Jabil Inc. Q1 FY2026 earnings call

Management Statement and Operational Highlights

• Q1 Performance: Net revenue for Q1 was $8.3 billion, at the high end of guidance. Core operating income was $454 million with a core operating margin of 5.5%. GAAP operating income was $283 million, and GAAP diluted earnings per share was $1.35. Core diluted earnings per share for Q1 was $2.85, at the upper end of guidance.
• Segment Updates:
  • Intelligent Infrastructure had revenue of $3.9 billion, ahead of expectations, driven by cloud/data center and networking. Q2 FY '26 guidance for Intelligent Infrastructure revenue is $3.76 billion, up 42% year-over-year. Raised FY '27 outlook by approximately $900 million.
  • Regulated Industries revenue was $3.1 billion, in line with expectations, up 4% year-over-year. Tracking above September expectations by roughly $100 million.
  • Connected Living and Digital Commerce revenue was $1.4 billion, ahead of expectations, with approximately $100 million incremental revenue offsetting customer pruning.
• Cash Flow and Balance Sheet: Inventory days for the quarter were 70 days (net of inventory deposits from customers, 57 days, consistent with targeted range). Cash flow from operations in Q1 was $323 million, adjusted free cash flow was $272 million, on track to deliver $1.3 billion in adjusted free cash flow for the full year. Ended the quarter with a healthy balance sheet, including net debt to core EBITDA of 1.2x and cash balances of $1.6 billion. Repurchased $300 million of shares under existing share repurchase authorization.

Segment Performance

• Regulated Industries: Generated $3.1 billion in revenue, up 4% year-over-year. Core operating margin was 5.8%, up 110 basis points year-over-year. Contributed approximately 37.3% to total net revenue of $8.3 billion.
• Intelligent Infrastructure: Revenue was $3.9 billion, ahead of expectations. Driven by strength in cloud and data center infrastructure, as well as networking. Core operating margin was 5.2%, up 40 basis points year-over-year. Contributed approximately 47% to total net revenue.
• Connected Living and Digital Commerce: Revenue was $1.4 billion, ahead of expectations with broad-based strength in automation, robotics, and retail warehouse programs. Core operating margin was 5.5%. Contributed approximately 16.9% to total net revenue.

Guidance

• Q2 FY '26:
  • Total company revenue expected to be in the range of $7.5 billion to $8 billion.
  • Core operating income expected to be in the range of $375 million to $435 million.
  • GAAP operating income expected to be in the range of $312 million to $382 million.
  • Core diluted earnings per share expected to be in the range of $2.27 to $2.67; GAAP diluted earnings per share expected to be in the range of $1.70 to $2.19.
  • Second quarter net interest expense expected to be approximately $69 million, full year interest expense expected to be approximately $270 million.
• FY '26:
  • Expected revenue of approximately $32.4 billion, an increase of $1.1 billion from prior outlook.
  • Anticipated core operating margins of roughly 5.7%, a 10 basis point improvement from earlier view.
  • Expected core diluted earnings per share of $11.55, an increase of $0.55 from previous estimate.
  • Adjusted free cash flow expected to be more than $1.3 billion.

Risks

• Interest Expense: Increase in interest expense due to additional debt from the anticipated acquisition of Hanley Energy Group and refinancing of existing senior notes.
• Market and Demand: Potential impact of AI bubbles or supply chain constraints on data center growth and overall business performance.
• M&A Integration: Integration risks associated with the acquisition of Hanley Energy Group, including challenges in combining operations and achieving expected synergies.

Question and Answer

Q: Ruplu Bhattacharya asks about new wins in Intelligent Infrastructure and impact of Hanley Energy acquisition A: Michael Dastoor discusses new wins in cloud/data center and networking, noting a $900 million increase in revenue, and talks about Hanley Energy's expected $200 million contribution to FY '26, expecting it to be modestly accretive in '26 and more so in '27 Q: Ruplu Bhattacharya asks about operating margin progression A: Michael Dastoor talks about margin improvement driven by better mix, capacity utilization, and SG&A leverage, expressing confidence in future margin expansion potential Q: Unknown Analyst asks about second hyperscaler and gross margins A: Michael Dastoor discusses second hyperscaler wins and notes that gross margins are driven by mix in Q1, with gross margin typically in the range of 9% to 9.5% for FY '26 Q: Steven Fox asks about health care growth and cloud capacity planning A: Michael Dastoor talks about health care M&A activity and ongoing discussions, and discusses cloud capacity plans including retrofitting factories and expansion in Memphis Q: Ruben Roy asks about Hanley Energy and power distribution A: Michael Dastoor discusses Hanley's role in power management and thermal solutions, highlighting its services-enabled business and complementarity with existing thermal management acquisitions like Mikros Q: Melissa Dailey Fairbanks asks about automotive and transport outlook A: Michael Dastoor talks about automotive conservatism, ongoing powertrain agnostic solutions work, and expects upside in '27 as programs won today show up then Q: Mark Delaney asks about data center constraints and third hyperscaler A: Michael Dastoor addresses data center power issues, stating Jabil's solutions are addressing heat questions, and mentions ongoing discussions with a third hyperscaler without specifying product details yet Q: David Vogt asks about second half growth and free cash flow A: Michael Dastoor discusses second half growth with $900 million of revenue added in Q3 and Q4, and Greg Hebard confirms free cash flow guidance of over $1.3 billion, noting slight tick up in CapEx and working capital in the back half