Exchange: NYSE | Sector: Technology | Industry: Hardware Equipment Parts
Q1 2025
Published: Jan 10, 2025
Earnings Highlights
Revenue of $6.99B down 16.6% year-over-year
EPS of $0.88 decreased by 40.7% from previous year
Gross margin of 8.7%
Net income of 100.00M
"“In Capital Equipment, the rise of AI is driving demand for semiconductor fabrication and test equipment, which we expect to continue throughout FY'25 and beyond. The AI piece is the one that's going to drive a lot of our future growth, $1.5 billion year-on-year is a big number on that $5 billion base from last year.”" - Mike Dastoor, CEO
Jabil Inc (JBL) QQ1 FY2025 Earnings Analysis: AI-Driven Growth Amid Margin Restructuring; solid FCF generation and a strengthened US footprint
Executive Summary
- JBL delivered a solid start to FY2025 with quarterly revenue of $6.99B and GAAP operating income of $197M, while core operating income reached $347M and core margins stood at 5.0%. This reflects a split performance across segments: Regulated Industries faced continued weakness stemming from renewable energy and EV softness, Intelligent Infrastructure demonstrated year-over-year growth driven by AI-related cloud and data-center demand, and Connected Living & Digital Commerce declined due to the Mobility Divestiture but showed 12% YoY growth excluding Mobility.
- Management articulated a clear, AI-centric growth trajectory for FY25, highlighted by an elevated AI/data center revenue outlook (core AI/DSC-related growth) and strategic assets such as Mikros Technologies for liquid cooling. The company also outlined a restructuring of margins in the back half of the year, driven by ramping AI-related capex, cost optimization initiatives, and the exit of legacy, higher-capital-intensity Mobility activities. Long-term free cash flow remains robust at ~$1.2B, supported by a healthy balance sheet (net debt ~$1.22B, cash ~$2.06B) and a strong buyback program.
- Near-term uncertainties center on end-market cyclicality (renewables/EVs, solar exposure), potential tariff shifts, and regulatory dynamics (EV tax credits). JBL’s strategic advantage rests on its global, US-domiciled manufacturing footprint, automation/robotics capabilities, and a growing suite of thermal-management and Silicon Photonics capabilities through Mikros, positioning it to benefit as hyperscalers and AI workloads expand.
Key Performance Indicators
Revenue
6.99B
QoQ: 0.43% | YoY:-16.61%
Gross Profit
606.00M
8.66% margin
QoQ: -8.60% | YoY:-21.81%
Operating Income
197.00M
QoQ: -38.05% | YoY:-34.98%
Net Income
100.00M
QoQ: -27.54% | YoY:-48.45%
EPS
0.89
QoQ: -21.24% | YoY:-40.67%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $6.994B; YoY change (reported) -16.6%; QoQ +0.4%. Excluding Mobility Divestiture, revenue was up about 1% YoY.
Net Income: $100M; net margin 1.43%; EPS GAAP $0.89; EPS Diluted $0.88; Management notes a higher "core" EPS figure of $2.00 for Q1 (per call remarks).
Financial Highlights
- Revenue: $6.994B; YoY change (reported) -16.6%; QoQ +0.4%. Excluding Mobility Divestiture, revenue was up about 1% YoY.
- Gross Profit: $606M; gross margin 8.66%; YoY gross profit change -21.8%; QoQ -8.6%.
- Operating Income (GAAP): $197M; operating margin 2.82%.
- Core Operating Income: $347M; core operating margin 5.00%.
- Net Income: $100M; net margin 1.43%; EPS GAAP $0.89; EPS Diluted $0.88; Management notes a higher "core" EPS figure of $2.00 for Q1 (per call remarks).
- EBITDA: $359M; EBITDA margin 5.13%.
- Free Cash Flow: $215M; CFO $312M; Net CapEx $86M; full-year CapEx guidance 1.5–2% of revenue; FY25 free cash flow guidance $1.2B.
- Cash & Equivalents: $2.058B; Total Debt: $3.279B; Net Debt: $1.221B; Debt/Core EBITDA ~1.4x.
- Balance Sheet Strength: Cash position and $2B+ operating cash flow underpin flexibility for buybacks and selective M&A.
- Segment Highlights: Regulated Industries revenue ~$3.0B (down 7% YoY; core margin 4.7%); Intelligent Infrastructure revenue ~$2.5B (up 5% YoY; core margin 4.8%); Connected Living & Digital Commerce revenue ~$1.5B (down 46% YoY; ex-Mobility ~+12% YoY; core margin 5.8%).
- Guidance (Q2FY25): Revenue $6.1–$6.7B; Core OI $286–$346M; Core EPS $1.60–$2.00; GAAP OI $183–$263M; Tax rate 21%; Net interest ~$60M.
- Full-year Guidance: Revenue ~$27.3B; Core margin ~5.4%; Core EPS ~$8.75; Free cash flow ~$1.2B; buybacks under way with $768M remaining on a $1B authorization.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.99B
-16.61%
0.43%
Gross Profit
606.00M
-21.81%
-8.60%
Operating Income
197.00M
-34.98%
-38.05%
Net Income
100.00M
-48.45%
-27.54%
EPS
0.89
-40.67%
-21.24%
Key Financial Ratios
currentRatio
1.06
grossProfitMargin
8.66%
operatingProfitMargin
2.82%
netProfitMargin
1.43%
returnOnAssets
0.56%
returnOnEquity
6.28%
debtEquityRatio
2.06
operatingCashFlowPerShare
$2.77
freeCashFlowPerShare
$2.77
dividendPayoutRatio
10%
priceToBookRatio
9.61
priceEarningsRatio
38.27
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the earnings call include:
- AI/data center growth as a primary driver: Mike Dastoor stated that Intelligent Infrastructure is driving the majority of FY25 growth and that AI-related demand for capital equipment and cloud/data-center infrastructure is a core growth engine. He quantified the AI opportunity as elevating the annual AI-related revenue base from a prior target toward $6.5B for FY25, with roughly a $1.5B year-over-year uplift, including about $400M from data cloud infrastructure and $100M from semiconductor equipment recovery. “In Capital Equipment, the rise of AI is driving demand for semiconductor fabrication and test equipment, which we expect to continue throughout FY'25 and beyond,” and “the AI piece is the one that's going to drive a lot of our future growth, $1.5 billion year-on-year is a big number on that $5 billion base from last year.”
- Mikros acquisition and thermal management expansion: Mike highlighted the Mikros Technologies acquisition as expanding capabilities in engineering liquid cooling solutions, enabling vertical integration for hyperscalers and AI-focused data-center infrastructure. “These capabilities... will support our future growth in verticals in both the datacenter ecosystem and other end markets that require thermal management.”
- Croatia facility and US manufacturing commitments: The team opened a large-scale site in Croatia to support European automotive OEMs (with GLP-1 drug-delivery support from FY'27) and relocated programs to the US to meet customer demand for geographically proximate manufacturing. “The team opened a large scale manufacturing site in Croatia,” and “beginning in FY'27, the site will also support our healthcare customers.” Management underscored the US footprint as a competitive advantage amid tariff discussions.
- Tariffs and geographic strategy: Mike emphasized the pass-through nature of tariff costs and JBL’s preparedness to navigate shifts, noting the business is largely local-for-local in China, and that the US manufacturing footprint is “never been bigger.”
- Margin trajectory and seasonality post-Mobility divestiture: The company anticipates higher earnings and margins in the second half as seasonality normalizes post-Mobility divestiture and as higher-margin semi-cap equipment businesses recover; cost optimization initiatives are expected to improve margins in the year. “We anticipate stronger earnings and margins in the second half of the year.”
- Capital allocation and M&A: Greg Hebard reiterated an 80/20 framework favoring buybacks, with $768M remaining on the current $1B authorization and a plan to complete it within FY25. Mike added that Mikros is not about revenue expansion but engineering capability, enabling cross-sell and vertical solutions. “80% of our free cash flow going to share buybacks” and “we did acquire Mikros… a leader in engineering liquid cool solutions.”
“In Capital Equipment, the rise of AI is driving demand for semiconductor fabrication and test equipment, which we expect to continue throughout FY'25 and beyond. The AI piece is the one that's going to drive a lot of our future growth, $1.5 billion year-on-year is a big number on that $5 billion base from last year.”
— Mike Dastoor, CEO
“We now anticipate approximately $27.3 billion in revenue with core operating margins of 5.4%. Core earnings per share now are expected to be $8.75. Importantly, we continue to foresee another robust year of free cash flow generation in FY'25 of $1.2 billion.”
— Mike Dastoor, CEO
Forward Guidance
- JBL’s FY25 revenue target of approximately $27.3B implies mid-to-high single-digit growth anchored by AI/data-center demand, with the back-half expected to meaningfully boost earnings and margins. Core operating margin guidance of 5.4% suggests a recovery from the Q1 drag, aided by the semi-cap equipment recovery and cost optimization. The company projects FY25 core EPS of $8.75, signaling meaningful earnings growth despite near-term cyclicality in Renewable Energy and EV end-markets.
- Key growth pillars and potential catalysts:
- AI/Data Center Growth: Upside from hyperscaler partnerships, silicon photonics, and liquid cooling capabilities (Mikros) expanding addressable opportunities in cloud infra, AI acceleration, and greener data-center thermals.
- Healthcare and Packaging: Long ramp cycles but potential multiyear stable returns from GLP-1 auto-injectors and CGMs as testing qualifications complete in 18–24 months; durable demand once programs ramp.
- US Domicile and near-shoring trend: JBL’s expanding US footprint positions it to capitalize on potential tariff changes and supply-chain localization, a strategic differentiator vs peers.
- Risks and sensitivities: End-market cyclicality (EV/renewables slowdown, solar demand), potential EV tax-credit policy shifts, tariff/regulatory developments, and integration risk from Mikros. JBL notes pass-through tariff costs, but the net profitability impact will vary by end-market and customer pass-through capabilities.
- Investment thesis: The company’s combination of a robust 2H FY25 margin uplift, AI/data-center secular growth, strategic asset acquisitions (Mikros), a strong FCF profile (~$1.2B), and a resilient US-domiciled manufacturing backbone supports an improving earnings trajectory and sustainable capital returns, albeit with cyclicality risk in its Regulated Industries and Connected Living segments.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
JBL Focus
8.66%
2.82%
6.28%
38.27%
SANM
8.37%
4.42%
2.89%
15.98%
CLS
10.30%
4.86%
5.54%
26.49%
PLXS
10.30%
4.80%
2.83%
28.67%
FN
12.30%
9.57%
4.24%
28.04%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Jabil is transitioning from a Mobility-driven, high-capital-intensive business to a more diversified, AI-driven growth platform anchored by Intelligent Infrastructure and data-center-focused capabilities. The QQ1 FY25 results show early signs of this shift, with core margin expansion potential in H2 supported by semicap recovery, cost optimization, and the Mikros-enabled thermal management stack. The full-year guidance implies durable earnings growth (FY25 core EPS of $8.75) and substantial free cash flow (~$1.2B), enabling continued buybacks (80% of FCF) and selective M&A within healthcare and Intelligent Infrastructure domains. The hybrid model—solids in AI/data-center capex, steadier contributions from healthcare packaging, and cyclical exposure to renewables/EV—creates a balanced risk-reward profile. Investors should monitor: (1) the pace of AI/data-center capex ramp and hyperscaler wins; (2) progress on Mikros integration and realized gross margin/throughput improvements from liquid cooling capabilities; (3) tariff-policy developments and their pass-through effectiveness; (4) EV tax-credit policy and automotive demand signals; (5) the evolution of the US manufacturing footprint as a strategic moat that could unlock incremental growth in onshoring and local demand.
Key Investment Factors
Growth Potential
- AI/Data Center and Cloud Infrastructure: anticipated core AI-related revenue growth to ~$6.5B for FY25, with ~1.5B YoY uplift; strong demand for capital equipment and data-center cooling solutions.
- Thermal management leadership: Mikros enhances JBL's end-to-end thermal management solutions for datacenters, semis, batteries, and EV infra, enabling cross-sell across Intelligent Infrastructure and other end markets.
- Healthcare packaging and GLP-1/CGMs: potential multiyear revenue visibility from healthcare and packaging programs as ramp cycles complete and lives cycle duration stabilizes.
- US footprint and near-shoring: favorable positioning for tariff-related shifts and resiliency in supply chains; opportunity to win new programs requiring US-based manufacturing.
- Digital commerce automation and warehouse automation: improving margin profile in Connected Living & Digital Commerce as digital commerce expansion scales.
Profitability Risk
- End-market cyclicality in Regulated Industries (Renewables & Automotive/EV) and in Connected Living (Mobility divestiture effects) could dampen near-term revenue growth.
- Tariff and policy risk: US-China tariff dynamics and potential EV tax credit policy changes could affect customer economics and demand signals; JBL emphasizes pass-through costs, but customers may react variably.
- Execution risk from Mikros integration: while strategic, integration and scaling of new liquid-cooling capabilities carry execution risk and potential capex intensity.
- Competitive intensity in AI/datacenter ecosystems and silicon photonics: sustained demand requires continuous investments and technology leadership; competitors’ scale could pressure pricing.
Financial Position
- Strong balance sheet and liquidity: cash and cash equivalents around $2.06B; net debt ~$1.22B; debt to core EBITDA ~1.4x, indicating manageable leverage.
- Free cash flow generation: guided to ~$1.2B for FY25, underpinning returns via buybacks and dividends (80% of FCF to buybacks; $768M remaining on $1B authorization).
- Capital intensity and capex discipline: net capex guidance of 1.5–2% of revenue supports ongoing capacity to meet demand while preserving cash flow quality.
SWOT Analysis
Strengths
Global manufacturing footprint with a strong US domicile