This call is being recorded on Monday, November 9th, 2026. I would now like to turn the conference over to Paige Melching. Please go ahead.
Thank you, Marissa. Good afternoon, ladies and gentlemen, and welcome to Sanmina's fourth quarter and fiscal 2026 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.
Good afternoon.
Jon Faust, Executive Vice President and Chief Financial Officer.
Good afternoon.
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 the 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 or 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 in 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 operations for the fourth quarter and fiscal year end October 3rd, 2026, 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 would now like to turn the call over to Jure.
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 our employees and Sanmina's leadership team for doing a great job. To you, Sanmina's team, thank you for your dedication, hard work, and delivering strong execution for our customers. Please turn to slide four. Ladies and gentlemen, I can tell you that I am very pleased with our performance. We delivered great results for the fiscal year 2026. Revenue grew 79% year-over-year to $14.53 billion. Non-GAAP operating margin expanded from 5.7% operating margin to 7.4% operating margin year-over-year. Non-GAAP diluted EPS more than doubled to $13.28. Cash flow from operation was also very, very strong, came in at $944 million.
I can tell you that we are executing according to our plan, with strong execution in both core Sanmina and Sanmina AI Group, ZT Systems. Now let's go to our agenda for today's call. We have Jon, our CFO, to review details of the results for you. I will follow up with additional comments about results and future goals. Jon and I will open for question- and- answers. Now, I'd like to turn this call over to Jon. Jon?
Thank you, Jure. Good afternoon, ladies and gentlemen, and thank you for joining today's earnings call. Before I review our financial results for the quarter and the fiscal year, I want to acknowledge the entire Sanmina team for their focused execution and thank them for delivering a great fourth quarter and a strong finish to the fiscal year. This was a transformative year for Sanmina as we delivered strong, broad-based growth across all of our end markets while largely completing the integration of the ZT Systems business, expanding our position in the Cloud & AI Infrastructure end market. I'm very proud of the team's performance, and I'm excited about the opportunities ahead across our entire business. Now please turn to slide six, where I'll speak to the financial highlights.
As Jure mentioned, we are very pleased with our financial results, which, as you can see, exceeded our previously communicated outlook for both the quarter and the fiscal year across all metrics. Revenue exceeded the high end of our outlook ranges. This was driven by both the core Sanmina business, which exceeded its outlook ranges, with growth coming from all end markets, and the ZT Systems business, which came in line with our outlook. Additionally, our non-GAAP operating margin and our non-GAAP diluted earnings per share both exceeded our outlook, driven by strong execution, mix, and disciplined cost management. We also had about $30 million of tariff recoveries, primarily associated with legacy ZT Systems products, which wasn't factored into our outlook and contributed about 75 basis points of favorability to our non-GAAP operating margin and about $0.42 to our non-GAAP diluted earnings per share.
All in all, this was an outstanding quarter for Sanmina, which closed out a strong fiscal year. With our proven track record of solid operational execution, we are now well-positioned to take advantage of robust market demand in the new fiscal year ahead. Now, please turn to slide seven, where I will speak to our non-GAAP P&L performance. As shown on the prior slide, we delivered revenue of $3.86 billion, which was up 84% versus the same period a year ago. Our core Sanmina business revenue of $2.97 billion grew 42% versus the same period a year ago, exceeding our outlook with broad-based strength across all of our end markets, several of which grew double digits year over year. Our ZT Systems business revenue of $884 million was in line with our outlook. Our non-GAAP gross profit was $444 million, or 11.5% of revenue.
This was up 210 basis points versus the same period a year ago and above the high end of our expectations. Our non-GAAP operating expenses were $96.3 million, or 2.5% of revenue, in line with our expectations. Our strong revenue and non-GAAP gross profit results, along with ongoing cost discipline and operating leverage, enabled us to achieve non-GAAP operating profit of $348 million, or 9.0% of revenue, up 300 basis points versus the same period a year ago. Our non-GAAP other income and expense was a net expense of $20.9 million, lower than our expectations, largely due to strong cash flow generation. Our non-GAAP diluted earnings per share was $4.43, based on approximately 55 million shares outstanding.
This strong non-GAAP diluted earnings per share performance represents a 166% increase versus the same period a year ago and showcases the high potential of our combined core Sanmina and ZT Systems businesses. Now, please turn to slide eight, where I will speak to the segment results. IMS revenue came in at $3.08 billion, up 83.3% versus the same period a year ago. This was driven by growth in all of our end markets, including the contribution from the ZT Systems business. Core Sanmina IMS revenue was $2.2 billion for the quarter, up 30.8% versus the same period a year ago. ZT revenue was $884 million for the quarter. Our total IMS non-GAAP gross margin was 11.2%, up 340 basis points versus the same period a year ago.
This was driven primarily by favorable mix, including the impact from the addition of the ZT Systems business, plus the tariff recoveries that I mentioned previously. CPS revenue came in at $822 million, up 83% versus the same period a year ago. This was driven by strong growth in our Viking Enterprise Solutions storage business, our metal fabrication business for AI system racks, and our high-technology printed circuit board business for aerospace and defense-related products, all of which we have been investing in since the end of last fiscal year. CPS non-GAAP gross margin was 12.0%, down 250 basis points versus the same period a year ago. This sequential and year-over-year decrease was primarily driven by mix, as well as the impact of the depreciation and other expenses related to investments to support future growth that I have spoken about on prior earnings calls.
Now, please turn to slide nine, where I will speak to our P&L performance for FY 2026 as compared to FY 2025. At the beginning of the year, when we provided our high-level expectations for FY 2026, we said we expected core Sanmina revenue to grow in the high single digits and ZT Systems revenue to be at a run rate of $5 billion-$6 billion, as it was being integrated into Sanmina and going through a product transition, and we delivered on both of those commitments. Core Sanmina revenue came in stronger than expected, with growth of 18.3% compared to the prior year, driven by a solid performance across all end markets. ZT Systems revenue came in at $5.4 billion on an annualized basis, falling well within the $5 billion-$6 billion annualized run rate.
As you may recall, we provided a formal full-year outlook in April during our second quarter earnings call, and then we increased that outlook in July in our third quarter earnings call. Pleased to report that we exceeded the July outlook with revenue of $14.5 billion, which is up 79% year-over-year and $225 million above the high end of that outlook. Non-GAAP gross profit was $1.47 billion, or 10.1% of revenue, up 90 basis points compared to the prior year. Non-GAAP operating income was $1.07 billion, or 7.4% of revenue, representing a 170 basis point improvement compared to the prior year, and exceeded the high end of our outlook.
Non-GAAP diluted earnings per share was $13.28, which represents an increase of 120% versus the prior year, and exceeded the high end of our outlook provided in July by $1.08, and the outlook we provided back in April by $1.93. These improvements were the result of strong revenue growth, favorable product mix, and solid operational execution. Now, please turn to slide 10, where I will speak to the balance sheet highlights. We continue to have a very strong balance sheet with prudent leverage and ample liquidity, giving us the capacity to invest in support of our growth objectives. Cash and cash equivalents were $1.68 billion.
We ended the quarter with inventory of $3.6 billion, net of customer advances, which is up 131% versus the same period a year ago, driven by the ZT Systems acquisition and material staging required to support current and forecasted revenue growth. Inventory turns, net of customer advances, were 5.2 x for the quarter, down from 6.7 x in the same period a year ago. It is important to remember that inventory is bound to firm customer purchase orders and binding forecasts, and that we do not make purchases on a speculative basis. In addition, we continue to utilize customer advances and prepayment agreements to de-risk against shifts in end market demand.
Our strong earnings growth and disciplined working capital management resulted in non-GAAP pre-tax ROIC of 48.8% for the quarter, which is well above our weighted average cost of capital, and an improvement from the 28.3% from the same period a year ago. Our net leverage ratio was 0.33 x for the quarter, below our long-term target range of 1.0x to 2.0 x. We still expect to increase into that target range this coming year as we invest in working capital to support the growth of the business. That being said, we remain committed to maintaining a healthy balance sheet, which means carefully managing the liquidity needed to invest in the business and capitalize on the strategic opportunities that further strengthen our position in the market. Now, please turn to slide 11, where I will speak to our cash flow highlights.
As a result of the team's disciplined working capital management, cash flow from operations came in at $242 million for the fourth quarter and $944 million for the fiscal year. Capital expenditures were $159 million for the quarter and $404 million for the fiscal year, and free cash flow was $83 million for the quarter and $541 million for the year. For the last several quarters, we have been making strategic investments in new capabilities and incremental capacity across both the core Sanmina and ZT Systems businesses, and we will continue to do so to support future growth. In the core Sanmina business, these investments include metal fabrication capacity for AI system racks, new capabilities for high-technology printed circuit boards for both AI and aerospace and defense-related products, and capacity and equipment for the new medium-voltage transformer business for the rapidly growing energy end market.
In the ZT Systems business, the focus has been on incremental power, liquid cooling, test cell capacity, and automation for the next generation of accelerated compute. We believe these strategic investments will help drive profitable growth and future cash flows, and generate an attractive ROI for the company and shareholders. In the quarter, we repurchased about 825,000 shares for $154 million, and for the full year, we repurchased about 2.4 million shares for $393 million. At the end of our fourth quarter, we had approximately $446 million available under our board-authorized share repurchase program. Now, please turn to slide 12, where I will speak to our liquidity position.
We ended the quarter with total available liquidity of over $3.83 billion, which consists of $1.68 billion in cash and cash equivalents, an undrawn revolver and other similar facilities of $1.55 billion, and a Term Loan A delayed draw of $600 million. After the end of the quarter, we refinanced our debt, further enhancing our financial flexibility and increasing our liquidity while reducing our interest cost. The refinancing, which was very well received by our existing and new lenders, increased our funded Term Loan A amount back to $1.4 billion, which was the original amount of that facility before we repaid approximately $70 million over the past year, so only a nominal increase.
In addition, the maturity of both our revolver and the Term Loan A facility was extended by one year to October 2031, and our option to borrow the delayed draw component of the Term Loan A facility, which is currently undrawn, has been extended by six months to April 2027, which better aligns with our actual needs. The annual mandatory repayment amounts have also been reduced, giving us further financial flexibility. Finally, the credit spreads have been reduced by approximately 25 basis points and are now linked to our credit rating rather than our leverage ratio, providing us with an additional opportunity to further reduce our interest costs in the future.
As I mentioned previously, we remain committed to maintaining a healthy balance sheet, which means carefully managing the liquidity needed to invest in the business and capitalize on the strategic opportunities that further strengthen our position in the market. Now, please turn to slide 13, where I will speak to our capital allocation strategy. When it comes to capital allocation, it is incredibly important to have a clear strategy and a well-defined set of priorities when making decisions. As we have shared with you before, our first priority is to invest in our business to drive long-term organic growth and margin expansion. We evaluate all investments with discipline and take a structured ROI-based approach. Second, we continuously evaluate strategic acquisition and partnership opportunities, which need to meet our ROI expectations to help accelerate our growth.
Third, we carefully manage our balance sheet and liquidity position with a focus on our long-term net leverage target, as well as our long-term goal of achieving an investment-grade rating. Finally, when appropriate, we return capital to shareholders through share repurchases, subject to maintaining a strong balance sheet and liquidity position. We have and will continue to execute on this strategy by utilizing these options, which enables us to take advantage of opportunities to grow our business. Now, please turn to slide 14, where I will speak to our Cloud & AI Infrastructure Strategy. Earlier this year, I provided an overview of our three-phase plan for the ZT Systems business, and I explained how we had clear objectives for how to realize the full value of combining the two companies.
In that plan, the first phase was focused on executing the immediate post-transaction integration actions, including making the necessary capital investments in incremental power, liquid cooling, and test cell capacity to be production-ready for the next generation of accelerated compute, all of which is largely complete at this point. The second phase was focused on the successful execution of a product transition process, which required that we win new accelerated compute business, which we have now done with Hyperscale, Frontier AI Lab, and OEM customers. The third and final phase is about driving growth and expansion, and that is what I would like to speak about today. First step is focused on our AMD partnership. Over the past year, we have made tremendous progress in establishing our partnership with AMD by winning new business with Hyperscale, Frontier AI Lab, and OEM customers for the Helios Accelerated Compute program.
The customer validation process is going well, and we're working in very close collaboration with AMD and our joint customers to support pre-production activities, providing the quality, delivery, and services to support customer needs. We finalized the operating models for several customers and are working to do the same for the others, and we'll continue to do so as new customers get added. We've also received preliminary production schedules from our customers, which will continue to get refined and updated throughout the program launch process. I'm also pleased to announce that we've now begun to ship the Helios product, albeit in small quantities, and we're very excited about the opportunity ahead as we grow and scale the program. The second step is focused on adding new platforms.
In our last earnings call, we announced that we won new programs on a second platform, which we're very excited about, as it took place earlier than expected. These new programs, which will start to ramp this fiscal year, are included in our FY 2027 outlook, which I will provide shortly. This past quarter, we also started discussions to win programs on a third platform. These programs are not included in our FY 2027 outlook, but could lead to upside later in the year. We're very pleased with the progress we've made with these new platforms, which demonstrate our value proposition through a full suite of product and service offerings and our ability to build upon what we acquired with ZT Systems to significantly scale our business in the Cloud & AI Infrastructure end market. The third and final step is focused on vertical integration.
While we didn't expect to participate in vertical integration with the Helios program, due to high demand and our ability to demonstrate our key technology offerings, we've won some additional programs. Our close collaboration with customers during the pre-production validation process has given us the opportunity to showcase our unique value proposition. By combining ZT Systems' large-scale systems integration capabilities with Sanmina's extensive sub-assembly expertise, we can deliver a full suite of offerings that includes our components, products, and services. We plan to continue investing in our engineering capabilities to support all platforms, and in doing so, we expect our vertical integration opportunities and wins to grow in scale throughout the year and into the future. Now, please turn to slide 15, where I will provide our outlook for the first quarter.
Our outlook is based on current customer forecasts, the return to a 13-week quarter, and takes into account ongoing market uncertainties and the geopolitical environment. With that said, we expect revenue between $3.8 billion and $4.1 billion. With the ZT Systems integration largely completed, going forward, we will report revenue for Cloud & AI Systems, which includes ZT Systems, as well as the additional platforms and other related products and services that I just spoke about. To be clear, Cloud & AI Systems is a subset of our Cloud & AI Infrastructure end market. We expect Cloud & AI Systems revenue to be between $1.3 billion to $1.5 billion. As we mentioned last quarter, we expect this part of our business to accelerate throughout the year, primarily driven by the timing of the Helios program ramp, as well as the additional platform opportunities and other related products and services.
At the midpoint, total Sanmina revenue would be $3.95 billion, which represents 23.8% growth versus the same period a year ago. Non-GAAP operating margin of 7.0%-7.5%, depending on mix, above the high end of the expectations Jure and I set for the combined business when we first announced the ZT Systems acquisition. We expect other income and expense to be a net expense of approximately $24 million. We expect our non-GAAP effective tax rate to be between 21%-23%. We estimate an approximate $5 million non-cash reduction to our net income to reflect our India joint venture partners' equity interests. Non-GAAP diluted earnings per share in the range of $3.50-$3.85, based on approximately 55 million diluted shares outstanding. At the midpoint of $3.675, that represents a 54.4% increase compared to the same period a year ago.
We expect capital expenditures to be $150 million as we continue to invest strategically to support our future growth expectations. Finally, depreciation of approximately $48 million. Now, please turn to slide 16, where I will provide our outlook for the full fiscal year 2027. Much like our outlook for the first quarter, our fiscal year 2027 outlook is based on current customer forecasts and takes into account ongoing market uncertainties and the geopolitical environment. With that said, we expect revenue between $17.5 billion and $19.5 billion. We expect Cloud & AI Systems revenue to be in the range of $7.5 billion-$9.0 billion. As I mentioned earlier, Cloud & AI Systems is a subset of our Cloud & AI Infrastructure end market and includes ZT Systems, as well as additional platforms and other related products and services.
When we first announced the ZT Systems acquisition in May 2025, we said we expected Sanmina revenue to double from about $8 billion to about $16 billion within three years. At the start of fiscal 2026, we accelerated that timeline to two years. Based on this fiscal 2027 guidance, we are now setting that bar even higher, with a revenue midpoint of $18.5 billion, which represents 27.4% growth versus the same period a year ago, and sets us on a great trajectory for the future. We expect non-GAAP operating margin of 7.0%-7.5%, depending on mix, which is above the high end of the expectations Jure and I set for the combined business when we first announced the ZT Systems acquisition. We expect other income and expense to be a net expense of approximately $140 million.
We expect our non-GAAP effective tax rate to be between 21%-23%. We estimate an approximate $20 million non-cash reduction to our net income to reflect our India joint venture partners' equity interests. Non-GAAP diluted earnings per share in the range of $15.50-$17.50, based on approximately 55 million fully diluted shares outstanding. At the midpoint of $16.50, that represents a 24.2% increase compared to the same period a year ago. We expect capital expenditures to be $450 million as we continue to invest strategically to support our future growth expectations, while carefully managing our liquidity position in order to maintain a strong balance sheet. Finally, depreciation of approximately $200 million.
In summary, I am very pleased with our results for both the fourth quarter and fiscal year 2026, as the team did an excellent job staying focused on the core Sanmina business while we worked to integrate the ZT Systems business and worked through a transition process, and did so in a very dynamic market. On top of that, we exceeded expectations on all fronts, not only for the fourth quarter, but also on a full-year basis from a revenue growth, non-GAAP operating margin expansion, and non-GAAP diluted earnings per share growth perspective. There is still a lot of work to do, but we are on a great trajectory, and that is clearly evident in our outlook for the full fiscal year 2027. With that, I would like now to turn the call back over to Jure.
Thank you, Jon. Ladies and gentlemen, please turn to slide 18. As you heard from Jon, we delivered strong financial results, but also you heard from him, there are a lot of things that we are doing, making this company a stronger company for the future. We are executing to our business plan. As you heard from Jon, we exceeded all our outlook, both the fourth quarter and fiscal year 2026. Also, we have been adding new customers and expanding our partnerships with existing customers. This allowed us to deliver the growth across all end markets in fiscal year 2026. Most important, again, is that Sanmina is well-positioned for growth in fiscal year 2027 and beyond. Please turn to slide 19. Let me share with you some of the performance by market. As you heard, Cloud & AI Infrastructure did really well.
In our last quarter, $2.37 billion, that is a growth of 179% year-over-year. For the year, we delivered, in this segment, $9.25 billion, up 198%. Industrial, energy, medical, defense, aerospace, and automotive did well in the fourth quarter and delivered $1.49 billion in revenue, up 19% year-over-year. For the year, delivered $5.27 billion, up 5%. Also, exciting news for us is when we look at our business, is the bookings. Bookings in the fourth quarter were very strong. Book-to-bill came in 1.221. Please turn to slide 20. Now, let me talk to you about market view for fiscal year 2027 and beyond. I can tell you that we see strong demand across our customer base. For cloud, AI infrastructure, communication networks, bookings continue to be strong. We are winning new AI platform business. We added new customers.
For this segment, we see strong demand not just for 2027, but also for 2028 today and beyond. For industrial and energy, we have very strong customer base. We expect growth to accelerate in fiscal year 2027, driven by expanding our energy business for AI data center and others, and a lot of other new programs that we have in the pipeline to drive the growth in fiscal year 2027 and beyond. For medical, in this medical business, we are well-diversified. We have a great customer base. We are leveraging our regulatory knowledge and experience to expand our customer base and programs. For fiscal year 2027, we expect to see improvements in demand, mainly driven by new programs that are coming up. For defense and aerospace, we expect the growth in traditional U.S.A. defense and aerospace business to continue to grow.
We are expanding our customer base in the satellite market, which is very exciting for us. We continue to see strong demand also in this segment, not just for 2027, but also for 2028 and beyond. For automotive and transportation, overall, we see stable demand. We continue to win new programs from new and existing customers. We also have a great customer base in these segments. Please turn to slide 21. Let me talk to you about a few things. As Jon was talking about, we've been investing into a diverse set of industry-leading capabilities. We also, as we got more and more involved in AI business, we're looking into increasing our addressable market through vertical integration and engineering. We've been beefing up our full system architecture and design. We've been investing in our traditional high-technology business around military and AI.
We're expanding our assembly capabilities, mechanical precision machining around racks and enclosure. We're investing in liquid cooling, including cooling manifolds and busbars. We've been expanding our joint development and ODM products, such as compute and storage. Our custom memory has been doing well, and we're expanding that. We're also expanding our custom optical modules and investing in that segment. Jon talked to you a lot about the AI investments around the ZT. Of course, all the way to global order fulfillment and services. So really excited what's in front of us from that point of view. Please turn to slide 22. Let me talk to you now what are my personal priorities. I call internally back to basics. Number one is continue to diversify our customer base. On the positive side, we are expanding our long-term customer partnerships.
We are adding new customers through building strong partnership by providing industry-leading technology solutions to them. Number two, we're executing cloud and AI strategy. Just to add few things what you heard from Jon. ZT Systems has been a great acquisition for us. Not just from a technology and capabilities, but from the people that we acquired. Also in the last 12 months, we made a lot of investments to drive operational excellence. Company's well-positioned in AI segment and expanding partnership with AI market leaders. Very exciting time for us. Number three, we are focused on long-term growth, margin expansion, and cash generation. For fiscal year 2027, we see strong demand, and we expect strong demand to continue into fiscal year 2028. In this market, we expect to maximize our operating leverage to expand profitability.
Number four is always to maximize shareholders' value by focusing on long-term shareholders' returns. We do have lots of opportunities to drive the growth the next two years, and the goal is to build Sanmina bigger and stronger company. Longer term, we expect to see continue to improve margin. We still believe there's room for improvements there. Now, please turn to slide 23. In summary, we delivered a strong fourth quarter and a fiscal year 2026. Exciting time for us. We're executing strategic priorities to drive sustainable growth. We'll continue to expand our industry-leading capabilities and manufacturing footprint. Investments that we're making today, it's not just for a growth for 2027, but also for a growth for 2028. We are seeing new products and platforms being introduced in fiscal year 2027. Very positive trends for us.
We expect the growth from all of our key end markets in fiscal year 2027 based on what we see today. Our outlook for 2027 reflects a strong demand and relentless focus on operational execution. As you heard from Jon, for fiscal year 2027, we are well-positioned for profitable growth. As he shared our outlook for the year, revenue of $17.5 billion-$19.5 billion, and operating margin of 7%-7.5%, and non-GAAP EPS $15.50-$17.50. The key for our success, as always, is delivering competitive advantage to our customers, and I believe we are doing that. Ladies and gentlemen, I would like to thank you all for your time and support. Operator, we are now ready to open the lines for question- and- answer. Thank you again.
Thank you, Mr. Sola. Ladies and gentlemen, we will now begin the question- and- answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Ruplu Bhattacharya with Bank of America. Please go ahead.
Hi.
Hello Ruplu.
Hi, Jure. Thanks for taking my questions. For fiscal 2027, you are guiding to a strong $8.25 billion of Cloud & AI Infrastructure revenue. Can you comment on how we should think about the cadence of that? How much is first half, how much is second half? How much is the mix, GPU versus CPU, and how much is consignment versus non-consignment? I have a follow-up.
You got a lot of questions. First of all, let me [inaudible] then maybe Jon can add more to it. First of all, we expect a strong demand for AI hardware in the second half of FY 2027. I mean, we see it today. It is all about now, where customers will accept the deliveries. The good thing is we are starting to deliver. We are learning a lot, and it is very exciting time for us. Not to break it in all details, when we deliver the full system, it includes everything that they just said, from GPUs, CPUs, and so on. It is a very expensive system. That is why performance, engineering, performance, quality is very, very critical for us. At the same time, we are expanding.
If you look at our Sanmina customer, I do not want to talk about and name it today, but we have a lot of customers that are typically been in networking business for a long time, but now also growing this business. A lot of their products that we used to ship to them, we will actually be shipping it to ourselves to integrate in the systems that we build. It is a very strong demand, Ruplu, and now it is all about executing and delivering when our customer needs it. Jon?
Yeah, just to add to what Jure said, I agree with all that. Ruplu, in short, not a whole lot has changed. From a timing perspective, still expected to be backend loaded to the second half. Still early days. We wanted to give a full-year perspective, so we did that as committed, both the Q1 guide and the full-year guide. But still expect it to be more backend loaded. In terms of the mix, no real change either, right? A lot of that revenue, the $7.5 billion-$9 billion for the full year, is related to ZT Systems and the GPU and the Helios business. But, as far as some of these other platforms, we expect those to ramp throughout the year, so we will see what those are able to deliver. And then yes, the assumption is still that net accounting basis with the consignment model.
We have, as I said in my prepared remarks, we finalized that with a couple of the customers already. The rest are in the works, but no change to the core assumptions.
Got it. Thanks for the details there. Can I ask, you are guiding for the full year 7.25% operating margin at the midpoint. How much is that being contributed by the core business improving versus having AI become a bigger part of the mix? How does that impact working capital and free cash flow for FY 2027?
Yeah, the contribution is from both parts of the business or all of the business. I will say that. When Jure and I, when we first announced the ZT Systems acquisition, we made an assumption that that business would have Sanmina-like margins, and we talked about a 6%-7% operating margin range. Now that we are guiding FY 2027, we are a little bit above that, which is great. A big part of that is the contribution of the core business. The core business is doing very well. It grew quite a bit in the second half of this past year. We expect that trajectory to continue, and we have been driving margin expansion there too, both in terms of the mix of the business, operational improvements, and operating leverage. The ZT Systems side, or what we are calling Cloud & AI Systems, is doing well too.
All in all, we are in a pretty good place. We are very happy with where we are at from an execution standpoint, essentially being ahead of the curve of what we initially thought in our investment thesis. What I mean by that is, winning programs on new platforms, starting to get things going with vertical integration. On the working capital front, this past year, we had a great year for cash flow, and we saw that with what we just reported. Cash flow from operations coming in at $944 million, almost $1 billion, was great. As we head into this next year, we do expect working capital to build. As I was saying in my prepared remarks, I do expect we will start to fall within our target range of that leverage ratio. But that is to be as expected.
No different than what we said before, and we are certainly still very well capitalized.
Can I just ask a quick clarification? When you say second platform and third platform, Jon, are these still with AMD, or does ZT have the capacity now to move beyond AMD to other platforms as well?
It's moving beyond AMD. When we talked about last quarter, there was a second platform, separate from AMD. Just early stages of that, but it is included in our guide and part of that Cloud & AI Systems revenue, because we do expect that to ramp throughout the year. Still a lot of work to get that off the ground, but we're making good progress. The third platform that I mentioned is not included in our guide. That's still early stages, not definitive enough to be able to include in guidance. That's why I said in my prepared remarks, we're very positive about that third separate platform. Hopefully, if all goes to plan, we'll be able to talk more about that, and it could provide some upside potential.
Again, it's a little bit too early, so first we've got to get that deal done, and then we can start thinking about the timing of revenue and profit that comes from that.
Yeah. For short term, we have plenty in our plate.
Plenty on our plate.
Right. Thanks for all the details. Appreciate it.
Thanks, Ruplu.
Thanks, Ruplu.
Your next question comes from Manmohan preet S ingh with JPMorgan. Please go ahead.
Hey, MP. How are you?
Hello, MP.
Hi, Jure and Jon. Thank you for taking my questions, and congrats on the strong print and guide. For my first question, just want to double click on the FY 2027 guide. I think it's a pretty wide range than usual. Can you just help us understand, like, what are the drivers which are making you give a wider range, and over time, what would help you to narrow that range down to a more discrete guidance? And I have a follow-up.
Yeah, sure. So, it's really just the length of the fiscal year, MP. If you look at our Q1 guide, our guidance ranges are very much in line with what we've been doing historically, right? So a revenue range of about $300 million, EPS range of $0.35, so below 10% on both fronts. Very much similar to what we've done for the last several quarters. On a full-year basis, you're right? The revenue range of $2 billion and the $2 of EPS, a little bit wider, above that 10% mark. But really, the rationale is that we've got a lot of new programs, big programs that are coming online. So it's a little bit early. But like we said on the call, everything that we know about from a customer forecast perspective, there's a lot of demand, as Jure said.
Geopolitical perspective, all those things have been factored in. Still a lot of risk out there. When you have a big new program, a complex program, there's always some risk. Even if you look at the Cloud & AI Systems revenue guide, if I point you to that on the full year, $7.5 billion-$9 billion. So that's one and a half of the $2 billion overall range. So, that's really the context. It's really just the length of time and just the dynamic nature of the market. But over time, we should expect to tighten that up.
Yeah, if I can add to that also, the supply chain. We have right now shortages out there, and then there's some uncertainties around supply chain.
Exactly.
No, that's helpful. And a quick follow-up on the fourth quarter results. So the core Sanmina business growth accelerated to, I think, over 40% in fiscal 4Q. Firstly, just want to do double-click on what exactly are the drivers within there? Is it some new market share wins or new program wins, or what's really driving that? And then when we look into FY 2027, core Sanmina growth kind of moderates into 2027. So, is it just conservatism given it's early into the year, or are there any definite drivers which are making you to kind of imply a moderation in growth rate there? Thank you.
Yeah. MP, on a core Sanmina, legacy Sanmina business, in the last couple years, we invested a lot of, how do I say, time with our critical customers. We had a lot of new programs coming in end of 2025 into the 2026. So we see a lot of those now programs starting to mature, and we believe that's what drove the growth. Well-diversified customer base across all the key markets. And if you look at our industrial, energy, medical, defense, and aerospace, that market today's well-positioned, grew nicely in that fourth quarter of 19%. And so we expect the Sanmina's business to grow low double digits. But there's a lot of strong programs in our pipeline, and it's a good time for us. And when you combine the opportunities we have with the ZT AI, that's why we're excited about the FY 2027 and beyond.
Jon, you want to add anything to that?
No, I think you said it well, Jure. I mean, we're not reporting core Sanmina versus ZT Systems anymore, right? You're kind of back into the high-level math of kind of low double- digits growth of that core business. I think that's a good proxy at the end of the day. The reality is, both Cloud & AI Infrastructure, communication networks, for a while, we had six quarters in a row of 20% year-over-year growth. Last quarter in Q3, now this quarter, that accelerated. We expect that to continue into the first half, but in the second half, we'll have some tougher compares, right? The rest, industrial, energy, medical, defense, and aerospace, that's really been accelerating, and we expect that to continue.
Our team, if I can add and really give a compliment to our operational team, our team is executing really well. Anytime you do a major acquisition as we did a year ago, you always kind of worry. If you look at our forecast from a year ago and what we've delivered, we delivered better than 40% than what was the forecast beginning of the year. That's all really to our operational team by executing. Our customers are being very supportive because of our execution and technology that we bring to them, and that's what we are building on. In this business, MP, you never can relax. It's a one day at a time, but the team has been doing well, and I think that's one reason we are winning new programs, and hopefully that will continue.
Thank you. Thanks a lot for the color there.
Thanks, MP.
Your next question comes from Steven Fox with Fox Advisors. Please go ahead.
Hi. Good afternoon, and congrats on all the great numbers. I guess first of all, just thinking about the full- year margin guidance, how would we think about that on sort of an apples- to- apples comparison? You had the tariff benefits in Q4, but you also had some unusual margins on some pre-engineering work you called out in prior quarters. What are we comparing the 7%-7.5% to, would you say, just to get a sense for that? Within that question, can you just give us It sounds like mix is the biggest driver on top of volume, but I just want to make sure I got that right. I had a follow-up.
Yeah, no, that's exactly right, Steve. I mean, I think it's a fairly apples- to- apples comparison. The NRE, the non-recurring engineering that we saw with the Helios program, the reality is, that's part of our business model, not just on the ZT Systems side of the business, but the core Sanmina business too. We always do that. It just happens that Helios is a very large program with large customers, so that had a pretty big impact, and it was just more than what we had expected within the year, so that kind of led to some of the beat that we saw. That will continue, and hopefully if we win the programs after Helios, we will see some of that again. It exists on both sides of the business, so kind of apples to apples. Tariffs was kind of a unique, one-time thing, the $30 million.
At the end of the day, that was related to some legacy ZT Systems products because it was not so much. It is not part of the core Sanmina business model, and it will not be part of ZT Systems going forward either. You could kind of adjust for that on a full- year basis, which is not a huge amount. That is why if you think about where we exited in 2026, full year compared to our full year 2027 outlook, not too far off aside from mix adjustment.
Yeah, also, if you look and see what we have been investing in the last 12 to 18 months, we have been in all more advanced technology product that should help us sometimes in 2027 add to the bottom line.
Great. That is very helpful, and that actually leads into my second question, which is, if I think about sort of the revenue guidance for the Cloud & AI segment that you are now defining, ZT plus additional platform business, is basically the difference between the total and whatever would be ZT related to you guys getting more attach rate on your vertical capabilities? Is that how we should think about it? Is there anything else that is getting in there that you are having success with? Then what do we think about the attach rate, maybe now versus exiting the year for some of those vertical skills?
Let me take that question, Steve, more from a business where we are being focused on. Every year is a different year, and the mix of the business is very critical. We have been strategically investing in a business that will allow us. They are a lot more difficult to build, require bigger investments, but should deliver us a better margin in the future. We are not there yet. We think there is room for improvements as we go out few quarters. Jon, a little bit talked about the energy investment, that this is a new business building large transformers that are over 12 tons. We have a huge demand on that right now. Once we start the production on that in January, we expect to start seeing some good profitable business middle of the next year. All those things, and we think differently today. I mean, even ZT.
ZT is completely a different company today from capabilities point of view than when we acquired them. We invested a lot of money into that. We strategically positioned for. We are building some very, very advanced systems that cannot fail. Those type of things, if you can do it right, you can squeeze out based on our efficiencies and leveraging your capabilities. A penny here, penny there should help us move in the right direction.
Yeah, and just to add to that, Steve, I mean, when we did the ZT Systems acquisition, that was a decision Jure and I made to expand deeper into the data center end market. Big focus on rack integration, but other opportunities too. So when you think about adding new platforms, for example, some of that could happen in the ZT plants, but some will be done in core Sanmina plants. So the lines are starting to blur, right? Even some of the vertical integration opportunities that we have, we win with like a Helios program, for example, is you do not get incremental revenue for that. It helps on the profit side because it gets eliminated. But we could also sell some of those products and services to non-Helios, right? So if you think about mechanical racks, right?
We can give mechanical racks for Helios for those customers, that revenue gets eliminated. But if we sell mechanical racks to other customers, now that is upside. So the point is, things, the lines are blurring as we have talked about between core Sanmina and ZT Systems, which is why we shifted to this Cloud & AI Systems category to help to give some insight in this first year as we turn the corner and grow.
Great. That is all very helpful. Thank you.
Thanks, Steve. Operator, we have time for one more question.
Wonderful. The final question comes from.
Sorry, two more questions. Sorry.
Two? Okay. Absolutely. The next question comes from Mehdi Hosseini with SIG. Please go ahead.
Hey, Mehdi, how are you?
Very good. Thank you. Thanks for taking my question.
Mehdi, I almost forgot you here for a second.
That is all right. I am sure you have been busy. Actually, speaking of being busy, if I just take the midpoint of your FY 2027 guide for Cloud & AI Systems, can you talk into diversification of customers? I know you talked about a second platform, but I also want to get a better sense of how big the second platform is. I am sure if I ask, you are not going to give me the dollar amount, but perhaps you could talk about the diversification of the customer mix in the Cloud & AI Systems midpoint for 2027. I have a follow-up.
Yeah, a couple things, Mehdi. One, even with the AMD platform business, primarily Helios, we've got a very diversified business, right? We've got multiple customers. Talked about Hyperscalers, the Frontier AI Labs, OEMs, Neoclouds, and that's across both the U.S. and non-U.S. or international. So pretty diverse base. Then you add on top of that, to your point, additional platforms and other products and services. One thing I'll point you to, if you didn't notice it, but in slide 19 in our earnings presentation, it's the end market mix that Jure covered. We did actually put in there the Cloud & AI Systems baseline for FY 2026. You got a comparison point. So what you can see is that ZT was $4.9 billion for last fiscal year. Cloud & AI Systems is $5.3 billion, so again, it's mostly ZT. We'll see how things progress throughout the year.
This is why we have that broader range, right? But our goal is always to and we've always wanted to drive diversification within the AMD business and then across the broader category overall.
Got you. Which is all encouraging, and this leads to my next question. If I just take your commentary and midpoint of the overall revenue, you're exiting fiscal year 2027 in a quarterly revenue of $5.5 billion-$6 billion. Given this diversification of AI customers and the prospect of the third platform materializing, then I see a continued double-digit growth into FY 2028, given the run rate you're exiting 2027 at. Would you agree with that thought process?
Everything is possible.
Yeah.
As a potential, we will just see how much. We are very positive with the key customers that we have today about the future, definitely 2027, but we also see a lot of positive things in 2028. I think potential is there to grow. I mean, that is what we want to do. That is what we are hoping for and working for, not just hoping. We are making things happen to position the company to have that potential.
Yeah.
I think Jure said it well earlier, when he said that there is a lot of demand out there, right?
Yeah.
We can go out and execute.
Yeah.
We can manage the supply chain well, and that is done in coordination with our partners and with our customers. If we can take advantage of that demand, anything is possible, so I agree.
So Jon, would your CapEx guide of, sorry, I forgot your CapEx guide of $450 million. I am sorry, $450 million, right?
Correct. That is correct.
Yeah. Is that CapEx for fiscal year 2027 be enough to sustain a double-digit growth into FY 2028?
Well, the one thing I will remind you of, Mehdi, is that third platform that we talked about is not part of our guide, either on the P&L perspective, either CapEx as well, right? So put that aside. But the guide that we have right now, $450 million, very much supports the P&L that we guided, the $17.5 billion-$19.5 billion. Now, if things go very, very well, we start to see that demand develop, right, that you were just asking about for FY 2028 and beyond, and we start trending towards the higher end of $19.5 billion, then certainly could we invest a bit more? Sure. And we will always look at those opportunities, following our capital allocation strategy that I talked about as a part of my prepared remarks, so.
Got it. Okay. Got it. Thank you.
Thanks, Mehdi.
Your final question comes from Anja Soderstrom with Sidoti. Please go ahead.
Hi.
Hello Anja.
Thanks for taking my questions, and congrats on the nice quarter here.
Thanks, Anja.
Most of my questions have been answered already or addressed already. I am just curious, you are talking about the third platform not included in the guidance, but what does the pipeline look like beyond that third platform?
Yeah, I mean, at this point, as Jure was saying just a few minutes ago, we have got a lot to execute with what we have got going on at the core business, the AMD partnership, even the second platform. But we have got the capacity to do more. Now, we are focused on this third platform right now, so we will see if there is something beyond that that makes sense. But one point I do want to make, Anja, is that we intend to maintain a very well-diversified portfolio. We exited this year, FY 2026, well-diversified between all of our end markets, and we want to continue that going forward.
Because as great as the data center business has been and how much demand is out there is a lot of opportunities elsewhere, and we feel it is important to stay well-diversified across end markets, the customers that we have, geographies, all of those things. We will balance those decisions about what comes next with that lens.
Okay, thank you. Just in terms of the margins, you guided to the same margin for the first quarter and the full year, but given it's going to be sort of a backend-loaded year, shouldn't that expand as you get higher revenue, and might the full- year margin guidance be a little bit shy maybe?
Yeah, no, I think it's fair and balanced. We always forecast on a center-weighted basis. The midpoint is our best guess. There's upside risk, there's downside risk. That's why we put the ranges out there, and a slightly higher range to MP's question on a full-year basis. But it's predominantly mix, right? Yes, to your point, as we grow, should we get more operating leverage? Yes. More fixed cost leverage? Yes. But also, some of the businesses that we're in have a little bit lower margin profile. Some of the other ones that we're growing is higher. So our best guess at this point in time is that 7%-7.5%, but it will depend on mix.
We'll update that on a quarterly basis.
Okay, thank you. It was helpful for me.
Thanks, Anja. Well, ladies and gentlemen, thank you very much for the great questions and the call. We're excited what's in front of us. If we didn't answer any of your questions, please give us a call, and appreciate your support, and talk to you in 90 days from now.
Thank you.
Bye-bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.