Jabil (JBL)

Electronics manufacturing services provider Jabil (NYSE:JBL) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $6.73 billion. On top of that, next quarter’s revenue guidance ($7 billion at the midpoint) was surprisingly good and 4% above what analysts were expecting. Its non-GAAP profit of $1.94 per share was 6.2% above analysts’ consensus estimates.

Company Overview

With manufacturing facilities spanning the globe from China to Mexico to the United States, Jabil (NYSE:JBL) provides electronics design, manufacturing, and supply chain solutions to companies across various industries, from healthcare to automotive to cloud computing.

The sector could see higher demand as the prevalence of advanced electronics increases in industries such as automotive, healthcare, aerospace, and computing. The high-performance components and contract manufacturing expertise required for autonomous vehicles and cloud computing datacenters, for instance, will benefit companies in the space. However, headwinds include geopolitical risks, particularly U.S.-China trade tensions that could disrupt component sourcing and production as the Trump administration takes an increasingly antagonizing stance on foreign relations. Additionally, stringent environmental regulations on e-waste and emissions could force the industry to pivot in potentially costly ways.

Jabil competes with other electronics manufacturing services providers including Foxconn (TPE:2317), Flex Ltd. (NASDAQ:FLEX), Sanmina Corporation (NASDAQ:SANM), and Celestica Inc. (NYSE:CLS).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $27.45 billion in revenue over the past 12 months, Jabil is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because it’s challenging to maintain high growth rates when you’ve already captured a large portion of the addressable market. To expand meaningfully, Jabil likely needs to tweak its prices, innovate with new offerings, or enter new markets.

As you can see below, Jabil struggled to increase demand as its $27.45 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a poor baseline for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Jabil’s recent history shows its demand remained suppressed as its revenue has declined by 11.6% annually over the last two years.

This quarter, Jabil’s $6.73 billion of revenue was flat year on year but beat Wall Street’s estimates by 5.1%. Company management is currently guiding for a 3.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.8% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Jabil was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.4% was weak for a business services business.

Looking at the trend in its profitability, Jabil’s operating margin might fluctuated slightly but has generally stayed the same over the last five years, which doesn’t help its cause.

In Q1, Jabil generated an operating profit margin of 3.6%, down 13.1 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Jabil’s EPS grew at an astounding 22.2% compounded annual growth rate over the last five years, higher than its flat revenue. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t expand.

We can take a deeper look into Jabil’s earnings to better understand the drivers of its performance. A five-year view shows that Jabil has repurchased its stock, shrinking its share count by 26.9%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q1, Jabil reported EPS at $1.94, up from $1.68 in the same quarter last year. This print beat analysts’ estimates by 6.2%. Over the next 12 months, Wall Street expects Jabil’s full-year EPS of $8.14 to grow 17.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Jabil has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.1%, subpar for a business services business.

Taking a step back, an encouraging sign is that Jabil’s margin expanded by 3.1 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.

Jabil’s free cash flow clocked in at $261 million in Q1, equivalent to a 3.9% margin. This result was good as its margin was 3.2 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Jabil hasn’t been the highest-quality company lately because of its poor top-line performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 29.9%, splendid for a business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Jabil’s ROIC has increased significantly over the last few years. This is a good sign, and we hope the company can keep improving.

Jabil reported $1.59 billion of cash and $2.88 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.01 billion of EBITDA over the last 12 months, we view Jabil’s 0.6× net-debt-to-EBITDA ratio as safe. We also see its $56 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Jabil blew past analysts’ revenue expectations this quarter. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 6.5% to $148.50 immediately after reporting.

Updated: June 14, 2025 at 10:57 PM EDT

Before deciding whether to buy Jabil or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Jabil’s business quality ultimately falls short of our standards. To kick things off, its revenue growth was weak over the last five years. And while its scale makes it a trusted partner with negotiating leverage, the downside is its operating margins reveal poor profitability compared to other business services companies. On top of that, its low free cash flow margins give it little breathing room.

Jabil’s P/E ratio based on the next 12 months is 18.4x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $176.01 on the company (compared to the current share price of $172.63).