Good morning, everyone, and welcome to the fireside chat with Jabil. I have the pleasure of hosting Michael Dastoor, who's the Chief Executive Officer, and Matt Crowley, who's EVP of Intelligent Infrastructure for Jabil. Thank you both for coming to the conference, and thank you to the audience as well. Mike, maybe I'll kick it off with you and Matt, feel free to jump in here. A lot of investors I talk to, what's been more sort of surprise to them has been the significant repositioning over the last five to seven years for Jabil. As you sit here today, you have 40% of your revenue exposure linked to AI, including some proprietary capabilities like optical via the Intel acquisition, Intel asset acquisition. You have power products via Hanley.
When you now think about the next 5 to 7 years, what do you see as Jabil's role in AI infrastructure landscape in particular?
Sure. I think, first of all, thank you for having us. I think the whole Intelligent Infrastructure piece today is going really, really well. Strong demand from everywhere. I think it's kudos to the team, Matt and his team here, who've actually built a profile which is not product-based. It's not just a single silo. It's across multiple capabilities. It's across multiple sort of the highlights that we've seen. You know, we're in power management, we're in service racks, we're in liquid cooling, we're in servicing and maintenance as well.
There's a whole bunch of things that we're involved in, and all of these are coming to fruition very nicely where you make an entry through one particular silo, and very soon the conversation goes across. I think one of the things that we've been trying to do is, it's all about value offering. It's all about an expanded value that you provide to your customers. If there is a chance for us to do an end-to-end solution across the data center, that becomes an extremely helpful sort of condition for customers. I think in going forward the next five, seven years, I don't see anything happening to this whole AI. I don't think there's a bubble. I think things continue to progress well for us.
I think, the only thing we have right now is some level of capacity constraints, and we're constantly working on those. Next five, seven years will probably be the most exciting years, that I've ever seen and Jabil has ever seen.
Yeah.
Yeah, I would just add, the proliferation of complexity in the hardware that we're seeing now around AI plays really well into our strategy, where we have specifically built capabilities versus being focused on one product or one piece of IP. As things get more complex, we feel like we're better positioned.
Okay. Okay. How do you think about, when you think about the growth over the next five to seven years or medium term, how do you balance that with margins and improvement in the margin profile as well? I think you've seen a significant margin improvement over the last few years, which you've been rewarded from by investors as well. How do you think about continuing that while pursuing the growth?
Sure. I think, if you look at margins and you refer to 6, 7 years ago, our margin was 3%. When you are at 3%, 4% looked like a ceiling. When you're at 4%, 5% looked like a ceiling, and so on and so forth. Since that time when we were 3%, we've repositioned the company. What do I mean by that? We're no longer a contract manufacturer. I don't like that term. It has very negative sort of connotations. I like describing Jabil as an engineering-led, supply chain-enabled manufacturing solutions company. I think the engineering piece, the supply chain piece are as important, if not more so, than the manufacturing piece.
Today, from an engineering perspective, if you look at the offering that we have, we almost have 9,000 engineers in the company. That's a big amount. Not many engineering companies have 9,000 employees or 9,000 engineers in their organization. A customer comes to us today with a concept, we're helping the customer design the product. We're helping them design for manufacturability. Most of the time when customers come to us, their design can't be manufactured. It can't be manufactured at the right cost or efficiency levels at scale. We help them through that entire process. Engineering is a big one. Supply chain, equally big, especially, I think our supply chain team is really good during normal times.
During constrained times, as we're seeing now, which is probably the new norm, they're really, really good, because of all the relationships they built up, because of the systems and everything, that they've focused on over the last few years. The manufacturing solutions, you look at robotics, you look at automation, you look at engineering, the quality that we provide, our test environment, et cetera. It's a higher value offering. I don't, I don't see 6% as a ceiling. I don't see 7% as a ceiling. You know, the organization's gonna keep pushing, and we're gonna continue to go up that value offering chain. That will allow us to continue with our margin accretion story.
maybe let's deep dive into the segments and then starting with Intelligent Infrastructure here. hyperscales CapEx, we've seen all the companies, cloud companies raise their CapEx spend outlooks. How should we think about broadly how Jabil has leverage to the increasing CapEx outlooks from these companies?
Yeah, I think, you know, when you think about the strategy we've deployed with a focus on capabilities versus products. That cuts across architectures, it cuts across customers, it cuts across models. Clearly, increases in CapEx across that customer base is good, great news. The way we've positioned the business and our capability around supporting customers broadly in that area, we think puts us in a great position to capture more than our fair share.
Yeah. Okay. Maybe talk about areas that you can incrementally address within those opportunities on AI infrastructure. You already do sort of compute, you have optics.
Yeah.
Maybe talk about whether you see the more sort of incremental opportunities with hyperscalers and helping them scale their AI infrastructure.
I would say that the opportunities are everywhere, right? At this point, it's not about share, it's really about keeping up with the organic growth of the entire market. If I think about specifically where I feel like we're gonna have a really good advantage, you know, we demonstrated a 1.6T LRO part at OFC, which is about 11 kilowatts, dramatically lower than current 1.6T power profiles. I think as that gets into qual, we're excited about that. We also have developed a partnership model as networking moves away from the top of the rack and to a more system rack level architecture. We feel like we're in a really good position to partner with some of the customers that we have.
We're never gonna compete with them, but delivering the ability to scale out and scale across via partnerships, I think is gonna be a great business for us. Frankly, you know, when you think about our inorganic growth strategy, it's really to Mike's point on how do we create more value that customers are willing to pay more for and thus have higher margins. I think we see the Intel transceiver business starting to pay off. I think Mikros is gonna pay off significantly, which is where we bought a company that has differentiated liquid to chip capability. Right now it looks like, you know, that part can cool incrementally up to 4 or 5 kilowatts versus competitors. Hanley, where we now have a services organization where we can deploy 50 kVA gear.
Not something you can pull somebody off the street, in Virginia to do, and then service it as an ongoing revenue recurring stream. Really nice margins there and we're headed towards, you know, the segment being at line, if not accretive to the enterprise.
Got it. Just to summarize, most of the incremental opportunities you're highlighting are better margins than what you currently see on the corporate.
Yeah, absolutely. We are gonna be very disciplined about the business we take, and we're gonna balance growth with expansion of margins, and that's our focus.
Okay. Maybe starting with one of those, which is liquid cooling, which is moving from just having a nice to have to now being mandatory or sort of required for all customers. Walk us through the broad capabilities that you have to address those requirements, including Mikros, particularly sort of how you think about Mikros in the next few years, delivering revenue for you.
I mean, we have very intentionally built engineering and architecture teams that can address any requirement across, you know, XPU, whether it's liquid cooled or air cooled. I think it starts there. We've got a transceiver part that's actually immersion cooled, we have capabilities in that space. We obviously, you know, have talked in the past about our factories on the East Coast, preparing them for liquid cooling, which, you know, per the call in Q2, clearly we've done a decent job at. You bring in Mikros where we can have differentiated levels of cooling. You know, as you get to Tomahawk 6, et cetera, where there is a higher level of power required and more heat to dissipate, we feel like we've got an advantage there.
It kind of rolls right into our DCI business, where we have the capability to manufacture CDUs at scale, per customer designs or not, and power equipment. Across the spectrum, from a liquid cooled perspective, we have capabilities that we can address pretty much any of our customers' problems with.
Got it. Got it.
Just to add on that, I think if you look at liquid cooling, liquid cooling is a way of getting into the door as well. There's a high demand for this capability. We seek to have a differentiated sort of offering there. We often go in through the liquid cooling door, and soon the conversations move to server racks, moves to power management, moves to other parts of a data center. That is the strategy. That's why we actually acquired Mikros Technologies. It wasn't for the revenue stream that Mikros Technologies got by itself. It's across the board. It's enablement of an entire data center.
Matt, going back to what you referenced, the power capabilities, towards the end of the last answer. A lot of investor interest that we're seeing on that front and understanding power capabilities that you have. Maybe help us understand the capabilities that Hanley brings, the acquisition brings to you, and how should investors think about the growth opportunity with Hanley?
Hanley was a really good fit because their approach was also not one of specific product, but rather engineering capability. We've got a really nice complement to the engineering and architecture capability that we had already created in the space. It expanded a bit, we can actually now design and manufacture at scale power products like PDUs, LVS, medium volt switchgear, as well as getting the ability to service and deploy the product. If I were to refer to what expectations around growth should be, you know, I would say that that business, much to the way Mike described the entry point, will probably start off between, you know, the $200 million-$500 million range, but will expand dramatically from there over the next three years.
Yeah. Are you seeing any changes on the lead times of these power products in terms of what's typical lead time in terms of you addressing customer demand today? Is the supply chain getting more constrained? Is that leading to somewhat maybe a pricing opportunity eventually as well?
Yeah, it will have challenges, a lot of it is very customer dependent and model dependent. For example, with our hyperscale customer, you know, we build their LVS gear. We build it and deploy it, they have a ton of procurement power, typically, you know, we'll get more than our fair share of parts in that space. We haven't seen it really impact the existing business. Does it threaten potentially future business? Could. We have a really good supply chain also to Mike's earlier point, we're very proactive in addressing any potential shortages we see coming.
Okay. Got it. Maybe now let's flip over to discussing optics and your silicon photonics.
assets that you have are quite well-placed because everyone wants silicon photonics at this point in their networking. Can you highlight what your competitive moat is at this point, and how is it helping you in terms of landing and expanding with some of your hyperscalers?
Yeah. I would tell you that, you know, obviously the Intel transaction gave us capability, it gave us capacity, and it gave us a quick entry into silicon photonics, so we'd be ready for co-packaged optics. I think that there's the potential for a relatively dramatic moat with our LRO part that's gonna pull 11 kilowatts, the 1.6T. That goes into different quals across the next, you know, 1-4 months. We'll have to see how it comes out. You know, the quals can take anywhere between 2-6 months, we feel like that could be a major differentiator in the space. We also created a pilot line in Ottawa, Canada for advanced packaging in order to be prepared for things like process development on co-packaged optics, where it's super complex.
We can develop processes in Ottawa and then deploy those at scale in places like Penang as we get more business. Obviously, we've had a continuing really nice business in the networking space, and being able to now deliver a co-packaged optic switch is going to put us in a great position.
Maybe talk about timing for co-packaged optics. I think there's a lot of industry debate about what that actual timing looks like. What are you thinking-
If you ask Jensen, it's today. I think if you look at the economics of it, the price curve has not come down in line per gig. My sense is that there, you know, as usual, Nvidia will probably be leading, clearly. Will the entire industry follow? I think there has to be some level of standardization from customers in order for suppliers to go and create, you know, processes that are repeatable, versus one-time events. Until you get to that kind of an ecosystem economically, I think it's gonna take a while. It's somewhere in between today with 1 customer versus X number of months with, you know, 50 customers.
Okay. Maybe let's just go a bit further down that path that you discussed, like the CPO switch, for example. Before we discuss CPO specifically on the switch side, you do have capabilities in switching that extend both across Ethernet and InfiniBand.
Correct.
Um-
We build both types today.
Yeah. How are you thinking about growth drivers for those individually? How do you sort of take that forward into what are you getting in terms of visibility from the customer in relation to a CPO switch?
Growth drivers are kind of everywhere. I would tell you that the entire market continues to expand. We obviously do see products mix, and I'm very careful not to try and reveal customer specific data, but I would tell you that the mix between an Ethernet and InfiniBand solution has been kind of back and forth, not one big pivot. For us, you know, it hasn't had a big change in the business. Overall, whether it's a CPO architecture or Ethernet or InfiniBand, again, our strategy around capability has us well positioned to deliver all of those.
Okay. Okay. Maybe moving to overall concerns that we've been generally hearing from investors, how should we think about the market share for Jabil with your current largest customer within Intelligent Infrastructure? There are obviously a lot of concerns around market share moving around when it comes to compute, in particular with your largest customer. What are you seeing in terms of position with the largest customer, and how confident are you about maintaining share?
What's the thesis on share concern?
More competitors coming into working with the largest customer on the compute side.
Yeah, I'm not worried about that necessarily, is what I would tell you. We build every rack type they consume, so core compute, networking, storage, custom silicon, liquid cooled, air cooled, GPU liquid cooled, air cooled. On the core compute side, you know, I will say probably the last time that I saw you, we were talking about the fact that I think that we're gonna see an actual increase in core compute because customers a couple years ago forgot that they still needed to actually compute, and all they spent money on with CSPs was AI. I think we've seen that start to come to fruition.
When you think about, you know, the recent conversations around CPU and agentic, and inference driving a whole bunch more x86 and/or Arm solutions, I think we're gonna start to see that shift inside of our business as well. You know, whether it's Graviton or another customer's solution in that space, you know, again, we have the capability to go and execute.
I think the relationship with the largest customer is in really good shape, and I see that relationship expanding even further.
Maybe address that from a capacity constraint standpoint. Like, as much as your relationship is strong, I think one of the concerns investors have is that you're capacity constrained, and does the largest customer need to engage more suppliers to ease some of those capacity constraints? Maybe talk about it from the standpoint of the largest customer, but then we can move more broadly in terms of what you're doing to address some of the capacity constraints broadly for the company as well.
Sure. I think the capacity constraints are more a timing issue. We've been working on a whole bunch of expansions. I think on the earnings call, I talked about our facility in on the East Coast of Florida. We talked about how the retrofit was going. Now we have the ability to air-cooled and liquid-cooled pieces. I think if you look at the new factory that we're looking at in North Carolina, that's on schedule towards the end of this fiscal year. If you look at the 1.5 million sq ft that we're adding in Memphis, that's another piece that's related to the largest customer. That's a big, humongous factory. 1.5 million sq ft is huge.
Then we're expanding parts of Mexico, we're expanding India. There's a whole bunch of expansion that's taking place for the largest customer, beyond the largest customer as well. One of the things just from a, from a capacity at the enterprise level, there's a little bit of a mismatch, 'cause we have a little bit of surplus capacity today on the regulated market side, which by the way, is improving. When that capacity gets absorbed, there's a multiplier effect. It helps absorb capacity on the underutilized side, and all these new factories, new expansions, new ramps will come on board. I don't lose sleep over capacity constraints.
We're extremely disciplined, and we sort of focus our expansion based on customer visibility as well.
Okay. Okay. How are you handling capital and resource allocation outside of Intelligent Infrastructure given the growth that Intelligent Infrastructure is seeing? I'm assuming that sees an outsized sort of investment in it relative to the other parts of the business. How are you making sure that you balance the resources and capital with the other groups as well?
Let me just start by saying Intelligent Infrastructure, Matt's business is actually an asset light business. It's actually great for free cash flows. It's actually quite limited on capital expenditure. You don't need special flooring, you don't need SMT lines, you don't need a whole bunch of equipment that you'd need on the other side of the business. Of course we're expanding, we're creating capacity. That has some level of cost, but it is absolutely not impacting the other side of the business. I'd go so far as to say that, you know, the surplus capacity that we have today is being absorbed on the other side, and we're looking at new sort of expansion beyond that, outside of Intelligent Infrastructure as well.
Salt Lake City, we're looking at Richardson, we're looking at buildings in Mexico, and they have nothing to do with Intelligent Infrastructure. CapEx is very measured, it's very focused, and I see absolutely no reason for it to be anywhere outside of the 1.5%-2% revenue. As the revenue numbers go higher and higher, 1.5%, 2%, is still a reasonable expectation from us.
Okay. Okay. Maybe let's switch over to regulatory industries for a bit. Automotive, renewables, these areas saw better than expected demand in the latest quarter. Just maybe let's start with automotive. How are you thinking about industry production trends going forward? I mean, clearly the, those haven't been robust in the past, is the outlook there improving or the confidence level there for the automotive segment improving?
Yes, we did take our automotive numbers up quite a bit on the last earnings call. It was a little bit of a mix. There's obviously some level of outlook improving outside of the U.S. and outside of China. If you look at Europe, if you look at other parts of Asia, well, we're seeing some pickup on the automotive side for sure. I think the If you go back a few years ago, we were heavily indexed on the EV side.
Since then, we've actually pivoted and we've moved our capabilities on a powertrain agnostic basis, which means our capabilities now go across hybrids, they go across ICE, and they go across EVs, and that is a very Jabil specific reason for the incremental revenue that we put out. There's a lot of interest. OEMs are bypassing tier ones. They wanna own the IP, they wanna own the experience. They are coming to companies like Jabil which can offer what they're looking for. Automotive's doing, I'd say better than feared. I think as things continue, I do think automotive will start to see a turnaround.
I think it was only in December or January, EV sales were highest in Europe. They'd overtook ICE sales for the first time. There are definitely pockets of improvement right now on the automotive side.
Okay. Okay, great. Maybe talk about the structural shift in your renewables business, because I think for 2 consecutive quarters you've had mid to high single digit upward revision in your outlook for fiscal 2026. How are you thinking about sustainability of the stronger demand you're seeing more recently there?
I think there's about, there's 3 reasons, let's say, for this expansion on the renewables side as well. I think there are some projects which have been safe harbored in the One Big Beautiful Bill Act. I think that's working out really well, and I think it still has long legs, so there's plenty of projects left on that safe harbor provision. I think if you look at the incessant demand for power through data centers and AI, that is driving a demand for alternative sources of power. There's a lot of conversations, there's a lot of interest shown, not just in the U.S., but overseas as well. Last but not least, I think the tax incentives were taken away for residential purposes.
I think we're seeing a big shift in residential projects moving to a commercial project-based outlook. It's good for us because residential is very tax incentive-based, while commercial is not. Again, very long legs in terms of renewables. We're trying to be prudent, so we'll always lead with conservatism there. As long as we continue to feel good, which I do right now, I think renewables will be a growth area going forward.
Interesting. Healthcare, ideal growth opportunity for the business. How are you thinking about potentially any accelerators of growth, and any updates on how you're thinking about the M&A pipeline for healthcare?
I, I'm most excited about the healthcare end market. Obviously, Intelligent Infrastructure is a piece that is driving all the growth, is driving all the demand today, so really good to see that. Healthcare, I like almost everything about healthcare. If you look at the long product life cycles, often the product life cycles go into double digits, 10 years, 15 years. You don't see that in other parts of the business. When you have 10, 15 years of manufacturing behind you, your efficiency levels, your cost savings go up considerably. I think long life is a big one. The financial metrics, if you look at the margins, you look at the free cash flows, everything is really positive there.
One additional data point on the healthcare piece is healthcare is a relatively immature outsourcing market today. There is a level of fear and hesitancy to outsource, that will open up one day. It has to because, I think healthcare companies are better off focusing on their own projects, their own development, their own products, and leaving the manufacturing to someone who can actually do it at scale with a whole bunch of engineering capabilities attached to it as well. I do feel really good about healthcare. I think in terms of growth, mid to high single digits is an expectation. I think that growth will come through GLP-1s for sure. We're the world's largest manufacturer of diabetes injector pens.
If you look at continuous glucose monitors, diagnostics, minimally invasive devices, all of that falls within within the healthcare purview and high growth potential there. Some of the accelerators that you referred to, obviously, I said I like almost everything about it. I don't like the fact that everything in healthcare takes a long time. To win the business takes eight, 12 months, 18 months. Once you've won the business, to get the FDA qualifications, the regulatory qualifications, setting it up, automating processes, et cetera, take another 18 and 36 months. It's a very long, long gestation period. Once it's there, it's there for 15 years. That's, it's definitely worth waiting for.
I think the acceleration will come on some of the program wins that we've had, but they haven't hit volumes yet. That will come. We're looking at capability-driven acquisitions. We'll continue to do that. We'll look at B2B transactions. I think we're having some good discussions. Overall, healthcare just seems to be steady Eddie, and it's, I The way I put it's not recession-proof, but it's definitely recession-mitigated. Healthcare, people still need healthcare.
Sure. Let me check if anyone in the audience has a question. I think if you can get a mic here.
In listening to your discussions around, both having current capabilities and acquiring capabilities, is it a view that you have a fairly significant untapped organic growth opportunity sitting inside the current client base?
Was that specific to intelligent?
Just-
Just in general?
Just in general, but it also sounds like.
Yeah
actually particularly in healthcare, I would think.
Right. I think healthcare is a great example of why we would do a capability-driven acquisition is to go vertical. I think we did that with the PII transaction. We're the world's largest maker of injectors. What if we could do the filling of the med, of the GLP-1 itself? It's all about making a vertical integration play. Most of our capability-driven acquisitions will be around that. I think the Mikros Technologies, that was based around data centers. Let's go, "Hey, can we go vertical across the data center?" Hanley Energy Group is another good example. "Hey, can we do deployment and servicing and maintenance of a data center?" I think capability-driven acquisitions, we've done quite a few in the past. They're nice tuck-in acquisitions.
They're not very expensive, but they have huge returns for a company that already has a whole bunch of capabilities attached, and you can sell it as a package.
Yeah, please.
I agree with you. I don't think we're gonna see a bubble burst in AI, but I do suspect at some point they'll be less frothy, maybe be a little more of a plateau at some point. When you hit that plateau, do you have some sense that you need to start thinking more about how to be more effective at the backlog that you've created and then, you know, transition from, you know, lots of acquisitions as well to how to become more operationally effective, which is a little more of a core capability at Jabil at one time.
You wanna talk about the AI?
I mean, from an AI perspective, I don't disagree with you. I think things could plateau. I think calling that is pretty difficult. You know, just over the last 2 or 3 weeks we've seen, you know, x86 and Arm explode because of agentic and inference. When it does happen, we very intentfully have built a resilient portfolio across the segment. The capabilities, whether they be in capital equipment, in cloud and DCI, in silicon photonics, we're still going to be able to build compute requirements, networking requirements, storage requirements. Even if there's an AI bubble, people are still gonna have to store data, they're still gonna have to compute, we're in a perfect position to support it. From our perspective, you know, is it gonna potentially plateau? Maybe.
When it does, we've got enough breadth of capability to still have a really good business.
I think a diversified portfolio, diversification within Matt's business itself, outside of Intelligent Infrastructure as well. Every end market goes through an up and down cycle. You need to make sure that you have natural hedge. When something's going down, something else will start coming up. The more optionality you have around these peaks and troughs of cycles, the more diversification plays a big role. Diversification will continue to be one of our strategies going forward as well.
My counter to the diversification, one of your peer companies did announce their spinoff of their data center link businesses.
It took you 29 minutes but I'm like, "Nah.
I was keeping the best for the last.
It's the longest of the day at least.
I wanted to make sure people stay back for that one.
Okay.
The one in primarily a lot of the investor questions have been does it make sense for Jabil to look at something similar? Any secondly, any thoughts on changing the competitive landscape on that count?
Look, the board and I are constantly looking at alternatives in terms of strategy. We're looking at ways to unlock and create shareholder value. It happens all the time. Having said that, I think our strategy remains unchanged from what it was two weeks ago. I don't think we're gonna change the strategy based on peer thoughts which, you know, well, might be valid for them. One thing if you look back in at what Jabil's strategy has been, diversification has been the biggest building block for us. We're in 8 end markets, like I said, we can talk about 27, 30 other sub end markets.
The diversification, and again, I talked about that, it's a natural hedge in up and down cycles. By the way, which we're seeing today when all of the end markets seem to be in a good position, there's a multiplier effect. Diversification does have its positives. Product companies have certain challenges as well. Fear of disruption. Technologies are evolving at such a rapid pace today that there's always a fear of disruption. That leads to more R&D, that leads to more capital expenditure, that leads to using your balance sheet to go and go and keep up with the technologies. You know, eventually I think customers also want to see some level of ownership of IP and the experience.
Look, it's just two different paths. I'm not suggesting one is better than the other. Today we'll stick with our strategy. Tomorrow if things change, we'll always look at ways of creating shareholder value.
Great. I'll wrap it up there. Thank you. Thanks for coming to the conference. Thank you to the audience as well. Thank you.
Thank you.