Jabil's Re-Rating Potential Amid Strong Earnings, AI Expansion, and Stable Credit Outlook

Jabil Inc. (JBL) has emerged as a compelling case study in value investing, combining robust earnings performance, strategic AI-driven growth initiatives, and a resilient credit profile. As the global AI infrastructure market accelerates, Jabil's ability to capitalize on these trends while maintaining financial discipline positions it for a potential re-rating in the equity markets.

Strong Earnings and Financial Performance: A Foundation for Value

Jabil's third-quarter 2025 results underscored its operational strength, with net revenue reaching $7.8 billion and U.S. GAAP operating income of $403 million. This momentum carried into Q4 FY2025, where revenue surged 18% year-over-year to $8.25 billion, driven by a 62% year-over-year increase in its Intelligent Infrastructure segment. For the full fiscal year 2025, the company reported $29.8 billion in revenue, with core operating income of $1.62 billion and a core operating margin of 5.4%. These metrics highlight Jabil's ability to generate consistent cash flows, a critical factor for value investors seeking undervalued companies with durable earnings power.

AI Expansion: A Strategic Catalyst for Growth

Jabil's aggressive foray into AI infrastructure is a key driver of its long-term re-rating potential. The company has committed to a multi-year $500 million investment in U.S. manufacturing for cloud and AI data center infrastructure, targeting high-growth markets such as capital equipment and networking. This initiative aligns with broader industry trends: the AI data center infrastructure market is projected to grow at a 28.3% compound annual rate, expanding from $13.62 billion in 2025 to $60.49 billion by 2030.

Jabil's strategic acquisitions, including Mikros Technologies for liquid cooling solutions and advancements in silicon photonics, further solidify its competitive edge. These capabilities are critical for addressing the thermal and latency challenges of high-density AI servers. Additionally, partnerships with firms like Arch Systems and AVL position Jabil to capture innovation-driven demand. Analysts project AI-related revenue to reach $10.5 billion in fiscal 2026, reflecting a 25% year-over-year increase.

Credit Stability: Balancing Leverage with Prudent Management

Jabil's high debt-to-equity ratio of 190.2% is offset by its strong interest coverage ratio of 9.8x and operating cash flow coverage of 56.8%, indicating its ability to service debt effectively. While net income for FY2025 declined by 52.67% to $657 million due to non-recurring charges, core operating margins of 5.37% and a gross margin of 8.88% demonstrate disciplined cost management. A Discounted Cash Flow analysis suggests Jabil is undervalued at $258.44 per share, trading at a 17.2% discount to intrinsic value. This valuation gap, coupled with a "Buy" consensus rating from analysts (7 out of 7 recommending the stock), highlights its appeal for value investors.

Analyst Sentiment and Market Outlook

The market's optimism is reflected in Jabil's forward-looking guidance. The company anticipates $31.3 billion in revenue for fiscal 2026, with core operating margins expanding to 5.6% and core EPS reaching $11.00. Analysts project a stock price of $239.43 in 2025, with 57% of ratings classified as "Strong Buy". These expectations are underpinned by Jabil's diversified portfolio and its ability to scale in high-margin AI infrastructure, which is expected to contribute $7.1 billion in fiscal 2025 revenue-a 54% year-over-year jump.

Conclusion

Jabil's combination of strong earnings, strategic AI investments, and stable credit metrics creates a compelling case for a re-rating. For value investors, the company's undervalued stock price, coupled with its position in a high-growth sector, offers an attractive risk-reward profile. As AI infrastructure demand accelerates, Jabil's ability to execute on its capital allocation and innovation strategies will be critical in unlocking long-term shareholder value.