Sanmina Surpasses Q2 Sales Goals, Yet Revenue Outlook Falls Short

Sanmina’s Q2 CY2025 Performance and Outlook

Sanmina, an electronics manufacturing services company, reported strong results for the second quarter of fiscal year 2025. The company achieved revenue of $2.04 billion, representing a 10.9% increase compared to the same period last year. This figure exceeded analysts’ expectations by 3.1%, indicating positive momentum in its business operations.

In addition to revenue growth, Sanmina delivered non-GAAP earnings per share (EPS) of $1.53, which surpassed analyst estimates by 8.1%. This performance highlights the company’s ability to exceed financial expectations despite challenges in other areas.

However, the outlook for the third quarter of 2025 is less optimistic. Sanmina provided revenue guidance of $2.05 billion at the midpoint, which falls short of analyst estimates of $2.13 billion. Similarly, its adjusted EPS guidance for the upcoming quarter stands at $1.57, below the expected $1.62. These figures suggest that while the company is performing well in the current quarter, there may be headwinds ahead.

Key Financial 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: $125.6 million vs. analyst estimates of $144.6 million (6.2% margin, 13.1% miss)
• Revenue Guidance for Q3 CY2025: $2.05 billion at the midpoint, below analyst estimates of $2.13 billion
• Adjusted EPS Guidance for Q3 CY2025: $1.57 at the midpoint, below analyst estimates of $1.62
• Operating Margin: 4.7%, in line with the same quarter last year
• Free Cash Flow Margin: 8.2%, up from 3.7% in the same quarter last year
• Market Capitalization: $5.27 billion

Jure Sola, Chairman and Chief Executive Officer of Sanmina, highlighted the company’s focused execution and operating discipline during the quarter. He noted that revenue, non-GAAP gross margin, and non-GAAP diluted earnings per share exceeded expectations. The company continues to benefit from operational efficiencies and a favorable business mix, as reflected in its healthy operating margin and robust cash generation.

Company Overview and Revenue Growth

Founded in 1980, Sanmina provides end-to-end electronics manufacturing solutions across various industries. Over the past five years, the company has experienced annualized revenue growth of 2.9%, which is considered sluggish compared to industry benchmarks. This growth rate fell short of expectations, raising concerns about the company’s long-term trajectory.

The past two years have been particularly challenging for Sanmina, as its revenue declined by 6% annually. This decline aligns with broader industry trends, as the Electrical Systems sector faced a cyclical downturn. Many similar businesses also observed lower sales during this period.

Despite these challenges, Sanmina reported a significant year-on-year revenue increase of 10.9% in the most recent quarter. Its revenue of $2.04 billion exceeded Wall Street’s estimates by 3.1%, signaling a potential turnaround. Management is currently guiding for a 1.6% year-on-year increase in sales for the next quarter. Sell-side analysts expect revenue to grow by 6.9% over the next 12 months, suggesting that new products and services could drive future performance. However, this growth rate remains below the sector average.

Operating Margin and Earnings Per Share

Operating margin is a key indicator of profitability. Sanmina’s operating margin has remained relatively stable over the past five years, averaging 4.6%. While this stability is positive, it is considered low for an industrials business, reflecting a suboptimal cost structure and low gross margin.

This quarter, Sanmina achieved an operating margin of 4.7%, matching the same quarter last year. This consistency indicates that the company’s cost structure has remained stable, but it also raises questions about its ability to improve profitability through operational efficiency.

Earnings per share (EPS) is another critical metric for evaluating a company’s performance. Sanmina’s EPS grew at a compounded annual growth rate of 15.6% over the last five years, outpacing its 2.9% revenue growth. However, this growth was largely driven by stock buybacks rather than improved operational efficiency. Over the past two years, EPS has declined by 3.8%, marking a reversal from the previous trend.

In Q2, Sanmina reported EPS of $1.53, up from $1.25 in the same quarter last year. This result exceeded analyst estimates by 8.1%. Looking ahead, Wall Street expects full-year EPS to reach $5.81, with a projected growth of 18.5% over the next 12 months.

Key Takeaways from Q2 Results

Sanmina’s Q2 performance showed strength in exceeding revenue and EPS expectations, but it also revealed weaknesses in EBITDA and forward guidance. The company’s operating margin remained stable, and its free cash flow margin improved significantly. However, the guidance for the next quarter fell short of analyst expectations, indicating potential challenges ahead.

While the current quarter’s results are encouraging, long-term fundamentals and valuation will play a crucial role in determining whether Sanmina is an attractive investment at its current price. Investors should consider these factors carefully when making their decisions.