TTMテクノロジーズ（TTMI）2026年第3四半期決算説明会：過去最高売上高と2027年ガイダンス

TTMテクノロジーズ（NASDAQ: TTMI）は、AI関連データセンター需要、航空宇宙・防衛プログラム、ならびに医療・産業・計測機器向け売上高の好調に支えられ、2026年度第3四半期の売上高と収益性が過去最高を記録したと発表した。

主なポイント

• 第3四半期の売上高は前年同期比60%増の12億ドルと過去最高を更新し、Non-GAAP希薄化後EPSは118%増の1.46ドルとなった。
• 調整後EBITDAは2億4,230万ドルに達し、マージンは前年同期から400ベーシスポイント拡大して過去最高の20.1%となった。
• データセンターおよびネットワーキングの売上高は115%増加し、四半期売上高の41%を占めた。経営陣によると、N+M製品が同事業の約30%を占めており、2027年には約50%に達する可能性がある。
• 航空宇宙・防衛分野の売上高は21%増加し、売上高の34%を占めた。受注残高は過去最高の20億ドルに達し、TTMは2027年の航空宇宙・防衛分野の見込み売上高の約65%について見通しを得ている。
• 経営陣は第4四半期の売上高の見通しを14億2,000万ドル〜14億4,000万ドル、Non-GAAP希薄化後EPSを1.77ドル〜1.83ドルと発表した。
• 未完了の買収案件を除く2027年度の予備的業績見通しは、売上高が65億ドル〜67億5,000万ドル、Non-GAAP希薄化後EPSが8.10ドル〜8.90ドルとしている。

主要業績ハイライト

売上増、好調なプロダクトミックス、およびTTMのペナン工場の運営改善が利益率の拡大を後押しした。経営陣は、ペナン工場の操業が2026年度第4四半期に損益分岐点付近に達すると見込んでいる。

事業および業績ハイライト

データセンターおよびネットワーキング

同セグメントは第3四半期売上高の41%を占め、売上高は前年同期比115%増加した。この成長は、先端技術を用いたN+M非対称プリント基板の生産拡大と、データセンターおよびネットワーキング顧客からの継続的な需要を反映している。

経営陣によると、当四半期の同セグメントにおけるN+Mの割合は約30%であり、2027年には事業の約半分を占める見通しである。主要3プログラムのうち2つは順調に進展しているが、3つ目は技術的、歩留まり、あるいは執行上の問題ではなく顧客側のスケジュール調整により後ずれした。

TTMは、第4四半期の売上高のうちデータセンターおよびネットワーキングが約49%を占めると見込んでいる。同市場からの2026年度通期売上高は、引き続き前年比で2倍以上に増加する見通しである。

同社はまた、2026年度第4四半期に開始し2028年初頭まで続く4億ドルの追加設備投資を発表した。この既存施設の拡張（ブラウンフィールド投資）は、主にN+Mの生産および2028年を中心とする収益機会を支援することを目的としている。

航空宇宙・防衛

航空宇宙・防衛分野は四半期売上高の34%を占め、前年同期比で21%増加した。TTMは、防衛予算の裏付け、プログラムの整合性、ならびに監視レーダー、APS-143海洋監視レーダー、ゴールデンドーム（Golden Dome）、機密プログラムに関連する受注を理由として挙げている。

航空宇宙・防衛（A&D）部門の受注残高は、1年前の15億ドル弱から増加し、過去最高の20億ドルに達した。経営陣は、同市場が第4四半期売上高の約31%を占め、買収した事業を含めて2026年度通期で約20%の成長を達成すると見込んでいる。

医療・産業・計測機器

売上高は前年同期比97%増加し、四半期売上高の18%を占めた。成長には、価格調整やAIソリューションを支援するために使用される自動テスト装置の需要が寄与した。

経営陣は、同市場が第4四半期売上高の約14%を占め、売上高は前年同期比で約90%増加すると見込んでいる。通期成長率は約70%と予測されている。

自動車

自動車分野は第3四半期売上高の7%を占め、前年同期比で11%増加した。TTMは引き続き、財務目標に沿ったマージンを持つ高付加価値製品を優先している。

経営陣は現在、自動車向け通期売上高が1桁台半ばの増収になると見込んでおり、従来の一桁台半ばの減収予想から上方修正した。

買収およびポートフォリオの拡大

TTMはEpiq SolutionsおよびSwiss Technology Group（現TTM GS Swiss）の買収を完了し、さらにILFA、Merlin PCB Group傘下企業、およびOphir Opticsを対象とする追加の買収案件を推進している。

6億5,000万ドルの全額現金によるOphir Optics買収提案は、規制当局の承認および慣習的な条件が満たされることを前提として、2027年第2四半期に完了する予定である。TTMは、この買収が調整後EBITDAマージンおよびNon-GAAP希薄化後EPSに直ちに貢献すると見込んでいる。推計買収マルチプルは、シナジー効果を除いたOphir Opticsの2027年予想調整後EBITDAの約10倍である。

経営陣は、取引完了時の純有利子負債倍率（ネットレバレッジ）が直近12ヶ月の調整後EBITDAの2倍未満にとどまると見込んでいる。同社は現在、金融市場での資金調達を計画しておらず、発表済みの取引が完了した後はレバレッジの削減に注力すると述べた。

業績見通し（ガイダンス）

2026年度第4四半期および通期の業績予想には、最近完了した買収および関連する資金調達コストが含まれているが、未完了の買収案件は除外されている。2027年度の予備的見通しも同様の取り扱いとなっている。

第4四半期について、TTMは販売管理費比率を売上高の約6.7%、研究開発費比率を約1%と見込んでいる。また、経営陣は支払利息を約3,390万ドル、実効税率を15%から19%と予想している。

経営陣は、高利益率のN+M製品が売上構成比で拡大することに伴い、2027年には売上総利益率および調整後EBITDAマージンが200ベーシスポイント以上上昇すると見込んでいる。

リスクと注視事項

• 大規模データセンターのプログラムは、顧客の都合により期を跨いで時期がずれる可能性がある。経営陣は、主要なN+Mプログラムの1つが延期された理由としてスケジュールのタイミングを挙げている。
• 主要材料のリードタイムは通常約12週間であるが、24週間以上に長期化する場合がある。TTMによると、これまでのところ顧客はこれに伴う値上げを受け入れている。
• 最近発行された社債および買収資金の調達により、四半期ベースの支払利息が約2,000万ドル増加すると見込まれており、買収関連の利益貢献が一部相殺されることになる。
• Ophir Opticsの買収は、規制当局の承認および慣習的な完了条件に従う。
• TTMは、2025年から2029年にかけて確約されている13億ドル超に加え、N+Mに特化した4億ドルの追加拡張を含む大幅な設備投資を実施している。

アナリストQ&Aの要点

経営陣は、N+Mの立ち上げは技術的に順調であり、歩留まりも想定通りの水準にあると述べた。時期の変動は製造や製品のパフォーマンスに関する問題ではなく、顧客のプログラムスケジュールを反映したものである。また、追加のN+Mプログラムも開発中である。

TTMは、基板の複雑化が高付加価値化と価格の上昇を支えているため、N+Mの売上総利益率は全社平均を大幅に上回っていると説明した。経営陣は、このミックス改善が2027年におけるさらなる売上総利益率および調整後EBITDAマージンの拡大を牽引すると見込んでいる。

M&Aに関して、経営陣はOphir Opticsが当面の間、最後の大型買収案件になる可能性が高いことを示唆した。短期的な優先事項は、統合プロセス、プラスのフリーキャッシュフロー創出、および負債返済にシフトする。

経営陣によると、電話会議の時点でOphir Opticsの2027年の受注率は85%を超えていた。TTMはまた、Ophirの赤外線・レーザー光学技術と、Epiq Solutionsの処理能力、ならびに既存のRF・相互接続ポートフォリオを統合する可能性にも期待を示している。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to TTM Technologies Third Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Sean Hannan, Vice President of Investor Relations. Please go ahead.

Sean Kilian Hannan

Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer; and Dan Boehle, our Executive Vice President and Chief Financial Officer.

Before we get started, I'd like to remind everyone today that the call contains forward-looking statements, including statements related to TTM's future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the risk factors we provide in our filings with the Securities and Exchange Commission, which we encourage you to review.

These forward-looking statements represent management's expectations and assumptions based on currently available information. TTM does not undertake any obligation to publicly update or revise any of these forward-looking statements whether as a result of new information, future events or other circumstances, except as required by law.

We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. Such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP. And we direct use the reconciliations between GAAP and non-GAAP measures included in the company's earnings release, which is available on the Investor Relations section of TTM's website at Investors.ttm.com. We have also posted on the website and earnings presentation that we will refer to during the call. Here is Edwin.

Edwin Roks

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our third quarter 2026 conference call. At TTM Technologies, we are focused on designing and manufacturing complex advanced interconnect products and printed circuit boards in addition to what we term up as up to chain products and solutions such as sophisticated RF modules resulting in subsystems and fully integrated mission systems for communications and sensing purposes. .

Core to the design of all our products and solutions as well as the strategy of our business is the innovative focus to safely next-generation needs for our customers and end markets, particularly regarding swap or size, weight and power. We believe the future of electronics lies in speed to market, high reliability and efficient technology integration, and we consequently engage early with our customers often multiple times, multiple years in the plant as part of their program road maps to ensure this alignment while also enabling optimal management of their complex supply chains.

It continues to be a very successful year for TTM so far. Our third quarter sets another new record with over $1.2 billion in revenue and we expect to close out the year strong, aided by increased shipments of our ample product offerings for data center and networking end markets in addition to continuing strong demand for TTM's aerospace defense business and product offerings.

Proposal activity in our aerospace and defense business remain at all-time highs with a record backlog of $2 billion. We already have visibility into roughly 65% of our projected A&D revenue for 2027.

Our medical, industrial and instrumentation and automotive end markets also outperformed our expectation year-to-date, with all our business performing well in 2026 to date we are increasing our full year 2026 revenue guidance from $4.47 billion to $4.49 billion.

Since our last quarterly earnings call, we have had many exciting developments here at TTM, and we continue to execute our long-term business strategy focused on projected value creation for our customers and shareholders.

As we said at our Investor Day in May, TTM continues to invest in organic growth opportunities and technological advancements across our product offerings for all our end markets. In addition to strategic M&A to enhance our capabilities and add diversification and longer-term structural enhancements.

To that end, we discussed three key strategic directives. First, investment in capacity and innovative technology for advanced interconnect. As previously disclosed in this area, we have invested or committed to invest over $1.3 billion in capacity expansion in the 2025 to 2029 time frame across both our data center and networking and aerospace and defense end markets.

While our commercial segment is currently the primary target for these investments, our model has proven over time that our investments in our commercial technology advantages provide critical value to leverage into our A&D offerings as that end market continues to modernize.

Last week, we announced an additional $400 million client investments that is expected to begin in the fourth quarter of 2026, and continue into early 2028. And this would primarily support revenue production focused on the 2028 period.

The basis of this initial investment provides critical commercial data center and networking end market customer support and their strong demand and low meter requirements to utilize our unique and present product approach. Recall, the majority of our customer business in this market currently is with our industry-leading innovative established and [ chemical AI ] players.

We remind investors that our fundamental business model has been -- continues to be what we discussed at the Investor Day, and that is to pursue a very disciplined risk-reduced brownfield expansion approach for internal organic investments with the expectations to fund these efforts from operating cash without any anticipated needs to access our borrowing facilities. These investments have been given substantial forecast are perf aligned with our customers and not simply reactive to the strong demand environment.

Our commitment to these investments is driven by our confidence in our projected cash flows supported by our visibility through the anticipated strong demand requirements of our differentiated and advancing technologies.

We are also in the early stages of investing in a new innovation center in the Eau Claire Wisconsin facility, very close to our existing technology center in Chippewa Falls, Wisconsin. This is has our intensifying R&D activities focused on pioneering technological advances such as mSAP, SAP, passives and embedded optics, among other technologies.

Second, recall that we are extremely focused on our diversified business model and that as part of this, we've pursued our initial geographic expansion in the European region. In June, we announced our intention to acquire two well-established European companies, Swiss Technology Group and the ILFA to begin this effort. We've since closed the Swiss Technology Group acquisition now called TTM GS Swiss and we believe we are nearing the close of ILFA.

On Monday, we announced the planned acquisition of Ophir Optics which established a presence in Israel and Romania. I'll share some additional comments on of Ophir Optics in a few moments.

Additionally, we engaged last week in plans to acquire two small but strategic printed circuit board companies under the Merlin PCB Group Holding Company in the United Kingdom. We are excited that all these transactions are both strategic from a technology and capability standpoint and also in terms of adding international diversification to our business information model.

Finally, our third strategic directive is investment in what we call up the chain of vertical product solutions with focus on communication and sensing. In line with this directive, we acquired Epiq Solutions, which is closed on September 30. We are excited to welcome the Epiq team members into TTM as we continue the integration activities. The announced plan to acquire Ophir Optics also supports the team of up to the chain, and both these companies bring a unique set of competencies that will deliver differentiated and high-value solutions to our end markets.

I now provide a few additional comments on the proposed acquisition of Ophir Optics before we move on to discuss our operating results of the quarter. Ophir Optics is a global leader in precision infrared thermal imaging and laser optics solutions for defense, homeland security and industrial applications with locations in Israel and Romania.

With Ophir market-leading advanced infrared and laser optical components, we can offer our customers solutions where we -- and we can combine these optics with our other in-house modalities and our interconnect capabilities. This applies for both A&D and industrial applications.

In A&D, we expect to have the opportunity to combine infrared optics and RF radar systems to offer customers a highly integrated and very small form factor mission subsystem for unmanned and countermand area systems, both difficult to organize defense priorities.

On top of that, Ophir Optics will add processing capabilities. Optics and processing are the key differentiators in any optical sensing system. Consequently, we expect the potential combined offerings of Epiq solutions and of Optics can advance a common strategy moving up the defense value chain and bringing together complementary software-defined radios and infra capabilities.

Both are keys to expanding our role in mission critical sensing modalities such as surveillance, recognizance, communications and electronic warfare.

In Industrial, this proposed acquisition provides laser optical subsystems used for shaping laser beams in industrial cutting, welding and PCB drilling machines. We are very excited for the opportunities ahead.

From a financial perspective, the proposed acquisition of Ophir Optics is projected to incrementally benefit our financial model by adding more high-margin long-cycle business to our mix.

Let me go through the financial highlights with you. We are acquiring Ophir Optics business for an all-cash purchase of $650 million as a carve-out from [ MKS ]. The transaction is expected to be funded through a combination of cash on hand and borrowings under TTM's existing revolving credit facility. And at this time, we believe it's important to compare to all our shareholders that we do not have any current incremental needs or plans to come to the financial markets to access capital.

On timing, we expect to close this in the second quarter of 2027, subject to regulatory approvals and other customary closing provisions. Ophir Optics experiencing strong revenue growth and margin expansion and the transaction is expected to be immediately native to our adjusted EBITDA margins and our non-GAAP diluted EPS.

The transaction multiple is estimated to be roughly 10x the expected Ophir Optics full year 2027 adjusted EBITDA without synergies. TTM's net leverage at casing is expected to be less than 2x adjusted last 12 months EBITDA and therefore, within our targeted leverage range. I'll now move on to an overview of our business highlights from the quarter. Then we'll follow up with a summary on our Q3 2026 financial performance, our Q4 and full year 2026 guidance and our initial preliminary guidance for 2027.

From a demand standpoint, product developments with our partners, bookings and backlog and broader signals in both AI and defense remain strong and are expected to provide very healthy growth momentum for the remainder of this year and as we look in 2027. We interact very closely with our customers and strategic partners and jointly engaged in very diligent conversations to plan for the future with thoughtful investments and take a disciplined approach to vet our outlook, which we believe provides us with a lot of optimism as will be evidenced in the guidance that Dan will share shortly.

We delivered an excellent third quarter of 2026. And as always, I would like to thank our employees for delivering these results. we achieved a sales of $1.2 billion and non-GAAP EPS of $1.46 per diluted share, both above our guidance and both all-time quarterly highs.

Sales for consolidated TTM grew 60% year-on-year, reflecting demand strength in our data center networking and markets, driven by AI while our medical, industrial and instrumentation sales almost doubled from a year ago. And the aerospace and defense end markets experienced very strong double-digit growth.

The company's adjusted EBITDA margin was 20.1% in the third quarter of 2026, up an impressive 400 basis points year-over-year and over 350 basis points sequentially, reflecting positive mix impacts and operational excellence. Non-GAAP EPS of $1.46 per diluted share was 118% improvement year-on-year.

The aerospace and defense end market represented 34% of third quarter 2026 sales. Sales in the aerospace and defense market grew 21% year-on-year in the third quarter with the vast majority of our facilities performing at strong levels. The sales growth in the defense market continues to be the result of positive tailwinds in defense budgets our strong strategic program alignment and key bookings for new and ongoing programs.

Our ability to support sustained Long-term growth is also very encouraging and further enabled by our recent strategic acquisitions. Our focus on product innovation is tracking well against our internal road maps for many new capabilities, including unique advances in printed circuit board technologies for materials that enable high frequency in support for all our applications.

During the third quarter of 2026, our A&D team's effective execution continued in securing another strong bookings quarter. Executing business related to the service surveillance by six radar, the APS 143 maritime surveillance radar, Golden Dome and a number of projected priority restricted programs. A&D's book-to-bill ratio was roughly 1.6% for the quarter, which led the total program backlog of $2 billion, a record level, up from just under $1.5 billion a year ago.

Within our backlog, we are excited to report that we have strong momentum in securing new business from new primes as well as restricted programs. Expected programs are incredibly sticky and very difficult for competitors to try in this place.

For the fourth quarter of 2026, we expect this end market to represent approximately 31% of our total sales and continue to delivering both year-on-year and sequential growth. For the full year 2026, we now expect this end market to deliver approximately 20% growth compared to 2025, including contributions from acquired businesses or roughly 80% on an organic basis.

Sales in the data center and networking end market represented 41% of third quarter 2026 sales. These end markets experienced 115% year-on-year growth in the third quarter, reflecting the strong ramp of our high-technology N+M asymmetric printed circuit boards and continued demand from data center and networking customers.

For the fourth quarter of 2026, we expect this end market to represent approximately 49% of net sales as our most Board continue to experience strong uptake at customers. For the full year 2026, we continue to expect sales in this end market to be more than double year-on-year.

The medical, industrial and instrumentation end market represented 18% of the third quarter 2026 sales. This end market saw year-on-year growth of 97% during the third quarter aided by price adjustments to fully capture the value add of our technology in addition to particular demand strength in instrumentation for automated test equipment supporting AI solutions.

For the fourth quarter of 2026, we expect the medical, industrial and instrumentation end market to represent approximately 14% of total sales, growing roughly 90% year-on-year. For the full 2026, we now expect sales in this end market to grow nearly 70% year-on-year.

Automotive sales represented 7% of third quarter 2026 sales and was up 11% year-on-year. We continue to be very selective in this market to focus on higher value-add products that carry margin profiles consistent with our financial goals.

Given conversations with customers, we are seeing additional share opportunities as some competitors reduce their market participation while long-term business cycles are showing signs of migrating back towards our advanced capabilities.

For the fourth quarter of 2026, we expect the automotive end market to represent about 6% of total sales, which reflects encouraging double-digit growth as we digitally push out the challenge of supply chain materials availability discussed last quarter.

For the full year 2026, we now expect sales in this end market to improve mid-single digits versus our prior expectations for a mid-single-digit decline year-on-year.

The overall book-to-bill was a remarkable 2.1% for the third quarter of 2026, with the commercial reporting segment at 2.5% and the A&D reporting segment at $1.6 billion. At the end of the third quarter of 2026, the 90-day backlog, which is subject to cancellations, was $1.3 billion compared to $610 million a year ago at 111% increase year-on-year.

Now then we'll summarize the financial performance in more detail. Dan?

Daniel Boehle

Thanks, Edwin, and good afternoon, everyone. I'll review our financial results for the third quarter of 2026 that were included in the press release distributed today. Key financial highlights are also summarized in the earnings presentation posted on our website.

For the third quarter, net sales were $1.2 billion compared to $753 million in the third quarter of 2025. The 60% year-over-year increase was due to growth across all our end markets and most notably continued strength in data center and networking, medical, industrial and instrumentation and aerospace and defense.

GAAP operating income for the third quarter of 2026 was $162.3 million compared to GAAP operating income for the third quarter of 2025 of $71.9 million. On a GAAP basis, net income in the third quarter of 2026 was $84.8 million or $0.79 per diluted share. This compares to GAAP net income for the third quarter of 2025 of $53.1 million or $0.50 per diluted share.

The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes M&A-related costs, restructuring costs, Certain noncash expense items such as amortization of intangibles, impairment of goodwill, stock-based compensation, gains on the sale of property, unrealized gains or losses on foreign exchange and other unusual or improved good items. We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparison with expectations and prior periods.

Gross margin in the third quarter of 2026 was 24.8%, an increase of 330 basis points from 21.5% in the third quarter of 2025. The year-on-year increase was due primarily to higher sales volume and favorable product mix, particularly in the data center and networking and aerospace and defense end markets. In addition to execution improvements at our facility in Penang, which we continue to expect to approach breakeven in the fourth quarter of 2026.

Selling and marketing expense was $23.2 million in the third quarter or 1.9% of net sales versus $20.5 million or 2.7% of net sales a year ago. Third quarter general and administrative expense was $57.3 million or 4.8% of net sales compared to $42.1 million or 5.6% of net sales a year ago. Third quarter research and development expense was $9.5 million or just under 1% of net sales compared to $6.9 million or just under 1% of net sales in the prior year.

Our operating margin in the third quarter of 2026 was 17.4%, a 510 basis point improvement from 12.3% in the same quarter last year. The increase in the period was due both to the improvement in gross margin as well as operating leverage resulting from selling, general and administrative expense discipline.

Adjusted EBITDA was $242.3 million in the third quarter of 2026, a record quarterly adjusted EBITDA margin of 20.1% and up 400 basis points year-over-year. This compares to adjusted EBITDA of $120.9 million in the third quarter of 2025 and with an associated adjusted EBITDA margin of 16.1%.

Interest expense was $12.1 million in the third quarter of 2026 compared to $9.9 million in the same quarter last year. Interest and other income was $3.1 million in the third quarter of 2026 compared to $2.5 million in the same quarter of last year. Realized foreign exchange loss in the third quarter of 2026 totaled $4.1 million as compared to $1.8 million in the same quarter last year, driven by the weakening of the U.S. dollar.

Our effective tax rate was 19.5% in the third quarter of 2026, resulted in tax expense of $38.2 million. This compares to an effective tax rate of 15% or a tax expense of $12.5 million in the same quarter last year.

Third quarter 2026 non-GAAP net income was $157.8 million or $1.46 per diluted share. This compares to third quarter 2025 non-GAAP net income of $71 million or $0.67 per diluted share. Cash flow provided by operating activities was $154.7 million in the third quarter of 2026, which compares to cash flow provided by operating activities of $141.8 million in the same quarter last year.

Free cash flow in the third quarter of 2026 was $74.8 million as compared to free cash flow of $42.6 million in the third quarter of last year.

Now I'll provide our financial guidance for the fourth quarter an update to our outlook for the full year of 2026 and an initial preliminary expectation for full year 2027.

We project net sales for the fourth quarter of 2026 to be in the range of $1.42 billion to $1.44 billion and non-GAAP earnings to be in the range of $1.77 to $1.83 per diluted share. These projected results include the contributions of recently closed transactions and associated financing. However, they exclude any contribution or impact from pending acquisitions.

Consequently, we now expect full year 2026 sales of approximately $4.47 billion to $4.49 billion, and non-GAAP earnings in the range of $4.97 to $5.03 per diluted share. These full year 2026 projections also include the contributions of recently closed transactions and associated financing, but exclude any contribution or impact from pending acquisitions.

The fourth quarter 2026 non-GAAP diluted EPS forecast is based on a diluted share count of approximately 107.8 million shares, which includes the dilutive effect of outstanding stock options and other stock awards. Our expected full year 2026 non-GAAP EPS forecast is based on a diluted share count of 107.5 million shares, similarly, including the effect of outstanding stock options and other stockholders.

We expect SG&A expense to be approximately 6.7% of net sales in the fourth quarter and R&D expenditures to be approximately 1% of net sales. We expect interest expense of approximately $33.9 million interest income of approximately $3.0 million and realized foreign exchange and other nonoperating expenses of approximately $4.7 million. We estimate our effective tax rate will be between 15% and 19%.

Further, we expect to record depreciation of approximately $39.7 million, amortization of intangibles of approximately $12.1 million stock-based compensation expense of approximately $18.7 million and noncash interest expense of approximately $0.9 million.

Looking to the preliminary full year 2027 forecast, we are providing our initial net sales forecast to be in the range of approximately $6.5 billion to $6.75 billion, and non-GAAP net income is expected to be in the range of $8.10 and to $8.90 per diluted share based on a diluted share count of 108.1 million shares, including the effect of outstanding stock options and other stock awards.

Our initial 2027 full year forecast includes contributions from recently closed acquisitions and associated financing costs, while excluding any contribution or impact from pending acquisitions.

And finally, I'd like to announce that we are scheduled to participate in the Bank of America Leveraged Finance Conference in Boca Raton, Florida on December 1 and the UBS TMT Conference in Scottsdale, Arizona on December 2.

That concludes our prepared remarks. So I'll turn it back to you, Shire for the Q&A session.

Operator

[Operator Instructions] And our first question will come from the line of Steven Fox with Fox Advisors.

質疑応答

Steven Fox

I guess my first question, I was wondering if we could sort of dig into the results to date and expectations going forward. Can you give us a sense for how much of the quarter was driven by the new product, where you think you are in terms of ramping yields, et cetera. And then how broad-based the product is expected to be used.

I'm just trying to understand like how dominant this is becoming within your traditional PCB sales? And then I had a follow-up.

Unknown Executive

Yes. Steve, yes. Happy to do that. Our N+M program is will be a substantial part of our data center networking group, as you know. Ramp-ups are going really well. It's currently about 30% of the data center and networking activities. And it will grow next year to about 50% of that group.

The ramp-up is going really well. We have three major programs, two of them are doing really well, one of them is, let's say, a bit moving to the right. This has nothing to do, by the way, with any technical issue, has nothing to do with our performance. It basically has to do with the program schedule of that customer, which is a normal thing with these way programs.

So far, we're getting very, very positive feedback on our N+M program. There are more N+M programs coming. I mentioned before, this will be 5 to 10 programs all around. So that's going well.

Yes, Steve, there will always be a bit of fluctuation in these programs. These programs are so big, so there will always be a bit of fluctuation. There is also a bit of pull forward I can tell you, some of the things are even enhanced. So that will be a fact. But again, currently, about 30% of the data center networking business going into next year to about 50%. So that technology is working really well.

Steven Fox

Great. That's helpful. And then just to be crystal clear on all the M&A you've done and how you're planning to finance it. Can you sort of talk about where this leaves you like what's the potential for more M&A once you close all these deals? And just big picture thoughts on balance sheet since you've been pretty active in the acquisition market in the last few months.

Daniel Boehle

Yes, Steve, this is Dan. I'll take that. Thanks for the question. Yes, I think this will be the end of the big stuff for a while. There may be a few little things that we've announced a few that we need to close. And they're one of those kind of medium size, the other smaller.

So we'll focus on strengthening our balance sheet, getting our leverage back down now. We've got a lot of strong cash flow coming in next year. We'll have positive free cash flow to continue to fund our capital expenditures as well as start paying down that debt.

But in our Q4 guide, so the difference between where we were last quarter and this quarter, we do have two of the businesses that have closed or expected to close in this period or closed right at the end of Q3 into Q4, will impact positively on our EBITDA but we did raise significant debt for the purchase of Epiq as well as to finance the Ophir product that we just announced. So that has an increase of interest expense of about $20 million a quarter, so that drags on our EPS.

And so you look at the change in EPS guidance from last quarter to where we are now, up from the transactions, but then offset by the debt.

Operator

One moment for our next question. That will come from the line of Will Stein with Truist.

William Stein

First, I want to recognize and say congratulations on the great results overall. But I want to also recognize that the data center networking end market came about 10% below your prior guidance in Q3. And so I'm hoping you can help us understand what happened there? Was it supply or like material availability or yield or something else?

Unknown Executive

None of these things. These things basically have to do with project timing on the customer side. Again, these large customers, these big customers we have they have multiple programs, and there are always fluctuations in these programs. Some of them move to the left, some of them move a bit to the right.

Again, there are no technical issues. Ramp is going well. Yield number yield numbers are where they should be. Again, they have always multiple suppliers. There's always a bit of, let's say, everybody has to be in that same window technology wise. So that's sometimes there's also a bit.

But again, two out of these three programs we initially had are doing really well. The third one is ramping up now that will be in ramp-up in the second half of fully in production in Q1. So that's going smooth.

And it's like I said before, there are more N+M programs coming. But again, there will always be a fluctuation and we always try to be as accurate as possible in our guidance. But yes, there are no major issues there. I appreciate that.

William Stein

As a follow-up, and when last quarter, I believe you told us that N+M would be approximately $200 million in and approximately $400 million in Q4. It sounds like in Q3 that might have been a little light, but not entirely sure. Maybe you can update both these numbers for us, please?

Unknown Executive

Yes, sure. In Q3, of the full data center networking business, it was about 30% of our business was based on N+M. So call it, let's say, 31% or $400 million, something like that.

In Q4, we expect about the same percentage, about 30% out of, let's say, a $700 million data center networking forecast. So these are about the numbers. So the ramp-up is going well. Is it exactly the $200 million and the $400 million. No, probably not. It will be slightly more than $200 million and slightly below the $400 million. But again, like I said, next year, it's about 50% of the full data center networking business. So things I'm just fluctuating a bit. But again, no big deal there.

Operator

One moment for our next question. And that will come from the line of Mike Crawford with B. Riley Securities.

Michael Crawford

Can you give some color on supply availability of key materials like [ CCL and T glass ]? And also how you match any increasing prices with quotes?

Unknown Executive

Sure, Mark. Lead times, let's say, are, let's say, in the order of, let's say, 12 weeks, sometimes a bit longer, sometimes 24 weeks, sometimes even a bit longer depending on the materials.

So far, I think we are handling this very well. On the A&D side, I think everything is solid. On the data center networking side, we -- it's an ongoing activity. Yes, lead times are going up, but we are also, let's say, these programs are getting bigger. So we have much more visibility on these things.

If you look at the costs, yes, the costs are going up. But so far, let's say, we are very transparent with our customers and the customers will take these price increases. And it's like I said, the [ emploxam ] is having higher ASPs, so that's helping us a lot. So price increases, yes, the customers will absorb that.

Michael Crawford

Okay. And then just to follow up related. The higher ASPs for the [ emploxam ], we understand that, but would you say that's higher than corporate average gross margin. And I guess, related, where do you see gross and EBITDA margins progressing throughout 2027?

Unknown Executive

Yes, yes, yes. These ASPs are growing faster than our cost, and that has to do with the complexity of the Board. the complexity is increasing a lot for these bars. So basically, it's all about the value. I rather don't talk about cost and ASP. I'd rather think about the value taking much more value in these data centers and networking configurations. So that's helping us a lot.

It's about a factor 4 if you compare it with, let's say, conventional architectures. And plaza is really adding a lot, let's say, in complexity. And of course, the customers are willing to pay for that.

Unknown Executive

Mike, maybe I'll just add. You mentioned about EBITDA. Our EBITDA margins will be increasing our gross margin on that nose product. is significantly higher than our corporate average. And so as that becomes more than [ megas ], our gross margin as well as our EBITDA margins will be increasing more than 200 basis points in the next year.

Operator

One moment for our next question. And that will come from the line of Ruben Roy with Stifel.

Ruben Roy

Edwin, I wanted to first follow up on Will's question on the N+M shift. If you think about Q4 and the guide there with $700 million of revenue for DC. How much is that coming from acceleration in customer demand versus maybe recovering some of the push to the right on [indiscernible]? You could start there.

Unknown Executive

Yes, these are indeed programs. And like I said, they move a bit. It's like I said, it's about 32% of the $570 million in commercial in CNC, what we call CNC data centers and networking is coming from N+M.

Again, these programs are ramping up. These programs are doing well. And again, the feedback is very, very positive from these larger customers that basically that more N+M programs are coming in.

Ruben Roy

Okay. And then on the $400 million capacity expansion, it sounds like that will be fully operational in '28. Can you talk about what kind of customer volume visibility you have against that increased commitment and are customers committing to programs against that spend?

Unknown Executive

Yes. Happy to do that. The $400 million is going on top of something we addressed earlier, a $1.2 billion expansion, let's say, over multiple years of 2029.

The $400 million is, I would say, is more allocated to N+M. So I would say the $400 million is pure N+M, rounding numbers here, yes. You have to think about our brownfield approach.

So basically, what we're very good at, and you see it in China, and I gave several examples during the investor meetings is that we build our brownfield. So basically, buildings close to our existing plants, we are going to utilize for additional capacity. We do that very, very fast, and we can follow the market much, much more accurate. So that's basically all of that.

It's a lot of equipment, Ruben, which we are installing there to grow our and present. It's like I said, CNC, our data center networking business, 50% of that will be N+M. So that's going really well. The technology is really doing what it should do.

Operator

Moment for our next question. And that will come from the line of Jim Ricchiuti with Needham.

James Ricchiuti

Hopefully, you can hear me.

Great. So I wanted to just ask you about the preliminary 2027 guidance. Relative to your earlier expectations, the growth that you're expecting now for 2027, how much of that is due to perhaps higher N+M expectations or data center or possibly how much is due to higher organic growth in the A&D business?

Unknown Executive

So if you look at -- starting to be the numbers, let's say, for this year, the $4.2 billion, $4.5 billion let's say, is a 48% growth year-over-year, yes. This is a number we are going to we're going to repeat next year, yes. And again, next year, we will grow 50%.

A substantial part of that growth will be N+M. The interesting thing, Jim, is that all the different end markets are growing. So if you look at our medical industrial instrumentation business, it's growing a lot, and it will continue to grow in next year.

if you look at our automotive business is growing over -- year-over-year. And of course, our aerospace and defense business is growing a lot next year. So that's -- it is just a matter that data center network is growing so fast that it doesn't look like the others are growing, but I can tell you, it's growing over 20%. Yes, that is -- these are big, big, big numbers. So yes, we are confident with the numbers we predicted for 2027.

James Ricchiuti

Got it. Follow-up question relates to the M&A activity. So we have Epiq other smaller M&A that you've done and the pending Ophir acquisition. If we look out to next year after Ophir closes, how much of's the A&D business is going to be non-PCB in nature now?

Unknown Executive

At the moment, if you look at our aerospace and defense business, about half of them is what we call up the chain. So our, let's say, sensing and communication activities. If we look at Epiq and Ophir.

By the way, they are very complementary. If you look at Epiq, let's say, that's more the processing. And Ophir, we're very happy with that one as well. That's more the optical side. If you have the optical side and, let's say, the processing under control and your sensor agnostic, you basically can make full sensing systems, which are very consistently used in complementary to our radar activity. So that's going well.

If you look at the numbers, all of our acquisitions. And of course, Ophir will only add, let's say, the second part of the year because we only closed it, let's say, hopefully, in Q2, at the end of Q2. So we have only 1 half year of that -- of Ophir. Then I would say if you add up all these acquisitions, it's about $0.5 billion in sales. of the 6.75%, 6.5% for next year. So that's about ratio.

Operator

One moment for our next question. And we do have a follow-up question from Will Stein with Truist.

William Stein

I wanted to ask about Ophir. When we look at the EBITDA multiples cited in your press release and in the seller's press release, one conclusion is that EBITDA is growing very significantly or you expect it to grow very significantly from '26 to '27 million. What's driving that? Is that backlog that's already in place? Or is that stuff that you expect to get design wins after the close? Any color to sort of...

Unknown Executive

Yes, it's a very good question. And yes, you get the answer yourself. The thing is if we look at the bookings for 2027, Ophir is over 85% booked with new things coming in. By the way, they have a tendency that they always beat their forecast, by the way.

So '27 85%, booked. The 10.3% we addressed as being the multiple EBITDA over the price we pay is probably even a bit more conservative. We did I think it was a very, very, very nice deal for us around 10x. So we're very happy with that. And it's, like I said, the synergies are not taking into the business case at all, but the synergies will be huge because this is giving us the optical system. We have the processing we can be center agnostic. That basically means we can make a full optical system. So it's a very nice acquisition for us.

William Stein

And then as a follow-up, you've now given us preliminary view on 2027. Normally, when you have guided revenue, you've given us some breakdown by end market. I wonder if you're willing to do that in this case for '27 how we should think about each end market as a percentage of revenues?

Unknown Executive

It's a bit early for that, Bill. But of course, we will provide more color. Again, we again, only a few quarters ago, we gave only, let's say, forecast for the next quarter.

Now let's say, we are giving a bit more guidance for the full year. you have an idea what our data center networking business is doing, how it will grow. Our Aerospace and Defense business will do better and better, let's say, looking at the munition side looking at the Golden Dome side, a lot of radar. So that will do better and better. It's a bit early to give that exact split. But we wanted to give some guidance for '27 and showing that we are maintaining that growth.

Unknown Executive

Yes. Well, I think we've done that in the past in the fourth quarter call. And so we'll strive to give that. We'll be able to get that in the next call.

Operator

I'm showing no further questions in the queue at this time. I'll turn the call back over to Mr. Edwin Roks for any closing remarks. .

Edwin Roks

Yes. Thank you. It has been a good call. So I thank you, operator. Now let's say, summarize with a few items. First of all, we are seeing strong -- very strong growth. We delivered very strong sales growth in Q3 of about 60% year-on-year, resulting in an all-time high of $1.2 billion for quarter revenue.

Driven by increase in our data center networking, medical, industrial, instrumentation and aerospace and defense markets. Basically, all the markets help there.

Second, our adjusted EBITDA for the second quarter of 20.1% reflected strong operating improvements and overall performance, leading to another all-time high record in non-GAAP EPS. As a result, 1.46 per diluted share and expect to continue building on this operating performance in the coming quarters.

And third, we continue to generate solid cash flows from operations, which is used to our source to invest in our organic operations and the support projected or continued growth.

In closing, as I said it before, I would like to thank all our employees of TTM, our customers, our suppliers and our shareholders for continued support, and thank you very much. Goodbye.

Operator

Thank you all for participating. This concludes today's program. You may now disconnect.