Sanmina Corporation (SANM) Cash Flow Statement

The OCF/NI ratio has been highly erratic, ranging from 0.85x to 4.26x over the past ten quarters, with the most recent quarter at 1.06x. This volatility suggests that net income is not consistently translating into cash, likely due to significant swings in working capital, particularly inventory and receivables. Investors should monitor whether the AI-driven revenue surge is accompanied by sustainable cash conversion or if it is creating accrual-based earnings that may not persist.

The FCF margin has shown a clear upward trend, peaking at 8.5% in 2026Q2, but the latest quarter saw a sharp contraction to 0.7% as capex nearly doubled sequentially and acquisition outflows of $242.8M were recorded. This suggests that while the underlying business is generating stronger cash flows, the recent ZT Systems acquisition and increased capital spending are temporarily suppressing FCF. The sustainability of this expansion depends on whether the AI infrastructure demand continues to drive revenue growth without requiring disproportionate capex.

Capex/Revenue has more than tripled over the past year, reaching 2.9% in 2026Q3, which aligns with the company's expansion into accelerated compute and high-speed networking. This elevated capital intensity appears to be growth-oriented, supporting the AI infrastructure build-out, but it also raises the bar for future cash generation. If the AI demand cycle slows, the higher fixed cost base could pressure margins and FCF, warranting close monitoring of capacity utilization.

The working capital line has been a major driver of cash flow variability, with positive contributions in recent quarters (e.g., $120.4M in 2025Q4) but negative in others (e.g., -$97.2M in 2026Q3). This suggests that Sanmina is managing inventory and payables dynamically, possibly to support rapid revenue growth, but the inconsistency may indicate inefficiencies or demand uncertainty. Investors should assess whether the company can stabilize working capital as it scales, as large swings can obscure underlying cash generation.

The ZT Systems acquisition has become the primary use of cash, with $242.8M in acquisition outflows in the latest quarter, dwarfing the $3.5M spent on buybacks. This marks a departure from the prior pattern of steady share repurchases, suggesting management is prioritizing capacity expansion over shareholder returns. The lack of dividends and reduced buybacks may be acceptable if the acquisition delivers the expected margin and growth benefits, but investors should monitor the return on this invested capital.