-looking statements made in this earnings release, the earnings presentation, the conference call, or in the Investor Relations section of our website, whether as a result of new information, future events or otherwise, unless otherwise required by law. Included in our press release and slides issued today, we have provided you with statements of operations for the second quarter ended March 28, 2026 on a GAAP basis, as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website. In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-cash stock-based compensation expense, amortization expense, and other unusual or infrequent items.
Paige Melching
Any comments we make on this call as it relates to the income statement measures will be directed at our non-GAAP financial results. Accordingly, unless otherwise stated in this conference call, when we refer to gross profit, gross margin, operating income, operating margin, taxes, net income, and earnings per share, we are referring to our non-GAAP information. I'd now like to turn the call over to Jure.
Jure Sola
Thanks, Paige. Good afternoon, ladies and gentlemen, and welcome. Thank you all for being here with us today. First, I would like to take this opportunity to recognize our employees and Sanmina leadership team for doing a great job. To you, Sanmina's team, again, thank you for your dedication, hard work, and delivering excellent service to our customers. Please turn to slide 4. Ladies and gentlemen, I can tell you that I'm very pleased with our performance for second quarter. We delivered a strong results for the second quarter. Revenue came in at $4.01 billion and strong non-GAAP operating margin of 6.4% and non-GAAP diluted EPS of $3.16. Cash flow from operation was also strong at $399 million.
Jure Sola
Overall, we're executing according to our plan with a strong execution in both Core Sanmina and Sanmina AI Group,
Jon Faust
Great. Thank you, Jure. Good afternoon, ladies and gentlemen, and thank you for joining today's earnings call. Before I review our financial results for the quarter, I want to acknowledge the entire Sanmina team for their focused execution and thank them for delivering a solid second quarter and first half of fiscal 2026. Now, please turn to slide 6, where I will speak to the financial highlights. As Jure mentioned, we are very pleased with our results for the quarter. As you can see, we exceeded our outlook across the board. Our revenue of $4.0 billion came in well above our outlook range, driven by strong execution and customer demand for the
Jon Faust
Also, we delivered growth across the majority of our end markets for the Core Sanmina business, which Jure will cover in more detail later in the call. Our non-GAAP operating margin of 6.4% and our non-GAAP diluted earnings per share of $3.16 also exceeded our outlook, driven by the additional revenue, mix, and disciplined cost management. These results put us on the right path towards achieving our revenue growth, margin expansion, and diluted earnings per share growth objectives for the fiscal year. Now, please turn to slide 7, where I will speak to our non-GAAP P&L performance. As I just mentioned, we delivered revenue of $4.0 billion, which was up 102% versus the same period a year ago.
Jon Faust
Our Core Sanmina business revenue grew 7.3% versus the same period a year ago, in line with our expectations. Our
Jon Faust
Our non-GAAP operating expenses were $103 million, or 2.6% of revenue. These strong revenue results, along with ongoing cost discipline and operating leverage, enabled us to achieve non-GAAP operating profit of $257 million or 6.4% of revenue, up 80 basis points versus the same period a year ago. This represents our third quarter in a row of non-GAAP operating margin at 6% or above. Our non-GAAP operating income and expense was a net expense of $25.9 million. Our non-GAAP diluted earnings per share was $3.16, based on approximately 55 million shares outstanding. This strong non-GAAP diluted earnings per share performance represents a 125% increase versus the same period a year ago and showcases the operating leverage in our business model.
Jon Faust
Now please turn to slide 8, where I will speak to the segment results. IMS revenue came in at $3.58 billion, up 123.5% versus the same period a year ago, driven primarily by growth in the cloud and AI infrastructure end market, including the strong contribution from the
Jon Faust
CPS revenue came in at $461 million, up 12.2% versus the same period a year ago. CPS non-GAAP gross margin was 11.6%, down 230 basis points versus the same period a year ago. This decrease was primarily driven by depreciation and other expenses related to investments to support new programs, which we expect will deliver margin-accretive growth in future quarters. In addition, component shortages impacted the timing of revenue and profitability for one of our product businesses, which we believe will be resolved in the second half of the fiscal year. Now please turn to slide 9, where I will speak to the balance sheet highlights. We continue to have a very strong balance sheet with prudent leverage and ample liquidity, giving us the fiscal agility to support our growth objectives.
Jon Faust
Cash and cash equivalents were $1.58 billion. At the end of the quarter, we had no outstanding borrowings on our $1.5 billion revolver, leaving us with substantial liquidity of approximately $3.7 billion, which will support the expected growth of the business. We ended the quarter with inventory of $2.1 billion, net of customer advances, which is up 75% versus the same period a year ago, driven by the
Jon Faust
We continue to have one of the strongest balance sheets in the industry with a net leverage ratio of 0.56x. This ratio is calculated in a balanced manner by annualizing our non-GAAP EBITDA results for the first half, which only includes 5 months for
Jon Faust
That being said, we remain committed to maintaining a healthy balance sheet, which means carefully managing the liquidity needed to invest in the business and capitalize on strategic opportunities that further strengthen our position in the market. Now please turn to slide 10, where I will speak to our cash flow highlights. As a result of the team's disciplined working capital management, our second quarter cash flow from operations came in very strong at $399 million. Capital expenditures were $57 million for the quarter, below our outlook, primarily due to timing. As I've mentioned before, we will continue to make strategic investments in the technologies and capabilities needed to strengthen our position in the market and to support our long-term financial objectives. Free cash flow was $342 million for the quarter.
Jon Faust
During the quarter, we repurchased approximately 1.1 million shares for approximately $160 million to offset the remaining dilution for the year. Our strong cash flow performance gives us the flexibility to continue to invest in the business and return capital to our shareholders. Now please turn to slide 11, where I will speak to our capital allocation strategy. When it comes to capital allocation, it's incredibly important to have a clear strategy and a well-defined set of priorities when making decisions. As we've shared with you before, our first priority is to invest in our business to drive long-term organic growth and margin expansion. We evaluate all investments with discipline and take a structured ROI-based approach. Second, we continuously evaluate strategic acquisition and partnership opportunities, which need to meet our ROI expectations to help accelerate our growth.
Jon Faust
Third, we carefully manage our balance sheet and liquidity position with a focus on our long-term net leverage target, as well as our long-term goal of achieving investment-grade ratings. Finally, when appropriate, we return capital to shareholders through share repurchases, subject to maintaining a strong balance sheet and liquidity position. We have and will continue to execute on this strategy by utilizing these options, which enables us to take advantage of opportunities to grow our business. We believe that our stock is a great long-term investment, and as such, share repurchases remain an attractive capital allocation option. With that said, today, we announce that our board of directors authorized an additional $600 million of share repurchases. This authorization has no expiration date as we intend to continue to repurchase shares opportunistically and in the context of the capital allocation strategy I just outlined.
Jon Faust
Now please turn to slide 12, where I'll provide an update on the
Jon Faust
The second phase, which is well underway, is focused on securing customer business and ensuring continuity. Since closing the acquisition, we have won and shipped new accelerated compute business, which is evident in our strong results for the quarter. In addition, we have secured next-generation accelerated compute business with both hyperscale and OEM customers and are currently in the process of finalizing customer production schedules. The third and final phase, which we've already started working on, is about driving growth and expansion. We expect to do this by driving additional synergies through vertical integration and increasing our addressable market by expanding on our existing engineering capabilities to support all platforms. Today, the focus of
Jon Faust
In the future, by combining it with Sanmina's existing capabilities, we'll also have the ability to build subassemblies and leverage our components, products, and services technologies. Now please turn to slide 13, where I will provide our outlook for the third quarter. Our outlook is based on current customer forecasts and takes into account ongoing market uncertainties stemming from the macroeconomic and geopolitical landscape. We expect revenue between $3.2 billion and $3.5 billion. We expect Core Sanmina revenue to be in the range of $2.2 billion-$2.3 billion. We expect
Jon Faust
At the midpoint, total Sanmina would be $3.35 billion, which reflects 64% growth versus the same period a year ago. We expect non-GAAP operating margin of 6.4%-6.9%. We expect other income and expense to be a net expense of approximately $30 million. We expect our non-GAAP effective tax rate to be between 21%-23%. We estimate an approximate $5 million non-cash reduction to our net income to reflect our India joint venture partner's equity interest. We expect non-GAAP diluted earnings per share in the range of $2.55-$2.85 based on approximately 55 million fully diluted shares outstanding. At the midpoint of $2.70, that represents a 77% increase compared to the same period a year ago.
Jon Faust
We expect capital expenditures to be $95 million as we continue to invest strategically to support our future growth expectations. Finally, depreciation of approximately $50 million. Now please turn to slide 14, where I will provide our outlook for the full fiscal year 2026. We expect revenue to be in the range of $13.7 billion-$14.3 billion. Within this range, we continue to expect the Core Sanmina business to grow in the high single digits and the
Jon Faust
Finally, we expect non-GAAP diluted earnings per share in the range of $10.75-$11.35 based on approximately 55 million diluted shares outstanding. In summary, I'm very pleased with our results for the second quarter and for the first half. There's still a lot of work to do in the fiscal year, but we're on a great trajectory for both the Core Sanmina business and the
Jon Faust
Based on what is in front of us, we are increasingly confident in our ability to achieve revenue of $16 billion+ in 2027. With that, I would like now to turn the call back over to Jure.
Jure Sola
Thank you, Jon. Ladies and gentlemen, as you heard from Jon, we delivered stronger results for the second quarter. Most important is that fiscal year 2026 is tracking better than our expectation at the start of the fiscal year 2026. Please turn to slide 16. Let me talk to you about now the revenue by end market for the second quarter of 2026. Communication networks, cloud, AI infrastructure came in at $2.77 billion. As you can see there was a nice growth. Actually, it's almost 280% growth. Sanmina Core contributed to that $891 million. That's up 22% year-over-year. As you heard from Jon,
Jure Sola
Industrial, energy, medical, defense and aerospace, automotive and transportation group delivered 31% or $1.24 billion. Overall, that was flat, which was expected. We knew that industrial was gonna be slightly down, and that's what happened. Overall, this is a great quarter when you look at the revenue now being over $4 billion. Core Sanmina revenue grew 7.3% year-over-year. I can tell you that the bookings for second quarter were strong. Book-to-bill was better than 1.1. We're seeing a very positive trends in our end markets. To tell you more about it, please turn to slide 17. Communication networks, cloud AI infrastructure is well diversified in these segments.
Jure Sola
What we consider high-performance communication networks, you know, that business for us has been pretty strong, driven by IP switching and routing, optical system, pluggables, broadband access, and 5G wireless infrastructure. As you heard from Jon, cloud and AI infrastructure continue to do well, driven by accelerated compute, general purpose compute, and storage. Key takeaways for this is that AI is driving growth for entire end markets, but we're also seeing some positive growth from a traditional telecommunication business. Bookings continue to be strong. We won several new programs. We do see a strong pipeline for new projects, especially as we look at in the calendar year 2027 and 2028, and we are positioning our company to be ready for that. We're well-positioned to drive the growth in this segment. Please turn to slide 18.
Jure Sola
Let me talk to you about industrial and energy. This segment for us is very promising, driven by power generation and distribution of power. We have multiple customers in this segment that we expect it to do well. Semiconductor capital equipment starting to move in the right direction and demand continues to go up. We have a good customer base there, and we expect to see nice growth. Transformers, we're investing in the business both from an engineering and design. We have multiple customers working on that, and we expect to see nice growth, especially in 2027. Power and storage and management is also a very strong business for us, and safety and surveillance equipment. Key takeaways on this is that we're doing well. We expect growth to accelerate in second half.
Jure Sola
We're expanding energy business for AI data centers all the way from engineering, design to full system and vertical integration. Please turn to slide 19. Let me give you some highlights on medical. In this segment, we are well-positioned around disposables, variable consumer business, laboratory diagnostic, research equipment, and medical offices, hospital and medical offices. Key takeaways here are it's very stable end market. We expect growth to accelerate in second half, and we are leveraging our regulatory knowledge and experience to expand customer base and the new programs to drive the growth. We're well-positioned here. Please turn to slide 20. Let me give you a few comments on defense and aerospace. We're well-positioned here. You know, the Sanmina/SCI has been in this business forever. We're building business here around the defense and commercial aerospace.
Jure Sola
We do everything from design to full system integration. Key takeaways here is we expect the growth in traditional U.S. defense and aerospace business to continue. We're expanding customer base in satellites market with some big opportunities. We continue to see strong demand in fiscal year 2027 and beyond. As we look at the second half of 2026, it's really positioned us to a good year, but most importantly, we see a lot of growth in the future. Please turn to slide 21. Few comments about automotive and transportation. We're well-positioned here. We have some solid customers here around automotive EV business, self-driving cars, and transportation. Key takeaways again, overall, we have stable customer demand here, a great customer base. We continue to win key programs from new and existing customers, and programs that transitioning from NPI into full-scale production for us.
Jure Sola
Please turn to slide 22. Let me talk to you right now about our Sanmina's capabilities. We do have diverse set of capabilities where we provide end-to-end solution for all our key markets. Our capabilities are industry-leading from engineering, design to full system for our key markets, including data center, AI infrastructure, end market. We typically get involved early stage of product development. We help the customer bring the product to the market. We provide high technology printed circuit boards. In this segment, we have some of the leading technology in industry, both here in North America and Singapore. We fabricate and assemble some of the most advanced boards and test. We build mechanical racks and enclosure and design. We invest a fair amount in liquid cooling. We fabricate and build cooling manifolds, busbars.
Jure Sola
We also have a strong compute and storage system around ODM and joint development, and we're expanding that. We do provide custom memory for key customers. We've also been growing and investing in custom optical modules. As I said, from the engineering to full system integration and direct global order fulfillment for our customers. When you look at Sanmina's capability, that's what really allowed us to establish a diverse customer base of market leaders with average relationship with our customers over 50 years. Very proud of that. Please turn to slide 23. Here you can see Sanmina's manufacturing footprint, which is strategically positioned to support our customers globally. We are aligned with the customer requirements, and we have a strong USA presence.
Jure Sola
We are leveraging our established global infrastructure and have the right capacity in place for the growth as we talk about, you know, next year, 2027 and 2028. Our global and regional supply chain is connected by one IT system, which is managed by Sanmina Smart MES. Sanmina's IT systems are very agile and responsive. We have industry-leading capabilities, especially in the market today when there's a lot of material shortages. Please turn to slide 24. In summary, as you heard from Jon, and I'm repeating myself again, our team executed well and delivered a great second quarter results. Revenue outlook for fiscal year 2026 is coming in strong at $13.7 billion-$14.3 billion, midpoint of $14 billion, year-over-year growth of approximately 73%. We're also well-diversified, as I just explained to you earlier, across and with all end markets.
Jure Sola
We have strong USA presence and global regional manufacturing footprint for the future. New programs build will drive the growth for us in fiscal year 2027 and 2028. As Jon said earlier, we're well-positioned to deliver $16 billion+ in fiscal year 2027 based on the forecast that we have in front of us right now. Again, we feel good about opportunities in front of us. I can tell you that overall, our strategy is working to build bigger and stronger Sanmina for the future. Now, ladies and gentlemen, I would like to thank you all for your time and support. Operator, we're now ready to open the lines for questions and answers. Thank you again.
Operator
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Ruplu Bhattacharya from Bank of America. Please go ahead.
Ruplu Bhattacharya
Hi, thank you for taking my questions.
Jure Sola
Hello, Ruplu.
Ruplu Bhattacharya
Hi, Jure. How are you?
Jure Sola
Good, good.
Ruplu Bhattacharya
Sounds like
Jure Sola
Yeah. Ruplu, excellent questions. First of all, you know, this was a great quarter. A customer wanted to pull in some of the products that originally was on a schedule for third and fourth quarter. They had a demand, and our team was able to deliver, so that's good. We did not ship any accelerated compute of NVIDIA product. Whatever we shipped, it was all based on AMD technology. As we look at the future, I think there's a lot of exciting stuff going around the new products. We won the, you know, multiple hyperscalers and ODMs for the future, so it's been an exciting quarter for us. Jon, I don't know if anything else you wanna add to that.
Jon Faust
Yeah. Just to add, Ruplu, on the front end. I mean, we're very excited, as Jure said, to do so much business in this quarter around accelerated compute, and it's new platform business, not the old legacy products that
Jon Faust
That came in, the team was able to build it quickly, so that's great. Hopefully, we'll see if there's gonna be more of those types of orders. At this point, you know, given the nonlinear nature, there isn't any, so. But we'll see. That could change. But our real focus, as Jure was saying, is on the future new generation platform. We're focused on getting production ready for that, and excited about the new opportunities that we won for that business.
Ruplu Bhattacharya
Okay. Jon, you mentioned in the PowerPoint that the margin profile for
Jon Faust
It's like you're kind of insinuating or getting at, Ruplu, it all depends on the mix of the business. Right now, you know, it's very much in line in this quarter, landing at 6.4%. If you look at our guide for Q3, we said 6.4%-6.9%, and that's kind of implied for Q4 'cause the full year comes in at 6.3%-6.6%. That's because we're not gonna have as much of the accelerated computes as we would in the future. Like long-term, as we've said before, you know, we expect the margin profile to be roughly in line with Core Sanmina and where that's been.
Jon Faust
Now, this will all depend as we're finalizing some of the customer agreements and where we land in terms of consignment and so forth. That may adjust. A little bit early to talk about expectations for 2027, but we did want to give you the guide specifically for fiscal year 2026. That's why we guided the full year, to let you know what we expect over the next six months.
Jure Sola
Yeah.
Ruplu Bhattacharya
Okay.
Jure Sola
If I can add to that, Ruplu, I think it's, as Jon said, a transition year. You know, a lot of work, but we're ahead of schedule, and, you know, we're gonna have a lot better year than what we expected at the beginning of the year. Most importantly, how well we're gonna be positioned for the future when it comes to the demand. Demand is not gonna be a problem. It's all about timing, when the hyperscalers mainly do their scheduling and so on. So it's all about getting ready for the better days in the future.
Ruplu Bhattacharya
Okay, Jure. I'm gonna try and sneak one more in. Can you give us some more details on the communication segment? I mean, this has been traditionally a strength for Sanmina. Can you talk about, like you mentioned, optical IP switching and broadband 5G. How much of the segment revenue comes from each of these buckets? And are you seeing more demand for optical transceivers, or are you seeing demand for switches? And are you actually shipping 1.60 switches today?
Jure Sola
First of all, before I forget, you know I'm an older guy here. Yes, we're shipping 1.6 TB switches. We're in a what I would call new product introduction and so on. As you know, we have multiple customers that we build switches. We do not compete with our customers, but we're building some of the most advanced switches for our partners. Back to your direct question. Yeah, we are very excited about our communication business because we're building some of the most advanced products that goes in there around IP routing, optical systems, optical pluggables around 400, 800, and we're also developing 1.6 TB in a pluggables. Those are all exciting stuff.
Jure Sola
As I said, traditional telecom is coming back, and we do a little bit of 5G wireless. That's a small percentage of overall business, maybe 2%-3% of it, but it's a, you know, couple solid customers there. You know, so overall, yeah, everything is. This segment for us right now is really doing well in every segment inside of it. We're well diversified from high-performance communication networks to cloud AI infrastructure.
Ruplu Bhattacharya
Okay. All right. Thank you for all the details. Appreciate it.
Jure Sola
Thank you, Ruplu.
Operator
Your next question comes from the line of Samik Chatterjee from JPMorgan. Your line is now open.
Jure Sola
Hello, Samik. Welcome.
Samik Chatterjee
Thank you. Thanks for taking my questions. Maybe for the first one, just going back to your reference to new wins on the
Jure Sola
Well, Samik, again, welcome for covering Sanmina. Let me kind of take some of that and I'll turn it over to Jon, because Jon being responsible pulling
Jure Sola
Opportunities, demand is big, and we are positioning the company and we're putting the infrastructure in a place to be able to handle the you know the latest technology for the future. From my perspective, we see a lot of upside. Jon.
Jon Faust
Yeah. Let me add a few points, Samik, and thanks again for joining and welcome. So yeah, the business that we did this quarter was all new accelerated compute business. Nothing to do with the legacy platforms. You know, there was very little, right, when you think about the next generation product. Now that's scheduled to be out in September and everything is very much on track from that perspective. You know, we're doing everything that we're responsible for, which is getting production ready, making sure that we can build all the products at scale for all these customers. That's very much on track now. Whether or not we get a huge amount of revenue in September remains to be seen, and now everything is on schedule.
Jon Faust
Just to give you guys some perspective, you know, once the silicon and so forth becomes production ready, it takes us a while to build the products. Say a couple of weeks, right? Then we've got to ship the products all around the world. Just to be clear, like the revenue recognition for us in this business is when the customers receive it, right? The opportunity in our fiscal 2026 isn't really huge. That's more of an FY 2027 play. That's why we talk about towards the end of the calendar year. As we said on the call or in our prepared remarks, you know, we have started to ship some pre-production volumes. You know, we're learning more and more about building these products, getting ready. More to come on the customer specifics and the schedules.
Jon Faust
That's why we wanted to put on the slide that we're working through those details. We are happy to say that we've won several customers now, multiple customers. Our goal is to fill up all of our capacity. If we continue to win beyond that, we'll look to invest more.
Jure Sola
Yeah.
Samik Chatterjee
Got it. Thank you. For my follow-up, maybe, to your comments about sort of 2027 revenues from these systems. Just looking at your $16 billion guide for fiscal 2027, if it still remains on course and Sanmina grows at high single-digit %, that sort of indicates
Jon Faust
Yeah, it’s just that it’s early days. That’s why we said 16+. Just a little bit of history too, Samik. Like, back when we first announced the deal in May of last year, so almost a year ago, we said that we’d expected to double Sanmina within three years. Then when we got to our Q4 earnings call of last year, we accelerated that to within two years. That’s where the $16 billion number comes from for fiscal year 2027. Now we’re saying $16 billion+ because we see all the demand is there. We’re still assuming at this point that the vast majority of that business will be consignment. You know, it’s not entirely clear just yet. We’re working through some of those details with customers.
Jon Faust
That's why it's still early days, but we did wanna make the point that we feel very confident. I think my words were increasingly confident, right, about the revenue profile next year. This year we still gotta wait to see, you know, how much we might do in the, say, the MI300 series business, kind of the current version of accelerated compute, but new for us. Then the growth potential from there will all come down to the customer schedules, as Jure said.
Jure Sola
Yeah. No, it's an exciting future and, you know, in our business, Samik, you take one quarter at a time, but we feel very comfortable for the rest of this fiscal year, and I think there's more to come in the future.
Samik Chatterjee
Okay. Got it. Great. Thank you. Thanks for taking my questions. Thank you for the warm welcome as well. Thank you.
Jure Sola
Thanks, Samik.
Operator
Your next question comes from the line of Steven Fox from Fox Advisors. Please go ahead.
Jure Sola
Hello, Steve.
Steven Fox
Hi. Good afternoon, everybody. I guess I had a couple questions. Maybe first, Jon, on the cash flows. I know that you mentioned a couple puts and takes with CapEx, and I see a one-time item in there. But you grew revenues quarter-over-quarter, like $900 million, and you still generated, you know, almost $300 million of free cash flow in the quarter. Do you have a better sense now for how the combined business can sort of throw off cash on a 12-month basis? Anything you wanna sort of hold your feet to the fire at this point in terms of CapEx versus working capital, things like that? It would be helpful to get a better feel for that. Then I had a follow-up, if I could.
Jon Faust
Yeah, sure, Steve. Thanks for joining. Yeah, this quarter, Q2, was just a great cash flow from operations. I'll talk that first before free cash flow. Almost $400 million in cash flow from operations, and it was really due to the linearity of the business and just very strong execution, right? We executed, you know, manufactured a lot, shipped a lot of product, and collected cash. If you look at the details there, you'll see it in our 10-Q. Our inventory levels came down, AR levels came down 'cause we collected very well on that front. I would kind of frame that up as linearity. I have, to your point, learned a lot, you know, over the last, say, six to nine months, around the dynamics of the
Jon Faust
Once we hit a, you know, more of a production steady state with customers and get out of this transition period, even more will become clear. But very excited to generate the cash that we did this quarter. Now as we look ahead into Q3 and Q4, and we don't guide cash specifically, but, you know, we will start to build inventory levels, rebuild some of those inventory levels to prepare for that new accelerated compute business. That'll probably start to come more in Q4. I expect in the near term to continue to generate cash. As I was saying in my prepared remarks, you know, I do think our leverage ratio will come within that range, you know, as we build the inventory to support the future business. Very pleased with where we're at right now.
Steven Fox
Oh, that's super helpful. If I'm reading through all the details here correctly, it sounds like you have two main cloud customers that have generated the upside and give you confidence in the numbers. I know you're doing business with, you know, all five, like Jure said. But can you talk about, like, how we think about not just the number of cloud customers for
Jon Faust
Mm-hmm.
Steven Fox
I know the focus is on cloud, but can you talk a little bit about how
Jon Faust
Yeah. It's really both, Steve. I mean,
Jon Faust
First things first, you know, right now it's, you know, focus on the customers that we're winning, make sure that we do very good business for them. That's why I say Q2 was a great proof point because the
Jure Sola
Yeah. We're building plenty of capacity. Capacity is not gonna be an issue, Steve.
Steven Fox
Understood. Thank you very much.
Jure Sola
Thanks, Steve.
Operator
Your next question comes from the line of Mehdi Hosseini from SIG. Your line is now open.
Mehdi Hosseini
Yes. Thanks for taking my question, and a couple of follow-ups from my end. I wanted just a quick-
Jure Sola
Hello, Mehdi, and welcome to covering Sanmina. Hopefully, we'll have some good quarters together in years.
Mehdi Hosseini
Sure. Definitely look forward to meeting in person. A couple of follow-ups from me, and just quickly on the fiscal year 2027 revenue target of $16 billion+. How should I think about
Jon Faust
Yeah, Mehdi, thanks for the question. As Jure said, welcome to the call. It's great to have you on board. Right now, FY 2027, it's early days. You know, I was giving Samik, when I was answering his question, a little bit of context on where this $16 billion came from, which we're now calling $16 billion+, but it relates to some comments that we made when we first acquired
Jon Faust
As you think about what
Mehdi Hosseini
Okay.
Jure Sola
Mehdi, let me add more about the rest of this Sanmina business. The key for us, as Jon mentioned in his prepared statements,
Mehdi Hosseini
Sure. Agree. Actually, as a follow-up to it, given opportunities there is, especially as we think about optimizing next-gen racks, would you need to elevate the R&D to above $10 million a quarter, or should we assume that the current R&D level can support the 15% revenue growth in FY 2027?
Jure Sola
Well, first of all, I think revenue for us is not gonna be at least what we see today as I look at the 2027, 2028 demand is there. We’re gonna continue to invest for not just for 2027 and 2028, we’re investing for the future. We’re working very close with our existing customer base, which basically, you know, is who’s who. We got all the key players. We’re gonna continue to invest for the growth of the business. It’s a partnership. End of the day, we are an extension of our customers. Building the what I call transparent relationship and building the trust is the key in our business. If you look at the relationship with our customers well over 15, 20, we have some customers been with us over 35 years.
Jure Sola
Our goal as we go into the AI business and growing that opportunity is to build a strong relationship, and we'll invest whatever it takes to be the industry leader. Because the capabilities that we acquire from
Mehdi Hosseini
Sure. Let me rephrase the question, and please correct me if I'm wrong, as it is my impression that you're transitioning or at least part of the business driven by
Jure Sola
Yeah. Yes. Definitely will. That's a part of the growth. In our business, as long as you grow, you're gonna be spending more R&D. It's project by project, program by program that is looked at. Yeah, but Sanmina will be investing to be able to create the right value and right solution for our customers.
Mehdi Hosseini
Thank you.
Jon Faust
Yeah. Just to add to that too, Mehdi, you know, we've got a strong foundation of engineering capabilities. That's where we spend our R&D dollars today. But as the business grows, to Jure's point, depending on the final customer set that we have and the opportunities that we want to pursue, whether it be vertical integration or otherwise, you know, we could invest more. More to come. Everything that we've planned on so far is factored into the guidance that we just gave, but more to come as we look ahead into FY 2027 later this year.
Mehdi Hosseini
Got it. Thank you.
Jure Sola
Thank you, Mehdi. Operator, we have time for one more question.
Operator
Thank you. As a reminder, if you wish to ask a question, please press star one. Our next question comes from the line of Anja Soderstrom from Sidoti. Your line is now open.
Jure Sola
Hello, Anja.
Anja Soderstrom
Hi. Thank you for taking my question.
Jure Sola
We save the best for the last, okay?
Anja Soderstrom
Of course. Thank you for squeezing me in. Most of my questions have been addressed, but I'm just curious, are you seeing any sort of supply chain disruptions or input costs or difficulties to find components at all or are you navigating that?
Jure Sola
Yeah, definitely, Anja. There's some material shortages around the memory, custom ASICs, and things like that is going on. I think it's gonna continue through rest of the year, and we'll see how things you know, change. Yeah, definitely, material is challenging right now as we look at the rest of the year and probably, you know, potentially in 2027.
Anja Soderstrom
You don't see any risk to your revenue, in terms of that or how are you managing it?
Jure Sola
I mean, Anja, in our business, we're custom manufacturing. You have to chase parts every day. You know, we manage that every day. We have a great IT system, we have great relationship with our suppliers. We work very close with our customers, you know, planning these things ahead. You know, last quarter, we could have shipped a little bit more if we were able to get every part number that we needed. Yeah, it's something that we have to manage every day, Anja.
Jon Faust
Yeah. To add to that too, Anja, I mean, everything that we're aware of today has been factored into our guide. You know, to the point Jure just made, you know, our book-to-bill was over 1.1 to 1. You know, we could have shipped a lot more. I mean, if you think about the Core Sanmina business communication networks and cloud infrastructure, that's been growing 20%+ year-over-year for the last 6 quarters. Could be growing a lot more if there was more components and equipment and so forth like available out there. Everything that we know of as of today and the forecast from our customers, that's been factored into our guide.
Anja Soderstrom
Okay, great. Thank you. That was all for me.
Jure Sola
Okay. Well, ladies and gentlemen, thanks for your time. Looking forward talking to you if, you know, 90 days from now. For some of you that have questions, please give us a call at any time. Thank you again.
Jon Faust
Thank you.
Jure Sola
Bye-bye.
Transcript from April 27, 2026
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