Sanmina (SANM) Up 10.8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Sanmina (SANM). Shares have added about 10.8% in that time frame, outperforming the S&P 500.

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

SANM Q3 Earnings Beat Estimates on AI Demand, Strong Execution

Sanmina reported strong third-quarter fiscal 2026 results, with adjusted earnings and revenues surpassing the Zacks Consensus Estimate. Non-GAAP earnings came in at $3.31 per share, up 116% year over year and ahead of the consensus estimate of $2.78 by 19.06%. Revenues of $3.46 billion increased 69.7% year over year and exceeded the consensus estimate of $3.43 billion by 0.90%.

Results reflected continued strength in cloud and AI infrastructure, broad-based growth across the core Sanmina business, and solid contributions from ZT Systems. Favorable business mix, disciplined cost management and non-recurring engineering services further supported profitability.

SANM’s Q3 Sales Gain From AI Infrastructure Demand

The top-line outperformance was driven by continued momentum in cloud and AI infrastructure as well as broad-based growth across the core Sanmina business. Core Sanmina revenues increased 17.0% year over year to $2.4 billion, exceeding management’s outlook, while ZT Systems contributed $1.1 billion in revenues, landing at the midpoint of guidance.

Management also highlighted strong bookings during the quarter, with a book-to-bill ratio above 1.1. The company continued adding new customers and projects, positioning the business for further expansion in fiscal 2027 and beyond.

Sanmina’s Profitability Improves on Mix and Cost Control

Profitability strengthened on favorable business mix and disciplined execution. Non-GAAP gross profit increased to $370 million from $186 million a year earlier, with gross margin expanding 160 basis points to 10.7%.

Operating leverage further boosted earnings. Non-GAAP operating income rose to $275.8 million, while operating margin expanded to 8.0% from 5.7% in the prior-year quarter. Management attributed the improvement to strong execution, disciplined cost management and higher contributions from non-recurring engineering services.

SANM’s Segment Growth Remains Broad Based

Integrated Manufacturing Solutions (IMS) revenue climbed 79.4% year over year to $2.96 billion, benefiting from growth across all end markets and the contribution from ZT Systems. IMS non-GAAP gross margin improved to 10.2%, driven primarily by favorable product mix.

Components, Products and Services (CPS) revenues increased 29.2% year over year to $546 million, supported by higher demand for AI system racks and high-technology printed circuit boards used in aerospace and defense. CPS non-GAAP gross margin declined to 12.8% from 14.7% a year ago due to depreciation and other costs associated with investments in new programs, although margin improved sequentially by 120 basis points.

Sanmina Expands AI Customer Base

Communications Networks, Cloud and AI Infrastructure represented 62% of quarterly revenue, totaling $2.15 billion, up 173.2% from the year-ago period. The remaining industrial and energy, medical, defense and aerospace, automotive and transportation businesses generated $1.32 billion in revenues, up 4.8%.

Management said AI continues to drive growth across the communications and cloud infrastructure markets. During the quarter, Sanmina secured additional next-generation accelerated compute orders, expanded its customer base and continued integrating ZT Systems while advancing vertical integration opportunities expected to support future growth.

SANM Maintains Strong Liquidity, Cash Flow Growth

Sanmina ended the quarter with $1.84 billion in cash and cash equivalents and approximately $4.0 billion of available liquidity. The company had no borrowings outstanding under its $1.5 billion revolving credit facility and reported a net leverage ratio of 0.29x. Cash flow from operations totaled $124.5 million as the company continued investing in AI-related manufacturing capacity, liquid cooling, automation and power infrastructure. In the first nine months of fiscal 2026 the company generated $702 million cash from operations compared to $421.6 million in the year ago period.

Sanmina Raised Outlook

Management issued fourth-quarter fiscal 2026 guidance for revenues of $3.3-$3.6 billion, non-GAAP operating margin of 7.5-8.0% and non-GAAP earnings of $3.05-$3.35 per share. It also raised its fiscal 2026 outlook, now expecting revenue of $14.0-$14.3 billion, up from the previous $13.7-$14.3 billion range. Non-GAAP operating margin guidance increased to 6.85-7.25% from 6.3-6.6%, while non-GAAP earnings guidance rose to $11.90-$12.20 per share from the prior range of $10.75-$11.35. Management also reiterated confidence in delivering more than $16 billion in revenue in fiscal 2027 as AI demand and ZT Systems integration continue to gain momentum.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in fresh estimates.

The consensus estimate has shifted 13.49% due to these changes.

VGM Scores

Currently, Sanmina has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock has a score of A on the value side, putting it in the top quintile for value investors.

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 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.

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research