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SANM Rides on Strong Operating Margin Growth: Will the Trend Persist?
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Key Takeaways
SANM's non-GAAP operating profit rose to $257M, with margin expanding to 6.4% from 5.6%.
Sanmina's revenues jumped 102.3% to $4.01B, led by stronger-than-expected ZT system performance.
SANM expects a 6.4-6.9% operating margin in Q3 FY26, backed by efficiency and demand.
Sanmina Corporation (SANM - Free Report) reported a non-GAAP operating profit of $257 million in the second quarter of 2026, up from $111 million a year ago. Non-GAAP operating margin improved to 6.4% from 5.6%.
The 131.5% increase year over year and an 80-basis point operating margin expansion are driven by a multitude of factors. The ZT system, which performed significantly better than expected, was one of the biggest contributors. This business generated 1.88 billion in revenues in the second quarter of 2026. Strong customer demand for accelerated compute systems and earlier-than-expected shipments supported the growth.
Revenues surged 102.3% year over year to $4.01 billion. Revenue growth significantly outpaced the increase in operating expenses. Disciplined cost management was also a key contributor in this regard. Along with traction in communications networks and cloud and AI infrastructure business, Sanmina’s core business also performed well. 7.3% year over year growth in the core business also supported this growth.
It is to be noted that non-GAAP gross margin declined slightly from 9.1% to 9.0% because of product mix. However, it is to be noted that lower operating expenses as a percentage of revenues more than offset the gross margin pressure. Backed by solid momentum across verticals and improving operational efficiency, management expects a 6.4-6.9% operating margin in the third quarter of 2026.
How Are Competitors Faring?
Sanmina faces competition from Jabil, Inc. (JBL - Free Report) and Celestica, Inc. (CLS - Free Report) in the electronics manufacturing industry. In the third quarter of 2026, Jabil reported a core operating margin of $504 million, up from $420 million a year ago. Core operating margin was 5.8%. Robust AI infrastructure demand remains a major contributor to Jabil’s revenue and operating margin growth.
Celestica’s adjusted operating margin expanded 90 basis points year over year to 8% in the first quarter of 2026. Rapid growth in AI infrastructure programs, strong growth in higher-margin Hardware Platform Solutions revenues, favorable product mix and operating leverage from rapid hyperscale cloud deployments are propelling Celestica’s operating margin.
SANM's Price Performance, Valuation & Estimates
Sanmina shares have rallied 168.8% compared with the industry’s growth of 128.4%
Image Source: Zacks Investment Research
From a valuation standpoint, the company’s shares currently trade at 19.43X forward 12-month earnings, lower than the industry tally of 28X.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have moved up 10.11% to $11.22 per share over the past 60 days, while the same for 2027 has increased 5.26% to $13.
View the Zacks #1 Rank List
Image: Bigstock
SANM Rides on Strong Operating Margin Growth: Will the Trend Persist?
Key Takeaways
Sanmina Corporation (SANM - Free Report) reported a non-GAAP operating profit of $257 million in the second quarter of 2026, up from $111 million a year ago. Non-GAAP operating margin improved to 6.4% from 5.6%.
The 131.5% increase year over year and an 80-basis point operating margin expansion are driven by a multitude of factors. The ZT system, which performed significantly better than expected, was one of the biggest contributors. This business generated 1.88 billion in revenues in the second quarter of 2026. Strong customer demand for accelerated compute systems and earlier-than-expected shipments supported the growth.
Revenues surged 102.3% year over year to $4.01 billion. Revenue growth significantly outpaced the increase in operating expenses. Disciplined cost management was also a key contributor in this regard. Along with traction in communications networks and cloud and AI infrastructure business, Sanmina’s core business also performed well. 7.3% year over year growth in the core business also supported this growth.
It is to be noted that non-GAAP gross margin declined slightly from 9.1% to 9.0% because of product mix. However, it is to be noted that lower operating expenses as a percentage of revenues more than offset the gross margin pressure. Backed by solid momentum across verticals and improving operational efficiency, management expects a 6.4-6.9% operating margin in the third quarter of 2026.
How Are Competitors Faring?
Sanmina faces competition from Jabil, Inc. (JBL - Free Report) and Celestica, Inc. (CLS - Free Report) in the electronics manufacturing industry. In the third quarter of 2026, Jabil reported a core operating margin of $504 million, up from $420 million a year ago. Core operating margin was 5.8%. Robust AI infrastructure demand remains a major contributor to Jabil’s revenue and operating margin growth.
Celestica’s adjusted operating margin expanded 90 basis points year over year to 8% in the first quarter of 2026. Rapid growth in AI infrastructure programs, strong growth in higher-margin Hardware Platform Solutions revenues, favorable product mix and operating leverage from rapid hyperscale cloud deployments are propelling Celestica’s operating margin.
SANM's Price Performance, Valuation & Estimates
Sanmina shares have rallied 168.8% compared with the industry’s growth of 128.4%
Image Source: Zacks Investment Research
From a valuation standpoint, the company’s shares currently trade at 19.43X forward 12-month earnings, lower than the industry tally of 28X.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have moved up 10.11% to $11.22 per share over the past 60 days, while the same for 2027 has increased 5.26% to $13.
Image Source: Zacks Investment Research
Sanmina currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.