Electronics manufacturing services company Sanmina (NASDAQ:SANM) announced better-than-expected revenue in Q1 CY2025, with sales up 8.1% year on year to $1.98 billion. On the other hand, next quarter’s revenue guidance of $1.98 billion was less impressive, coming in 5.5% below analysts’ estimates. Its non-GAAP profit of $1.41 per share was 2.5% above analysts’ consensus estimates.
Revenue: $1.98 billion vs analyst estimates of $1.97 billion (8.1% year-on-year growth, 1% beat)
Adjusted EPS: $1.41 vs analyst estimates of $1.38 (2.5% beat)
Adjusted EBITDA: $91.5 million vs analyst estimates of $139.7 million (4.6% margin, 34.5% miss)
Revenue Guidance for Q2 CY2025 is $1.98 billion at the midpoint, below analyst estimates of $2.09 billion
Adjusted EPS guidance for Q2 CY2025 is $1.40 at the midpoint, below analyst estimates of $1.60
Operating Margin: 4.7%, in line with the same quarter last year
Free Cash Flow Margin: 6.4%, up from 2.3% in the same quarter last year
Market Capitalization: $4.27 billion
StockStory’s Take
Sanmina’s first quarter results reflected broad-based revenue growth across most end markets, driven primarily by strength in Communication Networks and Cloud Infrastructure. Management credited operational efficiency and a diversified product mix for the improvement in non-GAAP earnings per share, with CEO Jure Sola noting, “We are expanding our capabilities to meet present and future demand, especially in data center and high-performance networking.” The company also highlighted contributions from new customer programs in medical, energy, and defense segments.
Looking ahead, Sanmina’s leadership expressed caution regarding its outlook for the next quarter. The company cited ongoing uncertainty from global tariffs and geopolitical factors as key reasons for more conservative guidance. Sola explained that while customer pipelines remain healthy and inventory levels are normalizing, “in this environment, it’s one quarter at a time.” Investments in capacity, especially in India, Mexico, and the U.S., are planned to position Sanmina for long-term growth but may weigh on near-term profitability if macro conditions remain volatile.
Key Insights from Management’s Remarks
Sanmina’s management attributed the quarter’s performance to strong execution in targeted end markets and disciplined cost control. The company emphasized its investments in technology and capacity expansion as central to its strategy going forward.
End Market Diversification: Growth was driven by Communication Networks and Cloud Infrastructure, which saw strong demand for high-density networking equipment and optical systems, while Industrial, Energy, Medical, and Defense also contributed stable performance.
Operational Efficiencies: Management pointed to improved gross margin and operating margin due to favorable product mix and ongoing cost discipline, especially in the Component Products and Services (CPS) segment.
Capacity Expansion Initiatives: Significant investments are underway in India, Mexico, and North America to support new data center projects, including a 100-acre campus in India focused on cloud infrastructure requirements.
Customer Inventory Normalization: CEO Jure Sola noted that inventory levels among customers are returning to typical ranges, signaling a stabilization in order patterns after previous supply chain disruptions.
Tariff and Geopolitical Risks: Management highlighted the ongoing uncertainty around tariffs and emphasized Sanmina’s flexible global manufacturing footprint, which enables it to shift production as needed to mitigate customer exposure to trade policy changes.
Drivers of Future Performance
Management’s outlook for the next quarter is shaped by careful navigation of geopolitical risks, continued investment in new capacity, and evolving customer demand in core segments.
Tariff Impact Management: The company identified tariffs and the broader geopolitical environment as the largest sources of uncertainty, with the potential to disrupt customer demand and require shifts in production locations.
Capacity and Technology Investments: Planned capital expenditures in India, Mexico, and the U.S. are expected to support growth in cloud infrastructure and advanced manufacturing, though these investments could temporarily pressure margins.
End-Market Program Growth: Leadership expects new and existing programs in medical, energy, and defense to underpin future revenue, while ongoing normalization of customer inventory levels may result in steadier order flow.
Top Analyst Questions
Ruplu Bhattacharya (Bank of America): Asked if customers pulled forward demand ahead of tariff changes; management said no significant shifts were observed, but noted ongoing discussions and contingency planning.
Ruplu Bhattacharya (Bank of America): Inquired about the prudence of guidance and potential demand slowdown; CEO Sola attributed cautious outlook to environmental uncertainty and a delayed major program, but expressed optimism for long-term growth.
Ruplu Bhattacharya (Bank of America): Questioned inventory trends and future cash flow; CFO Jon Faust explained inventory improvement year-over-year, with increases tied to supporting upcoming program launches.
Steven Fox (Fox Advisors): Asked about specifics of capacity investments in India, Mexico, and the U.S.; management cited expansion in data center manufacturing and advanced printed circuit boards as key focus areas.
Anja Soderstrom (Sidoti): Probed new customer wins and the competitive process; Sola described wins as broad-based, highlighting technology, flexibility, and global reach as differentiators.
Catalysts in Upcoming Quarters
In the quarters ahead, StockStory analysts will closely monitor (1) the pace and effectiveness of Sanmina’s capacity expansions in India, Mexico, and North America, (2) the company’s ability to manage shifting customer demand amid ongoing tariff and geopolitical risks, and (3) order trends in Communication Networks, Cloud Infrastructure, and key industrial segments. The trajectory of inventory normalization and execution on new program launches will also be key factors shaping near-term results.
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