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DATE

Monday, July 28, 2025, at 5 p.m. ET

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — Jure Sola
  • Executive Vice President and Chief Financial Officer — Jonathan P. Faust
  • Senior Vice President, Investor Communication — Paige Melching

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TAKEAWAYS

  • Revenue: $2.04 billion (non-GAAP) for fiscal Q3 2025, up 10.9% year over year, driven by broad-based demand and particularly strong performance in communications networks and cloud infrastructure.
  • Non-GAAP Gross Margin: 9.1% non-GAAP gross margin for fiscal Q3 2025, a 60 basis point improvement from the prior year period, attributed to favorable product mix and operational efficiencies.
  • Non-GAAP Operating Margin: 5.7% non-GAAP operating margin for fiscal Q3 2025, a 40 basis point improvement year over year, and at the high end of management’s previously communicated non-GAAP outlook.
  • Non-GAAP Diluted EPS: $1.53 non-GAAP diluted earnings per share on approximately 54.5 million shares outstanding, up 22.8% year over year (non-GAAP).
  • IMS Revenue: $1.65 billion, an 11.6% increase year over year (non-GAAP IMS revenue), with communications networks and cloud infrastructure as key contributors.
  • IMS Gross Margin: IMS non-GAAP gross margin was 7.5%, down 10 basis points year over year.
  • CPS Revenue: $422 million, up 8.8% year over year, driven by increased demand across all end markets.
  • CPS Gross Margin: 14.7% non-GAAP gross margin for DPS, up 320 basis points year over year, as a result of business mix, revenue growth, and operational improvements.
  • Cash and Liquidity: $798 million in cash and equivalents, and total liquidity of approximately $1.7 billion.
  • Inventory: $1.2 billion net of customer advances, reflecting a 12% reduction from the prior year (non-GAAP); Inventory turns, net of customer advances, improved to 6.3 times from 5.1 times for fiscal Q3 2024.
  • Non-GAAP Pre-tax ROIC: Non-GAAP pre-tax ROIC was 24.8%, an increase from 21.1% in fiscal Q3 2024.
  • Gross Leverage Ratio: Gross leverage ratio was 0.38 times.
  • Operating Cash Flow: $201 million in cash flow from operations; $422 million cash flow from operations for 9M fiscal 2025.
  • Capital Expenditures: $33 million in capital expenditures and $80 million for 9M fiscal 2025; full-year capex expected to be about 1.8% of revenue for fiscal 2025.
  • Free Cash Flow: Free cash flow was $168 million (non-GAAP), totaling $341 million in free cash flow (non-GAAP) over 9M fiscal 2025.
  • Share Repurchases: 200,000 shares repurchased for approximately $13 million; 1.4 million shares repurchased year to date for $114 million in fiscal 2025; $239 million remains authorized for future repurchases.
  • Q4 Outlook: Revenue guidance of $2.0 billion to $2.1 billion; non-GAAP gross margin of 8.7%-9.2%; non-GAAP operating margin forecasted at 5.5%-6%.
  • ZT Systems Acquisition: Transaction remains on track to close by year-end; expected to contribute $5 billion-$6 billion in annual net revenue run-rate and to double company net revenue within three years (based on anticipated impact of the ZT Systems acquisition, as stated by management).
  • End Market Revenue Detail: Industrial, energy, medical, defense, aerospace, and automotive revenue reached $1.256 billion (up 6.2%); communications networks and cloud infrastructure revenue was $786 million (up 19.1%).
  • Book-to-Bill Ratio: Approximately one to one, indicating balanced demand and bookings.

SUMMARY

Sanmina (SANM -0.28%) reported clear year-over-year growth in revenue, margin expansion, and earnings on a non-GAAP basis for fiscal Q3 2025, highlighting robust demand in key infrastructure markets. Management reinforced strategic intent by providing specifics on the path for further margin improvement and detailing ongoing global investments in capacity and technology. Forward guidance quantified expected performance, signaled continued operational focus, and outlined the anticipated financial impact and integration plans for the ZT Systems acquisition, including expectations that the transaction will add $5 billion to $6 billion in annual net revenue on a run-rate basis and be accretive to non-GAAP diluted earnings per share in the first year after closing.

  • CEO Sola said, "Long-term, we expect to improve our non-GAAP operating margin to greater than six percent."
  • CFO Faust stated, "At the time of the announcement on May 19, we said we expected net revenue run rate to be about $5 billion to $6 billion at the close of the ZT Systems acquisition, which is expected near the end of calendar year 2025. We do not intend to change that forecast."
  • The company’s net leverage ratio at deal close for ZT Systems is expected to be within the one to two times target range, with a temporary rise in net leverage ratio anticipated post-closing to support inventory-driven growth.
  • Management confirmed that cost impacts from tariffs are “essentially a pass-through” to customers for existing programs, with regional supply-chain strategies emerging for new program allocations.

INDUSTRY GLOSSARY

  • IMS (Integrated Manufacturing Solutions): Sanmina Corporation's operating segment focused on end-to-end design, manufacturing, and supply-chain services for OEM customers.
  • CPS (Components, Products and Services): Sanmina Corporation's operating segment providing standalone components and product services, including advanced printed circuit boards, precision machining, and specialized systems.
  • Book-to-Bill Ratio: Metric reflecting order intake versus revenue recognized; a ratio of one indicates demand in balance with shipments.
  • ZT Systems: Manufacturing business to be acquired from AMD, expected to add significant revenue and scale to Sanmina Corporation’s data center and AI infrastructure platform.

Full Conference Call Transcript

Operator: Good afternoon, ladies and gentlemen, and welcome to the Sanmina Corporation's Third Quarter Fiscal 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Monday, July 28, 2025. I would now like to turn the conference over to Paige Melching, Senior Vice President of Investor Communication. Please go ahead.

Paige Melching: Thank you, Chloe. Good afternoon, ladies and gentlemen, and welcome to Sanmina Corporation's Third Quarter Fiscal Year 2025 Earnings Call. A copy of our press release and slides for today's discussion are available on our website at sanmina.com in the Investor Relations section. Joining me on today's call is Jure Sola, Chairman and Chief Executive Officer, and Jonathan P. Faust, Executive Vice President and Chief Financial Officer. Before I turn the call over to Jure, let me remind everyone that today's call is being webcasted and recorded and will be available on our website. You can follow along with our prepared remarks in the slides provided on our website.

Please turn to slide three of our presentation and take note of our safe harbor statement. During this conference call, we may make projections or other forward-looking statements regarding future events and the future financial performance of the company. We caution you that such statements are just projections. The company's actual results could differ materially from those projected in these statements as a result of factors set forth in the safe harbor statement.

The company is under no obligation to and expressly disclaims any such obligation to update or alter any of the forward-looking statements made in this earnings release, the earnings presentation, the conference call, or the Investor Relations section of our website, whether as a result of new information, future events, or otherwise, unless otherwise required by law. Included in our press release and slides issued today, we have provided you with statements of operation for the third quarter ended June 28, 2025, on a GAAP basis, as well as certain non-GAAP financial information. A reconciliation between the GAAP and non-GAAP financial information is also provided in the press release and slides posted on our website.

In general, our non-GAAP information excludes restructuring costs, acquisition and integration costs, non-cash stock-based compensation expense, amortization expense, and other unusual or infrequent items. Any comments we make on this call as it relates to the income statement measures will be directed at our non-GAAP financial results. Accordingly, unless otherwise stated in this conference call, when we refer to gross profit, gross margin, operating income, operating margin, taxes, net income, and earnings per share, we are referring to our non-GAAP information. I'd now like to turn the call over to Jure.

Jure Sola: Thanks, Paige. Good afternoon, ladies and gentlemen. Welcome, and thank you all for being here with us today. First, I would like to take this opportunity to recognize Sanmina Corporation's leadership team and our employees for doing a great job. So to you, Sanmina Corporation's team, thank you for your dedication, hard work, and most importantly, delivering excellent service to our customers. For the third quarter fiscal year 2025, you delivered solid revenue of $2.04 billion and non-GAAP EPS of $1.53 per share. Again, to Sanmina Corporation employees, thank you. Let's keep it up. This is hard work, I know that. Now let's go to our agenda for today's call.

We have Jonathan, our CFO, to review details of the results for you. I will follow up with additional comments about Sanmina Corporation's results and future goals. Then Jonathan and I will open for questions and answers. And now I'd like to turn this call over to Jonathan.

Jonathan P. Faust: Great. Thank you, Jure. And good afternoon, ladies and gentlemen. We appreciate your participation in today's earnings call. Before I discuss our third quarter performance, I would like to thank the entire Sanmina Corporation team for their dedication, diligent execution, and support. In a highly dynamic environment, the team has demonstrated exceptional agility in meeting our customers' evolving needs. Jure and I, along with the entire same management team, commend these efforts, which have resulted in a solid third quarter and year-to-date fiscal 2025 performance. Now please turn to Slide five. I'll speak to the financial highlights. We're very pleased to report that our fiscal third quarter results either met or exceeded our previously communicated outlook.

More specifically, our revenue of $2.04 billion, non-GAAP gross margin of 9.1%, and our non-GAAP diluted earnings per share of $1.53 all exceeded our outlook. Furthermore, our non-GAAP operating margin of 5.7% was at the high end of our outlook. These strong results, along with our Q1 and Q2 performance, have established a solid foundation for the fiscal year and have positioned us well to achieve our long-term financial goals of driving growth and expanding margins. Now please turn to slide six, where I'll speak to our P&L performance for the third quarter. As previously noted, we generated revenue of $2.04 billion, which represents an increase of 10.9% year over year.

This growth was primarily driven by broad-based demand across all of our end markets, with particular strength in the communications networks and cloud infrastructure end markets, which Jure will speak to in more detail in his prepared remarks. Non-GAAP gross profit was $186 million, representing 9.1% of revenue and a 60 basis point improvement versus the same period last year. This expansion in our gross margin was a result of favorable product mix and ongoing operational efficiencies. Non-GAAP operating expenses totaled $70.3 million, slightly above our outlook, reflecting our continued strategic investments aimed at driving future growth. Non-GAAP operating income was $115.7 million, or 5.7% of revenue, representing a 40 basis point improvement versus the same period last year.

This improvement was driven by a combination of revenue growth, favorable mix, and disciplined execution. It is important to note that our non-GAAP operating margin consistently remains within our previously communicated short-term target range of 5% to 6%. Non-GAAP other income and expense resulted in a net expense of $4.5 million, which was slightly favorable to our guidance, largely due to our strong cash flow generation. Finally, non-GAAP diluted earnings per share was $1.53 based on approximately 54.5 million shares outstanding, representing a 22.8% increase versus the same period last year. Now please turn to slide seven, where I'll speak to our P&L performance for the nine months of fiscal year 2025 as compared to the same period last year.

Revenue for the nine months increased by 8.7% year over year. This growth was driven by a solid performance across all end markets, with notable improvements in the communications networks and cloud infrastructure end markets. Non-GAAP diluted earnings per share for the nine months increased by 13.5% year over year. As communicated at the start of the year, and in our earnings call since then, we anticipated fiscal 2025 to be a growth year for both revenue and profitability, and our nine months results put us on the right trajectory to achieve this objective. Now please turn to slide eight, where I'll speak to our segment results. IMS revenue came in at $1.65 billion, up 11.6% year over year.

This was driven by growth across all end markets, with particular strength in the communications networks and cloud infrastructure end markets. IMS non-GAAP gross margin was 7.5%, down 10 basis points versus the same period last year. DPS revenue came in at $422 million, up 8.8% year over year, driven by increased demand across all end markets. DPS's non-GAAP gross margin was 14.7%, an impressive 320 basis point improvement year over year. This performance was driven by higher revenue, favorable mix, and ongoing operational efficiencies.

While we're pleased with the performance of both the IMS and CPS businesses this quarter, we recognize the ongoing opportunity for further improvement in both revenue growth and margin expansion, which will remain key focus areas going forward. Now please turn to slide nine, where I'll speak to the balance sheet highlights. For many years, Sanmina Corporation has had one of the strongest balance sheets in the industry, and we continued to add to that strong foundation this quarter. Cash and cash equivalents were $798 million at quarter end. We had no outstanding borrowings on our $800 million revolver, leaving us with substantial liquidity of approximately $1.7 billion.

We ended the quarter with inventory, net of customer advances, of $1.2 billion, representing a 12% decrease in absolute dollar terms versus the same period a year ago. Inventory turns, net of customer advances, improved to 6.3 times for the quarter as compared to 5.1 times in the same period a year ago. While we're pleased with these results, we still see room for further optimization. Our non-GAAP pre-tax ROIC for the quarter was 24.8%, well above our weighted average cost of capital, and an improvement from 21.1% in the same period a year ago. The company continues to be in a net cash position, and our gross leverage ratio was 0.38 times.

This robust financial profile enables us to effectively execute on our strategic initiatives while still navigating macroeconomic uncertainties. Now please turn to slide 10, where I'll speak to the cash flow highlights. As a direct result of our team's disciplined working capital management, cash flow from operations for the third quarter was a strong $201 million and $422 million for the nine months of the fiscal year. Capital expenditures for the quarter were $33 million, which was lower than our outlook driven by the timing of receipts, and totaled $80 million for the nine months of the fiscal year.

As previously communicated, we remain committed to making strategic investments in the capabilities and technologies necessary to strengthen our market position and support our long-term financial objectives. To that end, we anticipate ongoing targeted investments in both capacity and technology across our operations in the US, India, and Mexico. Based on our spend for the first nine months and our fourth quarter projections, we now expect full-year capital expenditures to be about 1.8% of revenue. Free cash flow for the quarter was $168 million, bringing the nine months total to $341 million. During the quarter, we repurchased 200,000 shares for approximately $13 million, and year-to-date, we have repurchased 1.4 million shares for $114 million.

As of June 28, 2025, we have $239 million remaining under our authorized share repurchase program. Our strong cash flow performance has provided us with the financial flexibility to allow continued investments in the business while also returning capital to shareholders, all within a disciplined and balanced capital allocation framework. Now please turn to slide 11, where I'll cover our outlook for the fourth quarter. Our guidance is based on current customer forecasts and incorporates market uncertainties stemming from tariffs and the geopolitical landscape. Our fourth quarter outlook is as follows. We expect revenue between $2 billion to $2.1 billion.

At the midpoint of $2.05 billion, that would put us up 6.8% on a full-year basis, in line with our prior outlook. Non-GAAP gross margin is projected to be between 8.7% and 9.2%, subject to mix considerations. Operating expenses of $64 million to $68 million. Non-GAAP operating margin of 5.5% to 6%. We expect other income and expense to be a net expense of approximately $4 million, an effective tax rate of 20% to 22%. We estimate an approximate $4 million non-cash reduction to our net income to reflect our India JV Partners equity interest. Non-GAAP diluted earnings per share in the range of $1.52 to $1.62 based on approximately 54 million fully diluted shares outstanding.

At the midpoint of $1.57, that would put us up 9.8% as compared to the same period a year ago, and up 12.9% on a full-year basis. Capital expenditures are expected to be around $65 million, and finally, depreciation of approximately $30 million. In summary, we are very pleased with our Q3 performance despite the uncertainty around tariffs and the geopolitical landscape, and we're confident in our ability to deliver solid revenue and profitability growth in Q4 and beyond. Now please turn to Slide 12, where I'll provide an update on our previously announced planned acquisition of the ZT Systems manufacturing business.

We are progressing nicely and remain on track to close the transaction near the end of the 2025 calendar year, pending regulatory approvals. We are also on track with all of our required regulatory filings. As we mentioned when we announced the transaction, we expect it will add $5 billion to $6 billion of annual net revenue on a run-rate basis and anticipate it will double Sanmina Corporation's net revenue within the next three years. As a reminder, we expect the transaction to be accretive to non-GAAP diluted earnings per share in the first year after closing, with additional non-GAAP EPS accretion from both growth and synergies over time.

The syndication of our permanent debt financing is also on track, and we'll provide further updates on that front very soon. I also want to briefly discuss what this transaction means for our balance sheet and how it fully aligns with our capital allocation strategy, which will continue to focus on growth and cash generation while following a disciplined ROI-based approach. We've built one of the strongest balance sheets in the industry, with a net positive cash position, strong liquidity, and a low gross leverage ratio of 0.38 times as of our third quarter. I want to emphasize our commitment to maintaining a strong balance sheet, having ample liquidity to invest in the business, and executing on our strategy.

This transaction is an investment in working capital, primarily inventory, property, plant, and equipment, and a critical set of capabilities, which we believe will generate solid returns over time. At the time the transaction closes, we expect our net leverage ratio to be well within our target range of one time to two times and in line with our peer group. For a period of time after closing, we expect working capital to build to support investment in the growth of the business, which we anticipate will temporarily push our net leverage ratio above two times. To reiterate, we are committed to preserving our existing credit rating, and our goal is to become investment grade over time.

This is a compelling transaction for Sanmina Corporation, as it positions the company to capitalize on long-term growth trends in the data center and AI infrastructure end market. In summary, we're excited about the opportunities ahead and we look forward to discussing the financial profile of the business in more detail at the time the transaction closes. And with that, I will now turn the call over to Jure.

Jure Sola: Thank you, Jonathan. Ladies and gentlemen, let me add a few more comments about our results for the third quarter and the rest of the fiscal year 2025. Please turn to Slide 14. As you heard from Jonathan, our team delivered solid execution and excellent service to our customers. Revenue, non-GAAP gross margin, and non-GAAP EPS exceeded our outlook. We delivered a non-GAAP operating margin of 5.7%, and long-term, we expect to improve our operating margin to greater than six-plus percent. We generated a strong cash flow for the quarter, and we expect to continue to generate positive cash flow from operations to drive future growth. We delivered year-over-year growth for all end markets.

So I can tell you that our customers are still optimistic about their future, and we are starting to see a strong pipeline of new opportunities. So overall, a good quarter, but there's still room, as you heard from Jonathan, for improvements. To talk more about it, please turn to slide 15. Let's look at the revenue by end market for the third quarter. Industrial, energy, medical, defense, aerospace, and automotive segment came in at $1.256 billion, a growth of 6.2% year over year. Very strong overall segment. For communication networks and cloud infrastructure, they came in at $786 million, a growth of 19.1% year over year.

For the third quarter, total revenue of $2.04 billion, we delivered another solid quarter, up 11% year over year. Top 10 customers for the quarter were 52.8% of our revenue. Bookings continue to see solid demand overall, with book-to-bill coming around one to one. As you can see, we are a well-diversified company. We continue to see positive trends for fiscal year 2025 and beyond. For industrial and energy, we have a very solid customer base that is doing well. We have some great opportunities in the pipeline around energy and safety equipment. We see exciting new projects in the pipeline that should drive growth in fiscal year 2026.

For Medical, we see stable demand driven by medical devices and digital health. Again, we have a strong customer base well-diversified within the market. We also see a good pipeline of new opportunities for the future fiscal years 2026 and 2027. For defense and aerospace segments, we continue to see solid demand from critical defense projects. Our advanced printed circuit board fabrication business in this segment is doing well. We are growing and expanding defense in our segment and other capabilities of Sanmina Corporation. Overall, we expect this segment to continue to grow nicely from technology components all the way to full systems. For the automotive and transportation segment, short-term, we're seeing some softness in this market, overall slower demand.

For this segment, long-term, we have some good opportunities in the pipeline that we expect to grow again in fiscal year 2026. For communication networks and cloud infrastructure, we see a very positive trend. Solid demand for high-performance routers and switches, optical network systems, optical advanced packaging, and enterprise storage. We're also starting to see some positive signs about our mobile 5G business, driven both by cloud and service providers. For this segment, Sanmina Corporation is well-positioned, and we should continue nice growth in 2026 and beyond. Let me talk a little bit more about the fourth quarter and fiscal year 2025 outlook.

As you heard from Jonathan, we are pleased with our performance for the first nine months of 2025. As revenue was up 8.7% compared to the same period a year ago. We have grown the non-GAAP EPS for the first nine months to 13.5%. And we generated strong cash flow from operations. Based on our results for the first nine months and outlook for the fourth quarter at midpoint, this puts us on track to deliver nice growth in fiscal year 2025. We expect to see a growth of 6% to 8%. While we continue to manage through a very dynamic environment, we remain focused on operational execution, customer satisfaction, cost management, and consistently delivering value to our customers.

Please turn to Slide 16. Now let me talk to you about our strategic acquisition of ZT Systems from AMD. Let me add a few more comments to Jonathan's comments. This acquisition advances Sanmina Corporation's strategic data center AI strategy. It positions Sanmina Corporation to capitalize on a long-term growth trend in data center, AI infrastructure spend. If you look at the chart next year, the forecast is that the global data center investments will be over $500 billion. And as we go into 2028, that number could be over $800 billion, potentially over $1 trillion. So there's plenty of opportunity for us.

I can tell you that we are getting a lot of great interest in our new capabilities, both from existing and new potential customers. We do expect to expand our relationship with hyperscalers and OEM customers across all platforms and technologies in the industry. This strategic acquisition brings industry-leading manufacturing capabilities and capacity here in the US and Europe, reinforcing Sanmina Corporation's existing footprint. This complements Sanmina Corporation's well-established vertical integration strategy. Our strategy is to provide end-to-end solutions for the data center AI end market. So please turn to slide 17 so I can tell you more about our end-to-end capabilities for data center AI.

On this slide, you can see Sanmina Corporation's end-to-end solution for the data center AI end market. Data center AI requirements continue to evolve at a rapid pace, driving technology advancement. Sanmina Corporation has been investing and expanding our capabilities to meet this present and future demand. We expanded and grown our high-technology printed circuit boards. We've been assembling the most advanced systems that are available out there. We continue to fabricate and invest in mechanical racks and enclosures. We're expanding our liquid cooling rack systems. We're investing in cooling manifolds in racks, bus bars for racks. We're growing our ODM services and storage business, custom memory, and custom optical modules.

And with this strategic acquisition, our strategy now provides industry-leading capabilities from design to full system, end-to-end solutions for the data center AI infrastructure end market. These strategic acquisitions from AMD complement Sanmina Corporation's advanced data center AI technology and give us the ability to do full system integration at scale. I can also tell you that we'll continue to invest in this market to drive future growth. Please turn now to Slide 18. In summary, we are executing well in this dynamic environment. Third-quarter results were in line or exceeded our outlook. We delivered strong year-to-date and year-to-year performance across the majority of our end markets.

Fourth-quarter 2025 outlook aligns with achieving our fiscal year 2025 growth and profitability objectives. As you heard both from Jonathan and me, the third quarter was a busy time for us. We signed a definitive agreement with AMD to acquire ZT Systems. It's a strategic transaction for us, very exciting. This fits well with Sanmina Corporation's strategic growth priorities. We feel good about our future, new program wins, and we expect demand improvements to drive growth in fiscal year 2026. Sanmina Corporation is well-positioned to be a bigger and stronger company in the future. And I'm personally excited about the opportunities ahead. So ladies and gentlemen, now I would like to thank you all for your time and support.

Operator, we're now ready to open the lines for questions and answers. Again, thank you again.

Operator: Thank you. Ladies and gentlemen, we will now conduct a question and answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. If you are using a speakerphone, please lift the handset before pressing any keys. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Ruplu Bhattacharya from Sanmina Corporation. Your line is open.

Ruplu Bhattacharya: Hi. Thank you for taking my questions. On slide 12, you gave an update for the ZT Systems acquisition, and it still says $5 billion to $6 billion of net revenue run rate. Is that still your expectation for annual revenue? Is this still a declining revenue business? Or have the revenues now stabilized? And Jure, if you can also talk about your plan to turn this business around. Do you think you need to hire any Salesforce to go after hyperscale customers? And AMD kept the design engineers. Are you planning to hire any engineers to invest in the rack configurations?

So just talk about what you see as the annual revenue run rate as of today, and what is your plan to turn and expand this business?

Jure Sola: Alright. Well, it's a great question, and I will give a lot of information. As you know, we are not the owners of this organization yet, so I have to be careful what I can say and what I cannot say. But first of all, Ruplu, we are very excited. Today, I—you know, we announced this deal on May 19, I believe. And, personally, I'm more excited today than I was then, and I was very excited then. And the reason I'm more excited today is we're, you know, back to basically the critical customers out there with hyperscalers and critical OEM potential customers. We find out there's a lot of interest.

Also, we find out a lot more about the ZT system itself. We believe they have some advanced capabilities, some great people. You know, in this business, it's all about people. We believe they got some great people. And, you know, when I look at what's a potential, it's a great potential. You know, when AMD acquired this thing, their goal was to eventually, you know, find the right partner and separate engineering and manufacturing. And I will say that we're fortunate that we're becoming a critical partner to AMD and taking over this operation. We believe working together will give us a lot of opportunities. Not just believe, I see it today.

All these key capabilities that we have and the industry really needs capacity and capabilities that we have. So I'll be honest with you, I wish we could close this deal today. Because there's a—you know, I'll be able to tell you a lot more. Personally, I'm not worried about revenue, and Jonathan can comment later on that. I think the revenue is there. I think there's a lot more—you know, ZT has some older products that they've been doing for a long time. This place is profitable. It was profitable. It is profitable today, and we expect it to continue to be profitable in the future. But opportunities are bigger for the future than the past.

Let me leave it at that. Today, we're already selling Sanmina Corporation Plus ZT to our critical partners. That's going on every day, across all our critical people. We are adding some technical support, more about technology, to add more value to our customers. We know exactly what that is. But we are also picking a lot of great people from ZT. They got a lot of network people in the manufacturing, you know, and also around testing and so on. So this is a very, very strong team. I think partnering with AMD is very critical. They got a lot of exciting technology that's coming up.

And, again, I believe that we can help them get that product to the market at a faster rate with the technology that is required for high hyperscalers and OEM customers. We are definitely investing in sales, as you can see, our SG&A is a little bit higher because of that. And, again, I don't know what else to say except to tell you I'm excited. I think there's a lot of opportunity there. You know, as I said before, in my prepared statement, I think we're ready to build a lot bigger Sanmina Corporation from a very, very strong position. We have a strong foundation.

So give us some time here at least for the next six to twelve months to give you some good results. So with that, Jonathan, you want to add comments to that?

Jonathan P. Faust: Yeah. Just one point, Jure. I'll add, Ruplu, just to help answer the question around revenue. So back at the time of the announcement, on May 19, we said that we expected revenue run rate, the net revenue run rate to be about $5 billion to $6 billion at the time of the close. And we don't intend to change that forecast. You know, as Jure mentioned, we'll come out with a lot more details when we close the transaction, but that's still the case. You know, the business has a very stable foundation of general-purpose kind of compute and also storage.

You know, it's the accelerated compute component that's going through a transition, as we had mentioned, but you know, we've got full confidence in what's happening on that part of the business too. But more to come when we close the deal.

Jure Sola: Just to add to that, you didn't answer the question. We are adding—you know, at Viking, we have a very strong core engineering team that basically can do the same or similar thing that the old ZT engineering team could have. Now ZT was the biggest scale, but we're expanding our team, but we do have a core right now that, specifically for this data center, that it can do the job today, and we are going to be expanding and growing that team.

Ruplu Bhattacharya: Okay. No. I appreciate all the details. For my follow-up, can I ask, you know, you had very strong growth in fiscal 3Q? I mean, you reported 11% year-on-year growth. When we look at the guide for fiscal 4Q, there seems to be somewhat of a meaningful slowdown. I think the midpoint of the guidance implies 1.6% year-on-year growth. Can you just talk about if any markets are weaker than you expected? And then, like you said, Jure, if you look at the full year, you're going to be growing revenues fiscal 2025 at 7% almost year-on-year. Can you give us your early thoughts into fiscal 2026?

I mean, let's say, even without ZT Systems, do you think the base business can continue this 7% year-on-year growth? So just any thoughts you have on fiscal 4Q, what is driving that, and your thoughts on fiscal 2026?

Jure Sola: Yeah. First of all, comparison from this fourth quarter to last year, to 2024, you're right. It's not a huge growth. But the business is not slowing down. I will say the business—if you look at last year, we were kind of coming out of inventory. It was choppy. It was a transition year. So it was really choppy for most of our competitors too. It just happened to be a fourth quarter last year better than what it was third and second. Today, the business is a lot more stable. Yes. We have some uncertainties out there with this geopolitical issue, the tariffs, and so on. Looks like that, you know, that temperature is coming down.

So we feel a little bit more comfortable, and we can predict the future better. Our customer is a lot more positive about the future. If I look at the customer's forecast, they look very positive. And we, you know, today, we're kind of discounting those. So for us to forecast 2026, we like to wait more, probably another ninety days. But I can tell you that right now, and what I said earlier in the prepared statement, we're excited. We expect to grow our core business, hopefully, at the same or faster rate next year.

But overall, I wish you have a—unless something really, you know, falls off the cliff that we are completely out of our control, we expect to have a great year next year.

Ruplu Bhattacharya: Okay. And if I can just put in one more quick question, Jonathan. CPS margins were up 320 bps sequentially. Was there any one-time items? And can this continue? So much for taking my questions.

Jonathan P. Faust: No. And it's primarily driven just by the business mix, you know, Ruplu. And as you know, the CPS margins and that profile, that's an area that we've been focused on for a long time. We've been making a lot of investments there. So we're very pleased with the results. You know, from any—from one quarter to the next, you can see some ups and downs just because of the nature of that business. There's so many different components within it. But pretty much across the board, we've been looking to improve the margin profile of each individual division. So what I believe that we're seeing now is the results of some of those investments coming through to fruition.

So very happy with results. Nothing one-time in nature that we'd want to call out. And as far as the future goes, you know, we're going to continue to drive that profile. Both Jure and I have said before that we expect that business to be above 15%, and we're getting very close to that number already today.

Ruplu Bhattacharya: Alright. Thank you so much.

Jure Sola: Thanks, Ruplu.

Operator: Our next question comes from the line of Steven Fox from Fox Advisors. Your line is open.

Steven Fox: Hi. Good afternoon, guys. First of all, just I had another question on the ZT deal now that you've had a little bit more time with it. Can you just talk about the risk on the inventory side, Jonathan? I know it's a big piece of the valuation. Do you guys get a last look at valuing that, you know, the inventories before you close? And I guess my bigger concern is, like, anything that you might inherit that could be sort of lagging generation on the GPU side that you might have write-downs on. Can you just sort of talk about that risk? And I had a follow-up.

Jonathan P. Faust: Yes. Absolutely, Steve. Thanks for the question. So yeah, we do have a working capital target of about $2 billion, you know, as a part of the transaction. We talked about that when we announced the deal back on May 19. You can basically think of that as, you know, primarily related to inventory. There's a property, plant, and equipment too of $250 million, but the $2 billion is primarily around inventory. And as a part of the deal, we spend a lot of time evaluating that inventory position. A lot of discussions with AMD and ZT.

And so we'll make sure, just like as we always do in this business and our business around manufacturing, to make sure that inventory is supported by customer demand and forecasts. So there's always risk. There's some risk there, but, you know, our intent is to fully evaluate that, and both AMD and ZT are committed to that as well.

Steven Fox: Great. That's helpful. And then on the legacy business, Jure, I know you just mentioned, you know, what you've been doing on the CPS side. I was wondering if you could just start because I'm looking—it looks like that was, like, a record CPS margin. So I was wondering if you can maybe sort of help us step back a little bit more, talk about how CPS is sort of, you know, helping your business by served markets a little bit. Like, it seems like it must be helping growth, not just margins. Any help there would be useful.

Jure Sola: Yeah. Steve, first of all, yeah, not everything is perfect at CPS today, but we believe, as Jonathan mentioned, that, you know, we always target over 15, but I would say that our target is higher than 15 right now because we know there's more opportunity. You know, we still have some softness in some of the semiconductor business that typically we have. But we also have some great opportunities in the defense business. If you look at our advanced printed circuit boards here in North America, that's mainly, you know, high-technology product for defense. That business is doing well.

We're expanding that business, and we expect to continue to have at least a few great years in that segment when it comes to demand. Our mechanical business is doing well, especially around the data center. As I mentioned earlier, we are expanding, investing in liquid cooling racks. Demand for racks is very strong. You know, it's all around the data center. And we expect that business actually to increase now with the acquisition of ZT. So we see a lot of positive things there. We are also expanding our precision machining into the military side of the business.

We are expanding and have been investing a fair amount, and hopefully, we'll get a lot of returns on optical modules, specifically pluggables, you know, custom memory around military for jet fighters and so on. So there's a lot of exciting stuff that we have in our segment of what we call components technology group, with a lot of upside potential and a lot of growth opportunities. So, yes, we are very comfortable with our core business, and we're still pushing those plans that we talked about a year ago.

We need to grow our core business at a higher rate, and we believe we are positioning right now that we're going to start seeing that nice growth in 2026 and beyond.

Steven Fox: Great. That's super helpful. Thank you.

Jure Sola: Thanks, Steve.

Operator: Our next question comes from the line of Anja Soderstrom from Sidoti. Your line is open.

Anja Soderstrom: Hi. Thank you for taking my questions. Hi, Jure. How are you doing?

Jure Sola: Good. Good. Congrats on doing nice performance here in the third quarter. With the additional revenue that you expect from the ZT acquisition and doubling the revenue in three years, where do you expect the operating margins to be?

Jure Sola: Well, definitely, first of all, we are improving our margin across the existing business, and we believe that the end-to-end solution that we will be providing for the data center AI end market, we're adding a lot of value to our customers and a lot of capabilities. That will allow us to deliver better margins than historical. So I'm saying today, higher than 6%, but I believe there's an upside to that. And we like to talk to you more about it ninety days from now, and hopefully, we'll be in control of ZT by that time. So, we'll talk more. But we're excited about what's in front of us.

You know, like I said, there's some great people at ZT. We are committed. We're investing—we've been investing a fair amount of money in these critical components that go for the data center. And I think with now capabilities for full system integration at scale, you know, we should be able to continue to improve our margin going forward.

Anja Soderstrom: Okay. Thank you. And for the Indian joint venture, how's that progressing? It seems like you had a little bit higher payout to them, or actually, was it in line with what you had expected? But you didn't really give a guidance for that for the fourth quarter either, I think, or maybe I just missed it.

Jonathan P. Faust: Yeah. On that point, Anja, we always guide on the adjustment to our net income to reflect their equity interest, but the JV overall has done very well. I mean, we're very pleased coming up on almost three years now that we've had the JV in place. But India is a very important market to us. You know, we expect to see a lot of growth in that market. And as far as the business goes, you know, we're looking to expand the different end markets that we serve. It's an area that we're investing in as well. You know, I mentioned that from a CapEx perspective, and Jure might want to comment on that as well.

But we see a lot of opportunity in there. But, yeah, we do just guide and comment specifically on the net income adjustment to begin with.

Jure Sola: India is a very exciting project for us. First couple of years, you know, when you do a joint venture, it takes time to kind of get to know each other, put it all, what our goals are. But I believe Reliance and Sanmina Corporation are on the same page. We want to build something big in India. You know, we are expanding. And we'll also make more comments on that at the end of this year. But a lot of opportunities in India across all our markets from industrial, medical, India defense, automotive in India, transportation, definitely for, you know, data center AI opportunities.

There will be, we believe, in India, and we are positioned to play across all of those key markets. So a great decision on our part to go with the JV with Reliance. You know, we still run that thing 100%, but I think having a good partner in a market like this is very critical, and I believe we have a great partner.

Anja Soderstrom: Okay. Thank you. And just one last one in terms of the tariffs. What are you seeing in terms of the tariffs and potential headwinds from that?

Jure Sola: I'll give that to Jonathan.

Jonathan P. Faust: Yeah. I mean, so there's still a very dynamic environment out there when you think about tariffs and percentage changes and things of that nature. So our approach has been the same as it's been since all of this started. We're close to our customers, understand what they're trying to do and what they're trying to achieve. But based on the footprint that we have, you know, we can certainly move programs around, but it's up to them at the end of the day. And, typically, what we're seeing is current programs are staying in place. But there's a lot of discussion and evaluation for new programs.

Because we think supply chain, you know, on a broad basis is becoming more regionalized. And we've got the right footprint to enable that and support that. Not just our footprint, but also our system structure, our single ERP, our single shop floor system with 42Q. You know, all of those things enable us to be able to support our customers regardless of where they want to do manufacturing. Then just as a reminder, from a business model perspective, you know, these costs are actually borne by our customers who are essentially a pass-through from that point of view.

But our objective at the end of the day is to help them, you know, make those decisions, decide where to manufacture, and what makes the most sense for their business.

Anja Soderstrom: Thank you. And do you see any customers having a sort of a wait and see then for looking maybe the new programs, I guess?

Jonathan P. Faust: We haven't at this point, we haven't seen anything, like, any current programs on a material basis shift. Because that does take time and investment to do that. But certainly for new programs, there's a lot of evaluation and discussion going on. So our goal or our objective is to make sure that we understand, you know, the rules and regulations as they're changing, and then partner closely with our customers to help them do that analysis. And decide what makes the most sense for them.

Jure Sola: Yep. But, Anja, just to add to that, I think the model is that we are going more in this geopolitical world, I think, in the future. We're going more to a regional type of manufacturing. Definitely, you know, there'll be more business manufactured here in North America, but it's not going to happen overnight. Because it takes time to bring the technology up to date and so on.

But our customers are trying to balance, you know, they look at their market globally, you know, what are they going to do in Asia, what are they going to do in India, what are they going to do in Europe, what are we doing in North America, and then we're trying to help them balance those requirements, not just for a short term, but also long term. So there's a lot of talk about the long term, how their strategy is going to play. We had a customer a couple of days ago here. It's a European customer that they are looking at the whole world, how they're going to supply and service their customer in the future.

So a lot of work, I think it'll be positive for us. It's just the way we are structured. We've got a very good structure globally. I believe that our structure is lean. It's a state-of-the-art structure, and, you know, I think we'll be fine.

Anja Soderstrom: Okay. Thank you. That was all for me.

Jonathan P. Faust: Thanks, Anja.

Operator: Once again, if you would like to ask a question, please press 1 on your telephone keypad. There are no further questions at this time. I would like to turn the conference back to Jure. Please go ahead, sir.

Jure Sola: Ladies and gentlemen, again, thanks for your time that you spent with us today. Looking forward to talking to you. If you have any questions, give us a call. Otherwise, we'll be talking to you ninety days from now. Hopefully, we'll continue to deliver some great news for you. Thanks a lot. Thank you, everyone. Bye-bye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.