Jabil's High Valuation and Capacity Constraints Raise Concerns

Jabil Inc.'s high valuation of 19x NTM PE and capacity constraints are concerns. Despite positive fundamentals, the company's stock has a hold rating. JBL has delivered strong financial performance, but its high valuation and capacity limitations are factors to consider.

Jabil Inc. (NYSE: JBL) reported strong financial performance for the quarter ended August 31, 2025, with adjusted earnings per share (EPS) of $3.29, surpassing analysts' expectations of $2.92 per share Jabil Inc reports results for the quarter ended August 31 - Earnings Summary^[2]. The company's revenue rose 18.5% to $8.25 billion, also exceeding the estimated $7.59 billion Jabil Inc reports results for the quarter ended August 31 - Earnings Summary^[2]. Despite these positive results, JBL faces significant challenges that have led analysts to maintain a hold rating on the stock.

One of the primary concerns is JBL's high valuation, currently trading at 19x NTM PE. This valuation multiple is seen as too high by some analysts, despite the company's strong fundamentals. For instance, Seeking Alpha's analyst noted that while the fundamentals are positive, the valuation is too high at 19x NTM PE Jabil: Capacity Constraints And High Valuation Are Concerns^[1]. This high valuation makes the stock less attractive to investors, especially in a market where other companies may offer similar growth prospects at lower multiples.

Another major concern is JBL's capacity constraints. The company is facing bottlenecks in power, labor, and semiconductor chips, which could hinder its ability to meet demand and convert it into revenue. The analyst from Seeking Alpha highlighted that JBL's growth narrative is compelling, but the capacity constraints pose a significant challenge Jabil: Capacity Constraints And High Valuation Are Concerns^[1]. These constraints could lead to delays in delivery, which would impact billings and revenue recognition.

JBL's AI-driven growth narrative is a significant positive factor. The company's AI revenue grew from ~$5 billion in FY24 to ~$9 billion in FY25, and management is guiding for AI-related revenue to climb another 25% to $11.2 billion in FY26 Jabil: Capacity Constraints And High Valuation Are Concerns^[1]. However, this growth is contingent upon JBL's ability to execute through capacity bottlenecks fast enough to justify its premium valuation.

The company's balance sheet has improved, with incremental adjusted free cash flow (FCF) of $1.3 billion and a cash position of $1.93 billion at the end of the year Jabil: Capacity Constraints And High Valuation Are Concerns^[1]. However, these improvements may not be sufficient to offset the costs associated with capacity constraints and the buildout of new facilities.

Despite these challenges, JBL's strong performance in the AI and Intelligent Infrastructure sectors has driven growth in cloud and data center markets. The company's focus on these areas has been praised by analysts, who have given the stock 9 buy ratings and 2 hold ratings, with no sell ratings Jabil Circuit (JBL) Earnings: 4Q Net Revenue Surpasses Estimates with Strong Performance^[3]. However, the consensus recommendation for the electronic equipment & parts peer group is also "buy," indicating that the sector as a whole is seen as a growth opportunity.

In conclusion, Jabil Inc. has delivered strong financial performance, but its high valuation and capacity constraints are significant concerns. While the company's AI-driven growth narrative is compelling, investors need to be aware of the risks and expectations embedded in the valuation today. Until there is better visibility that demand can be fully converted into revenue and that margins won't take a hit during this buildout, investors may want to approach JBL with caution.