Sanmina's AI Datacenter Expansion: A Misunderstood Catalyst for Long-Term Valuation Growth

The acquisition of ZT Systems' data center infrastructure manufacturing business by Sanmina in October 2025 has been hailed as a transformative move, yet its full implications for the company's valuation and supply chain positioning remain underappreciated. By integrating ZT Systems' state-of-the-art facilities in New Jersey, Texas, and the Netherlands, Sanmina has not only expanded its global footprint but also solidified its role as a critical enabler of AI infrastructure-a sector projected to grow from $304 billion in 2024 to $893 billion by 2028. This strategic pivot positions Sanmina to capitalize on the accelerating demand for mission-critical technologies, with analysts now projecting the acquisition could double the company's revenue within three years.

Strategic Integration: From Manufacturing to Ecosystem Leadership

Sanmina's acquisition of ZT Systems was not merely a transaction but a calculated step to redefine its role in the AI supply chain. By securing ZT's full rack assembly capabilities, Sanmina has moved beyond traditional electronics manufacturing to become a one-stop provider for hyperscalers and OEMs. This vertical integration allows the company to deliver end-to-end solutions, from design to deployment, for cloud and AI infrastructure-a capability that differentiates it from peers like Jabil and Celestica.

The partnership with AMD further amplifies this advantage. As a preferred new product introduction (NPI) partner, Sanmina is now central to the rapid deployment of AMD's cloud rack and cluster-scale AI solutions. This alignment with a leading semiconductor player ensures Sanmina's proximity to cutting-edge innovations, reducing lead times and enhancing its value proposition. According to a report by Sanmina's investor relations team, the acquisition is expected to add $5–6 billion in annual revenue on a run-rate basis, effectively doubling the company's revenue scale.

Financial Performance: Margin Expansion and Operational Efficiency

Sanmina's fiscal 2025 results underscore its ability to execute on this strategy. The company reported $8.1 billion in revenue, a 7.4% year-over-year increase, with a non-GAAP operating margin of 5.7%-a 30-basis-point expansion from the prior year. This margin resilience, despite macroeconomic headwinds, highlights Sanmina's disciplined cost control and operational efficiency.

The integration of ZT Systems is expected to further drive margin expansion. With ZT's high-margin data center infrastructure business now under its umbrella, Sanmina is poised to benefit from the premium pricing associated with AI-specific hardware. Analysts at Bloomberg note that the acquisition's contingent consideration structure-$450 million tied to financial performance-aligns Sanmina's incentives with long-term value creation. This, combined with the company's $1.7 billion liquidity position and its $621 million in FY 2025 cash flow from operations, provides a robust foundation for managing integration risks.

Valuation Justification: Premium Multiples in a High-Growth Sector

Critics argue that Sanmina's current valuation multiples-EV/EBITDA of 11.41 and a forward P/E of 20.56-are inflated relative to its historical averages according to analysts. However, this perspective overlooks the transformative impact of the ZT Systems acquisition. In the AI infrastructure sector, where companies with demonstrated scalability and ecosystem integration command valuations of 25–30x enterprise value to revenue, Sanmina's multiples appear justified.

The company's strategic alignment with AMD and its expanded capabilities in high-margin AI infrastructure position it to capture a larger share of the value chain. For instance, Sanmina's Q1 2026 revenue guidance of $2.9–$3.2 billion reflects confidence in its ability to leverage ZT's facilities to meet surging demand. Moreover, its non-GAAP operating margin of 5.7% in FY 2025 already outperforms Jabil's 5.37% and approaches Celestica's 7.6%, suggesting there is room for further margin improvement as AI infrastructure becomes a larger portion of its revenue mix.

Risks and Realities: Execution Challenges

While the long-term outlook is compelling, execution risks remain. Analysts at Aventis Advisors caution that the integration of ZT Systems and the ramping of AMD programs could strain margins if not managed carefully. Additionally, the company's current valuation implies a 53.5% overvaluation relative to its intrinsic value of $98.68 per share, a gap that could widen if integration milestones fall short.

However, Sanmina's financial strength-$798 million in cash, no debt under its revolving credit facility, and its $422 million in year-to-date free cash flow-provides a buffer against these risks. The company's disciplined approach to capital allocation and its focus on high-growth verticals suggest it is well-positioned to navigate the integration phase without compromising long-term value.

Conclusion: A Catalyst for Sustainable Growth

Sanmina's AI datacenter expansion, anchored by the ZT Systems acquisition, represents more than a tactical move-it is a strategic repositioning to lead in a sector poised for explosive growth. By transforming from a traditional EMS provider to a mission-critical infrastructure partner, Sanmina has justified a re-rating of its valuation multiples. While near-term execution risks persist, the long-term potential-driven by AI's foundational role in the digital economy-makes this a compelling case for investors willing to look beyond short-term volatility.