Jabil (JBL) Taps AI Infrastructure Boom to Boost Earnings Per Share

Yahoo

26-06-2025

Manufacturing solutions provider Jabil Inc. (JBL) is riding the artificial intelligence (AI) wave with impressive results. The company has successfully positioned itself as a key player in the AI infrastructure buildout, delivering top and bottom-line beats for the most recent quarter, driving the stock up roughly 25% in the past month.
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Following an almost 45% year-to-date price increase, the stock is now trading at a valuation in line with its industry peers, such as Sanmina-Sci (SANM), OSI Systems (OSIS), and Plexus (PLXS), suggesting limited upside. Yet, strong momentum tends to feed on itself, and we could see the share price continue to run well into premium valuation levels from here.
I am bullish about the company's long-term potential and see the current situation as a growth-at-a-reasonable-price (GARP) opportunity.
Jabil has implemented a series of strategic initiatives designed to drive long-term growth across multiple high-potential sectors. The company announced a $500 million investment to build out AI infrastructure at its southeastern U.S. facilities, positioning itself as a key player in the fast-growing data center supply chain. It's also broadening its global footprint with a new plant in Gujarat, India, focused on silicon photonics and co-packaged optics for AI and telecom applications.
In addition to deepening its core electronics business, Jabil is expanding into the healthcare sector. Its acquisition of Pharmaceutics International adds significant U.S.-based pharmaceutical manufacturing capacity, aligning with the rising demand for domestic drug production and the needs of an aging population.
Further diversifying its future capabilities, Jabil is collaborating with Apptronik to manufacture humanoid robots and plans to deploy these Apollo robots across its own facilities, boosting internal efficiency while gaining expertise in advanced robotics supply chains.
Jabil's third-quarter 2025 results exceeded expectations, with revenue rising 16% year-over-year to $7.8 billion, primarily driven by a 51% surge in its AI-related business, which now accounts for $3.4 billion. According to JBL, its Intelligent Infrastructure segment drove growth, with AI-related revenue 'contributing significantly,' while the regulated and Connected Living and Digital Commerce segments performed 'as planned'.
On the earnings front, JBL reported EPS of $2.55 for its Q3 2025 results earlier this month, beating analyst expectations and bringing its forward P/E ratio (32.8) closer to the sector median (22.4). Importantly, JBL is consistently outperforming earnings expectations based on strong sales revenues, thereby indicating that AI infrastructure development continues to accelerate.
Despite shifting toward faster-growing markets, the company maintained strong operating margins between 5.0% and 5.5%, reflecting disciplined execution. Financially, Jabil remains on solid footing, with a debt-to-core EBITDA ratio of just 1.4x and free cash flow exceeding $406 million. This robust cash generation supports continued investment in AI and positions the company to complete $1 billion in share repurchases by the end of the fiscal year.
While Jabil's strong operational performance stands out, its valuation paints a more complex picture. The stock currently trades at a P/E of 40x—well above the Information Technology sector average of 21.8x, suggesting limited room for multiple expansion.
Relative to peers, Jabil's valuation appears fair but not particularly cheap. Esco Technologies (ESE) trades at a similar 39.75x earnings, while Flex (FLEX) trades at the sector average. TTM Technologies (TTMI) commands a premium at 49x.
Technical indicators remain favorable, with Jabil's stock trading well above key moving averages across all major time frames. Academic research supports the notion that momentum is a factor in stock outperformance, suggesting that JBL could continue its upward trend as long as positive price momentum persists.
Jabil is rated as a Strong Buy on Wall Street, based on the most recent recommendations of eight analysts. Seven analysts are currently bullish, one is neutral, and none are bearish. JBL's average 12-month stock price target for JBL stock is $220, indicating a potential 6% upside from current levels.
Wall Street responded favorably to the latest financials, with several analysts raising their price targets for the stock. For instance, Bank of America's Ruplu Bhattacharya increased the price target for JBL from $225 to $245, while maintaining a Buy rating, noting projections for Jabil's FY26 and FY27 are more optimistic than the general market consensus, suggesting further growth in operating margins and revenue.
Argus Research's Jim Kelleher also upgraded Jabil to a Buy rating from Hold, citing significant outperformance in revenue and earnings for Q3, and a return to positive annual topline growth. He noted the recent results are driven by strong underlying business momentum.
Similarly, Raymond James' Melissa Fairbanks raised its price target from $170 to $230, while reiterating a Strong Buy rating, highlighting Jabil's growth in key markets and improvements in its margin profile. Fairbanks considers Jabil a top pick among Electronics Manufacturing Services providers due to its effective business diversification strategy and the evidence of successful execution.
Jabil is emerging as a compelling transformation story, well-positioned in high-growth markets. Its strategic investments in AI infrastructure, global diversification, and healthcare manufacturing are building long-term competitive advantages that could fuel continued outperformance.
While its valuation leans toward the higher end, growth-oriented investors may find it justified given Jabil's shift into faster-growing sectors. Backed by strong fundamentals, I remain bullish on the stock and view it as a solid GARP (growth at a reasonable price) opportunity.
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