Sanmina's AI sales grew 173%. Its profit has grown 0.2% a year.

Sanmina·−2.87% — Sanmina, down 2.87 percent as of its last quote ran both directions in two sessions. On October 14 the contract electronics manufacturer (Nasdaq: SANM) fell 8.25% in the AI rout, then rose more than 7% after the close on optimism about its AI business↗ ¹. By the afternoon of October 15 the stock sat near $182, the after-hours bounce gone in a day ². The whipsaw is the argument in miniature: the AI revenue is real and vertical, the conversion of that revenue into profit and cash is unfinished, and the market has already paid for the conversion.

ZT Systems roughly doubled the revenue, and lifted the margin

The bull case has evidence behind it. Sanmina bought ZT Systems, the data-center rack manufacturer, from chipmaker AMD▼−1.75% — AMD, down 1.75 percent today for about $2.55 billion in cash and stock↗, and the purchase closed at the end of October 2025 ³⁴. Sales to communications, cloud and AI infrastructure customers rose 173% year over year in the June quarter, and ZT contributed $1.1 billion of it ⁵.

The margin moved with the volume, and the demand is booked ahead. Non-GAAP operating margin reached 8.0%, from 5.7% a year earlier, and management raised its fiscal 2026 revenue outlook to a $14.15 billion midpoint↗, with the chief executive pointing to growth ramping through fiscal 2027 and into fiscal 2028 ⁶. The limit sits upstream of Sanmina: the nearline drives, the high-capacity hard drives that fill those storage racks, are largely allocated into 2028 ⁷.

The conversion stops below the operating line

Contract-manufacturing math then takes over, because a manufacturer buys its parts before it books the sale. Inventories climbed from $2.0 billion to $3.2 billion in nine months ⁶. Working capital absorbed $97 million in the June quarter alone, and free cash flow fell to $24 million, from $168 million a year earlier ⁶.

The build was financed with $2.2 billion of new debt, and quarterly interest expense has climbed from $5 million to $32 million ⁶. Management repurchased no stock in the quarter, with about $600 million still authorized, and the shares issued to AMD have the count rising again ⁵.

The longer arc is flatter still. Net income has grown 0.2% a year for three years, and earnings per share advanced 2.2% a year only because the share count shrank ⁵.

The fourth-quarter report decides the multiple

The stock trades at 34.8 times trailing earnings, against a five-year median of 15.6 ⁸. The stock-analysis site GuruFocus↗ counts a year of insider selling at about $43 million net, an automated tally; the individual Form 4 filings behind it↗ were not opened one by one ⁸⁹.

What limits Sanmina is not demand; it is the balance-sheet step, whether shipped racks become collected cash after inventory and interest. Its plants, including the Chennai operation whose imported rack parts a Mumbai customs ruling just put at nil duty ⁷, are doing the AI economy's physical work, and the margin gain says that work is worth paying for.

The fiscal fourth quarter, ending October 3, is guided to a non-GAAP operating margin of 7.5 to 8.0% ⁶. If that margin lands while inventories stop outgrowing sales, the premium was earned. If not, shareholders funded the ramp.