Jabil Inc. ((JBL)) has held its Q2 earnings call. Read on for the main highlights of the call.
Jabil Inc. recently held its earnings call, revealing a generally positive sentiment with strong performance in key segments and a bright outlook for AI-related business and cash flow generation. Despite some challenges in the regulated industry and Connected Living & Digital Commerce segments, as well as inventory management concerns, the positives moderately outweigh the negatives, painting an optimistic picture for the company’s future.
Solid Q2 Revenue and Earnings
Jabil reported robust Q2 results with $6.7 billion in revenue, marking a 3% year-over-year increase when excluding the divested mobility business. The company achieved a core operating income of $334 million with core operating margins at 5%, showcasing its financial strength and operational efficiency.
Intelligent Infrastructure Segment Growth
The Intelligent Infrastructure segment experienced significant growth, with revenue reaching $2.6 billion, an 18% increase year-on-year. This growth was driven by strong demand in AI-related cloud, data center infrastructure, and capital equipment markets, with core operating margin improving by 110 basis points to 5.3%.
Positive Outlook for AI-Related Business
Jabil has a promising outlook for its AI-related business, projecting approximately $7.5 billion in revenue for FY 2025, which represents a 40% year-on-year increase. This highlights the company’s strategic focus on AI as a key growth driver.
Strong Cash Flow and Share Repurchase
The company reported an adjusted free cash flow of $261 million for the quarter, contributing to a year-to-date total of $487 million. Jabil also repurchased 2.5 million shares and plans to complete its $1 billion share repurchase authorization by FY 2025, reflecting its commitment to returning value to shareholders.
US Manufacturing Expansion
Jabil is strategically positioned to navigate potential tariffs with a significant U.S. manufacturing footprint. Additionally, the company plans to expand its operations in India to support photonics capabilities, underscoring its global growth ambitions.
Decline in Regulated Industry Segment
The regulated industry segment saw a revenue decrease of 8% year-over-year, attributed to expected weakness in the renewable energy and EV markets. Despite this decline, core margins improved to 4.8%, indicating some resilience in the segment.
Challenges in Connected Living & Digital Commerce
Revenue in the Connected Living & Digital Commerce segment declined by 13% year-on-year due to the mobility divestiture. Excluding the divestiture, revenue growth was approximately 4%, although there was weaker demand in consumer-driven connected living products.
Inventory Management Concerns
Inventory days increased by 4 days sequentially to 80 days, with net inventory days slightly above the targeted range due to timing within the Intelligent Infrastructure segment. This indicates some challenges in inventory management that the company needs to address.
Cautious Outlook for Certain Markets
Jabil remains cautious about the EV and renewable energy markets, with expectations of continued caution in these areas for the fiscal year. This cautious stance reflects the uncertainties in these sectors.
Forward-Looking Guidance
Looking ahead, Jabil anticipates Q3 revenue between $6.7 billion and $7.3 billion, with core diluted EPS projected between $2.08 and $2.48. The company expects full-year free cash flow to exceed $1.2 billion and highlights a 40% increase in AI-related revenue, projecting $7.5 billion in FY 2025. Jabil also emphasizes its strong U.S. manufacturing footprint amid potential tariff challenges.
In summary, Jabil Inc.’s earnings call conveyed a moderately positive sentiment with strong performance in key segments and a promising outlook for AI-related business. While challenges in certain segments and inventory management concerns persist, the company’s strategic initiatives and robust financial performance position it well for future growth.