Jabil Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Hi, thank you for taking my questions. Mike, can you talk about your existing footprint in the US? You mentioned that several times. And your ability to support customers who want to move manufacturing, do you think such moves are possible? And would that make sense from a landed cost standpoint?

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay. Thanks for the details there. Can I ask you about the cloud revenues? And you raised the guidance for that as well as for AI-related revenues. Can you talk more about the opportunity with silicon photonics? And how do you see that market growing and your revenues growing? You mentioned Gujarat. Just elaborate on what you plan to build there and how do you see that market trending.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Okay. Thanks for all the details there. Maybe I'll sneak one more in. Just looking at the forecast, it looks like you tweaked down networking and healthcare forecast for fiscal '25. Just what should we read into that, if anything? Thank you so much.

Question: Ruplu Bhattacharya - BofA Global Research - Analyst : Thanks for all the details. Appreciate it.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Hi, folks. Thanks for taking my question. Mike, it does seem like when I look at Intelligent Infrastructure, something changed materially for the positive this quarter. Because all through last year, you're doing about $2.2 billion, $2.3 billion revenue run rate per quarter. You extended that sequentially into $2.6 billion this quarter, and you're guiding to $2.8 billion. Also, you're raising the AI guidance by about $1 billion after raising it by $0.5 billion last quarter. So it just seems like there's an increase in the confidence. And I'm just wondering if there was something noticeable that happened during the quarter in terms of either sort of more design wins or more visibility into ramps that is driving that confidence? And I have a quick follow-up after that. Thank you.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Got it. And then for my follow-up. On the margin, particularly on a segment basis, when I look at Connected Living and Digital Commerce, obviously, there's some headwind related to Mobility on the revenue side. But when we look at margins, what's driving some of the weakness here? Obviously, there are probably some revenue leverage. But otherwise, how you're thinking about the road map in terms of improving the margin for that particular segment.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Great. Thank you. Thanks for taking my questions.

Question: Mark Delaney - Goldman Sachs - Analyst : Yes, good morning. Thanks very much for taking my questions. Thanks for the comments you've provided so far on tariffs. I'm hoping you can expand a bit on that topic and help us better understand what you're seeing from customers currently in terms of how they may want to respond to tariffs and potential tariffs. Are there a meaningful number of customers that have already started to work on plans to shift sourcing into the US or told you that's something they want to do? Or is it more that customers are working through scenario analysis and planning in the event that higher tariffs do go into effect?

Question: Mark Delaney - Goldman Sachs - Analyst : No, that's helpful. And I understand there's a lot of moving parts here. I did want to make sure investors and we understand what is embedded into your fiscal '25 guidance with tariffs. Are you assuming tariffs on imports from Mexico and the reciprocal tariffs go into effect on April 2? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, JBL.N - Q2 2025 Jabil Inc Earnings Call And then similarly, have you tried to bake in any revenue headwinds from potentially higher prices or even just some conservatism because of the uncertainty and perhaps, timing to move products around the world? Thank you.

Question: Mark Delaney - Goldman Sachs - Analyst : That all makes sense. Mike, appreciate all your commentary on this topic, and congrats on the solid results and outlook. I'll pass it on.

Question: David Vogt - UBS Equities - Analyst : Great. Thanks, guys. I want to follow up on that, but not necessarily on the actual gross margin impact of tariffs, but on revenue. And maybe this is for Greg to start. So Greg, I just want to make sure I understand sort of the year-over-year compares. I know you have the divestiture of Mobility last year, but you also exited some legacy networking businesses last year. Is that in sort of the commentary in terms of how you're thinking about the growth rates going forward? Because I thought it was my understanding that in February of last year, you had a couple of hundred million from that business and a little bit similar number in May. So I'm trying to understand kind of the pro forma growth rate for Fed revs. I think you said 3%, but it suggests to me that it should be stronger than that. And then I have a follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, JBL.N - Q2 2025 Jabil Inc Earnings Call

Question: David Vogt - UBS Equities - Analyst : Got it. Okay. So then my follow-up to that is, so if I just take your guidance at face value for the year, I would imagine in Q4 of this fiscal year, you don't have a tough compare. And so what's implied by the guide, and maybe it goes back to Mike's point about being conservative, is that you have a fairly meaningful deceleration as we move through the summer months into the fall. Is that a reflection of anything you're seeing from a demand perspective to date or tariff potential impact or just prudence given sort of the uncertain macro? Maybe just kind of help flesh that out, that would be great. Thank you.

Question: David Vogt - UBS Equities - Analyst : Got it. And then I would imagine that is -- is that prudence in cloud and data center, auto EVs, or across the board? I'm just trying to get a sense for where you feel the most caution is warranted, given the strong demand that you're seeing in semi-cap and cloud and data center.

Question: David Vogt - UBS Equities - Analyst : Great. Thanks, guys.

Question: Steven Fox - Fox Advisors LLC - Analyst : Hi, good morning. I had two questions, if I could. First of all, I was wondering if you could expand on the comment, Mike, that you made about GPU racks and liquid cooling continuing to accelerate. And it seems like you were tying it into your ability to deliver higher yields at launch of new racks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, JBL.N - Q2 2025 Jabil Inc Earnings Call But I was wondering, what does that exactly mean that you're doing and why you're benchmarking, I guess, supposedly better against competition? And then I had a follow-up.

Question: Steven Fox - Fox Advisors LLC - Analyst : Yeah, that's really interesting. I appreciate that color. And then on the flip side, the Auto and Transport segment, it's still a bit of a melting ice cube for you guys in terms of your forecast. And I was wondering how confident are you that you have a good handle on what EV production could be like for the second half of the year, and whether you have any offsets within that segment around like new programs or new content, et cetera? Thanks.

Question: Steven Fox - Fox Advisors LLC - Analyst : Great. Appreciate that color. Thank you.

Question: George Wang - Barclays - Analyst : (inaudible) congrats on the quarter and the guidance. And thanks for taking my questions; I have a couple. I'd be remiss not to ask about CPO, especially following the GTC -- NVIDIA unveiled CPO. Just curious, I thought Jabil could be beneficiary on the CPO assembly, just based on leverage your optics assets. Can you kind of give more color in terms of how Jabil could be positioned to take advantage of the CIPO-based CPU assembly?

Question: George Wang - Barclays - Analyst : Great. Just a quick follow-up in terms of the transceiver. Three months ago, you guys talked about in discussion, in call with the three hyperscalers for 800G now and the 1.6T towards the year-end. Just curious if there's any progress or development in that front? Or are you guys making incremental progress you can report here?

Question: George Wang - Barclays - Analyst : Great. I just want to squeeze in one more quickly, if I can. Just kind of glad to see you guys raised the guidance by $800 million around the server rack. Was it likely driven by your biggest hyperscale customer? Just curious about timing for the ramp. Earlier, you guys talked about it will be more FY26 in terms of the ramp, with the sort of custom rack with your biggest customer in the DCI side. Just curious if there's any pull in into the back half of FY25, kind of evidenced by the strong growth in the segment and the kind of guidance you raised. Just curious if you have any refreshed thoughts in terms of nuance just on the cadence for the ramp. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 12:30PM, JBL.N - Q2 2025 Jabil Inc Earnings Call

Question: George Wang - Barclays - Analyst : Great. Thank you. Congrats again.

Question: Melissa Fairbanks - Raymond James - Analyst : Hey, guys. Thanks so much. So I had a question about some of the supply chain dynamics. I appreciate all of the detail that you gave us about your expectations for tariffs. I'm not sure if Frank is in the room. If he is, he might be able to address this. But I was wondering if there's been any change in the way your customers are thinking about procuring components. Your manufacturing footprint is what it is, and we know that it's very strong. But either customers pulling in from future demand or managing how or where they expect you to source materials from, has there been any change in behavior there?

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Great. Thanks. And then maybe just one quick follow-up. You've talked about some of the M&A that you've done recently. Some of it has been very successful, obviously, with the silicon photonics and the liquid cooling. Are there any other capabilities that you're looking at that maybe customers are coming to you and saying, hey, we don't want to do this anymore or hey, we see this is where our road map is going, and we need you to be able to do this? Are there any pockets there where you see opportunities?

Question: Melissa Fairbanks - Raymond James - Analyst : Excellent. Great. That's it for me, guys. Thanks.