Jabil's Q4 Earnings and the AI-Driven Growth Narrative: A Cautionary Assessment of Premium Valuation

Jabil Inc. (JBL) has long positioned itself at the intersection of manufacturing innovation and technological transformation. Its recent Q4 2024 earnings report and forward guidance underscore a strategic pivot toward artificial intelligence (AI), with the segment now accounting for 30% of its top line. According to a report by Bank of America, analyst Ruplu Bhattacharya highlights that Jabil's AI-related revenue is projected to grow by 25% year-over-year, reaching $10.5 billion by fiscal 2026. This trajectory, coupled with a $500 million investment in a North Carolina facility for cloud and AI data center components, signals a bold bet on the sector's secular growth. Yet, as the company trades at a premium valuation-trailing P/E of 37.56 and EV/EBITDA of 14.70-investors must ask: does the AI-driven narrative justify these multiples, or does it risk overreach in the face of macroeconomic and industry-specific uncertainties?

The AI Growth Engine: Momentum and Structural Tailwinds

Jabil's Q3 FY2025 results revealed a 51% year-over-year surge in intelligent infrastructure revenue, a category encompassing AI-related markets. This aligns with broader trends: enterprise spending on agentic AI is forecast to expand at a 150% CAGR, surging from under $1 billion in 2024 to $51.5 billion by 2028. The company's forward guidance for AI revenue of $8.5 billion in FY2025 further reinforces its confidence in this trajectory. Such growth is not merely speculative; 65% of firms now regularly deploy generative AI, doubling from 33% in 2023, suggesting a shift from experimentation to embedded adoption.

However, Jabil's aggressive capital allocation-such as the North Carolina facility-requires scrutiny. While the project is slated to begin production in mid-2026, it will take time to translate into cash flow. The company's debt-to-equity ratio, exceeding 200% at year-end 2024, raises questions about its ability to fund such expansions without compromising flexibility.

Valuation Metrics: Premium or Discount?

Jabil's current valuation appears elevated relative to both historical and peer benchmarks. Its trailing P/E of 37.06 as of December 2025 exceeds its 10-year average of 26.75 and the Technology sector average of 31.43. While this premium is lower than Celestica's 56.96 P/E, it still outpaces peers like Flex Ltd (27.67) and Plexus Corp (24.33). The EV/EBITDA ratio of 11.64 also trades above the industry's forward-looking estimates of 9.2x–10.8x for P/E and 13.0x for EV/EBITDA.

These metrics reflect optimism about Jabil's AI-driven margins. The company's intelligent infrastructure segment, which includes AI, reported a 16% year-over-year revenue increase in Q3 FY2025, outpacing its overall growth. Yet, the market's willingness to pay a premium hinges on the assumption that AI demand will remain resilient.

Risks to the Narrative: Macro and Micro Headwinds

The AI market's explosive growth is not without shadows. While 92% of U.S. GDP growth in H1 2025 was attributed to AI data center investments, global economic indicators suggest a moderation. The IMF projects global growth to decelerate from 3.3% in 2024 to 3.1% in 2026, with advanced economies stagnating near 1.5%. Such a slowdown could dampen corporate spending on AI infrastructure, particularly in sectors sensitive to capital expenditure cycles.

Jabil's exposure to international markets compounds this risk. A global macro slowdown could erode international sales, while geopolitical tensions threaten supply chain stability. Additionally, the company's high leverage-200% debt-to-equity-limits its capacity to navigate downturns without deleveraging or cutting growth initiatives.

Conclusion: A Compelling Buy or a Speculative Bet?

Jabil's AI-driven growth narrative is compelling, underpinned by structural trends in enterprise AI adoption and a robust pipeline of capacity expansions. Its valuation, while elevated, is not entirely unjustified given the sector's explosive growth potential. However, the premium reflects a high degree of optimism about the durability of AI demand and Jabil's ability to execute its capital-intensive plans.

For long-term investors, the key question is whether the company can sustain its AI revenue growth amid macroeconomic headwinds and competitive pressures. If Jabil can demonstrate that its AI segment's margins and cash flow generation justify the current multiples, the stock may remain a compelling buy. Conversely, any signs of a slowdown in AI adoption or a deterioration in its balance sheet flexibility could trigger a re-rating. In a world where AI's trajectory remains uncertain, prudence dictates a cautious approach to Jabil's premium valuation.