Jabil Inc. (JBL): Riding the AI Wave in a Challenging Market

The electronics manufacturing giant Jabil Inc. (JBL) has emerged as a key player in the race to harness artificial intelligence (AI) innovation, but its stock’s trajectory in early 2025 reveals a market torn between optimism and caution. With AI-driven revenue surging and strategic bets on U.S. manufacturing expansion, Jabil is positioned for growth—but lingering margin pressures and softness in critical sectors keep investors on edge. Here’s why this stock could be among the best electronic components plays in the coming quarters.

The AI Opportunity: A Tailwind for Jabil

The strongest argument for Jabil’s stock is its role in the AI boom. In Q2 2025, the company reported $2.6 billion in revenue from its Intelligent Infrastructure segment, a 18% year-over-year jump fueled by demand for cloud and data center hardware. Jabil now projects AI-related sales to hit $7.5 billion in fiscal 2025, a 40% increase from earlier estimates. This growth isn’t just about volume—it’s also driving margin improvements. The segment’s operating margin rose to 5.3%, signaling that Jabil is successfully scaling its AI-focused operations.

Analysts bullish on JBL highlight this momentum. “Jabil’s deep partnerships with tech giants designing next-gen AI systems give it a first-mover advantage,” said one analyst, noting the company’s investments in photonics and advanced packaging. The firm’s decision to expand U.S. manufacturing and build photonics capabilities in India—key for reducing tariff risks—further underscores its strategic focus on high-growth sectors.

The Downside: Margin Pressures and Sector Headwinds

Yet not all segments are thriving. Jabil’s regulated industry segment, which includes automotive and renewable energy markets, saw an 8% revenue decline in Q2 2025. Meanwhile, the Connected Living & Digital Commerce division dropped 13% (excluding the divested mobility business). These sectors account for roughly 15% of Jabil’s total sales, and their struggles are dragging on overall profitability.

The company’s adjusted operating margin has slipped to 5.0%, down 99 basis points year-over-year, as cost pressures and weak demand in certain markets bite. Bears argue that Jabil’s reliance on cyclical industries like automotive and semiconductors leaves it vulnerable to broader economic slowdowns. “Margins need to stabilize near the 5.4% target for JBL to justify its current valuation,” warned one skeptic.

Valuation and Analyst Outlook

Wall Street’s “Moderate Buy” consensus reflects this mixed picture. The average price target of $139.88 (as of September 2024) implies a 30.9% upside from recent trading around $106.83. The highest analyst target of $161.00 hinges on sustained AI growth and margin recovery, while the lowest of $120.00 factors in sector-specific risks.

Investors should monitor Jabil’s next earnings report on June 19, 2025, where consensus calls for $2.29 EPS, up from $1.89 in Q3 2024. A beat here could push shares higher, especially if AI revenue growth accelerates or inventory days (currently 80) continue to trend downward.

Conclusion: A Buy for Investors Willing to Ride Volatility

Jabil’s stock is a compelling buy for investors who believe AI’s rise will overshadow near-term challenges. The $7.5 billion AI revenue target and disciplined capital allocation—like its $1 billion share repurchase program—are clear positives. Cash flow remains robust, with $487 million in adjusted free cash flow year-to-date, providing a cushion against sector headwinds.

However, the path forward isn’t without risks. Margin improvements must materialize, and Jabil must navigate softness in automotive and renewables. The stock’s history of volatile earnings reactions—like the 11.44% drop in June 2024 despite solid EPS—suggests investors should brace for swings.

If Jabil can sustain AI-driven growth and stabilize margins near its 5.4% target, the stock could hit its $161.00 upside target, delivering a total return of over 50%. For now, JBL remains among the best electronic components stocks to buy—provided investors have the patience to ride out the turbulence.