Thanks, Constantine. Good afternoon, ladies and gentlemen, and welcome to Sanmina's first quarter 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 our 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 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 operation for the first quarter ended December 27, 2025 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, tax, net income, and earnings per share, we are referring to our non-GAAP information.

I'd 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. Happy New Year, and all the best to all of you.

First, I would like to take this opportunity to recognize our employees and Sanmina leadership team for doing a great job. To you, Sanmina's team, thank you for your dedication, hard work, and delivering excellent service to our customers.

Please turn to slide number four. Ladies and gentlemen, I can tell you that I'm very pleased with our performance for the first quarter.

Overall, we're executing according to our plan. Revenue came in at $3.190 billion, non-GAAP operating margin at 6%, and non-GAAP diluted earnings per share of $2.38, and we delivered strong cash flow from operation of $179 million.

Again, I'm excited about the future opportunities that we have in front of us. Now, let's go to our agenda for today's call.

We have John, our CFO, to review details of our results for you. I will follow up with additional comments about the results and future goals, then John and I will open for question and answers.

Now, I'd like to turn this call over to John. John?

Great. 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, I want to acknowledge the entire Sanmina team for their focused execution and thank them for delivering a solid start to the new fiscal year.

Now please turn to slide six, where I'll speak to the financial highlights. We're very pleased with our first quarter results, which, as you can see, either met or exceeded all of our outlook commitments.

Our revenue of $3.19 billion and our non-GAAP operating margin of 6.0% each came in towards the high end of our outlook. In regards to revenue, both the core Sanmina business and the ZT Systems business came in near the high end of their respective outlook ranges.

Also, our non-GAAP diluted earnings per share of $2.38 exceeded our outlook. These results represent a great start to fiscal 2020 2026 and sets us on the right path towards achieving our growth and margin expansion objectives for the year.

Now please turn to slide seven, where I'll speak to the P&L performance. As I just mentioned, we delivered revenue of $3.19 billion, which was up 59% compared to the same period a year ago.

This was driven primarily by growth in the communications networks and cloud and AI infrastructure end markets for the core Sanmina business and the addition of the ZT Systems business, which Jure will speak to in more detail as a part of his prepared remarks. Non-GAAP gross profit was $298 million, or 9.3% of revenue, up 30 basis points compared to the same period a year ago.

This was driven by favorable mix as well as operational efficiencies. Non-GAAP operating expenses were $106 million, or 3.3% of revenue, down 10 basis points compared to the same period a year ago.

We continue to make targeted investments to drive future growth, but are doing so in a very structured and disciplined manner. Non-GAAP operating profit was $192 million, or 6.0% of revenue, up 40 basis points compared to the same period a year ago and at the 6% level for the second quarter in a row.

This is a result of revenue growth, favorable mix, and strong operational discipline. Non-GAAP other income and expense was a net expense of $19.1 million, which was $3.9 million favorable to our guidance, driven by our strong cash generation.

Non-GAAP diluted earnings per share came in at $2.38 based on approximately 56 million shares outstanding and up 66.1% compared to the same period a year ago. As we mentioned on our prior call, we expect fiscal 2026 to be a growth year, and our results for the first quarter represent a solid start towards achieving that objective.

Now please turn to slide eight, where I'll speak to the segment results. IMS revenue came in at $2.79 billion, up 72% compared to the same period a year ago, driven primarily by growth in the communications networks and cloud and AI infrastructure end markets for the core Sanmina business and the addition of the ZT Systems business.

IMS non-GAAP gross margin was 8.7%, up 80 basis points compared to the same period a year ago. This was due primarily to favorable mix, including the impact from the addition of ZT Systems revenue, and operational efficiencies in both the core Sanmina and ZT Systems businesses.

CPS revenue came in at $434 million, up 4.3% compared to the same period a year ago. CPS non-GAAP gross margin was 12.9%, up 40 basis points compared to the same period a year ago.

That being said, the 12.9% is lower than our recent performance, and that's due to multiple investments that came online to support new programs, which we expect will deliver margin-accretive growth in the near future, as well as a few program transitions. While we executed well, we continue to see opportunity for further improvement in both revenue growth and margin expansion, which we will continue to focus on going forward.

Now please turn to slide nine, where I'll speak to the balance sheet highlights. We maintained a very strong balance sheet in the first quarter.

Cash and cash equivalents were $1.42 billion. At the end of the quarter, we had no outstanding borrowings on our $1.5 billion revolver, leaving us with substantial liquidity of approximately $3.6 billion to support the expected growth of the business.

We ended the quarter with inventory of $2.2 billion net of customer advances, which is up 74% versus the same period a year ago, driven by the ZT Systems acquisition. Inventory turns, net of customer advances, were 5.3 times for the quarter, down from 5.8 times in the same period a year ago, driven by the ZT Systems acquisition.

It's also important to note that that Q1 calculation only includes two months of ZT Systems' cost of goods sold. Now that being said, core Sanmina inventory turns, net of customer advances, improved for the quarter, both sequentially and versus the same period a year ago.

While we're pleased with these results, we believe there is still room for improvement. Our non-GAAP pretax ROIC was 32.1% for the quarter, well above our weighted average cost of capital and a sizable improvement from the 23.5% from the same period a year ago.

We continue to have one of the strongest balance sheets in the industry, with a net leverage ratio of 0.8 times. This ratio is calculated conservatively by annualizing our Q1 EBITDA results, as using the pro forma trailing 12 months for ZT Systems wouldn't accurately represent the current run rate of the business.

Our long-term net leverage target remains 1.0 times to 2.0 times, and we expect our leverage to increase into this range over time as we invest in working capital to support the growth of the ZT Systems business. I want to emphasize our commitment 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 excel our position in the market, with strong financial policies to guide our decision-making process.

To be clear, our goal remains to achieve investment-grade ratings over time. Now please turn to slide 10, where I'll speak to the cash flow highlights.

As a result of the team's disciplined working capital management, our first quarter cash flow from operations came in at a solid $179 million. Capital expenditures were $87 million for the quarter, slightly above our outlook.

As I mentioned before, we will continue to make strategic investments in the technologies and capabilities needed to strengthen our position in the market and to support our growth expectations, and we expect to fund these efforts through our strong cash flow generation in line with our capital allocation strategy. To that end, we anticipate ongoing targeted investments in both capacity and technologies across our operations in the United States, India, and Mexico to drive further growth and margin expansion across all of our end markets.

Free cash flow was $92 million, enabled by our strong working capital management and operational discipline. During the quarter, we repurchased 516,000 shares for approximately $79 million to offset dilution for the year.

At quarter end, we had approximately $160 million remaining on our current share repurchase program. Our strong cash flow performance has provided us with the financial flexibility to allow for continued investments in the business while also returning capital to shareholders, all within a disciplined and balanced capital allocation framework.

Now please turn to slide 11, where I'll speak to our capital allocation strategy. When it comes to capital allocation, it's incredibly important to have a clear strategy and a well-defined set of priorities when making decisions.

As we 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 investment-grade ratings.

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 12, where I'll provide our outlook for the second quarter, which is based on current customer forecasts, a full quarter of the ZT Systems business, and taking into account ongoing market uncertainties stemming from tariffs and the geopolitical landscape. Our second quarter outlook is as follows.

We expect revenue between $3.1 billion to $3.4 billion. At the midpoint of $3.25 billion, that reflects 62% growth compared to the same period a year ago.

We continue to expect the core Sanmina business to grow high single digits this fiscal year. As for ZT Systems, the business is performing well and in line with our expectations as we work through the transition period, and we're very excited and focused on the opportunities and future ahead.

Non-GAAP operating margin of 5.7% to 6.2%, dependent on the mix of the business. We expect other income and expense to be a net expense of approximately $26 million, as it now includes a full quarter of our new debt structure.

We expect our non-GAAP effective tax rate to be between 21% to 23%. We estimate an approximate $3 million non-cash reduction to our net income to reflect our India joint venture partner's equity interest.

Non-GAAP diluted earnings per share in the range of $2.25 to $2.55 based on approximately 56 million fully diluted shares outstanding. At the midpoint of $2.40, that represents a 66.7% increase compared to the same period a year ago.

Capital expenditures are expected to be around $95 million as we continue to invest strategically to support our future growth expectations. Finally, depreciation of approximately $45 million.

In summary, fiscal 2026 is off to a great start. We remain focused on driving revenue growth, margin expansion, and cash generation while maintaining a healthy balance sheet and making investments that further support our strategic objectives.

Based on our Q1 performance and our outlook for the second quarter, combined with the demand signals from our customers, we continue to expect fiscal 2026 to be a growth year. There's a lot of work ahead of us, but we are very excited about our future.

With that, let me turn the call back over to Jure.

Thank you, John. Ladies and gentlemen, let me add a few more comments about our results for the first quarter and the rest of the fiscal year '26 and beyond.

Please turn to slide 14. As you heard from John, we delivered strong results for the first quarter.

We delivered revenue and non-GAAP operating margin at the high end of our outlook, and non-GAAP diluted earnings per share exceeded our outlook. Most important, fiscal year '26 is on tracking to our expectation.

The way I would say it, great start to fiscal year 2026. As you can see, our consistent execution is driving our financial performance.

Also, I can tell you this is exciting time to be in Sanmina. Please turn to slide 15.

Let's look at the revenue by end markets for the first quarter 2026. For communication networks, cloud and AI infrastructure, that came in at around 62% in total.

Sanmina core business in this segment grew year-over-year approximately 20%. ZT revenue came per our plan at the high end of our guidance, in total of $1.964 billion.

For industrial, energy, medical, defense and aerospace, automotive and transportation, that was 38% of our revenue, or $1.226 billion. That was slightly down year-over-year about 3%.

The way I would review this segment is it's very consistent and stable. This is a heavy-regulated markets that we participate, and we focus on mission-critical and advanced technology products.

I'll talk more about it later on about the future about this segment. As you can see, Sanmina is well diversified within market leaders.

Bookings continues to be solid, over 1% over 1, I should say, solid demand on existing business, and strong pipeline of new projects. At this time, we're seeing very positive trend across the majority of our focused end markets.

To tell you more about it, please turn to slide 16. Now let me talk to you more about end markets the way we see it today.

Overall, it's very positive trend for us as we look at the fiscal year '26 and beyond. For communication networks and cloud infrastructure, we are well positioned for growth in this segment.

For communication segment, we participate mainly in a high-density high-performance networks. We see strong demand for high-performance switches and enterprise storage.

We also growing and expanding our optical advanced packaging products business. We do high-performance network systems from 400, 800 gig, and we're starting to ship 1.6 terabytes.

For cloud and AI infrastructure, we see strong growth opportunities, and we are well positioned in cloud and AI end market. We see strong pipeline of new projects to drive the growth for second half of calendar year '26 and calendar year '27 and beyond.

Now let me talk to you about industrial and energy. For industrial and energy, we have great base of customers.

We have strong demand for power products to support AI data centers, and solid demand for safety and surveillance equipment. We see solid new projects in a pipeline to drive future growth.

Industrial and energy is a very strong segment for us. Let me tell you more about our expansion of new state-of-the-art factory in Houston, Texas for our energy business.

Outlook for electricity demand is very positive. There are several areas for this power markets where Sanmina will play, such as distribution, transmission, and storage of electrical power.

In energy segment such as distribution, we're going to focus on medium-voltage transformers. For transmission, we're going to focus on grid-scale transformers.

For storage, battery storage systems. Here, we basically get involved early stage of product design to full system, and utilizing our vertical integrations such as electronics, machining, fabrication, busbars, etc.

On this extension, I should say, of this energy business, we've been working for last couple of years. We made a decision to basically grow this business, as I said earlier, the outlook for electricity demand is very positive.

For these projects, we partnered with company called Končar out of Europe, Croatia, to co-design custom medium-voltage transformers for our customers plus other opportunities for USA market. We have a long-term commitments from our customer.

This is a large, industry-leading strategic customer for Sanmina. We're ramping up this facility right now, and we are planning to ship few units in late 2026 and be ready for full production in calendar year 2027.

It's exciting opportunity for our energy business and also for Sanmina. Let me tell you more about the medical.

Medical is well diversified within a market that we participate in. We're starting to see recovering in this medical segment.

We expect medical drug delivery devices to grow in fiscal year '26 and '27, and overall medical business for us, we see solid opportunities in pipeline. For defense and aerospace, we continue to see strong demand for next few years.

This segment continues to do well. We see strong opportunities in pipeline for next few years.

For automotive and transportation, this business for us starting to become more stable. We do have a great customer base, and what we see for next year is that we have a new programs that will drive that growth for us.

For industrial and energy, medical, defense, aerospace, automotive and transportation, overall, we see solid opportunities in this segment, and we expect to see more growth in a second half of fiscal year 2026. Now please turn to slide 17.

Now let me tell you more about Sanmina-ZT Systems AI business. I can tell you that we are executing to the plan.

Integration is on track and is doing well. Good thing about this acquisition, it's immediately accretive to our EPS.

ZT Systems margins is in line with our core Sanmina, as John told you. Most important, we do have strong management and technical team in place.

Where we go from here? We expect more growth in a second half of calendar year, driven by new projects.

As I said before, and we're saying this again, the goal is to double Sanmina revenue in next two years. What we see today, the AI opportunities are on track to deliver a $16-plus billion in our calendar year '27.

We also pursuing vertical integration opportunities for AI. As you see on this slide on the right side of the slide, when we talk about full system integration for AI data center at a scale, you can see all the way from design to the full system.

Our capabilities for AI data center are industry-leading, from components and liquid cooling racks to full system integration at scale. Please turn to slide 18.

Let me talk to you about our priorities. Number one, we are focused on our customers as we always did.

The focus is to continue to broaden and deepen our customer partnership, and we are also adding new market-leading customers to our base. Number two, continue to focus on leadership in technology.

Our technology is a competitive advantage in a high-technology markets. Our capabilities are in place from design to full system at scale, and we are planning to do more for the future.

Number three, how to execute on ZT System opportunities. ZT Systems is working on large opportunities for AI data center business, mainly new projects driven.

Sanmina is well positioned. We are investing in AI data center and continue to expand capacity for the future requirements for fiscal year '27 and '28.

Of course, number four is to continue to drive profitable and sustainable growth. In Sanmina, we call this building big for the future, while staying true to our core values, focusing on margin expansion, continue to diversify to higher and sustainable margin business.

I can tell you that we are forecasting steady improvements in operating margin. Short-term, we're forecasting 5.7% to 6% operating margin, and longer-term, we expect to improve those margin from 6% to 7-plus percent.

Overall, our strategy is to build bigger and stronger Sanmina for the future, and always maximize shareholder value for our investors. Please turn to slide 19.

In summary, we are focused on sustainable and profitable growth. As John mentioned, this is a great start to our fiscal year 2026.

We expect core Sanmina to grow in the high single digits, and we expect strong demand from AI hardware in second half of calendar year 2026, '27, into '28, all driven by new platform, new technology projects. We have capacity and power requirements to support customer demand for present demand, but we are continue to invest for the future.

We focused on market diversification with higher-margin opportunities. Our manufacturing footprint is well aligned with our customer requirements, and we do have strong USA presence.

The key to our strategy again, to continue remain focused on Sanmina's strategy and to be a partner of choice with the market leaders. Ladies and gentlemen, now I would like to thank you all for your time and support.

Operator, we're now ready to open the lines for question and answers. Thank you again.

Hi, Jure. Thank you for taking my questions.

Can you help me parse through the sequential revenue guidance for the March quarter? Looks like revenues at the midpoint are guided up $60 million.

If I think about it, ZT, you should have a full quarter of revenues, which is about $1.4 billion. That means that ZT itself is contributing, say, half a billion of incremental revenues, two months versus three months in the March quarter.

Is something weaker sequentially? Any color you can give us on revenue from legacy Sanmina versus ZT non-accelerated versus ZT NVIDIA?

How are you seeing the trends in those different buckets of revenue?

Okay. Actually, our business is improving in a second quarter, let me explain that.

Yes, you're right, we only had a two months. You cannot take a two months divided by two, multiply by three, because the transition of our business, this business is mainly all business is being transitioned, and we're now strictly focused what we call base business that's going to stay with us and the future business.

If you really look at it today from our perspective, we only guiding one quarter at a time, but overall, if you look at the Street expectation, we feel comfortable with that. We're just guiding one quarter.

For the first quarter, we're shipping more than a Street expectation by approximately $100-plus million. As we guiding $3.1 million to $3.4 billion, Sanmina business itself, the core business, will grow quarter-over-quarter and will grow double digits year-over-year, okay?

We expect ZT System to grow quarter-over-quarter. Overall, we expect a strong quarter.

Most importantly, I think, we are positioning a company for the new product, new platforms that are going to be coming up in end of the fiscal year and calendar year, and we're investing for that. We're really excited about the future about that.

That's all I have to say. John, anything else you want to add to that?

I think you covered it well, Jure. First and foremost, just talking about the Q1 results, Ruplu, both parts of the business, core Sanmina and ZT Systems, performed well at the high end of the range.

We did provide specific guidance in that first quarter, but we're very pleased to see both parts of the business do well. Just like Jure was saying, ZT Systems is effectively in line with our expectations.

You go all the way back to May 19th and what we said, and pretty much everything we've said and committed about the business has been happening the way that we expected, including in Q1. Very excited about the future.

The transitions taking place like we expect, and we're just focused on executing those new opportunities.

Yeah. If I can add to that, Ruplu, I think that we have a lot of interest from existing customers and future customers what going on.

As I said in my prepared statement, the most importantly, I think the more I learn about ZT's management, I'm very comfortable, very excited with that team, what they can do. They're basically self-sufficient going forward.

Very excited. It's a great acquisition for Sanmina, and this will transform Sanmina.

There's no way we could get to $16 billion in '27 without a potential that we have in a new platforms coming out.

Okay. I appreciate the details there.

Can I ask a conceptual question about ZT? As I see the business, there are really three parts to the business, right?

There's the non-accelerated part, which would be just non-GPU servers or racks. Then there's the accelerated part, and there's some legacy NVIDIA business you would have.

Then obviously, you're going to be ramping with AMD in the second half of the year, as you said. As we think about this total revenue, I think last quarter, we were talking about high $5 to $6 billion, and the guidance implied something like $5.7 billion.

Does that $5.7 billion kind of factor in some decline in the NVIDIA part of the business, whereas, as you ramp AMD, you're going to be focused more on that, and so that will ramp? Any thoughts on how fast that transition can occur this year?

Do you think that you will ramp AMD in time for any offset to the NVIDIA business that might decline?

Good question, Ruplu. This is John.

To just clarify, and a reminder for everyone, back in May 19th, we said when we'd close the transaction, we'd expect the revenue run rate to be between $5 to $6 billion, right? That was implying that we had a point of view on how that transition was going to occur with the accelerated compute component of the portfolio, and it pretty much landed right in our expectations, right?

You annualize our Q1 guide, the two months, and you get to $5.7 billion, but we're still going through that transition right now. A lot of the old platforms, at this point now, have rolled off, we're really just focused about the future.

That's why we wanted to be clear. At the time, we were just guiding the Q1 number that we did, and now we're guiding Q2, but the opportunity, like Jure was saying, for accelerated compute specifically, is huge, and that's what we're focused on right now, doing our part of that to be able to execute on that demand and on that opportunity.

That really comes at the end of calendar 2026.

If I can add to that, I think opportunities utilizing AMD partnership is huge for us and all the investments being made to be able to support those future requirements. Ruplu, I would just say, you know us, we like to guide one quarter at a time.

We feel very comfortable about our guidance. As you can see, we are increasing our earnings per share.

This is second quarter that we deliver 6%. I think we can expand margins both on Sanmina's side and ZT's side in the future.

Those are exciting things. There's a lot of vertical integration opportunities that we're starting to kind of work on that.

It's going to take some time, but in a year from now, that part of the business when it comes to vertical integration around the AI data center will improve. Then our core business around data center is doing really well.

We like what we have. As I said in my prepared statement, only few businesses is that automotive was down, but it's getting stable.

Everything else starting to move in a right direction.

Thanks for that. Can I ask a clarification, Jure?

I know you're not guiding for the full year, but one thing you said in your prepared remarks is that when you look at consensus estimates, you're comfortable with that. If I look at consensus for 2026 right now, it's about $14 billion of revenue, and I think your last guidance for ZT was kind of in that high $5 to $6 billion range.

Are you still comfortable? Is that the message today that you're still

The message, if you look at the first call, we believe we have a very good chance hitting $14 billion.

$14 billion. Okay.

I understand. Then, can I ask last

As much as I hate to tell you on a yearly basis, but let me just put it this way. I'm personally more excited what's in front of us, what opportunities we have today than in May when we did the deal, and even a lot stronger than 90 days ago.

A lot of work in front of us, but hey, we're not afraid of work. All

right. If I can sneak one last one in.

Jure, let's move beyond data center. If you look at the communications market, right, Sanmina is strong in optical and networking.

That market has been going through many years of inventory correction. How do you see that recovering?

What is happening? Can you give us what happened in the December quarter and how you see the March quarter in terms of the overall communications market, whether it's optical or networking or whatever parts you play in?

Very strong. Very very strong today.

We have some material shortages out there around memory and some of the special ASICs, custom ASICs, but very strong demand, and First of all, it was very strong in December quarter, it'll continue to be strong in March quarter. I think it'll be very strong rest of the year.

Okay. Thank you for all the details, Jure.

One quarter

But Ruplu, one quarter at a time, but we're excited about the year and the future.

Okay. Thank you for all the details, Jure.

Appreciate it. Yeah.

Thank you. Thanks, Ruplu.

Hello, Steve.

Hi. Good afternoon.

Thanks for taking my question. I guess just off of all of that, maybe you can tie that into the operating margin.

It looks like the operating margin was a little bit better in the quarter. It looks like it could even be flattish this quarter.

Can you talk about some of the things going on, puts and takes, and why you're able to hang on to that six-handle, maybe not only this quarter, but next quarter? Then I have a follow-up question.

Steve, this is John. Very pleased with the operating margin for the quarter, as I was saying in my prepared remarks, pretty consistent with where we exited last year in Q4.

It's largely dependent on mix. That's always a big factor in our business.

It's also the same levers that we're always focused on that we're talking about. Just to be clear and to reiterate that, but we're always looking to drive operational efficiencies within both of our businesses or within both of our segments, both IMS and CPS.

Clearly, the addition of ZT, it helped out as well. We're always looking for opportunities to get more efficient with our SG&A cost structure, too, and we're really focused on growing those businesses that are accretive to the overall margin profile.

Last year, Jure and I talked a lot about investments that we were making in CPS in particular that would be margin-accretive, and we're starting to see some of those investments coming online. That created a little bit of short-term pressure in CPS in particular, but long-term, the opportunity's there.

It's the same set of levers that we're always executing on, and that's what we're going to continue to do going forward.

Steve, if I can add to that, and investments that we are making, especially as you look at in end of '26, '27 year, it's a lot of it in the businesses that can deliver the higher margin for us. The key for us, that's why we feel, of course, you got to take one day at a time, one quarter at a time, but we are positioning company to really push for the higher-margin business, something that is sustainable not just for one quarter, but is sustainable for many quarters.

As you can see, our business becoming more technology-driven, it requires a higher return on investment to be able to make investments for the future.

Just to be clear, when we're talking about mix here, John, are we talking about mix of components, products, and services, or mix across served markets?

I was referring more to across components, products, and services, Steve. I think at the end of the day, I think the key important thing to remember here is that, even with the acquisition of ZT Systems, our core strategy hasn't changed, what Sanmina wants to focus on.

Clearly, that added to the overall IMS part of the portfolio, and that's great. It's essentially an extension of the TAM more broadly into the data center end market, or as we call it, the cloud and AI infrastructure end market.

The core strategy of always trying to get better on all the programs across all of our businesses hasn't changed, and then also our focus on our cost structure and just growing CPS to be a bigger component of the overall mix. Core strategy hasn't changed.

Excited about ZT, and just on ZT, they've been executing well. Pretty much everything that we've said back to May, we've executed on to date.

Now we're focused, as Jure was saying, on all the opportunities we've got ahead of us in that business.

Got it. Then, just as a follow-up, can you just help us a little bit more on the ZT wins for later in the year?

It sounds like you have confidence in these wins, that you've won some substantial stuff, but I'm wondering if you can give us colors to, is it all accelerated compute-related, legacy technology, too? How would you sort of describe what and why you're winning that you have confidence in doing $14 billion on a path to $16 billion in revs?

I think number one why we're winning is execution. This is a great team.

They're known for to execute. They have a very strong relationship with existing customers, and the way we are structuring for the future and the technology that are coming out.

These are very difficult systems. Our customers believe that we're positioned to win.

We still have to go work on it and deliver. Opportunities, Steve, are there.

Opportunity is not an issue. I think it's all about timing and making sure that we do what we said we're going to do as we making commitments to our customers.

Anything else, John?

No, the only thing I would add to that, Steven, and Ruplu talked about it earlier, but there's multiple components to the ZT business, and all of them, we're interested in and we're investing in. Accelerated compute is certainly the part of it that has the most growth potential, but we're focused on all aspects.

Yeah. I think what I would just also add, we don't talk too much about it, but there was a lot of talk, hey, we're not going to be able to retain all customers.

I think our team is doing a great job, and we have a high confidence that those customers will grow in the future, and we're going to be adding new customers to that. From opportunities point of view, that's not an issue.

At least what we see today, what we hear from our customers, like I said, there's a lot of opportunity. We are investing for the future, as you just heard from John earlier.

We spent what, over $85 million last quarter?

$87 million.

$87 million, and we're going to be spending around $90-plus, and that's all for future. 90% of that is really for '27, for '28.

Got it. Understood.

Thank you.

Thanks a lot, Steve.

Hello, Anja.

Hi, and thank you for taking my questions. Within industrial, medical, auto, and defense, what was the pocket of weakness there that

drove that? I think as I said in my prepared statement, I think we had some weakness in last couple of quarters in automotive and transportation part of the way we measure it.

That's starting to stabilize, and it's mainly driven with some of the new programs that are coming that we won. I would say that business is going to be short-term stable, but the longer-term, I think we'll start recovering.

Medical is starting to recover pretty nicely. We're pretty well diversified there.

Defense and aerospace, it's pretty stable. These are long-term programs, and just that, sometimes they don't move as fast, but the demand for those are solid.

Industrial, I just talked about earlier, that's a very good market for us. We talked about expansion down in Houston, Texas.

We do have orders in the books already for what we call medium-voltage transformers that we co-design with this Croatian European company. We're very excited about that.

Actually, customer wants the product today. Overall, that segment, we expect it to grow, more growth in the second half of our fiscal year, calendar year 2026.

Okay. Did you say you expected that to grow sequentially in the second quarter or

Yes, we're going to see some growth in a second quarter, but we'll see more growth in a second half of our fiscal year 2026.

Okay. Thank you.

Then, in terms of the cash cycle days, you said it was some things going on in this quarter that drove that up. Do you think we'll see a drop in the second quarter, is that going to be taking some time to get that down or?

What I was referring to there, Anja, is that I was talking primarily in my prepared remarks about inventory turns, and in that calculation, you've got the full amount of inventory that came over from ZT, but only two months of the cost of goods sold, it somewhat distorts the calculation. Same thing applies for the cash conversion cycle, but that also applies to revenue as well.

I think we'll be a little bit better, but all in all, we're pleased with the performance of the business on that front, and it's per our expectations. As I mentioned for core Sanmina, we drove improvement on inventory turns, and that's been the big area that we've been focused on for the last couple of years.

We continue to do well on that front, but more work to be done. In ZT, once we've got a full quarter in there, I think you'll get a more realistic view of inventory turns, cash conversion cycle, but as always in our business, that's always going to be an area of focus of where can we optimize, how can we do better.

Okay. Thank you.

That was all for me.

Thank you, Anja.

Ladies and gentlemen, again, thank you for your time you spent with us today. Hopefully, we answer most of your questions.

If not, please contact us, and looking forward talking to you if not in a near term, 90 days from now. Thanks a lot.

Bye-bye.