Jabil (JBL) Q3 2025 Earnings Call Transcript
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Image source: The Motley Fool. DATETuesday, June 17, 2025 at 8:30 a. ETCALL PARTICIPANTSChief Executive Officer — Mike DastoorChief Financial Officer — Greg HebardVice President, Investor Relations — Adam BerryNeed...
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June 17, 2025
09:39 AM
The Motley Fool
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Image source: The Motley Fool
DATETuesday, June 17, 2025 at 8:30 a
ETCALL PARTICIPANTSChief Executive Officer — Mike DastoorChief Financial Officer — Greg HebardVice President, Investor Relations — Adam BerryNeed a quote from one of our analysts. [ tected] RISKSSoftness persists in EV and renewable end, with CFO Hebard noting, "EVs and renewables remain below normalized levels of fitability. "Connected Living and Digital Commerce revenue declined apximately 7% year over year in Q3 FY2025, reflecting continued softness in consumer-driven ducts despite offsetting growth in warehouse and retail automation
The regulated industries segment is jected to decline 5% year over year in Q4 FY2025, as Hebard stated a "prudent near-term outlook on the EV and renewable. "Management does not expect a turnaround yet in automotive or renewable energy, indicating continued headwinds without specific drivers for recovery noted for fiscal 2026
TAKEAWAYSRevenue: Net revenue was $7. 8 billion in Q3 FY2025, up 16% year over year and $800 million above the midpoint of previous guidance, with strength driven by demand in cloud and data center infrastructure
Core Operating Income: Core operating income reached $420 million in Q3 FY2025, solidly above the company’s range according to CFO Hebard
Core Operating Margin: Core operating margin was 5. 4% in Q3 FY2025, up 20 basis points year over year
Core Diluted Earnings per (EPS): Core diluted earnings per was $2. 55 in Q3 FY2025, up 35% compared to Q3 of last year
GAAP Diluted EPS: GAAP diluted earnings per was $2. 30 in Q3 FY2025; GAAP Operating Income: $403 million, both reported directly in the call
Cash Flow from Operations: Cash flow from operations was $406 million in Q3 FY2025, with adjusted free cash flow of $326 million in Q3 FY2025; Year-to-date adjusted free cash flow totaled $813 million for 9M FY2025
Repurchases: $339 million in s were repurchased in Q3 FY2025; company remains on track to complete the $1 billion authorization in Q4
Intelligent Infrastructure Segment Revenue: Intelligent Infrastructure segment revenue was $3. 4 billion in Q3 FY2025, up apximately 51%, driven by AI-related cloud and data center ; segment margin was 5. 3% in Q3 FY2025
Regulated Industries Revenue: Regulated Industries segment revenue was $3. 1 billion in Q3 FY2025, flat year over year due to softness in EV and renewable end, partially offset by healthcare growth; segment core operating margin was 5. 5% in Q3 FY2025
Connected Living and Digital Commerce Revenue: Connected Living and Digital Commerce segment revenue was $1. 3 billion in Q3 FY2025, down apximately 7% year over year; segment margin was 5. 3% in Q3 FY2025, up 20 basis points year over year
Inventory Days: Inventory days sequentially imved by six days to seventy-four in Q3 FY2025; net of inventory deposits, imved by two days to fifty-nine in Q3 FY2025
Guidance - Q4 Revenue: Revenue is anticipated in the range of $7. 1 billion to $7. 8 billion for Q4 FY2025; core operating income is guided between $428 million and $488 million for Q4 FY2025; core diluted EPS is expected between $2. 04 for Q4 FY2025
AI-Related Revenue: Management raised the full-year AI-related revenue expectation to apximately $8. 5 billion for FY2025, representing over 50% year-over-year growth
Manufacturing Expansion: Plans announced for a new southeastern U
Site to support AI data center demand, with an anticipated $500 million investment over several years, The facility is expected to be operational by mid-calendar year 2026 and to materially impact financials starting in FY2027
Capital Expenditure Outlook: CapEx is expected to remain at 1. 5% to 2% of revenue for FY2025 despite the new site, with no short-term change to annual capital spending levels
Free Cash Flow Guidance: The company expects to generate over $1. 2 billion in adjusted free cash flow for FY2025
Debt and Cash Position: Debt to core EBITDA was apximately 1. 4 times in Q3 FY2025, and the cash balance was apximately $1. 5 billion at Q3 FY2025 quarter end
SUMMARYJabil Inc. 86%) reported substantial top- and bottom-line outperformance in Q3 FY2025, with management attributing revenue strength primarily to AI-driven Intelligent Infrastructure and data center demand
Full-year revenue guidance was raised to apximately $29 billion in FY2025 with core operating margins targeted at 5. 4% in FY2025, reflecting mix strength in high-growth secular trends
The company formally disclosed plans for a major $500 million investment to build a southeastern U
Facility focused on AI data center infrastructure, which is jected to augment U
Manufacturing capacity but is not expected to impact overall capital expenditure rates through FY2026
Management reiterated its capital allocation discipline, while maintaining flexibility for potential capability-driven tuck-in acquisitions
Investors were told to expect d multi-year growth and margin guidance at the virtual investor briefing in late September
CEO Dastoor said, "Demand for AI hardware is not slowing down
If anything, it's accelerating. " highlighting secular tailwinds underpinning growth
CFO Hebard confirmed, We do see our current $1 billion authorization gram being in Q4 and our typical cadence of new authorizations and continuing that type of policy
Networking and communications exposure was described as margin-dilutive, particularly 5G, whereas capital equipment and cloud data center es are accretive to overall margins
Photonics/transceiver is ramping post-acquisition and is expected to der up to $1 billion in annual revenues in subsequent years, according to CEO Dastoor
Management attributed persistent underutilization of overseas manufacturing sites to geographic revenue concentration, particularly with U. -based AI expansion, noting Our normal capacity utilization is in the 85-86% range
Today, we're still at the 75% range
Highlighted a focus on end-market diversification, with incremental contributions expected from healthcare and digital commerce, although longer-term revenue growth from these areas may extend through fiscal 2027 and beyond
INDUSTRY GLOSSARYIntelligent Infrastructure: Jabil Inc. 's reporting segment focused on cloud, AI, capital equipment, networking, and data center hardware
Core Operating Income/Margin/EPS: Non-GAAP measures that exclude certain items to present normalized performance
Photonics: Refers to optical transceivers and networking components, often used for high-speed data transmission in data centers, including those acquired from Intel
Vertical Capabilities: Integrated offerings within a specific industry, such as drug dery and diagnostics within healthcare
Adjusted Free Cash Flow: Cash flow remaining after capital expenditures, adjusted for non-recurring or specific strategic items as defined by management, representing available cash for holder returns or reinvestment
Full Conference Call TranscriptGreg Hebard: Thanks, Adam
Good morning, everyone
Thanks for joining our call today
I'm very pleased with our third-quarter performance, which at the enterprise level came in well above our expectations across revenue, core operating income, and core earnings per
In the quarter, we saw significant upside in our Intelligent Infrastructure, led by the segment's AI-related revenue
At the same time, our regulated and CLD segments came in largely as planned
The environment remains dynamic, but our performance this quarter demonstrates the strength of our operating model and our ability to der consistent results even as conditions shift
Let's walk through the details for the quarter
For Q3, the team dered $7. 8 billion in net revenue, up an impressive 16% year over year, and $800 million above the midpoint of the guidance range we gave in March
Upside strength in revenue was primarily driven by cloud and data center infrastructure
Additionally, it's worth noting both our capital equipment and Connected Living end also saw higher than expected demand in the quarter
Given all this strength, core operating income for the quarter came in solidly above our range at $420 million
Core operating margins were at 5. 4%, a 20 basis point imvement year over year
Net interest expense in Q3 was $66 million
On a GAAP basis, operating income was $403 million, and our GAAP diluted earnings per was $2
Core diluted earnings per for Q3 was $2. 55, up 35% compared to Q3 of last year
Turning now to our performance by segment in the quarter
Our regulated industries reported revenue of $3. 1 billion, roughly in line with our expectations and flat year over year
This reflects softness in the EV and renewable end, partially offset by growth in our healthcare
Core operating margin for this segment was 5. 5%, up 70 basis points sequentially
However, this is down 50 basis points year over year as EVs and renewables remain below normalized levels of fitability
In the Intelligent Infrastructure segment, we saw revenue of $3. 4 billion, up apximately 51% year on year and well ahead of our expectations for the third quarter
This growth continues to be driven by sustained strong demand in our AI-related cloud and data center infrastructure, including power, cooling, and server rack solutions
Capital equipment was also strong in the quarter as the need for testing gear remains robust
This growth was offset slightly by lower demand in our networking and communications end market due to softer 5G demand
Our operating margin for the segment was 5
In our Connected Living and Digital Commerce segment, revenue was $1. 3 billion, slightly higher than what we thought ninety days ago
On a year-over-year basis, the segment was down apximately 7%
This is mainly reflecting softness in consumer-driven ducts offset by growth in areas such as warehouse and retail automation
Core operating margins for this segment came in at 5. 3% in Q3, up 20 basis points year over year, reflecting both the benefits from the restructuring actions taken earlier this year to reduce costs as well as a changing mix of within this segment
Next, I'll vide an on our cash flow and balance metrics for the end of Q3
Inventory days decreased sequentially by six days to seventy-four days
Net of inventory deposits from our customers, inventory days were fifty-nine, an imvement of two days sequentially and within our targeted range
In Q3, cash flow from operations was strong at $406 million
Net capital expenditures for the third quarter were $80 million
As a result of this solid performance, adjusted free cash flow for the quarter came in at $326 million, bringing our year-to-date adjusted free cash flow to $813 million
With our results through three quarters, we are well on track to generate over $1. 2 billion in free cash flow for the year
We exited the third quarter with a healthy balance sheet with debt core EBITDA levels of apximately 1. 4 times and cash balances of apximately $1
In Q3, we repurchased $339 million of our s
We're on track to complete our current $1 billion repurchase authorization in Q4
With that, let's turn to the next slide for our Q4 FY 2025 guidance
Beginning with revenue by segment, we anticipate revenue for regulated industries will be $2. 9 billion, down 5% year on year as we maintain a prudent near-term outlook on the EV and renewable
We are also closely monitoring potential impacts, positive or negative, arising from the impending legislation in the U
For our Intelligent Infrastructure segment, we expect strong growth to continue with the revenue for the quarter to be $3. 3 billion, up apximately 42% year over year
We expect this increase to be driven by sustained broad-based AI-related growth in cloud data center infrastructure and capital equipment
In our Connected Living and Digital Commerce segment, revenues are expected to be $1. 3 billion, down 21% year on year, reflecting continued softness in consumer-centric ducts offset slightly by growth in warehouse and retail automation
Putting it all together at the enterprise level, total company revenue for Q4 is expected to be in the range of $7. 1 billion to $7
Core operating income for Q4 is estimated to be in the range of $428 million to $488 million
GAAP operating income is expected to be in the range of $331 million to $411 million
Core diluted earnings per is estimated to be in the range of $2
GAAP diluted earnings per is expected to be in the range of $1
Net interest expense in the fourth quarter is estimated to be apximately $65 million
Our core tax rate for Q4 and for the full year is expected to remain at 21%
In closing, the Jabil Inc
Team's execution thus far in FY 2025 amid heightened geopolitical uncertainty has been tremendous
Our ability to execute effectively is a testament to the strength of our diversified portfolio and our strategic alignment with high-growth secular trends such as AI and industrial automation
This resilience not only reinforces our competitive position but also sets the stage in the coming years for continued revenue expansion, margin enhancement, and robust free cash flow generation
With that, I'd to thank you for your time this morning and your interest in Jabil Inc
I'll now turn the call over to Mike
Mike Dastoor: Thanks, Greg, and good morning, everyone
I want to start by acknowledging the tremendous work of our global team
Their consistent execution in a complex environment is the driving force behind our performance and our ability to der for our customers
The dedication I see across the organization is remarkable, and I am grateful for their efforts
A dedication which is fundamental to our strategy, especially as we navigate the evolving geopolitical landscape
Today, most of our manufacturing has migrated local for local and region for region
This focus on manufacturing mainly in-region has continued to play out well for us, particularly in today's geopolitical environment
Furthermore, I continue to see our global and growing U
Foot as a significant competitive advantage
Our ability to offer customers diverse, resilient, and localized manufacturing solutions has become more valuable than ever
Domicile company with deep experience across 30 countries allows us to partner with customers to navigate issues potential tariffs and supply chain complexities, a capability I believe is unmatched in the industry
Now turning to our performance in the quarter
As Greg detailed, our third-quarter results were very strong, reflecting higher than expected growth in cloud and data center infrastructure, capital equipment, and connected living end
At the same time, healthcare, automotive, digital commerce, networking, and communications were largely in line with our expectations from March
As a result, the team dered $7. 8 billion in revenue, 5. 4% core operating margins, and $2. 55 in core diluted earnings per, up 35% from Q3 la.
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