Six beat-and-raises in six weeks

The companies in this group do not design chips or sell software. They take other people's designs — a Broadcom accelerator, an Nvidia board, a hyperscaler's rack specification — and build, test, cable and ship the finished hardware at assembly margins in the mid single digits. Between 17 June and 30 July, every one of them told investors demand was running ahead of plan.

Celestica, a Toronto-based builder of switches, data-centre interconnects and custom server racks for hyperscale cloud operators, grew revenue 62% year over year in the June quarter with operating margin at 9.75%, and raised 2026 guidance to $20.5bn of revenue and $11.30 of earnings per share, citing custom racks for OpenAI, a design-and-build role on AMD's Helios interconnect, and ten active 1.6-terabit networking programmes.

Sanmina, the San Jose maker of printed circuit boards, backplanes and precision enclosures that bought ZT Systems' data-centre manufacturing arm from AMD for up to $3bn, grew revenue 70% to $3.46bn with operating margin at 6.43% against 4.70%. Its cloud and AI end market is now 62% of the company at $2.15bn, up 173%, while its industrial, medical and defence book grew 4.8% — the clearest illustration of what is actually driving the group.

Flex, the Singapore-founded manufacturer of power components, switchgear and busway for server halls, reported net sales of $7.9bn, up 21%, with its Cloud and Power Infrastructure unit up 35% and a tax-free spin-off of that unit targeted for the first quarter of calendar 2027. Jabil, the Florida manufacturing-services group, was the growth outlier — revenue up 11.8%, decelerating from 23.1% — but still lifted its AI-related revenue guidance to roughly $13.6bn, 50% growth with gross margin expanding to 9.46%. Plexus, the Wisconsin builder of medical, aerospace and industrial electronics, grew 28% and reported a record $4.5bn sales funnel with about $0.5bn of it in data-centre power and cooling. Benchmark Electronics, the smallest at a $3.0bn market value, grew 17.7% with its advanced-computing segment up 71%.

Verdict A on the business: CONTRADICTS the move. Revenue growth accelerated at five of six and operating margins widened at five of six. Nothing in the order book explains a softening tape.

What changed is the cash, not the orders

Winning rack-scale programmes means buying factories and financing inventory before payment arrives. Celestica's June-quarter capital spending was 5.6% of revenue against 1.1% a year earlier, with a $1bn 2026 budget and a $1.5bn placeholder for 2027. Flex guided to $1.5–1.6bn of capex and cut its free-cash-flow conversion target to about 40% from 60%. Sanmina told investors working capital would build as its accelerated-compute programme ramps.

Then the bill came due in public: Celestica priced 9.68m shares at $310 on 5 August for $3bn of gross proceeds — below the prior close of $362.76, roughly 8.3% dilution, earmarked for working capital and capex — and the stock fell 14.8% the next session on twelve times normal volume.

The cash divide inside the group is now wide: trailing free-cash-flow yields of 9.5% at Sanmina and 4.2% at Jabil against 2.4% at Flex, 1.4% at Celestica and 0.9% at Plexus.

The backdrop is sector-wide, and these names are following rather than leading. Alphabet's free cash flow turned negative in the June quarter for the first time since 2004, chip and AI-hardware stocks shed more than $1 trillion of value in late July, and credit-default swaps on Oracle, Alphabet, Amazon and Meta hit record highs in early August. The question the market is asking is who funds the buildout, not whether it happens.

Valuation: one name is the exception

Celestica trades at 32.7x trailing and 27.9x forward earnings, down from 45–50x trailing as recently as May; Flex at 46.9x trailing and 25.8x forward, against 62x in May. Jabil is at 42.1x trailing, 26.8x forward and 18.0x enterprise value to EBITDA — the cheapest on that measure. Sanmina is the cheapest outright at 16.8x forward and 0.77x forward sales. Benchmark's 55.6x trailing collapses to 27.8x forward off a depressed 2025 earnings base.

Plexus is the exception: 31.5x forward earnings and 29.0x trailing enterprise value to EBITDA on consensus revenue growth of 13.8% next fiscal year, the slowest in the group. Verdict B on valuation: CONTRADICTS the pullback for five names — earnings, not multiple expansion, carried the last leg — and CONFIRMS caution only at Plexus. The ceiling is set elsewhere: Taiwanese assemblers Foxconn, Quanta, Wistron and Inventec hold most AI server rack share at 5.3–8.3% margins.

The tape

All six shifted from their strongest uptrend classification to a milder one between 30 June and 22 July — 50-day averages still above 200-day, but the gap narrowing — and shares fell an average 5.5% over the following month. In the most recent week five of the six rebounded 3–9%; only Celestica, absorbing its share sale, fell further.

The setup

Where it stands — Six contract manufacturers raised guidance into a falling tape; the pressure is on funding and dilution, not demand. Would confirm — Celestica delivering its $600m 2026 free-cash-flow target while 2027 capex stays near the $1.5bn placeholder. Would invalidate — Any of the six trimming full-year revenue guidance, or a second equity raise in the group. Watch next — Jabil's fiscal fourth-quarter results in late September, the first report after the July selloff. Valuation — Celestica 32.7x trailing and 27.9x forward, versus 45–50x trailing in May; Sanmina 16.8x forward, the group's floor.