Shares of contract electronics manufacturer Jabil (JBL) have been performing exceptionally well in recent months, fueled by strong quarterly results. The company’s latest report suggests that it may continue this positive trajectory as it heads into the new year.
On December 18, Jabil announced its fiscal 2025 first-quarter results, covering the three months ending November 30. The announcement propelled the stock upward, as Jabil’s performance significantly outperformed Wall Street’s expectations. In a particularly encouraging turn, Jabil also raised its full-year guidance, attributing part of this optimism to the expanding role of artificial intelligence (AI) within its business model.
Let’s delve into Jabil’s latest quarterly figures and assess whether this stock can maintain its impressive momentum throughout 2025 and beyond.
Jabil Thrives Amidst Challenges
Jabil reported a revenue of $7 billion for fiscal Q1, surpassing its initial guidance range of $6.3 billion to $6.9 billion. Additionally, the company achieved non-GAAP earnings of $2 per share, well above the midpoint of its projected $1.85 per share. It’s important to note that Jabil’s revenue saw a 17% decline compared to the previous year, with adjusted earnings dipping by 23%, largely due to the divestment of its mobility business completed in December 2023.
If we exclude the impact of this divestiture, Jabil’s revenue actually grew by 1% year-over-year. The company also faced challenges from hurricanes Helene and Milton, which forced temporary facility closures and impacted revenue. Nevertheless, Jabil managed to exceed its earnings guidance, despite a slight margin hit of 10 to 20 basis points from the storms.
Moreover, the company has updated its fiscal 2025 revenue guidance to $27.3 billion, maintaining the earlier expectation while projecting adjusted earnings of $8.75 per share, compared to a prior estimate of $8.65. Given the robust tailwinds in semiconductor capital equipment, networking, and cloud and data center infrastructure, further upgrades to outlook could be on the horizon as the year progresses.
Management highlighted that the increasing demand for AI is driving the need for semiconductor fabrication and test equipment, a trend expected to persist throughout FY25 and beyond. Jabil has fortified its relationship with its largest hyperscale customer for integrating custom AI chips into server racks and has welcomed a new hyperscale customer for its silicon photonics solutions.
The company is confident that rising demand for liquid-cooled AI servers will create substantial long-term growth opportunities. In fact, liquid cooling in data centers is forecast to grow at an annual rate of 24% until 2033, potentially generating nearly $40 billion in revenue. Meanwhile, silicon photonics is expected to grow at an astounding compound annual growth rate of 42% through 2029.
These AI-driven growth opportunities could enable Jabil to rebound into positive growth in the next fiscal year, a sentiment echoed in revenue forecasts for the upcoming years.
JBL Revenue Estimates for Current Fiscal Year data by YCharts
Analysts predict that this uptick in revenue will also translate into improved bottom-line results, projecting double-digit earnings growth for Jabil starting next fiscal year.
JBL EPS Estimates for Current Fiscal Year data by YCharts
Why Jabil Presents a Compelling Investment Opportunity
Currently, Jabil is trading at a mere 14 times its trailing earnings, significantly lower than the tech-heavy Nasdaq-100 index’s trailing earnings multiple of 34. This discount presents a prime opportunity for investors to consider adding Jabil to their portfolios, especially given the forecasted strong earnings growth that could lead to impressive future gains.
For instance, if Jabil achieves an earnings per share of $11.16 in a couple of years and the stock trades at 27 times forward earnings—aligning with the Nasdaq-100’s forward metrics—its share price could skyrocket to $301, more than doubling its current valuation.
As such, investors keen on acquiring an AI stock with affordability and substantial growth potential should closely examine Jabil before its promising future unfolds.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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