Q1 2025 Earnings Summary
- Jabil increased its AI-related revenue guidance from $5-6 billion to $6.5 billion, reflecting robust growth in the AI, cloud, and data center infrastructure segments. This includes an additional $500 million increase in the AI space. ,
- The Intelligent Infrastructure segment is expected to be a significant growth driver over the next few years, with margins above 5%, and is performing "relatively well" especially with capital equipment.
- Anticipated strong growth in automated test equipment (ATE), driven by increased demand from new silicon chips and the shift to smaller nanometer nodes, is expected to significantly boost the semi cap equipment business.
- Continued weakness in renewable energy and electric vehicle (EV) markets is causing underutilization of capacity and weighing on margins in Jabil's Regulated Industries segment. , ,
- Despite increased revenue expectations, operating margins are not improving, indicating potential margin pressure and profitability risks. ,
- Uncertainty in the automotive and renewable energy sectors, exacerbated by post-election uncertainties, has led Jabil to adjust forecasts downward, suggesting potential growth challenges ahead. ,
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -17% | Divestiture of the Mobility Business significantly reduced revenue, while softness in certain end markets (e.g., 5G and wireless) also contributed to the decrease. The transition to a consignment model for selected customers further impacted sales. |
Foreign Revenue | Decreased from 86.4% to 80.8% | The Mobility Business divestiture removed a major source of foreign-sourced sales, lowering overall foreign revenue. Weaker overseas market conditions and strategic exit from certain non-core product lines also contributed to the drop. |
Operating Income | -35% | Absence of prior one-time gains and increased restructuring charges reduced profitability. Lower volumes in key segments, as well as higher labor and component costs, placed additional pressure on operating margins. |
Net Income | -48% | The one-time gain realized in the prior period from the Mobility Business divestiture did not recur, while restructuring and severance expenses increased. Softening demand in certain end markets also weighed on net income. |
Diluted EPS | -40% | The decline reflects lower net income versus the prior period’s one-time gains, plus the impact of restructuring. Although share buybacks helped partially offset the drop, the year-over-year contrast remains pronounced due to the prior divestiture gain. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q2 2025 | no prior guidance | $6.1B–$6.7B | no prior guidance |
Core Operating Income | Q2 2025 | no prior guidance | $286M–$346M | no prior guidance |
GAAP Operating Income | Q2 2025 | no prior guidance | $183M–$263M | no prior guidance |
Core Diluted EPS | Q2 2025 | no prior guidance | $1.60–$2.00 | no prior guidance |
GAAP Diluted EPS | Q2 2025 | no prior guidance | $0.69–$1.27 | no prior guidance |
Net Interest Expense | Q2 2025 | no prior guidance | $60M | no prior guidance |
Core Tax Rate | Q2 2025 | no prior guidance | 21% | no prior guidance |
Revenue | FY 2025 | $27B | $27.3B | raised |
Core Operating Margins | FY 2025 | 5.4% | 5.4% | no change |
Core EPS | FY 2025 | $8.65 | $8.70 | raised |
Net Interest Expense | FY 2025 | $245M | $235M | lowered |
Core Tax Rate | FY 2025 | 21% | 21% | no change |
Free Cash Flow | FY 2025 | no prior guidance | $1.2B | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q1 2025 | $6.3B to $6.9B | $6,994M | Beat |
GAAP Operating Income | Q1 2025 | $143M to $223M | $197M | Met |
GAAP Diluted EPS | Q1 2025 | $0.26 to $0.83 | $0.88 | Beat |
Net Interest Expense | Q1 2025 | ~$65M | $38M | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI-Related Revenue Growth and Forecast Expansions | Previously saw progressive increases: Q4 2024 anticipated $1B YOY growth, Q3 2024 noted limited current AI revenues but big potential, Q2 2024 projected $4.5-$5B to >$6B | Raised AI revenue forecast from $5-6B to $6.5B, reflecting a $500M increase; main drivers include $100M from semi-cap recovery and $400M from data cloud infrastructure | Continuing, with sentiment increasingly bullish |
Operating Margin Improvements Across Segments | Incremental YOY margin improvements noted in Q4 2024, Q3 2024, and Q2 2024 across segments | Core operating margin at 5.4% for FY 2025; slight gains in Regulated Industries, Intelligent Infrastructure, and Connected Living segments | Slight YOY improvement |
Weakness and Underutilization in EV and Renewables | Q4 2024 and Q3 2024 calls also flagged persistent softness (particularly in solar and EV); began in Q2 2024 | Regulated Industries down 7% YOY, capacity underutilized in EV and renewables | Continuing challenge |
Healthcare Market Opportunities and Facility Repurposing | Q4 2024 emphasized GLP-1, medical devices, and facility agility; discussed similarly in Q3 and Q2 2024 | Expanding GLP-1 drug delivery and CGM programs; Croatia site to support healthcare | Ongoing expansion |
Semiconductor Capital Equipment Demand Driven by AI | Q4 2024 saw recovery in wafer fab and test equipment, Q3 2024 expected delayed but eventual upturn, Q2 2024 noted muted demand with recovery toward year-end | AI-related needs boosting semi-cap demand; about $100M of the $500M AI forecast raise tied to capital equipment | Continuing driver |
Pricing Pressures in Cloud and Data Center Infrastructure | Q4 2024 acknowledged mild ongoing price pressure; not highlighted in Q3 or Q2 2024 | No specific mention in Q1 2025 | Fading mention |
Strategic Portfolio Reshaping and Exiting Lower-Margin Revenue Streams | Q4 2024 featured large divestitures, including mobility; Q3 2024 and Q2 2024 underscored ongoing rationalizations | Exiting legacy networking, focusing on higher-margin AI/cloud areas | Ongoing strategy |
Share Buybacks and Capital Return Strategy | Prior quarters consistently emphasized substantial buybacks and new authorizations (Q4 2024, Q3 2024, Q2 2024) | 80% of FCF to share buybacks; $1B repurchase by end of FY 2025 | Continuing practice |
Acquisition of Mikros Technologies | No mentions in Q4 2024, Q3 2024, or Q2 2024 | New acquisition focusing on thermal management, liquid cooling, and engineering capabilities | New |
Delayed Automotive Growth and Negative Leverage in Automotive Sector | Q4 2024 flagged program pushouts and consumer/interest-rate challenges; Q3 2024 cited delays from oversupply in China; no mention in Q2 2024 | Ongoing EV market softness impacting Regulated Industries | Continuing challenge |
Pillar 2 Global Minimum Tax and Rising Interest Expense | Q4 2024 expected tax rate impacts in FY 2025; Q3 2024 also noted higher interest expense; Q2 2024 discussed rising net interest | No mention in current period | No longer mentioned |
Softness in Key End Markets (EV, Mobility, Renewables, 5G) | Q4 2024 and Q3 2024 identified ongoing softness; Q2 2024 highlighted sudden slowdown in renewables and 5G | Continued weakness in EV and renewables; mobility divestiture complete; 5G not specifically cited | Continuing |
Changes in Revenue Guidance and Forecasting Accuracy | Q4 2024 indicated conservative forecasting; Q3 2024 withdrew FY 2025 guide; Q2 2024 lowered revenue outlook | EPS guidance up by $0.10 but cautious on next quarters; total FY 2025 revenue near $27.3B | Continuing |
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AI Revenue Growth
Q: Has your AI revenue expectation changed?
A: Jabil increased its AI-related revenue expectation from $6 billion to $6.5 billion for fiscal '25, with an additional $500 million entirely in the AI space. This growth is driven by $100 million in semiconductor capital equipment and $400 million in data cloud infrastructure, deepening relationships with hyperscale customers. The AI segment is expected to drive significant future growth, representing a 30% year-on-year increase on a $5 billion base from last year. -
Margins and Guidance
Q: How should we think about margins recovery?
A: Margins are expected to be north of 5% for all three segments: Regulated Industries, Intelligent Infrastructure, and Connected Living. Current underutilization in EV and renewables is a drag but presents greater opportunities as these markets recover. Intelligent Infrastructure margins are above 5% and show the biggest growth potential over the next few years. Connected Living is anticipated to have high margins with double-digit growth rates from a lower base. Overall, margins are healthy, and the guidance provided is appropriate without being overly conservative. -
Capital Allocation Plans
Q: What's your plan for share buybacks and M&A?
A: Jabil is allocating 80% of free cash flow to share buybacks and is committed to completing its $1 billion share repurchase authorization in fiscal '25, with buybacks weighted more heavily in the first half. M&A remains a focus, targeting capabilities expansion in growth markets like healthcare and intelligent infrastructure. Recent acquisitions, such as Mikros for liquid cooling technology, enhance engineering capabilities rather than immediate revenue, positioning Jabil for future growth. -
Hyperscaler Relationships
Q: Are you deepening ties with your largest customer?
A: Yes, Jabil is winning new business and strengthening its relationship with its largest hyperscale customer, leading to significant growth potential. Additionally, the company is expanding into silicon photonics with a second hyperscaler customer. Currently working on 100G, 200G, and 400G technologies, Jabil plans to quote 800G in the first half of '25 and explore 1.6T towards the end of '25. This expansion leverages the acquisition from Intel last year, enhancing engineering capabilities and opening opportunities in silicon photonics. -
Tariffs and U.S. Manufacturing
Q: How do U.S. costs compare to Mexico?
A: While costs in the U.S. are higher than in Mexico, automation and robotics help mitigate the difference. The impact varies by end market, depending on price elasticity and the ability to pass on or absorb costs. Jabil views tariffs as pass-through costs and has nearly doubled revenues since the last administration took office, seeing growth as a positive outcome. With 30 U.S. sites and the ability to expand capacity quickly, Jabil is well-positioned to meet customers' needs and navigate tariff-related shifts in manufacturing. -
Automotive and EV Outlook
Q: What is the impact of EV tax credit repeal?
A: The potential repeal of the EV tax credit may impact certain OEMs, but Jabil's largest customer in this space is less affected due to lower reliance on credits. OEMs are expected to respond appropriately, and any impact is largely already reflected in Jabil's forecasts. The company does not anticipate significant EV business growth in fiscal '25 or '26 but remains well-positioned across internal combustion engine (ICE), hybrid, and EV platforms to capture future opportunities. -
Silicon Photonics Growth
Q: What's the upside in silicon photonics?
A: Starting from a small base after acquiring Intel's silicon photonics business last year, Jabil has grown this segment to the $300 million to $400 million range. With enhanced engineering capabilities, the company aims to expand offerings to more customers. Working on 100G, 200G, and 400G technologies today, 800G is expected to gain traction next year, with plans for 1.6T developments. While growth will be gradual, silicon photonics holds exciting potential over the next few years. -
Inventory and Cash Flow
Q: How will inventory levels trend?
A: Jabil expects inventory levels to remain within 55 to 60 days, aiming for the lower end of that range in the back half of fiscal '25 despite higher revenue growth. The company is confident in its ability to manage inventory effectively, contributing to improved cash flows and maintaining operational efficiency. -
Seasonality Post Mobility Divestiture
Q: Is there seasonality within the new segments?
A: Following the divestiture of the mobility business, which previously introduced significant seasonality and was dilutive to margins, Jabil now benefits from a 25 to 30 basis point positive impact on margins. Current ramps are in areas like data center infrastructure (DCI) and warehouse automation in the first half, with higher-margin semiconductor capital equipment recovery expected in the second half. Cost optimization initiatives are projected to add another 10 to 20 basis points to margins, particularly benefiting the fourth quarter.
Research analysts covering JABIL.