Sanmina Raises Revenue Forecast Amid Q3 Buyback Pause

Sanmina (SANM) executives raised the company's fiscal 2026 revenue forecast to a midpoint of $14.15 billion, up from a previous projection of $14.0 billion, while disclosing that no shares were repurchased during the third quarter. The electronics manufacturer has returned 68% to shareholders over the past twelve months, significantly outperforming the S&P 500's 17.0% return over the same period. This outperformance coincides with a structural shift in the company's equity base, as Sanmina now operates with approximately 7% fewer shares than it held three years ago.

The reduction in share count has not followed a linear path. Over the first two years of this three-year period, the share count fell by about 7.6%. However, the number of shares rose by 0.5% over the most recent twelve months. This recent increase occurred despite Sanmina's buybacks exceeding stock issued as compensation by $150 million, a figure representing 1.3% of its market value. The divergence was driven by share issuance associated with the acquisition of ZT Systems.

Sanmina's earnings per share have advanced at an annual rate of 2.2% over the last three years, while net income grew at a mere 0.2% annually. This discrepancy highlights how a nearly static profit pool is being divided among a shrinking number of shares. The company funds these repurchases with cash generated from contract electronics manufacturing, a business characterized by thin margins. Sanmina operates with a 5.5% operating margin, compared to the S&P 500's 18.5%. The business model also requires holding significant inventory, which currently equals 24.7% of revenue. Supplier credit covers only 0.8 times that inventory amount, meaning existing credit does not fully offset the stockpile.

Despite these operational constraints, Sanmina's cash generation has been robust relative to its buyback activity. The company pays no dividend, and its free cash flow over the last twelve months was 2.48 times the amount spent on share repurchases. A significant portion of this cash flow is supported by rapid growth in sales to communications networks, cloud, and AI infrastructure customers, which rose 173.2% year-over-year in fiscal Q3 2026. The acquired ZT Systems business contributed $1.1 billion in revenue during that quarter.

Management cited anticipated growth in both its core business and the ZT Systems unit as reasons for expecting higher working capital requirements, which will impact cash flow from operations. Consequently, approximately $600 million remains available under the current buyback program, yet no repurchases occurred in fiscal Q3 2026. Debt levels are low, with net debt sitting at just 0.5 times EBITDA and operating profit covering interest expenses 7.4 times over. Investors will closely monitor Sanmina's fiscal Q4 2026 results to see if the company continues to prioritize growth investments over share repurchases.