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SANMINA CORP (SANM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered revenue of $1.98B and non-GAAP diluted EPS of $1.41; both exceeded the company’s outlook and beat Wall Street consensus on revenue and EPS. Consensus EPS was ~$1.375 and revenue ~$1.965B; actuals were $1.41 and $1.984B, respectively, a beat on both metrics (consensus values from S&P Global)* .
  • Non-GAAP operating margin was 5.6% and non-GAAP gross margin 9.1%, modestly higher year over year, driven by favorable mix and operational efficiencies .
  • Q3 FY25 guidance calls for revenue of $1.925–$2.025B and non-GAAP EPS of $1.35–$1.45, a slight raise versus prior quarter’s guidance ranges, with CFO detailing margin, OpEx, OIE and tax guardrails; management still sees FY25 as a growth year .
  • Stock reaction catalysts: accelerating Communications Networks & Cloud Infrastructure demand (+20.3% YoY), the push into full rack integration and liquid cooling, and a strategic acquisition announced May 19 to acquire ZT Systems’ data center manufacturing business from AMD to deepen AI/Cloud infrastructure exposure .

What Went Well and What Went Wrong

  • What Went Well

    • Strong end-market performance: Communications Networks & Cloud Infrastructure revenue was $733M (+20.3% YoY), 37% of total, as high-end routing/switching and optical networks strengthened; “AI requirements continue to evolve…we are expanding our capabilities to meet present and future demand” .
    • Margins edged up: Non-GAAP gross margin was 9.1% (up ~20 bps YoY) and non-GAAP operating margin was 5.6% (up ~20 bps YoY), driven by mix and operational efficiencies; “either met or exceeded all of our outlook commitments” .
    • Robust cash generation and capital returns: Cash from operations $157M; FCF $126M; repurchased ~1.03M shares for ~$84M; ending cash $647M .

  • What Went Wrong

    • Elevated OpEx: Non-GAAP operating expenses were $70.7M, above outlook due to targeted investments to drive future growth .
    • Tariff uncertainty persists: Management emphasized scenario planning and agility; “uncertainty remains…we remain in constant communication with our customers,” with costs passed through to customers, but potential demand impacts remain a risk .
    • Program timing: One major customer program was pushed out for redesign until late Q4 FY25 timing, tempering near-term growth cadence despite longer-term optimism .

Financial Results

  • Year-over-year (Q2 FY24 → Q2 FY25)
MetricQ2 FY24Q2 FY25
Revenue ($USD Billions)$1.835 $1.984
GAAP Diluted EPS ($)$0.93 $1.16
Non-GAAP Diluted EPS ($)$1.30 $1.41
Non-GAAP Gross Margin (%)8.9% 9.1%
Non-GAAP Operating Margin (%)5.4% 5.6%
  • Sequential trend (Q4 FY24 → Q1 FY25 → Q2 FY25)
MetricQ4 FY24Q1 FY25Q2 FY25
Revenue ($USD Billions)$2.018 $2.006 $1.984
GAAP Diluted EPS ($)$1.09 $1.16 $1.16
Non-GAAP Diluted EPS ($)$1.43 $1.44 $1.41
Cash from Operations ($USD Millions)$52 $64 $157
Free Cash Flow ($USD Millions)$29 $47 $126
  • Segment Breakdown (Q2 FY24 → Q2 FY25)
SegmentQ2 FY24 Revenue ($USD Millions)Q2 FY25 Revenue ($USD Millions)Q2 FY24 Non-GAAP Gross Margin (%)Q2 FY25 Non-GAAP Gross Margin (%)
Integrated Manufacturing Solutions (IMS)$1,461 $1,604 7.7% 7.7%
Components, Products & Services (CPS)$398 $411 12.9% 13.9%
  • KPIs (Q2 FY25)
KPIQ2 FY25
Cash from Operations ($USD Millions)$156.9
Free Cash Flow ($USD Millions)$126.2
Share Repurchases (Shares / $USD Millions)1.03M / $84
Ending Cash & Cash Equivalents ($USD Millions)$647
Inventory Turns (net of customer advances) (x)5.9x
Non-GAAP Pre-tax ROIC (%)23%
  • Results vs. Wall Street Consensus (S&P Global)
MetricQ1 FY25 ConsensusQ1 FY25 ActualQ2 FY25 ConsensusQ2 FY25 Actual
Revenue ($USD Billions)$1.977*$2.006 $1.965*$1.984
Primary EPS ($)$1.37*$1.44 $1.375*$1.41

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)Q3 FY25N/A$1.925–$2.025 Raised vs Q2 guide midpoint
Revenue ($USD Billions)Q2 FY25$1.9–$2.0 Actual $1.984 Beat vs guide
GAAP Diluted EPS ($)Q3 FY25N/A$1.05–$1.15 New
GAAP Diluted EPS ($)Q2 FY25$1.03–$1.13 Actual $1.16 Beat
Non-GAAP Diluted EPS ($)Q3 FY25N/A$1.35–$1.45 Raised vs Q2 guide midpoint
Non-GAAP Diluted EPS ($)Q2 FY25$1.30–$1.40 Actual $1.41 Beat
Non-GAAP Gross Margin (%)Q3 FY25N/A8.6%–9.0% New
OpEx ($USD Millions, Non-GAAP)Q3 FY25N/A$62–$66 New
Non-GAAP Operating Margin (%)Q3 FY25N/A5.4%–5.8% New
Other Income/Expense (Net, $USD Millions)Q3 FY25N/A~$6 expense New
Tax Rate (%)Q3 FY25N/A20%–22% New
Noncash reduction to net income ($USD Millions)Q3 FY25N/A~4.5 (India JV) New
Capex ($USD Millions)Q3 FY25N/A~$50 New
Depreciation ($USD Millions)Q3 FY25N/A~$30 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24, Q1 FY25)Current Period (Q2 FY25)Trend
AI/Technology initiativesBuilding capabilities in servers/storage, optical; communications/cloud strength noted Expanding liquid cooling, rack systems, ODM products; moving to full system integration and test; AI driving tech advancement Increasing
Supply chain/inventoryInventory down YoY; turns/days improving; continued focus Net inventory turns 5.9x; some sequential stockpiling to support growth Improving
Tariffs/macroGeopolitical uncertainties referenced Tariffs uncertainty highlighted; costs passed through; agile footprint to shift production Elevated risk
Product performance (Networking/Optical)Communications/cloud +15% YoY in Q1; high-end programs targeted Communications & cloud +20.3% YoY; routers/switches and optical strong Strengthening
Regional trends/capacityStrong US footprint; global capacity; CapEx 1–2% of revenue Targeted investments in capacity/tech in US, India, Mexico; India JV expansion for data center Expanding
R&D/OpEx investmentsTargeted investments to drive growth; slight OpEx above outlook OpEx above outlook to build capabilities for more complex programs Continuing

Management Commentary

  • “We delivered solid financial results for the second quarter, with revenue at the high end and non-GAAP earnings per share exceeding our outlook… We remain confident that fiscal 2025 will be a growth year.” — Jure Sola, CEO .
  • “Our revenue of $1.98 billion and our non-GAAP operating margin of 5.6%, each came in towards the high end of our outlook… puts us on the right path towards achieving our long-term financial goals of driving growth and expanding margins.” — Jon Faust, CFO .
  • “AI requirements continue to evolve at a rapid pace and is driving technology advancement. We are expanding our capabilities to meet present and future demand… our goal is to provide industry-leading capabilities from design to full system end-to-end solution for the data center and cloud infrastructure.” — Jure Sola, CEO .
  • “Our third quarter outlook… non-GAAP gross margin of 8.6% to 9.0%… OpEx of $62M to $66M… non-GAAP EPS in the range of $1.35 to $1.45… we expect revenue to grow between 6.0% and 8.0% on a full year basis.” — Jon Faust, CFO .

Q&A Highlights

  • Tariffs: No major changes in last 90 days; multiple customer discussions on options; footprint enables local/global shifts; costs are passed through, but demand could be impacted .
  • Demand cadence: Guidance prudence amid dynamics; one major program pushed out for redesign to late Q4 timing; longer-term opportunities remain robust (FY26–27) .
  • Inventory: Sequential gross inventory up as stockpiles build for growth; focus remains on net inventory and improving turns (target ~6x; achieved 5.9x) .
  • Communications end-market: Strength led by high-end routers/switches and optical packaging; inventory correction largely near end; demand seen strong in next couple of quarters .
  • Capacity/technology investments: Targeted capacity/tech additions in India (data center), Mexico, North America; expansion in high-tech PCBs and mechanical capacity; CapEx ~2% of revenue for FY25 .

Estimates Context

  • Q2 FY25 beats: Actual EPS $1.41 vs consensus $1.375*; revenue $1.984B vs $1.965B*. Q1 FY25 also beat EPS ($1.44 vs $1.37*) and revenue ($2.006B vs $1.978B*) (consensus values from S&P Global)* .
  • Implications: Margins and mix are trending slightly higher; targeted OpEx indicates ongoing investment. With Q3 guide midpoint slightly above prior quarter’s guide, revisions may bias modestly upward on EPS for near term if execution/mix hold .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Momentum in Communications Networks & Cloud Infrastructure and AI-related systems integration is the core growth engine near term; watch continued mix shifts and pipeline ramps .
  • Margins are stable-to-improving on non-GAAP basis (gross 9.1%, operating 5.6%); favorable mix and efficiencies offset higher OpEx investments .
  • Cash generation remains strong (CFO $157M; FCF $126M) enabling both growth investments (US/India/Mexico) and buybacks ($84M in Q2; $253M remaining authorization) .
  • Near-term risk: tariff outcomes and program timing (one redesign push-out); management’s diversified footprint and pass-through mechanisms mitigate, but demand volatility remains a watch item .
  • Q3 guide is a slight raise vs Q2 guide midpoint (revenue and EPS), supporting FY25 growth narrative; monitor gross margin range (8.6–9.0%) and OpEx containment against investments .
  • Strategic M&A: planned acquisition of ZT Systems’ manufacturing business from AMD should expand scale and hyperscaler exposure in AI/Cloud, with expected non-GAAP EPS accretion post-close; monitor regulatory timeline and integration execution .
  • Trading setup: Positive estimate surprise pattern and AI/Cloud momentum vs tariff macro overhang; catalysts include data center program ramps, India capacity come-online, and transaction updates .