Jabil's Q3-Q4 2025 Earnings Calls: Contradictions Emerge in AI Revenue, Healthcare Expansion, and Operating Margins

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 25, 2025

Financials Results

• Revenue: $8.3B, exceeded guidance midpoint by ~$0.8B
• EPS: $1.99 GAAP; $3.29 core diluted EPS (no YOY provided)
• Operating Margin: 6.3% core, up 50 bps YOY

Guidance:

• Q1 FY26 revenue expected $7.7–$8.3B; core op income $400–$460M; GAAP op income $263–$343M; core EPS $2.47–$2.87; GAAP EPS $1.27–$1.84; tax rate 21%; Q1 net interest ~$64M.
• FY26 revenue ~ $31.3B (~5% growth); core op margin ~5.6% (up ~20 bps); core EPS ~$11; adjusted FCF >$1.3B; FY26 net interest $240–$250M.
• Q1 segment revs: Regulated Industries $3.05B (+3% YOY); Intelligent Infrastructure $3.67B (~+47% YOY); CLDC $1.29B (−16% YOY).
• FY26 outlook: Intelligent Infrastructure +18% revenue; AI-related revenue +~25% to ~$11.2B; Regulated Industries flat with margin expansion; CLDC −~13% revenue.
• Plan to fully execute $1B buyback in FY26; target ~80% of adjusted FCF returned.

Business Commentary:

* Revenue Growth and Strong Segment Performance: - Jabil Inc. reported revenue of $8.3 billion for the fourth quarter of fiscal 2025, exceeding the midpoint of their guidance by roughly $800 million. - Revenue growth was broad-based, with all three segments coming in higher than anticipated.

• Intelligent Infrastructure as Key Growth Driver:
• The Intelligent Infrastructure segment is expected to see strong growth, with revenue for the quarter to be $3.67 billion, up approximately 47% year-over-year.

• Growth is driven by sustained broad-based AI-related growth across cloud and data center infrastructure and capital equipment markets.

• Regulated Industries Margin Expansion:

• Regulated Industries revenue was $3.1 billion, with core operating margin expanding by 40 basis points to 6.5% year-over-year.

• This expansion was due to a better mix of higher-margin projects and programs.

• Digital Commerce & Robotics Segment Transition:

• The Connected Living & Digital Commerce segment saw revenue slightly ahead of expectations at $1.4 billion, but a decline of approximately 14% year-over-year.
• The decline is intentional as Jabil focuses on strengthening the quality of its portfolio by exiting lower-margin programs and remixing towards more durable growth opportunities.

Sentiment Analysis:

• Q4 revenue was ~$8.3B, beating guidance midpoint by ~$800M; core operating margin 6.3%, up 50 bps YOY. FY26 outlook calls for ~5% revenue growth to ~$31.3B, ~20 bps margin expansion to ~5.6%, core EPS ~$11, and adjusted FCF >$1.3B. AI-related revenue expected to grow ~25% to ~$11.2B. Company plans to fully execute a $1B buyback while maintaining investment-grade profile.

Q&A:

• Question from Ruplu Bhattacharya (BofA Securities): Where is AI growth strongest (racks vs optics vs switching), any share shifts, and margin outlook?
  Response: AI revenue to rise ~25% to ~$11.2B; gaining share, especially in data center infrastructure (triple-digit growth in data center infrastructure); no share loss; segment margins managed to enterprise targets.

• Question from Ruplu Bhattacharya (BofA Securities): Health care growth drivers and Croatia timing/margins?
  Response: Health care poised at/above ~5% growth on GLP-1/biologics injectors and CGMs; multiple new wins; Croatia remains on plan for late FY27 ramps; margin accretive over time.

• Question from Ruplu Bhattacharya (BofA Securities): U.S. vs India investment prioritization amid tariffs?
  Response: Prioritizing U.S. (30+ sites; new North Carolina facility) for AI growth while pursuing India for large domestic demand; monitoring tariffs.

• Question from Mark Delaney (Goldman Sachs): How are you managing capacity for data center demand and the shape of growth?
  Response: Running 24/7, utilizing underused U.S. capacity, and retrofitting sites for liquid cooling; ramps through FY26 set up stronger FY27.

• Question from Mark Delaney (Goldman Sachs): Intelligent Infrastructure margin dynamics this year and longer term?
  Response: Mix of accretive (e.g., silicon photonics, data center infrastructure) and enterprise-level businesses; investing in capabilities; managing portfolio to enterprise margin targets (mid-5% range).

• Question from Steven Fox (Fox Advisors): Bridge to FY26 margin guide (+20 bps) amid puts and takes?
  Response: Margin up ~20 bps on mix; 20–25 bps headwind from underutilized capacity outside U.S.; more balanced 1H/2H with margins improving through the year.

• Question from Steven Fox (Fox Advisors): Impact of product pruning and AI investments on the 5.6% margin?
  Response: Deliberate exit of low-margin consumer boosts margin quality; 6%+ long-term margin goal intact via mix shift, ~10 bps annual efficiency, and improving utilization (75% toward ~85%).

• Question from Melissa Dailey Fairbanks (Raymond James): Section 232 implications for healthcare customers?
  Response: Net positive; region-for-region manufacturing limits disruption, and potential U.S. pharma reshoring would benefit Pii operations.

• Question from Melissa Dailey Fairbanks (Raymond James): Can you capture upside if auto inflects given current utilization?
  Response: Yes—capacity exists to support upside; FY26 stays cautious, but SDV-driven electronic content should restore growth longer term.

• Question from Melissa Dailey Fairbanks (Raymond James): North Carolina facility ramp, revenue/margin implications, and CapEx?
  Response: Plenty of demand; meaningful contribution begins FY27; FY26 CapEx ~$75–$100M within 1.5%–2% of revenue.

• Question from Brian (UBS): Why guide EV down in FY26 despite new ramps?
  Response: Prudent view amid portfolio resets and U.S./Europe softness; China growth helps; added two Chinese OEMs; vehicle-agnostic electronics continue, but new platforms take time.

• Question from Brian (UBS): Any implications from a competitor’s Amazon warrant deal?
  Response: Jabil was first EMS to secure warrants; competitor’s warrants are redundant; strong demand warrants multiple agreements—no concern.