10-K: Sanmina Reports Strong 2025 Growth, Completes ZT Systems Acquisition

Sanmina Corporation announced increased net sales, gross profit, and net income for fiscal year 2025, driven by strategic acquisitions and operational efficiencies, while also remediating prior internal control weaknesses.

Summary

• Net sales increased by 7.4% to $8.13 billion in fiscal 2025, up from $7.57 billion in 2024.
• Gross profit rose to $716.36 million (8.8% margin) in 2025, compared to $640.43 million (8.5% margin) in 2024.
• Operating income grew to $354.57 million in 2025 from $335.49 million in 2024, maintaining a 4.4% operating margin.
• Net income attributable to common shareholders increased to $245.89 million ($4.56 per basic share) in 2025, up from $222.54 million ($4.00 per basic share) in 2024.
• Cash and cash equivalents significantly increased to $926.27 million in 2025 from $625.86 million in 2024.
• Net cash provided by operating activities surged to $620.66 million in 2025, compared to $340.22 million in 2024.
• The acquisition of ZT Systems was completed on October 27, 2025, for $1.6 billion, comprising $1.46 billion in cash and $150 million in common stock, with potential contingent cash consideration of up to $450 million.
• Material weaknesses in internal control over financial reporting identified in fiscal 2023 and 2024 have been remediated as of the end of fiscal 2025.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with significant increases in revenue, gross profit, and net income, coupled with robust cash flow from operations. The successful acquisition of ZT Systems and the remediation of internal control weaknesses are key strategic and operational achievements. While there are ongoing legal and tax challenges, the overall trajectory and strategic execution are positive.

Positives

• Net sales increased by 7.4% year-over-year, driven by new program wins and ramp-ups in communications networks, cloud infrastructure, and medical end markets.
• Gross margin improved to 8.8% in 2025 from 8.5% in 2024, reflecting improved operating efficiencies, particularly in the Components, Products and Services (CPS) segment.
• Operating income and net income both saw increases in 2025, demonstrating improved profitability.
• Cash provided by operating activities more than doubled to $620.66 million, indicating strong cash generation.
• The successful acquisition of ZT Systems expands the company's presence in the growing Cloud and Artificial Intelligence ecosystem.
• Remediation of previously identified material weaknesses in internal control over financial reporting strengthens financial integrity and compliance.

Negatives

• Operating expenses increased to $361.79 million in 2025 from $304.94 million in 2024, primarily due to higher employee compensation, professional fees, IT system expenditures, and acquisition and integration charges.
• Acquisition and integration charges of $34.16 million were incurred in 2025 related to the ZT Systems acquisition.
• Other income (expense), net, shifted to a net expense of $(10.84) million in 2025, compared to $(1.22) million in 2024, mainly due to lower market-value gains on deferred compensation plan investments.
• The company faces ongoing litigation, including a qui tam lawsuit alleging $100 million in fraud related to its SCI subsidiary, and California Labor Code class actions.

Risks

• Adverse changes in key end markets (industrial, medical, defense and aerospace, automotive, communications networks, cloud infrastructure) could reduce sales and margins.
• Operating results are subject to significant uncertainties, including supply chain disruptions, inflationary pressures, high interest rates, and geopolitical conditions.
• Reliance on a relatively small number of customers (top ten customers represented 52% of net sales in 2025) poses a risk if sales to these customers decline.
• Current U.S. trade policy, including tariffs and import/export restrictions, could increase manufacturing costs and reduce customer demand.
• Transfers of business or operations may increase costs and disrupt customer service.
• Failure to comply with U.S. export control and regulatory requirements for the defense business could result in fines and reduced future revenue.
• Manufacturing or design defects, or non-compliance with regulatory standards (e.g., FDA, IATF 16949:2016), could lead to claims, damages, and loss of customers.
• Inability to protect intellectual property or allegations of infringement could result in significant costs or damages.
• Cyberattacks and other IT system disruptions could interrupt operations, lead to data loss, and incur damages.
• Failure to comply with environmental laws could result in significant cleanup costs, damages, or fines.
• Changes in financial accounting standards or policies could affect reported financial condition or results of operations.
• Global, national, and corporate initiatives addressing climate change could increase operating costs.
• Customer credit problems could reduce future revenue and net income.
• Inability to generate sufficient liquidity to maintain or expand operations, or high interest rates reducing net income and operating cash flow.
• Covenants in credit facilities may adversely impact business, and failure to comply could trigger immediate debt repayment.
• Risks associated with implementing and integrating strategic transactions, including the ZT Systems acquisition, and potential impairment charges for goodwill and other acquired assets.
• Intense competition in the electronics manufacturing services (EMS) industry could lead to lost sales and reduced financial performance.
• Consolidation in the electronics industry could increase customer buying power and component prices.
• Changes in income tax rates or exposure to additional tax liabilities, including the ongoing IRS audit for fiscal 2009, could increase taxes and decrease net income.
• Foreign exchange rate fluctuations and currency controls could reduce net income and impact the ability to repatriate funds.
• Insufficient insurance coverage for potential claims and losses.
• Challenges in recruiting and retaining key personnel.
• Risks associated with natural disasters and global events impacting operations and supply chain.

Future Outlook

The company intends to continue diversifying into mission-critical markets and creating a portfolio of more complex, higher-technology products with longer product life cycles. It plans to invest in factory automation, process improvements, robotics, and artificial intelligence to enhance manufacturing efficiency. The company believes its end-to-end manufacturing solutions and global supply chain management differentiate it from competitors and will drive sustainable revenue growth and opportunities for operating margins exceeding industry standards. The ZT Systems acquisition is expected to expand its presence in the Cloud and Artificial Intelligence ecosystem.

Management Comments

• Our strategy is to leverage our comprehensive product and service offerings, advanced technologies and global capabilities to further penetrate diverse end markets that we believe offer significant growth opportunities and have complex products that require higher value-added services.
• We believe this strategy differentiates us from our competitors and will help drive more sustainable revenue growth and provide opportunities for us to achieve operating margins that exceed industry standards.
• A core component of our business strategy is to secure and retain long-term customer partnerships with leading companies in growth industries, capitalizing on our global/regional footprint and unique value proposition in advanced electronics manufacturing.
• We intend to continue to invest in factory automation, process improvements, robotics and artificial intelligence, keeping up with the trends in technology to further enhance our efficiency output.
• Despite these challenges, we remain focused on improving our operations, building flexibility and efficiencies in our processes and adjusting our business models to changing circumstances.
• As our end markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important driver for our business going forward.

Industry Context

The electronics manufacturing services (EMS) industry is expanding beyond electronic components to include product design, engineering, high-level assembly, direct order fulfillment, logistics, after-market services, and global supply chain management. Companies in this industry are increasingly relied upon by OEMs to focus on core competencies, access advanced capabilities, optimize supply chains, reduce costs, and accelerate time to market. Sanmina's focus on complex, highly-regulated products in industrial, medical, defense, aerospace, automotive, communications networks, and cloud infrastructure markets aligns with the industry trend towards higher value-added services and increased outsourcing.

Comparison to Industry Standards

• Sanmina's gross margin of 8.8% in 2025 shows an improvement over previous years, indicating a positive trend in operational efficiency within the competitive EMS industry.
• The company's strategy to pursue higher-margin business through its CPS segment, which achieved a 13.9% gross margin in 2025, suggests a focus on value-added services that can differentiate it from competitors like Flex Ltd., Jabil Inc., and Celestica, Inc., which often operate on thinner margins in high-volume, lower-complexity manufacturing.
• The stock performance over the past five years, with a 429.79% return, significantly outperformed the S&P 500 (214.30%) but lagged behind its peer group (781.82%), indicating strong individual growth but also highlighting areas where competitors may be achieving even greater market appreciation.
• The remediation of material weaknesses in internal control over financial reporting positions Sanmina favorably against industry peers by demonstrating a commitment to robust financial governance and compliance, which is critical for investor confidence.

Management Changes

Corporate Governance

Legal Proceedings

• Settled a lawsuit with Orange County Water District for $3 million in August 2024, related to alleged groundwater contamination at a former facility.
• Pled nolo contendre to three misdemeanor criminal counts related to alleged California Health & Safety Code violations at its San Jose plant in December 2024, paying $0.6 million in fines in March 2025.
• Settled litigation with former customer Dialight plc in March 2025, with Dialight agreeing to pay $12 million over two years (final payment by December 31, 2025).
• Responding to Civil Investigative Demands from the U.S. Department of Justice and contesting a qui tam lawsuit filed by a former SCI employee, alleging approximately $100 million in fraud related to government contracts.
• Defending against four putative class actions filed in California (Ramirez, Lobatos, Gomez, Guerrero Cases) alleging violations of various California Labor Code and Wage Order requirements.

Related Party Transactions

• Sales to the ten largest customers represented 52% of net sales in 2025, with one customer accounting for 10.1% of net sales in both 2025 and 2024.
• The Sanmina India Joint Venture, where Sanmina holds 49.9% but consolidates due to contractual control, represents a significant related party arrangement.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, EPS, and ongoing share repurchase program. The ZT Systems acquisition is a strategic growth initiative.
• Employees: Increased employee compensation and stock compensation expense, indicating investment in human capital. Ongoing legal proceedings related to labor laws could impact employee relations.
• Customers: Expanded offerings and capabilities through the ZT Systems acquisition, particularly in cloud and AI infrastructure, enhancing value proposition. Supply chain management efforts aim to ensure continuity of supply.
• Suppliers: Strong supplier relationships are beneficial during supply shortages, and the company is committed to ethical business partners.
• Creditors: New credit facilities and term loans provide significant financing, but also increase debt obligations. Compliance with debt covenants is crucial.

Next Steps

• Integrate ZT Systems into the business and execute on the business plan to support large-scale data center rack deployments.
• Complete the preliminary allocation of the ZT Systems purchase consideration to acquired assets and assumed liabilities in the first quarter of fiscal 2026.
• Continue to contest the IRS's asserted $8 million tax underpayment for fiscal 2009 through administrative and judicial procedures.
• Defend vigorously against the Eckert Qui Tam Suit and the California Labor Code class actions.
• File the Proxy Statement for the 2026 annual meeting of stockholders not later than 120 days after the fiscal year end.
• Participate in annual conference calls with the Administrative Agent and Lenders within 30 business days after annual financial statements are delivered.

Key Dates

Recommendation

Sanmina's fiscal 2025 results demonstrate robust financial health, marked by significant revenue growth, improved margins, and strong cash flow from operations. The strategic acquisition of ZT Systems positions the company favorably in high-growth cloud and AI markets, indicating a clear path for future expansion and value creation. The successful remediation of internal control weaknesses enhances investor confidence in the company's governance. While ongoing legal and tax disputes present some uncertainty, the overall positive financial trajectory, strategic initiatives, and commitment to operational excellence suggest a strong investment opportunity.

Keywords

Electronics Manufacturing Services, EMS, Integrated Manufacturing Solutions, IMS, Components Products Services, CPS, ZT Systems Acquisition, Cloud Infrastructure, Artificial Intelligence, AI, Defense and Aerospace, Medical Devices, Automotive Electronics, Financial Performance, SEC Filing, 10-K, Corporate Governance, Risk Management, Supply Chain, Capital Expenditures, Debt Financing, Share Repurchase, Internal Controls, Cybersecurity, Environmental Compliance, Taxation, Legal Proceedings