It has been about a month since the last earnings report for Sanmina (SANM Quick QuoteSANM - Free Report) . Shares have added about 20.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Sanmina due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Sanmina Beats Q2 Earnings Estimates on Solid ZT Systems Momentum

Sanmina reported strong second-quarter fiscal 2026 results. Adjusted earnings were $3.16 per share, beating the Zacks Consensus Estimate of $2.42 by 30.58%. Revenues of $4.01 billion topped the consensus mark of $3.27 billion by 22.7%.

Results reflected an outsized contribution from the ZT Systems business, including accelerated compute shipments that moved into the quarter. Revenue surged 102.3% year over year, while earnings jumped 124.1%. Cash flow from operations was $399 million, underscoring strong execution and working-capital discipline.

SANM’s Q2 Sales Surge Fueled by ZT Systems

The top-line outperformance was driven by ZT Systems, which delivered $1.88 billion of revenue in the quarter and came in well ahead of management’s prior expectations. Leadership attributed the strength to strong execution and customer demand that pulled certain accelerated compute shipments forward from the second half of the year.

Core Sanmina businesses also contributed to steady growth. Management said core revenue rose 7.3% year over year, supported by broad-based demand across most end markets, helping the company reach the $4 billion quarterly revenue level for the first time since the ZT Systems acquisition was integrated into results.

Sanmina’s Profitability Benefits From Mix and Cost Discipline

Profitability improved on a favorable mix and disciplined cost control. Non-GAAP gross profit rose to $360 million, with gross margin at 9%, reflecting the revenue ramp and a mix shift tied to cloud and AI-related programs.

Operating leverage also showed up in the income statement. Non-GAAP operating profit increased to $257 million, and operating expenses were $103 million, enabling operating margin expansion from the year-ago period despite mix headwinds in certain areas.

SANM’s End Markets Skew Toward Cloud and AI Infrastructure

End-market performance highlighted the scale of the company’s exposure to communications networks and cloud and AI infrastructure. Revenue from that combined category climbed to $2.77 billion from $733 million a year ago, reflecting both the ZT Systems contribution and ongoing strength in core programs.

By contrast, the company’s industrial and energy, medical, defense and aerospace, and automotive and transportation end markets generated $1.24 billion in revenue, essentially flat year over year. Management noted it expected industrial to be slightly down, offset by stability across the broader portfolio.

Sanmina’s Segments Show Diverging Margin Trends

At the segment level, Integrated Manufacturing Solutions (IMS) revenue rose to $3.58 billion, benefiting from the surge in cloud and AI infrastructure demand and the contribution from ZT Systems. IMS non-GAAP gross margin improved to 8.5%, helped by mix.

Components, Products and Services (CPS) revenue increased to $461 million from $411 million. However, CPS non-GAAP gross margin declined to 11.6% from 13.9%, with management citing depreciation and other costs tied to investments for new programs. Component shortages also pressured the timing of revenue and profitability for one product business, which management expects to resolve in the second half.

SANM Expands Buyback Capacity on Strong Free Cash Flow

Cash and cash equivalents were $1.57 billion at quarter end, with long-term debt of $2 billion. Capital returns were a notable theme for the quarter. Free cash flow came in at $342 million, supported by solid earnings and balance-sheet execution, while net capital expenditures were $57 million, which management said was below its outlook primarily due to timing. SANM also continued repurchasing stock, buying back 1.1 million shares for $160 million during the quarter. Separately, the board authorized a new $600 million share repurchase program with no expiration date, reflecting management’s confidence in liquidity and cash-generation capacity.

Outlook 

Management’s outlook implies a normalization after the shipment pull-forward into the fiscal second quarter. For the third quarter of fiscal 2026, the company guided revenues of $3.2-$3.5 billion and earnings of $2.55-$2.85 per share, with non-GAAP operating margin between 6.4% and 6.9%. For fiscal 2026, Sanmina expects revenues of $13.7-$14.3 billion and earnings of $10.75-$11.35 per share. Management also reiterated that ZT Systems is expected to land well within the $5 billion to $6 billion annualized revenue framework previously discussed, positioning the company for a larger revenue base heading into fiscal 2027.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in estimates review.

VGM Scores

Currently, Sanmina has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Sanmina has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.