Jabil (JBL) Q4 2026 earnings call transcript

Thanks, Steve. I actually feel really good about the 6.1% for the year. I think that's 30 pips up year on year. The $8.4 billion of revenue. I think we're growing capacity by about 4 million square feet. And that's quite a big task. Obviously, it involves a lot of execution. We've been on that journey for a while, so it's not something we're doing now. I feel really good about the team executing to that 8.4 billion. There might be some upside on that as well if the execution comes in better than expected. I think the capacity is something we always watch. We have a line of sight to all the capacity that we're adding. We have booked orders.

We have customers ready to go. So it comes on through the year, and that's one of the reasons you'll find the revenue through the year is relatively well balanced. I think it's 45% to 55% first half to second half. The margins, though, are a little bit back-end loaded because of the initial ramp that you get when you put up that much capacity. And when I say ramp, it's not just revenue. It's yields. It's additional expenses. It's training. There's a whole bunch of things that go into bringing on capacity online. So I feel really good about that. And it's 6.1% number there. We're going to try and outperform that as well.

So, Steve, I think if you look at physical AI, it's still very, very early commercialization stage. Real-world deployment is negligible, especially in the West. I think China might be ahead of us, but it's a cost issue and a complexity issue still. The price points still haven't made it to that full adoption phase. But if you sit back and look at Jabil and what we do so what are some of the devices and machines that are impacted with physical AI You have your retail warehouse robots You have drones You have autonomous vehicles You have robotics humanoids industrial automation systems intelligent edge devices All of that Jabil plays in And so we're well positioned in all the devices and the peripherals that will come through those devices on physical AI.

And then if you think of all the capabilities that we have, you think of sensors, think of onboard compute, connectivity, power, thermal solutions, and liquid cooling. Every humanoid is going to need liquid cooling there. Your motion and actuated related systems. We've been doing that for a while now. So from a capability standpoint, we're really, really well positioned as well. So I can't wait for the adoption. I just at this stage for FY27, we haven't built in that much from a physical AI perspective. But, hey, is this a 28 event? Is it a 29? Only time will tell. One thing you can definitely take away is that Jabil, as an early participant, An early adopter actually is probably the best position in this end market as of today.

Yeah, thanks, Mark. Obviously, we spend a lot of time working with the government, understanding where regulation is headed. But what I would tell you is at this point, we don't see any significant impact and or disruption. I think obviously with the midterms ahead, there is potential inflection points depending on how that turns out. But even with that, it feels like there's nothing that is going to create a significant impact to 27 fiscal.

And certainly at this point, we also don't see anything hitting fiscal 28. But it's something we watch closely and will continue to, and so as the midterms evolve, we'll have to see what comes out of that.

I think you'll see a little bit of a drop in Q2 just from the seasonality. If you go back to all our Q2s in the last two or three years, that's a seasonal event for us. As you come off some of the holiday season span, as you come off some of the seasonality that's built into our various end markets, I think from an income standpoint, you'll find even the revenues 45, 55, I think income is a little bit more back and loaded. As I said, on the ramp and bringing on capacity, the revenues are there. So it's not about revenues as much as it is about getting the yields up. It's about getting the cost through initially the first one or two quarters in any ramp.

The costs are going to be much higher, as a result of which margins can be a little bit lower in the first half. Having said that, if you look at Q1 of 27, it's actually year-on-year we're up by 20 bps. So we're doing much better than in previous years. It's just the shape of the year is slightly different this time around because of the heavy ramp and capacity that we're bringing online.

Hey, Marcus. Thank you, Kai. Right.

Yeah, so I wouldn't suggest that we're immune from everything that's going on from a constrained marketer there, but I definitely feel that Jabil is really, really well positioned just because of, and this has been decades in the building around developing supply relationships that are strong enough and there will be confidence in them. They're mature and there's a level of trust built in there. So, yeah, where we'll navigate some bumps in the night through fiscal 27, I'm really confident. We've put a structure in place. We've developed and invested in the right tools. We've got the right team, and I think we've got the right relationships to see us through kind of whatever the world throws at us, but certainly through this constrained market.

Yeah, hi, Joe. This is Greg. Yeah, so again, as Mike mentioned, you know, the shape of the year will be very similar to last year. You know, again, we're going to be a little bit lighter on the first half from a margin perspective, and then ramping up as we fill capacity and utilization of that in the back half. So we'll continue to see, you know, leverage on our SG&A, you know, better mix as we go into the back half, and the key point is just the capacity we're bringing online. You know, that'll be, you know, better utilized as we go into the back half.

Yeah, thanks for the question, Joe. So, yeah, that's exactly it. On the networking side, we're actually growing roughly 45% to 50%. And so what you're seeing pull through in the 15% and that reporting line is really effectively some of the downside that we're seeing in the communication space. So we're actually very happy with where the networking business is, and we'll continue to manage through the bouncing around the bottom that comms continues to see. But at the end of the day, 45% to 50% growth in the networking space we feel like is very much well in line with, if not ahead of the market.

So I absolutely and categorically think we still have an asset-like model. CapEx requirements are going to be in that 1.5% to 2% range, almost closer to the 1.5% in my view. I'll let Greg answer on the capacity piece, but I think overall the capitalization, the strong balance sheet that we have, I know that there's no need to get any more funds like some of our competitors, but I feel asset-line model is probably one of the biggest differentiators that Jabil is now providing. I do believe the level of growth we're seeing, the level of returns that we're able to provide, the free cash flow generation that we're able to get is depreciated from some of the others.

Just to add to Mike's comments, good morning, it's Greg. Again, as we mentioned, we're adding $4 million of square footage across the organization, so we feel really good at supporting incremental revenue above our guide. CapEx, absolutely, 1.5% to 2%. When we look at the intelligent infrastructure segment, that itself is really closer to 1% of revenue, so we really feel, again, asset light on that. What I would say is working capital as we go into next year, you know, with $8 billion plus of growth, we do see a dollar increase in just managing net working capital for the year, but we still feel really good about generating free cash flow of, you know, $1.6 billion. So, again, feel really good of how we're positioned for the year on that.

Yeah, thanks, Rublu. This is Steve. On Croatia, that remains as planned with the ramp continuing in fiscal year 27. And then, as I've stated before, really moving into full production in fiscal year 28. And what I would say there is the bottom line is that that continues to be on track. Relating to growth, and I guess related to GLP-1 question, there is a small element of growth, you know, kind of linked to GLP-1. But I'll tell you what has me excited in the healthcare part of the business is the growth is actually across all the subsegments of healthcare. We have new wins in autoinjectors, but that's across biologics, diabetes, insulin, GLP-1s, and that's requiring expansion in our North Carolina site.

We have new wins in med devices and patient monitoring and continuous glucose monitoring devices. I tell you, we also have new wins in orthopedics as well as diagnostics that relate to advanced testing platforms. So, you know, we have a great foundation now with the new wins of this past year and launching those as we move into 27 and beyond for a really good foundational business for that 5% to 7% growth of healthcare as we go forward.

Look, we're always appropriately conservative. There's a whole bunch of geopolitics, inflation, supply chain constraints that we're always cognizant of. So we have estimated where a 6.1 percent margin for the year falls out. But I think if you look at year over year, I do expect each of the quarters to outperform the year-on-year quarter comps. Overall, I think is there some upside? Sure, there might be some upside. If we have a flawless execution, like I said, we're bringing on 4 million square feet of capacity. All of that, if that comes together and there's no major issues in supply chain, we could well have a higher margin profile there as well.

I won't provide FY28 growth sort of numbers, but I do think you hit all the right spots. If you look at regulated, which was sort of in a recovery mode over the last two or three years, actually, I'm really pleased with how regulated is turning out, and the expectation is for each of those end markets in regulated to start growing. I think Matt talked about intelligent infrastructure and how demand continues to be through the roof. Demand is way outweighing Supply right now. So I think that's a long leg on data center infrastructure. And by the way, the capabilities that we're providing, the holistic approach that the team has taken in providing all these various capabilities is actually resonating with customers.

So I think that is going really well. And then in Rafael's business, if you think of warehouses and retail automation, robots, intelligent devices, all of that is doing well. The only one that I highlighted earlier in my prepared remarks was on the connected living side, where one of the things we're trying to do is compete on capability there.

It's got to be complex. It's got to be a high level of capability required. We're not competing on low cost. So that might be a – and we packed that into our guide. I think if you look at the connected living piece, that's down 15%. But overall, 27, I think year on year, if you look at 26 over 25, I think it was 21%. If you look at 27 over 26, it's 24%. Am I saying 28 will be similar? I don't know at this stage, but everything is in place for us to be able to deliver a good FY28 as well. I think, like I said, on a CapEx basis, the bulk of the growth is coming, and the new capacity that we're adding is coming through the intelligent infrastructure space.

The regulated and the warehouse automation piece is actually utilizing some of our surplus capacity. So overall, the company is well set for a decent period of growth going forward.

Hey, David. Thanks for the question. Yeah, I would say, you know, one, we did spend a big part of 26, adding capacity in preparation for 27. So we feel really good about that. From an outlook on demand, you know, currently we feel good about what we see 12 to 24 months out, and certainly we have felt that way for at least the last two quarters. So we really have been preparing for more of an 18-month horizon. If we start to see some unanticipated demand coming from new customer wins that we don't currently have in the funnel, then it's something we'd look at. But again, if you think about our strategy, which is capability-based, it kind of depends on where the upside would potentially come from.

In our data center infrastructure space, we can add capacity with lower power requirements at 2 to 4 megawatts at a million square feet relatively quickly inside 3 to 4 months. If the demand is coming from an increase in need for highly complex AI racks that are going to require 20 to 30 megawatts of power towards test infrastructure, then that's a different profile. But at this point, we've brought on the capacity that we think we're going to need, and we feel good about the next 12 to 18 month outlook.

Hey, Melissa, it's Greg. So let me start that and then head it off to Frank. So, yeah, our net inventory days is 64. We're down four days from Q3, so progressing well there, but we are above our target range of 55 to 60 days. We have seen, you know, as our gross inventory has gone up, we have seen, you know, an incremental increase in our inventory deposits, which has helped support, you know, the market at this time, but, you know, there is some higher commodity pricing. We also have higher weighting of our inventories in the cloud DCI space. And I'll let Frank kind of add from there any color.

Yeah, thanks for the question, Melissa. You know, this isn't kind of rocket science here. I mean, this is just a lot of rolling up sleeves and really hard work to try and keep the inventory as low as we possibly can. I do think we are going to normalize a little bit back to the range that Mike has been chatting about over the last couple of years, I think that can have a 55-60 day range as long as we continue to get support from customers on the end of the process as well, which I believe we will. And then just locking hands with operations and making sure that we have got the right tools and people in place to execute.

And it's just blocking, tackling, rolling the sleeves up and working closely with each other. I mean, it's really that simple, and I think the team is doing a really good job. And I think we're going to be able to continue to execute in a very, very challenging environment.

Thank you. Appreciate it.

You know, we're really well-built, Melissa, in terms of the logistics flow and the way we have that set up, and we're really good at moving programs and inventory from region to region where customers decide maybe their new strategy is going to be, A little bit more of a nearshoring position as we continue to navigate through the ever-changing dynamics of legislation change. So I feel really good that wherever those moves are needed, we've got a process and a methodology to go execute really, really well. So yeah, not anything that's keeping me up at night. The thing that keeps me up at night is still getting access to spying. Again, as I mentioned in the prepared remarks and from the question earlier, I think we've got the right combination of relationships with suppliers.

I think our customers are doing a really nice job getting in front of this for us, and in combination making sure that we are positioning Jabil for success when we think about access to our unfair share in, again, what is a very, very constrained marketplace.

Thank you very much. This concludes our call.