Sanmina's Q2 FY2026 earnings call provides non-GAAP financial results, excluding certain costs, and highlights leadership team's dedication and service to customers. The call includes a reminder of forward-looking statements' risks and the availability of webcast and recording on the company's website.

Executives express satisfaction with Q2 results, emphasizing robust revenue, non-GAAP operating margin, and cash flow. CFO to review details, followed by updates on core operations and AI group achievements. Q&A session to follow.

The company reported a successful second quarter, exceeding revenue and profit forecasts. This was attributed to strong customer demand and execution in the Zt systems business, leading to accelerated shipments. The Corus Sanmina business also saw growth across major end markets. Non-GAAP operating margin and diluted earnings per share surpassed expectations, demonstrating effective cost management and revenue mix, positioning the company well for fiscal year objectives.

Announced third consecutive quarter of Non-GAAP operating margin at 6%+, with diluted earnings per share up 125% YoY. IMS segment revenue soared 123.5% YoY, driven by favorable mix and Z Systems' impact. EPS segment saw revenue growth but faced margin pressure from investments and component shortages, expecting resolution in H2.

The dialogue emphasizes the company's robust balance sheet, ample liquidity, and effective working capital management, resulting in strong cash flow from operations and free cash flow. It also mentions strategic investments in technologies and capabilities to support long-term financial objectives and shareholder returns, while maintaining a healthy balance sheet.

Discusses a clear capital allocation strategy focusing on business investments, strategic acquisitions, balance sheet management, and shareholder returns through share repurchases, recently authorizing an additional $600 million for repurchases.

Following the acquisition, the integration of Zt Systems and Sanmina is progressing through three phases. The first phase, focused on immediate post-transaction integration, is largely complete. The second phase is underway, securing customer business and ensuring continuity, evidenced by winning new accelerated compute business. The third phase, already in progress, aims to drive growth and expansion through vertical integration and expanding engineering capabilities to support all platforms.

The dialogue outlines the company's third-quarter outlook, projecting revenue between $3.2 and $3.5 billion, with core Sanmina revenue expected at $2.2 to $2.3 billion and Zt Systems at $1.0 to $1.2 billion. It highlights a 64% year-over-year growth midpoint of $3.35 billion, non-GAAP operating margin of 6.4%, and diluted earnings per share ranging from $2.55 to $2.85, reflecting a 70% increase from the previous year. Strategic investments in capital expenditures are also noted.

The presentation outlines expectations for fiscal year 2026, including revenue projections of $13.7 to $14.3 billion, non-GAAP operating margins of 6.3% to 6.6%, and diluted earnings per share between $10.75 to $11.35. Confidence is expressed in achieving $16 billion in revenue by 2027, with positive integration progress noted for the Zt systems business.

Force Cloud's second quarter revenue from AI infrastructure and communication soared by 280%, with core contributions increasing 22% year-over-year. Industrial, energy, medical, defense, aerospace, automotive, and transportation sectors saw a 31% rise, totaling $1.24 billion, despite a slight dip in industrial revenue. Overall, the company's revenue surpassed expectations, with a 7.3% year-over-year increase in semiconductor revenue, supported by strong Q2 bookings and a book-to-bill ratio better than 1.

The dialogue highlights robust growth in high-performance communication networks, emphasizing AI's role in driving expansion across various sectors. Key points include strong bookings, new program wins, and a promising pipeline for future projects, positioning the company for sustained success in the evolving market.

The industrial and energy segment is thriving, driven by power generation, distribution, and semiconductor capital equipment. Investment in engineering, design, and vertical integration for AI data centers is expected to fuel growth, especially in power storage, management, and safety equipment.

The dialogue highlights strategic positioning and growth prospects in medical disposables, laboratory equipment, defense and aerospace systems, and automotive transportation. Key takeaways include stable end markets, accelerating growth, expanding customer bases, and transitioning programs to full-scale production, emphasizing regulatory expertise and strong customer demand.

Semina offers industry-leading capabilities, from engineering design to full system solutions, for data center AI and infrastructure markets. Early involvement in product development and provision of high-tech circuit boards highlight their commitment to helping customers bring products to market successfully.

The dialogue highlights Semin's extensive manufacturing capabilities, including board testing, mechanical rack assembly, liquid cooling systems, and custom memory solutions. It emphasizes the company's global footprint, strategic customer alignment, and agile IT systems for managing supply chains. Investments in custom optical modules and a strong compute and storage system support ODM and joint development, reinforcing Semin's position as a leader in supporting market leaders with advanced solutions.

The team achieved robust second-quarter revenue growth, reaching $14 billion with a 73% year-over-year increase. The company is diversifying across end markets, strengthening its U.S. presence, and expanding its global manufacturing footprint. A confident outlook is expressed for future growth, with a focus on executing strategies to build a stronger foundation for upcoming fiscal years.

Discussed factors behind Zt's outperformance, including demand pull-in and no shipment of Nvidia GPU products. Emphasized focus on future platforms and new opportunities, guiding confidence in revenue projections.

Discussed the sustainability of Zt's margin profile amidst business acceleration, emphasizing the dependency on business mix and future customer agreements. The dialogue also covered the robust demand in the communication segment, particularly in optical transceivers, switches, and 5G, with a focus on preparing for future market demands.

A discussion on the excitement surrounding advanced communication products, including IP routing, optical systems, and high-capacity plugins, as well as the resurgence of traditional telecom and a minor focus on EDG wireless, highlighting a strong business segment performance.

Discussed the expansion from high-performance communication networks to cloud AI infrastructure, emphasizing a broadened and diversified technological portfolio.

A semiconductor firm discusses its strategic advancements in securing business with hyperscale clients for AI infrastructure, highlighting its goal to win all major hyperscalers and expressing confidence in future market opportunities and revenue potential. The company outlines its progress in developing and shipping pre-production systems, with plans to scale operations to meet growing demand.

The dialogue discusses the company's revenue recognition timeline post-production, emphasizing the lead time for product build and global shipping. It highlights the company's strategy to increase capacity through customer wins and outlines a revenue growth target of $16 billion plus by fiscal year 27, with the majority of business anticipated to be on consignment. The conversation underscores the importance of customer schedules in driving future growth potential.

An investor discusses various financial strategies and market trends with an advisor, seeking advice on optimizing portfolio performance and managing risks in the current economic climate.

The dialogue discusses the company's impressive cash flow from operations, attributed to strong execution, reduced inventory, and effective accounts receivable management. It highlights the balance between CapEx and working capital, indicating a positive outlook for future cash generation.

The dialogue discusses strategies for increasing production efficiency at Zt Systems, rebuilding inventory levels for upcoming demand, and expanding business through cloud and OEM customers. It highlights successful execution on customer demand, investment in capacity, and the potential for growth in both cloud computing and OEM sectors.

Discusses achieving $16 billion revenue target through Zt Systems' growth, maintaining core customers, expanding into CSPs and OEMs, and enhancing vertical integration to boost Semina core, accelerating market entry and increasing customer importance.

The dialogue emphasizes the necessity of continued investment in R&D to support business growth, particularly as the company transitions from EMS to value-added ODM services. It highlights the importance of building strong, transparent relationships with customers and investing in capabilities to meet future demands, ensuring the company remains an industry leader in AI and ODM services.

A participant inquired about potential supply chain disruptions, input costs, and related difficulties during a Q&A session, expressing curiosity despite most questions being addressed.

The dialogue discusses ongoing material shortages, particularly affecting memory and custom ASICs, with concerns extending into the next year. Despite these challenges, there's an emphasis on monitoring revenue risks without direct attribution to specific individuals.

The dialogue highlights the daily challenge of managing parts procurement to ensure smooth manufacturing and shipment processes. It emphasizes the importance of IT systems, supplier relationships, and customer planning in mitigating these challenges. Despite potential for increased shipments due to component availability, current forecasts and customer expectations have been integrated into business guidance. The core business, focusing on communication networks and cloud infrastructure, continues to grow, albeit constrained by equipment and component supply. The discussion concludes with an open invitation for further questions, reinforcing the company's commitment to customer engagement and transparency.