Sanmina's Q4 2025: Contradictions Emerge on ZT Systems Revenue, Legacy Growth, and Cloud Diversification

Date of Call: November 3, 2025

Financials Results

• Revenue: $8.13B for FY2025, up 7.4% YOY; Q4 revenue $2.1B, up 3.9% YOY
• EPS: $6.04 per diluted share for FY2025, up 14.4% YOY; Q4 non-GAAP EPS $1.67, up 16.7% YOY (based on ~54.9M shares)
• Gross Margin: FY2025 non-GAAP gross margin 9.2%, up 50 bps YOY; Q4 gross margin 9.4%, up 70 bps YOY
• Operating Margin: FY2025 non-GAAP operating margin 5.7%, up 30 bps YOY; Q4 operating margin 6.0%, up 70 bps YOY

Guidance:

• Q1 FY26 revenue $2.9B–$3.2B (legacy $2.05B–$2.15B; ZT $850M–$1.05B for two months; company midpoint $3.05B, +52% YoY)
• Non‑GAAP operating margin 5.6%–6.1%
• Other income/expense ~net expense $23M; effective tax rate 21%–23%; ≈$4M non‑cash reduction for India JV
• Non‑GAAP diluted EPS $1.95–$2.25 (midpoint $2.10, +46.3% YoY) on ~56M diluted shares
• CapEx ≈$85M; Depreciation ≈$45M

Business Commentary:

• Revenue Growth and Margin Expansion:
• Sanmina reported revenue of $8.13 billion for fiscal 2025, a growth of 7.4% year over year, with a non-GAAP operating margin of 5.7%.

• The growth was driven by broad-based demand across end markets, particularly in communication networks and cloud and AI.

• Strong Financial Performance:

• The company delivered solid revenue of $2.1 billion for Q4 fiscal 2025, with a non-GAAP EPS of $1.67 per share, meeting or exceeding its previously communicated outlook.

• This performance was due to revenue growth, favorable product mix, and disciplined execution.

• Successful Acquisition of ZT Systems:

• Sanmina completed the acquisition of ZT Systems, which is expected to increase its scale and expand its capabilities, especially in the cloud and AI end market.

• The acquisition is anticipated to drive future growth and is seen as complementary to Sanmina's existing capabilities.

• Robust Cash Flow:

• Sanmina achieved strong cash flow from operations of $621 million for fiscal 2025, despite driving significant revenue growth.
• This was possible due to disciplined working capital management and positive trends expected to continue into fiscal 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management: "I’m very pleased with our performance for fiscal year 2025" — revenue $8.13B (+7.4% YoY), "very strong cash flow from operations of $621 million," Q4 results "met or exceeded our previously communicated outlook," and management said they are "very excited about our growth potential" after the ZT acquisition.

Q&A:

• Question from Ruplu Bhattacharya (Bank of America): Can you confirm ZT Systems' annual run-rate and whether ZT's operating margin is in the high‑5% range (~5.9%)?
  Response: ZT annualized run rate ≈$5.7B (two‑month midpoint annualized) and is expected to be in‑line with Sanmina at roughly a 5.6%–6.1% operating margin.

• Question from Ruplu Bhattacharya (Bank of America): Will legacy Sanmina grow high single digits in FY26 and accelerate in the back half; what drives that acceleration?
  Response: Legacy Sanmina is expected to grow high‑single‑digits for FY26 (Q1 mid‑single), with H2 acceleration driven by industrial/energy, medical, defense, and communication networks/cloud & AI programs.

• Question from Ruplu Bhattacharya (Bank of America): Does implied FY26 ~$14.5B lead to your $16B target a year earlier (i.e., ~10% YoY into FY27)?
  Response: Management is optimistic that the $16B target could occur sooner—potentially within two years—driven by legacy growth plus ZT and AI opportunities, but will provide detailed guidance in January.

• Question from Ruplu Bhattacharya (Bank of America): How should we think about working capital, cash conversion cycle and free cash flow after adding ZT?
  Response: Legacy business remains cash‑generative with CCC in the '50s; ZT's working‑capital impact is uncertain and could be a cash draw depending on growth; more cash‑flow specifics to be provided in future quarters.

• Question from Steven Fox (Fox Advisors): How do you plan to rebuild ZT's accelerated‑compute capabilities — timing, breadth and go‑to‑market?
  Response: Sanmina will immediately expand ZT's engineering, integrate Viking resources and leverage the AMD partnership and Sanmina's system‑level capabilities to pursue full‑system ODM/JDM accelerated‑compute opportunities; timeline depends on execution.

• Question from Steven Fox (Fox Advisors): Is the ~$2.05B purchase price final or could it increase materially; what are the cash‑flow implications?
  Response: Purchase price is subject to a 90‑day true‑up but is not expected to move materially; legacy Sanmina should continue to generate cash while ZT's net cash impact depends on its growth and working‑capital needs.

• Question from Anja Soderstrom (Citi): What AI opportunities do you see beyond current bookings and how will the acquisition affect your India JV and auto exposure?
  Response: Management sees a large AI pipeline for 2026–2028, expects ZT to complement the India JV (new India factory coming online early next year) and views recent program wins as offsetting short‑term softness in automotive for 2026–2027.

Contradiction Point 1

ZT Systems' Revenue Outlook and Growth Expectations

The contradiction lies in the differing projections for ZT Systems' annual revenue run rate and growth expectations, which could influence investor expectations and strategic planning.

Confirm ZT Systems' annual run rate and operating margin. Is it aligned with Sanmina's high 5% margin guidance? - Rupalu Bhattacharya (Bank of America)

2025Q4: ZT Systems is at a $5 billion-$6 billion run rate. We guided a range of $850 million-$1.05 billion for the two months, which annualizes to about $5.7 billion. The midpoint of 5.6%-6.1% margin for the combined business includes ZT Systems, which aligns with Sanmina's margin expectations. - John Faust(CFO)

After updating the ZT Systems acquisition, does the $5 billion to $6 billion net revenue run rate reflect your current annual revenue expectation? - Ruplu Bhattacharya (BofA Securities, Research Division)

2025Q3: The revenue outlook remains at $5 billion to $6 billion at closing. - John Faust(CFO)

Contradiction Point 2

Legacy Sanmina Business Growth Expectations

The contradiction involves differing growth expectations for the legacy Sanmina business, which impacts overall revenue projections and strategic planning.

What are the growth expectations for the legacy Sanmina business in fiscal 2026? - Rupalu Bhattacharya (Bank of America)

2025Q4: We expect the legacy Sanmina business to grow in the high single digits in fiscal 2026. The growth is driven by opportunities across end markets, with acceleration expected in the second half of the fiscal year. - Jure Sola(CEO)

You had strong growth in fiscal Q3 with 11% year-on-year growth. The Q4 guidance shows a significant slowdown. Can you explain if any markets are underperforming? - Ruplu Bhattacharya (BofA Securities, Research Division)

2025Q3: The legacy business is expected to return to growth in fiscal 2026 and accelerate into the second half of the fiscal year. - Jure Sola(CEO)

Contradiction Point 3

Inventory Corrections and Demand Recovery

It involves differing perspectives on the status of inventory corrections and demand recovery in the communications segment, which impacts expectations for future growth.

Is the inventory correction in the communications segment complete, and how do you expect the segment's revenue to grow this year? - Ruplu Bhattacharya (Bank of America)

2025Q4: We expect demand for the calendar year to be slightly down, but we believe we are through the bottom of demand. - Jure Sola(CEO)

What are growth expectations for the legacy Sanmina business in fiscal 2026? - Ruplu Bhattacharya (Bank of America)

2025Q1: Inventory at customers continues to come down, though some remains. There is excitement in communication networking, especially in high-end networks and optical modules. We anticipate a fair amount of growth in this sector this year. - Jure Sola(CEO)

Contradiction Point 4

Cloud Infrastructure and End Markets

It highlights differing expectations regarding the contribution of cloud infrastructure to overall growth and the focus on specific end markets.

What are growth expectations for the legacy Sanmina business in fiscal 2026? - Ruplu Bhattacharya (Bank of America)

2025Q4: Our growth is diversified across the five end markets, which is consistent with our long-term strategy. Our growth is not coming from one or two markets, but five end markets. - Jure Sola(CEO)

For fiscal 2025 guidance, how much of the high-single-digit growth is from the cloud infrastructure segment? What capabilities are you adding, and how many customers do you have in this segment? - Ruplu Bhattacharya (Bank of America)

2025Q1: We are well diversified across key markets, with cloud infrastructure being one of them. We offer an end-to-end solution, providing high-technology printed circuit boards, server storage products, and more. - Jure Sola(CEO)