Jabil (JBL) Earnings Preview: AI Momentum Drives Expectations

Jabil's stock price (NYSE: JBL) has gained 6.13% in the last five days, heading into earnings off the back of a 12 month double up (103.68%). The stock's performance reflects a market digesting recent strong earnings, fueled by surging demand in AI-related infrastructure. But is this growth sustainable, or are there headwinds on the horizon?

Adding to the uncertainty is the upcoming earnings report scheduled for Thursday, before market open. Analysts project that Jabil will report an average EPS of $2.94, with revenue expected to reach $7.65 billion, reflecting an estimated 9.89% year-over-year growth. These forecasts suggest steady performance, with expectations for both earnings and revenue growth compared to the same quarter last year. The projections reflect a generally positive outlook, though actual results will depend on execution and market conditions.

Jabil's recent success is undeniably linked to its robust third-quarter fiscal 2025 earnings. The company reported a stellar 16% year-over-year increase in net revenue, reaching $7.83 billion, significantly exceeding analyst expectations. This surge was largely attributed to the Intelligent Infrastructure segment, which saw a remarkable 51% jump, driven by demand for AI-related cloud and data center components.

Net income also painted a rosy picture, with GAAP earnings per share (EPS) at $2.03, compared to $1.06 in the same quarter last year. Non-GAAP EPS, a metric favored by many analysts, came in at $2.55, again beating estimates.

The company has revised its full-year revenue guidance upwards to approximately $29 billion, and expects non-GAAP earnings per share of $9.33, increases from prior estimates. This optimistic outlook has undoubtedly contributed to the positive sentiment surrounding the stock.

However, a closer look reveals potential vulnerabilities. While the AI-driven Intelligent Infrastructure segment is booming, the Regulated Industries segment (including renewable energy and electric vehicles) remained flat, and the Connected Living & Digital Commerce segment experienced a 7% decline. This disparity raises concerns about Jabil's reliance on a single growth engine.

While the market is currently enamored with Jabil's AI connection, it's crucial to consider the sustainability of this growth. The AI infrastructure boom is attracting significant investment, and competition is intensifying. It's possible that Jabil's margins could come under pressure as rivals vie for market share.

Furthermore, the electric vehicle and renewable energy sectors, once promising growth areas, are currently facing headwinds. If these sectors fail to rebound, Jabil's overall growth could be significantly hampered. The market may be overvaluing the AI narrative and undervaluing the risks associated with Jabil's other business segments.

Jabil's future hinges on its ability to navigate these challenges and diversify its revenue streams. While the AI boom has provided a significant boost, long-term success will require a more balanced and resilient business model.