Jabil Inc Q3 2025 Earnings Call Transcript

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

Question: Ruplu Bhattacharya - Bank of America - Analyst : Hi. Thank you for taking my questions. Mike, you're seeing strong growth in data center and cloud revenues, and today you guided AI-related revenues to $8.5 billion for fiscal '25. What's a reasonable level of growth to expect in this segment for fiscal '26 and beyond, and can you help us rank order the revenue growth and margins for the different segments within intelligent infrastructure? For capital equipment, cloud data center, and networking comms, how should we think about revenue growth and margins for these? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 17, 2025 / 12:30PM, JBL.N - Q3 2025 Jabil Inc Earnings Call

Question: Ruplu Bhattacharya - Bank of America - Analyst : Okay. Thanks for the details there, Mike. Can I ask fiscal year '25 operating margin, you're holding steady at 5.4%. What needs to happen for operating margins to get to 6%-plus? I mean, what do you need to see in terms of revenues and other things to get the operating margin to that level?

Question: Mark Delaney - Goldman Sachs - Analyst : Congratulations on the strong results, and thanks very much for taking my questions. First, I'm hoping to better understand how you're assessing the potential risk that some of the strong sales that you saw in the third quarter was due to pull-in buying perhaps because of tariff uncertainty. And is that a factor in the guidance for sequential moderation in revenue in the fourth quarter?

Question: Mark Delaney - Goldman Sachs - Analyst : Very helpful. Thanks, Mike. My second question was around the announced planned expansion in the US. Is this primarily to support current customers and programs? Or do you see incremental opportunities that's giving you the confidence to commit more capital domestically? Thank you.

Question: Steven Fox - Fox Advisors, LLC - Analyst : Please go ahead. Hi. Good morning. A couple questions, if I could. First, just looking at the quarter just recorded, can you just sort of discuss the [II] margins quarter over quarter? So it looks like you were flat at 5.3% on almost an $800 million increase in revenue. So what specifically were the puts and takes there that we should consider and how those apply maybe going forward? And then I had a follow-up.

Question: Steven Fox - Fox Advisors, LLC - Analyst : Great. That's very helpful. And then just sort of looking ahead, not just necessarily for this quarter but beyond, Mike, how do we think about just managing all of this growth? You mentioned -- you highlighted a new plant coming online, new customers. There seems to be vendor consolidation going on, new opportunities for other technologies for you guys to focus on. How do you sort of ensure that you're adding capacity at the right rate, focus on the right technologies, et cetera? Just any thoughts there given how great the growth is going forward?

Question: Melissa Fairbanks - Raymond James - Analyst : Great news on the US manufacturing investment. You mentioned that this is largely AI-driven or AI-related data center business that's driving this investment. Are there any other segments or end markets that are exploring moving to the US or maybe consolidating in other geographies longer term? Are you seeing more customer conversations about this, given the tariff uncertainty?

Question: Melissa Fairbanks - Raymond James - Analyst : Okay, great. Thanks. And then just to give you a little break from the cloud and AI questions, I was wondering, the stock has obviously moved up pretty considerably recently. Free cash flow is outstanding. Just wondering how you're thinking about capital allocation. You mentioned that this US investment was not going to change your CapEx levels, but thinking about how you're looking at deploying cash in the future.

Question: Melissa Fairbanks - Raymond James - Analyst : Great. Thanks very much. Fantastic job managing it. Thanks very much.

Question: Tim Long - Barclays - Analyst : Yeah, two as well, if I could. First, back to the cloud data center, obviously upside in the quarter and in the guide pretty meaningfully. Just give us a little update on, I think you talked about some of the product breadth that you're seeing in that upside. Could you just maybe double click on that and also talk about kind of customer diversity within that bucket, how broad that's getting? And then to follow up on that, I was hoping you could update us on the transceiver business, anything new on customer activity there, and now that we're a few months away from the release of the 1.6T. Any customer feedback or outlook on timing there would be helpful. Thank you.

Question: Tim Long - Barclays - Analyst : And on the transceiver side?

Question: Samik Chatterjee - JPMorgan - Analyst : I guess maybe if I start with the Q4 guide, and, Mike, the run rate that you have for Q4 in regulated industries and connected living and digital commerce, both of them are down modestly in Q4, while intelligent infrastructure is growing rapidly. I'm just trying to think in terms of when we look below that headline number for regulated industries and connected living, are there drivers that as you go over the next 12 months drive those segments back to growth? Or should the sort of starting assumption for the next 12 months be that those two segments remain a bit sluggish while most of the growth comes from intelligent infrastructure? Thank you. And I have a follow-up.

Question: Samik Chatterjee - JPMorgan - Analyst : And anything in terms of drivers to call out that changes as we go into fiscal '26?

Question: Samik Chatterjee - JPMorgan - Analyst : And for my follow up, if I can just go back to the announcement of the manufacturing capacity, any broad way for us to think about the $500 million, how to split that between capital versus operating expenses over the time period.? And maybe Mike, in terms of your reference to this being largely capacity for incremental sort of customer wins in terms of tightening up utilization in the international locations, do you see sort of over time tilting your manufacturing more to the US and maybe sort of restructuring some of the manufacturing in international locations to achieve that better utilization? Or do you see enough demand to fill the international locations where you have a bit more underutilization at this point? Thank you.

Question: David Vogt - UBS - Analyst : Mike, I know you said not to focus on the $500 million, but I'm going to focus on it anyway. You help frame sort of the revenue opportunity that underpins that incremental $500 million of investment over the next couple of years. And without that $500 million, do you have enough capacity to kind of hit your growth plan over the next two to three years, particularly in cloud and data center? And then my follow-up is on the networking side. Obviously, you called out weakness in 5G. Can you maybe speak to the trends underneath 5G? What I mean by that is [ex-5G], how is networking trends trending over the last couple of quarters and how should we think about that going forward if we strip out the 5G business? Thanks.

Question: David Vogt - UBS - Analyst : Yeah, on the $500 million investment, obviously, you're mostly local for local, as we've talked about pretty extensively. But without the $500 million, could you hit your growth targets today within intelligent infrastructure? Or is this critical capacity addition needed to kind of hit your multi-year plan? And if so, what kind of revenue can be supported by this incremental $500 million of capacity? If we just think about what your gross [PPD] looks on the balance sheet, I'm just trying to make sort of an extrapolation of how to think about what the incremental revenue could look like, particularly within that segment.

Question: Ruplu Bhattacharya - Bank of America - Analyst : Hi. Thanks for taking my follow-up. Mike, a lot of things are going strong for Jabil. What's the biggest risk you see to this story today? Also, you've done some acquisitions in the past. Over the last couple of years, you've bought the Intel transceiver business, liquid cooling. How would you prioritize M&A versus buybacks over the next year? Thank you.

Question: Ruplu Bhattacharya - Bank of America - Analyst : Just on M&A versus buybacks.

Question: Ruplu Bhattacharya - Bank of America - Analyst : Yeah.