Electronics manufacturing services company Sanmina (NASDAQ: SANM) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.9% year on year to $2.04 billion. On the other hand, next quarter’s revenue guidance of $2.05 billion was less impressive, coming in 3.8% below analysts’ estimates. Its non-GAAP profit of $1.53 per share was 8.1% above analysts’ consensus estimates.

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"Our focused execution and operating discipline yielded solid third quarter financial results. Revenue, non-GAAP gross margin, and non-GAAP diluted earnings per share exceeded our outlook. We continue to benefit from operational efficiencies and a favorable business mix as reflected in our healthy operating margin and robust cash generation," stated Jure Sola, Chairman and Chief Executive Officer.

Company Overview

Founded in 1980, Sanmina (NASDAQ: SANM) is an electronics manufacturing services company offering end-to-end solutions for various industries.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Sanmina’s 2.9% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Sanmina’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 6% annually. Sanmina isn’t alone in its struggles as the Electrical Systems industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

This quarter, Sanmina reported year-on-year revenue growth of 10.9%, and its $2.04 billion of revenue exceeded Wall Street’s estimates by 3.1%. Company management is currently guiding for a 1.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months. While this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Sanmina’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 4.6% over the last five years. This profitability was lousy for an industrials business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, Sanmina’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Sanmina generated an operating margin profit margin of 4.7%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sanmina’s EPS grew at a spectacular 15.6% compounded annual growth rate over the last five years, higher than its 2.9% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into the nuances of Sanmina’s earnings can give us a better understanding of its performance. A five-year view shows that Sanmina has repurchased its stock, shrinking its share count by 21.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Sanmina, its two-year annual EPS declines of 3.8% mark a reversal from its (seemingly) healthy five-year trend. We hope Sanmina can return to earnings growth in the future.

In Q2, Sanmina reported EPS at $1.53, up from $1.25 in the same quarter last year. This print beat analysts’ estimates by 8.1%. Over the next 12 months, Wall Street expects Sanmina’s full-year EPS of $5.81 to grow 18.5%.

Key Takeaways from Sanmina’s Q2 Results

We enjoyed seeing Sanmina beat analysts’ revenue expectations this quarter. We were also glad its adjusted operating income outperformed Wall Street’s estimates. On the other hand, its EBITDA missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $98.35 immediately following the results.

So do we think Sanmina is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.