SANM Q2 Deep Dive: Core Growth and ZT Systems Acquisition Shape Outlook

August 12, 2025 at 23:43 PM EDT

SANM Cover Image

Electronics manufacturing services company Sanmina (NASDAQ: SANM) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 10.9% year on year to $2.04 billion. On the other hand, next quarter’s revenue guidance of $2.05 billion was less impressive, coming in 4% below analysts’ estimates. Its non-GAAP profit of $1.53 per share was 8.1% above analysts’ consensus estimates.

Is now the time to buy SANM? Find out in our full research report (it’s free).

Sanmina (SANM) Q2 CY2025 Highlights:

Revenue: $2.04 billion vs analyst estimates of $1.98 billion (10.9% year-on-year growth, 3.1% beat)
Adjusted EPS: $1.53 vs analyst estimates of $1.42 (8.1% beat)
Adjusted EBITDA: $133.2 million vs analyst estimates of $144.6 million (6.5% margin, 7.9% miss)
Revenue Guidance for Q3 CY2025 is $2.05 billion at the midpoint, below analyst estimates of $2.14 billion
Adjusted EPS guidance for Q3 CY2025 is $1.57 at the midpoint, below analyst estimates of $1.62
Operating Margin: 5.1%, in line with the same quarter last year
Market Capitalization: $6.60 billion

StockStory’s Take

Sanmina’s second quarter results were well received by the market, reflecting solid expansion across all end markets and notable strength in communications networks and cloud infrastructure. Management attributed the robust revenue growth to broad-based customer demand and operational efficiencies that improved gross margins. CEO Jure Sola highlighted the company’s ability to adapt quickly to customer needs, stating, “the team has demonstrated exceptional agility in meeting our customers’ evolving needs.” Segment performance was supported by growth in both Integrated Manufacturing Solutions (IMS) and Components, Products, and Services (CPS), with the latter benefiting from favorable business mix and targeted investments.

Looking ahead, Sanmina’s guidance for the next quarter factors in ongoing macroeconomic uncertainty, including tariffs and geopolitical risks, as well as expectations for continued investments in capacity and technology. Management sees significant opportunity from the upcoming ZT Systems acquisition, which is expected to double company revenue within three years and position Sanmina as a key supplier in the data center and AI infrastructure markets. CFO Jonathan Faust noted, “we expect the transaction to be accretive to non-GAAP diluted earnings per share in the first year after closing,” while Sola emphasized expanding end-to-end capabilities for new and existing customers.

Key Insights from Management’s Remarks

Management pointed to strong execution and diversification across end markets as primary drivers of the quarter, while also highlighting progress on strategic initiatives such as the ZT Systems acquisition.

Communications and cloud growth: Sanmina saw particularly strong demand in communications networks and cloud infrastructure, driven by customer investments in high-performance routers, switches, and enterprise storage. This segment’s momentum is expected to continue as data center and AI spending accelerate.
CPS margin expansion: The Components, Products, and Services segment achieved a notable improvement in gross margin, attributed to a favorable product mix, operational efficiencies, and targeted investments in advanced printed circuit boards and defense-related components.
End market diversification: Management stressed the importance of a diversified customer base, with stable performance in industrial, energy, medical, and defense sectors offsetting softness in automotive and transportation. This balance helped maintain overall business stability.
Strategic ZT Systems acquisition: The planned acquisition of ZT Systems is a cornerstone of Sanmina’s strategy to capitalize on long-term growth trends in data center and AI infrastructure. Management anticipates this will drive substantial revenue and margin expansion by enhancing manufacturing scale and technical capabilities.
Regionalization and supply chain flexibility: In response to ongoing tariff and geopolitical challenges, Sanmina is investing in regional manufacturing capacity in the U.S., India, and Mexico. This approach allows the company to support customers’ shifting supply chain strategies and mitigate risk.

Drivers of Future Performance

Sanmina’s outlook is anchored by expectations for continued growth in data center and AI markets, further margin expansion, and risk management amid macro uncertainty.

ZT Systems integration: The ZT Systems acquisition is expected to add $5–$6 billion in annual net revenue and support double-digit growth, while providing access to new hyperscale and OEM customers. Management expects the deal to be immediately accretive to non-GAAP EPS and to expand Sanmina’s product and service offerings for data center and AI infrastructure.
Margin improvement initiatives: Ongoing investments in automation, advanced manufacturing, and end-to-end solutions are anticipated to drive operating margin above the current 6% target over time. Management highlighted expanding high-value offerings, such as liquid cooling and custom optical modules, as key to this effort.
Navigating external headwinds: Tariffs, shifting trade policies, and geopolitical risks remain headwinds, but Sanmina’s global manufacturing footprint and strong balance sheet provide flexibility. Management noted that most tariff costs are passed through to customers, but new program decisions are increasingly influenced by supply chain regionalization and regulatory changes.

Catalysts in Upcoming Quarters

Over the coming quarters, our analysts will focus on (1) the closing and integration of the ZT Systems acquisition and its initial impact on Sanmina’s revenue and margin profile, (2) continued execution in high-growth segments such as data center, communications, and cloud infrastructure, and (3) management’s progress on margin expansion through advanced manufacturing and regionalization. Developments in global trade policy and customer supply chain strategies will also be important indicators.

Sanmina currently trades at $124.47, up from $98.29 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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