Jabil (JBL) Seizes the AI Infrastructure Boom: Why This Manufacturing Leader is Poised to Thrive

The AI revolution is reshaping the tech landscape, and Jabil Inc. (JBL) is emerging as a key beneficiary of this secular shift. By strategically pivoting toward advanced manufacturing for AI hardware, data center solutions, and semiconductor packaging, Jabil has positioned itself to capitalize on a $7.5 billion AI revenue stream in FY2025 alone. With structural tailwinds in AI infrastructure demand, robust margin expansion potential, and a compelling valuation, JBL is a compelling buy for investors seeking exposure to the next era of computing.

Structural Industry Trends Fueling AI Infrastructure Demand

The AI boom is not just about algorithms—it's a hardware arms race. Training and deploying AI models requires massive compute power, driving exponential demand for advanced data center infrastructure, liquid cooling systems, and high-performance semiconductors.

• Cloud Infrastructure Growth: Hyperscalers like AWS, Google, and Microsoft are investing aggressively in AI-specific data centers. The global AI hardware market is projected to grow at a 6.6% CAGR through 2029, with Jabil's Intelligent Infrastructure segment—now 40% of total revenue—already delivering 18% YoY growth in Q2 2025.
• Geopolitical Shifts: Governments are prioritizing domestic manufacturing of AI infrastructure as a national security imperative. Jabil's $500 million investment in a U.S. Southeast facility (to open by mid-2026) directly addresses this trend, locking in long-term contracts with hyperscalers and government projects.
• Semiconductor Packaging Innovation: AI chips require advanced packaging (e.g., chiplets, 3D stacking) to manage heat and power demands. Jabil's silicon photonics capabilities—acquired via its Intel deal—are enabling 1.6T transceiver modules, critical for next-gen data center interconnects.

Jabil's Competitive Positioning: A Manufacturing Powerhouse

Jabil isn't merely a contract manufacturer—it's a strategic partner to tech leaders. Its vertically integrated model, combining design, prototyping, and global production, gives it an edge in delivering customized AI hardware solutions:

1. AI-Specific Capabilities:
2. Liquid Cooling: Post-acquisition of liquid cooling specialists, Jabil now provides end-to-end thermal management systems for AI servers. This segment's growth isn't yet fully captured in forecasts but is expected to drive long-term differentiation.

3. Partnerships: Collaborations like the Badger Technologies' Digital Teammate autonomous robots and AVL Software's automotive systems (ADAS, powertrains) extend Jabil's reach into adjacent high-margin markets.

4. Diversification Mitigates Risk:
   While EVs and renewables face sector softness, Jabil's focus on healthcare (via its pharmaceutical acquisition) and industrial markets ensures stability. The Intelligent Infrastructure segment's 51% YoY revenue growth in Q3 2025 underscores its resilience.

Financial Analysis: Margin Expansion and EPS Trajectory

Jabil's financials reflect a company transitioning from cyclical headwinds to secular growth:

• Revenue Growth: Full-year FY2025 revenue guidance was raised to $29 billion, up from $27.9B, with AI-driven segments driving 40% of revenue. The Intelligent Infrastructure segment now accounts for 44% of sales, up from 40% in Q2.
• Margin Improvement: While gross profit dipped 8.6% YoY due to mix shifts, Intelligent Infrastructure margins expanded 110 basis points, signaling scalability. Management expects full-year core operating margins to remain healthy at 5.4%, supported by higher-margin AI work.
• EPS Strength: Core diluted EPS jumped to $1.94 in Q2, beating estimates, and full-year guidance was raised to $9.33—a 20% increase from 2024.

Valuation: A Discounted Play on AI Growth

At a P/E of 13.99x, JBL trades at a 40% discount to its sector average (22.1x), despite its DCF-based upside of 26%. Key valuation metrics:
- Free Cash Flow (FCF): Jabil's $261M FCF in Q2 and $487M year-to-date are on track to exceed its $1.2B FY2025 target, underpinned by $1.6B in cash and an investment-grade balance sheet.
- Peer Comparison: JBL's valuation is compelling relative to peers like Flex Ltd (FLEX), which trades at 17x P/E despite slower AI exposure.

Risks and Mitigation

• EV/Renewables Softness: Jabil's Regulated Industries segment fell 8% YoY, but its $7.5B AI revenue target and healthcare diversification offset this.
• Margin Pressures: Lower-margin segments like Connected Living (down 13% YoY) are being pruned, while capital allocation focuses on high-return AI projects.

Investment Thesis: Buy with a Strong Upside Case

Jabil's strategic bets—U.S. manufacturing expansion, silicon photonics, and liquid cooling—are all aligned with the AI infrastructure boom. With a "Strong Buy" rating, a 12-month price target of $85, and catalysts like FCF milestones and AI revenue growth, JBL offers asymmetric upside.

Key Buy Signals:
1. AI Revenue Milestones: The $7.5B target is achievable with 2026's U.S. facility online.
2. Margin Expansion: Intelligent Infrastructure's scalability should push core EPS toward $10+ in FY2026.
3. Undervalued Stock: A P/E of 14x vs. peers' 20x+ multiples leaves room for re-rating.

In a sector where AI is no longer optional but foundational, Jabil is the unsung hero—engineering the hardware that powers the future. This is a "buy the dip" stock with secular tailwinds and a balance sheet to weather any near-term storms.

Positioning Note: Consider a 5% allocation to JBL with a trailing stop at $75 to capture the AI-driven growth while mitigating sector volatility.