With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Fortune Global 500

Industries included in the sector are computers, internet services, IT services, semiconductors, and software companies.

Fortune Sector Leaders: Technology

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

America's Most Innovative Companies

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

World's Most Admired Companies

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

With 100 plants in 30 countries, the manufacturing services company is frequently recognized for its efforts in social and environmental responsibility. Its two largest customers, Amazon and Apple, contributed 31% of the company's $27.3 billion net revenue in the last fiscal year, according to an SEC filing.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-104-Jabil

This year's Fortune 500 marks the 66th running of the list.

F500-2020-121-Jabil

A contract manufacturer of circuit boards and computer systems for companies in many industries, Jabil operates at more than 100 sites worldwide.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Jabil provides electronics manufacturing and diversified manufacturing services to the telecommunications, health care, and automotive industries as well as others. The company was founded in 1966 and, up until 2017, was known as Jabil Circuit. In addition to providing design, production, and product management services for electronics, Jabil also offers product safety and compliance-related services and more.

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Jabil (JBL): Company Profile, Stock Price, News, Rankings

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Jabil

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Greetings. Welcome to Jabil's second quarter fiscal 2026 earnings conference call. At this time, all participants will be in listen only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to Adam Berry, Senior Vice President, Investor Relations and Corporate Affairs. Thank you, Adam. You may now begin.

Hello and welcome to Jabil's second quarter fiscal 2026 earnings conference call. Joining me on today's call are Chief Executive Officer Mike Dastoor and Chief Financial Officer Greg Hebard. Please note that today's presentation is being live streamed and during our prepared remarks, we will be referencing slides. To view these slides, please visit the investor relations section of jabil.com. After today's presentation concludes, a complete recording will be available on our website for playback. In addition, we will be making forward-looking statements during this presentation, including, among other things, those regarding the anticipated outlook for our business, such as our currently expected third quarter and full fiscal year 2026 net revenue and earnings. These statements are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially.

An extensive list of these risks and uncertainties is identified in our annual report on Form 10-K for the fiscal year ended August 31st, 2025, and other filings with the SEC. Jabil disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I'd now like to hand the call over to Greg.

Thank you, Adam. Good morning, everyone, and thank you for joining our call today. Our second quarter exceeded expectations on both revenue and core operating margin, driving another step up in core EPS. While intelligent infrastructure continues to be the primary driver of growth, we were encouraged to see solid performance across other areas of the portfolio as well. In regulated industries, revenue came in about $200 million above our Q2 guide, driven mainly by automotive, with renewables also performing better than expected. In intelligent infrastructure, we were up nearly $300 million above our Q2 guide, driven mainly by cloud and data center infrastructure and networking and communications. In connected living and digital commerce, performance was largely in line with expectations. Overall, Q2 was a strong quarter, and it provides us with greater confidence in our outlook for the back half of our fiscal year.

With that, let's walk through the numbers for the quarter. Net revenue for Q2 was $8.3 billion, exceeding our outlook for the period. Favorable revenue mix and ongoing cost discipline enabled us to achieve core operating income of $436 million and a core operating margin of 5.3%. On a GAAP basis, operating income was $374 million, and GAAP diluted earnings per share was $2.08. Core diluted earnings per share for Q2 was $2.69, reflecting results that were above our expectations for the quarter. Now turning to performance by segment in the quarter. Regulated Industries generated $3 billion in revenue, up 10% year-over-year and well above our outlook in December. The higher year-over-year revenue was driven by all three end markets.

Core operating margin for the segment was 4.8%. Intelligent Infrastructure revenue was $4 billion, up 52% year-over-year and also ahead of expectations. Growth was broad-based across capital equipment, cloud and DCI, and networking and communications. Core operating margin for the segment was 5.7%, up 40 basis points year-over-year, supported by favorable mix and disciplined execution. Connected Living and Digital Commerce revenue was $1.2 billion, down 8% as expected, reflecting planned program attrition and customer pruning. This was partially offset by continued growth in robotics, advanced warehouse, and retail automation. Core operating margin for the segment was 4.9%, up 40 basis points year-over-year. Turning now to cash flow and balance sheet metrics. Inventory days for the quarter were 75.

Net of inventory deposits from customers, inventory days were 60, consistent with our targeted range of 55-60 days. Cash flow from operations in Q2 was $411 million, and net capital expenditures were $51 million, resulting in adjusted free cash flow of $360 million for the quarter. This keeps us well-positioned to deliver over $1.3 billion in adjusted free cash flow for the full fiscal year. Our balance sheet remains in excellent shape. We ended Q2 with $1.8 billion in cash and remain fully committed to maintaining our investment-grade credit profile. During Q2, we repurchased $300 million of shares under our existing share repurchase authorization. With that, I'll walk through our guidance for Q3 FY 2026.

Beginning with revenue by segment, we anticipate Regulated Industries revenue of $3.1 billion, reflecting some growth in renewables, steady healthcare demand, and stabilizing trends in automotive and transport. For Intelligent Infrastructure, we expect revenue of $4.2 billion, up 22% year-over-year, supported by ongoing demand across cloud and data center infrastructure, advanced networking and communications, and capital equipment. For Connected Living and Digital Commerce, we expect revenue of $1.2 billion, down 10% year-over-year, reflecting continued program transitions and portfolio optimization, partially offset by growth in automation, robotics, and advanced retail and warehouse programs. At the enterprise level, total company revenue for Q3 is expected to be in the range of $8.1 billion-$8.9 billion.

Core operating income is expected to be in the range of $452 million-$512 million. GAAP operating income is expected to be in the range of $398 million-$458 million. Core diluted earnings per share is expected to be in the range of $2.83-$3.23. GAAP diluted earnings per share is expected to be in the range of $2.36-$2.76. We expect third quarter net interest expense to be approximately $73 million and full year interest expense to be approximately $280 million. Our core tax rate for Q3 and the full year remains at 21%.

Let me close by saying Q2 delivered strong results, and we are entering Q3 with solid momentum. Our performance this quarter demonstrates the strength of our diversified portfolio and disciplined execution. As we move through the year, our priorities remain consistent. We remain focused on margin expansion, capital efficiency, and sustained cash generation. With that, I will turn the call over to Mike, who will share more on fiscal 2026 and our updated guidance.

Thanks, Greg, and good morning, everyone. Before I get in the quarter, I want to recognize and thank our teams around the world for the focus and execution they continue to show. Jabil's strong performance in the first half has required a great deal of coordination across customers, sites, and the supply chain, and I'm sincerely grateful for what the Jabil team continues to do every day. As Greg outlined, the second quarter came in stronger than we had anticipated in December, with revenue approximately $500 million above the midpoint of our guidance, which also drove better than expected performances in both core operating margin and core EPS. For me, what was great to see, the revenue upside in the quarter was broad-based as cloud and data center infrastructure, networking and communications, automotive, and renewables all performed ahead of expectations.

When taking a closer look at the outperformance, clearly our Intelligent Infrastructure segment, driven by the AI data center build-out, continues to be our growth driver in the near term, while the outperformance in areas where we've recently seen headwinds, such as automotive and transportation and renewables and energy infrastructure, suggests to me that those markets have bottomed and are now slowly recovering. Just as importantly, our teams across the organization did an outstanding job by delivering for our customers and converting the stronger demand into higher than expected margins and strong core EPS growth and high free cash flow generation. In summary, Q2 was a strong quarter and is yet another example of our strategy in action. The diversifying model continues to matter, and the momentum we're seeing gives us confidence as we move through the balance of the year.

Let me now walk through our updated outlook for fiscal 2026 by segment, starting with Intelligent Infrastructure. We now believe our Intelligent Infrastructure segment will be approximately $16.5 billion, an increase of $1.1 billion over our previous expectations and 34% growth over fiscal 2025, driven by incremental growth in all three of our end markets in that segment. We now believe our cloud and data center infrastructure end market will be $10.4 billion, up approximately $600 million for the year relative to our forecast from 90 days ago, driven primarily by two factors. As a reminder, in September, we discussed our intention to retrofit our U.S.-based facility on the East Coast to support liquid-cooled racks, which gives us the flexibility to support both liquid and air-cooled configurations.

I'm proud to say that those modifications are largely behind us, which means we now have incremental capacity available a bit ahead of schedule. All of this comes at a good time for us as demand continues to outstrip supply for the integration of highly complex racks and servers. Secondly, also within cloud and DCI, we're seeing strong execution regarding the ramp with our second hyperscale customer in Mexico, which is also contributing meaningfully to stronger outlook, along with continued strength in data center power in Memphis. Also, our Hanley acquisition integration is going very well and according to plan. Next, in networking and communications, we now anticipate revenue will be approximately $400 million higher for the year, coming in at $3.1 billion, reflecting stronger demand and exceptional execution across our advanced AI networking programs in India.

This momentum is fueled by customers investing in greater high-speed interconnect capacity to keep pace with rapidly expanding AI workloads. It's also worth noting that our outlook for 5G spending is showing signs of recovery. In capital equipment, we're seeing positive momentum in this segment as well, with our outlook for the year now expected to be $100 million higher for the year, coming in at $3 billion. This reflects a combination of strong demand and execution in automated test equipment and more encouraging signs in wafer fab equipment, where the demand environment is improving beyond our earlier assumptions. Building on the strong results and positive momentum across the segment, we're further increasing our fiscal 2026 AI-related revenue outlook by approximately $1 billion compared to December, bringing the total to roughly $13.1 billion.

This now represents a strong increase of 46% year-over-year. I'm really proud of our Intelligent Infrastructure team and their ability to stay ahead of the curve and diversify across data center stack with multiple products, customers, and capabilities, which I believe is a key factor in our strong results and outlook for fiscal 2026. Simply put, our approach is delivering real value and is a key differentiator for Jabil. Our holistic strategy here centers on capabilities our customers' needs versus a product focus. We now have the capability to design and deliver integrated systems at the system level, combining compute, networking, power distribution, and advanced cooling, all aligned to our customers' specific requirements.

This seamless integration of capabilities accelerates deployment times and reduces total cost for our customers while leveraging our position as a U.S.-domiciled manufacturer, which is exactly what customers want as demand for AI capacity continues to expand and global uncertainty continues to grow. Moving to regulated industries, we're seeing some momentum behind the bounce off the bottom for the end markets we play in. For fiscal 2026, we're increasing our regulated outlook by approximately $500 million versus our December view to $12.5 billion. In automotive and transport, our strategy to focus on powertrain-agnostic capabilities is working as we continue to win programs on ICE platforms. On a positive note, and as I mentioned previously, we're also beginning to see momentum for EVs, mainly outside the U.S.

We're encouraged by what we're seeing, but we're going to stay extremely disciplined in both our outlook and investments regarding EVs. In healthcare and packaging, our business remains both solid and aligned with our expectations for growth as we move into the back half of the fiscal year, supported by continued strength in drug delivery platforms, including GLP-1 and continuous glucose monitors, as well as ongoing demand across diagnostics and minimally invasive technologies. In terms of pipeline for healthcare, our outlook remains solid for this end market, with good visibility into program ramps across drug delivery, chronic disease management, and other regulated devices in fiscal 2026 and beyond. We're also seeing improving conditions in renewables relative to what we assumed earlier in the year.

Again, we'll stay measured here, but it's worth highlighting that the mix of solar business has shifted to accommodate both residential and commercial installations, which we believe will create a more sustainable level moving ahead. Finally, in Connected Living and Digital Commerce. Our full-year outlook here is largely in line with what we laid out in December, but the story within the segment continues to move in the right direction. While Connected Living remains more stable, Digital Commerce continues to grow, driven by broad-based trend in automation, robotics, and advanced retail and warehouse programs. I believe robotics and Physical AI represent meaningful long-term growth opportunities for Jabil and should become increasingly important contributors to the segment's performance over the next several years. Given the strength of Q2 and the strong outlook for the back half of the year, we're increasing our full-year outlook for revenue and core EPS.

For fiscal 2026, we now expect revenues of approximately $34 billion, an increase of approximately $1.6 billion from our prior outlook of $32.4 billion. We're also raising our full-year diluted earnings per share outlook to $12.25, up from $11.55. For the full year, we continue to expect core operating margins of approximately 5.7%. Importantly, we still expect adjusted free cash flow of more than $1.3 billion. Even with the higher revenue outlook and the working capital that naturally comes with that growth, we expect to maintain strong cash generation and stay disciplined on capital efficiency. As we move ahead, the focus from here does not change for us. Profitable growth, disciplined mix, margin expansion and strong cash generation.

That focus continues to create momentum across the business and allows us to navigate changing market conditions while steadily building long-term earnings power. Additionally, as part of our ongoing commitment delivering value to shareholders, we remain focused on returning capital through share repurchases and other prudent capital allocation strategies. This approach not only reinforces the high level of confidence in our business, but also demonstrates our dedication to enhancing shareholder returns over the long term. Before closing, I want to again thank our teams, customers, and suppliers for their commitment and partnership. The consistency in our results is a direct reflection of their efforts, and I am grateful for the trust they continue to place in Jabil. As we mark Jabil's sixtieth anniversary, it's also worth taking a moment to reflect on the strong foundation built over decades and the shared commitment that continues to move us forward.

We are proud of our history, grateful to everyone who has shaped it, and excited about what lies ahead. With that, I'll turn the call over to Adam.

Thanks, Mike. Before we move into Q&A, allow me to close out with five quick key takeaways. First, we're exiting the first half with strong momentum. Q2 came in better than expected, and the strength was broad-based across multiple end markets. Second, Intelligent Infrastructure continues to perform at a very high level, with solid segment margins reflecting strong execution and continued growth. Against that backdrop, demand tied to AI and data centers remains strong, and we now expect AI-related revenue to grow approximately 46% year-over-year to $13.1 billion in fiscal 2026. Third, we're encouraged by what we're seeing in Regulated Industries. While healthcare has remained solid, automotive and renewables are starting to improve off their lows. Moving ahead, we'll stay disciplined in our approach for these end markets as the recovery continues.

Fourth, Connected Living and Digital Commerce is moving in the right direction as our mix within the segment shifts towards automation, robotics, and Physical AI, which we believe will be a growth driver over time. Finally, all of this supports a stronger outlook for fiscal 2026. We're raising our fiscal 2026 revenue outlook and core EPS expectations year-over-year, while we also continue to expect healthy margins and strong free cash flows as we approach fiscal 2027. One last shout-out to Jabil. Happy 60th birthday. Operator, we're now ready for Q&A.

Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question at this time, please press star one on your telephone keypad and a confirmation tone indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question is from the line of Ruplu Bhattacharya with Bank of America. Please proceed with your question.

Hi. Thank you for taking my questions. Mike, you raised Intelligent Infrastructure revenue by $1.1 billion. Can you help us rank order where you see the most opportunity? Is it in compute, networking or semi cap? This year, AI revenues are now growing almost 50% year-on-year. Is it reasonable to think that that strong growth can sustain beyond fiscal 2026?

Sure. Thanks, Ruplu. I know this is a critical part of our story, so I'll try and be as detailed as I can. The Intelligent Infrastructure growth was really broad-based across all three end markets. I think I mentioned on my call, Cloud and DCI was up approximately $600 million, networking and comms up about $400 million, and capital equipment up about $100 million. The $1.1 billion raise in Intelligent Infrastructure is quite broad-based. In Cloud and DCI, the $600 million increase. In September, we talked about the retrofitting of our site on the East Coast of the U.S. to accommodate liquid-cooled racks.

That would give us the optionality to do both liquid cooled and air-cooled servers. It would be sort of backward compatible and future-proofed as well. I'm happy to say, as I mentioned on the call, that retrofit actually was done sooner than we expected. We're about two or three months ahead of schedule, and that opened up some capacity on the East Coast, and that's flowing through our DCI cloud and DCI line. In addition, if you think about some of the other, the second hyperscaler that we've talked about, going really well in Mexico, it's on the AI compute storage ramp there. Some of our power business in Memphis, I think we've talked about that in the past, LV, MV switchgear.

The in-row heat exchangers that we do in Memphis is going extremely well. In fact, we have expansion plans for Memphis again, as we've talked about in the past. If you look at networking and communications, which is up about $400 million, it was really good to see $300 million of that came in from the networking side, and $100 million of that came from 5G. I don't think we've talked about 5G in a very long time, and we're seeing some positive upside there as well. On the networking side, the demand for high-speed interconnect continues to expand. We're looking at both Ethernet-related demand, InfiniBand-related demand, strong execution that we've had across our networking programs.

All that's coming across really well. Our sites in India are doing amazingly well, and we have some expansion plans for there as well. Networking and communications, again, well sort of spread out. Last but not least, capital equipment. If you think of the strong demand in capital equipment continues, the rapid sort of evolution that we're seeing in chip technologies, the high-performance computing, AI applications continuing to drive demand for testing. Automated Test Equipment's really doing well. If you go beyond that to wafer fab equipment, we're actually seeing some signs of improvement there as well.

On the wafer fab equipment, just being a little bit more prudent, it appears a little lumpy, so we're being conservative there, and we'll take our numbers up on the WFE side going forward as we see some level of clearer visibility as well. The $1.1 billion in Intelligent Infrastructure really well spread out. I think if you look at the AI piece that we talked about, that was $1 billion year-on-year. Sorry, from December outlook. Again, all of that, I'm really pumped up with what's going on in Intelligent Infrastructure right now.

Okay. Thanks for all the details there. I really appreciate it. As a follow-up, can I ask? Looks like, you know, it's a broad-based strength, and you've raised total company revenue guidance by $1.6 billion, but op margin is still 5.7%. Can you talk about the factors that are going into that? Are Intelligent Infrastructure margins where you would like them at? How much is mix a factor, and what are the factors that help drive op margin to greater than 6%, going forward, maybe in fiscal 2027?

As a reminder, we did take margins up in December by 10 bps. I feel really good about the 5% right now, the 5.7% for the year in FY 2026. Could it be higher? Sure. I just feel a little sort of. We wanna be a little bit more conservative given everything that's going on in the world with the geopolitics and the uncertainties out there. We'll update margin guidance in our next quarterly call for sure, but I'll be surprised if it doesn't go higher than 5.7% at this stage, but we're just being a little bit more prudent there.

As it relates to 6% and beyond, I think we have a really high level of confidence in that 6% for FY 2027. I think I've said this in the past, I feel better about 6% than I have ever gotten before. I think if you look at the main drivers for 6%, we're getting a really good mix of business, not just at the enterprise level, where some of the older, not the old, but the legacy businesses are coming back. Within Intelligent Infrastructure as well, we're seeing some decent signs of margin improvements there, particularly as we bring on new capabilities online, such as power, such as liquid cooling, et cetera, which are at a higher margin.

Silicon Photonics will be another one. I think overall, the 6% mix is really good. If you think of the operating leverage on a higher revenue base, we've taken up revenues $4 billion this year, and that will pay dividends as well going forward as we take revenues up, the leverage on that. We're seeing some better capacity utilization as well. I think last year we were at 75%. Today we're coming in at 80%, so that will continue to be a driver of higher margin.

If you add the acquisition that we made, the Hanley acquisition, that will scale with the Intelligent Infrastructure business, and that is gonna be accretive to our margins as well. All in all, 6% and beyond is highly doable, Ruplu.

Again, thanks for the details there. If I can sneak one quick one for Greg. Can you remind us on uses of cash? I mean, you've got growth in many different areas. How are you thinking about CapEx spend for this year? Where are you investing for growth? And also, if you can talk about capital structure, how are you thinking about you know, lowering leverage and also or taking on leverage for M&A? How should we think about that? Thank you.

Yeah. Good morning, Ruplu. Yeah, so on cash, really strong free cash flow quarter in Q2 of $360 million. We feel really good about the full year guide of $1.3 billion+. You know, what I would say is with the revenue increase, you know, working capital is slightly expanding, so we are holding our guide to $1.3+. Similar to Mike's, you know, comments on margins, you know, we'll see as, you know, the back half progresses, if there's opportunities to increase. On CapEx, you know, the back half we'll see CapEx in the 1.5%-2% range, so that will be slightly higher than what we saw in the first half. Overall for the year it will be around 1% of revenue.

We feel really good about where we're allocating our CapEx and continuing to grow. On use of cash as well, we're still very much committed to our capital allocation framework. You know, 80% of our free cash flow go on the share buybacks. We still feel buybacks remain an excellent use of cash for Jabil as we feel, you know, our shares are undervalued, and we'll continue to be opportunistic in that area. Again, feeling really good on our leverage where we are today. To your question on M&A. Yeah, you know, today, you know, 20% of our use of cash is for kind of nip and tuck capabilities and we've been really, I think, successful with that in the last couple of years.

We are at a point in leverage where we could lever up if the right type of M&A deal was available to us. We're always monitoring that, and we'll be ready and positioned if those opportunities come about.

Our next question is from the line of Mark Delaney with Goldman Sachs. Please just give us your questions.

Yeah, good morning. Thank you very much for taking the questions. First, on the data center and AI market, Jabil discussed in prior quarters being close to winning a new customer or potentially multiple new customers, and perhaps another large hyperscaler. I was hoping you could give us an update on where you stand with those efforts, and if you could also talk about what sorts of products and applications you think are most likely where you could see some share gain.

Oh, sure. The wins that we've seen, I think we've talked about Intelligent Infrastructure wins in the past of a second hyperscaler. We've done really well with that. The ramp's going really positively there. I think we're in close discussions with third hyperscaler. I expect some level of closure within the next few weeks. That will be a major contributor for FY 2027 as well. Our facilities, if you think of the expansion that we're undertaking in Memphis, where we're adding 1.5 million sq ft, that expansion is on track. We've talked about North Carolina in the past. We feel really good about filling up North Carolina.

I think North Carolina is on track. I think it'll be ready by July, August. FY 2027, we have a whole bunch of customers that are interested in that site, and we expect again to close on that relatively soon. Overall, the growth that we're seeing in Intelligent Infrastructure, the expansion plans, even networking, communication, all of that, is going exceedingly well. It's actually really broad-based. It's across the whole portfolio in Intelligent Infrastructure. I think I have to give a shout out to our team who's come up with a strategy on that as well, where it's a holistic sort of approach. We're not product-based.

We're providing integration at a system level, where we look at compute, we're looking at networking, we're looking at power, liquid cooling, and we're going across the customer's needs and requirements. It's not just one siloed sort of approach. Overall, it's going really well is the best way to describe it. I think I mentioned this in the past. I'm really pumped up with what's going on in Intelligent Infrastructure, and this is nowhere near slowing down. In fact, it's actually gaining momentum, particularly with all the capabilities and the design and engineering architecture that our team has managed to collate around this.

Very helpful, Mike. Thanks for those details. My other question was on supply chain. I think even prior to the upside in demand that Jabil has been seeing, there was some tightness in certain components. Could you speak more on what you're seeing in some of these various areas? I think, you know, semiconductors and memory was one. I think, you know, maybe some other components have been tight as well. Now that demand is stronger, as well as given what's going on with the Middle East, can you speak to your ability to get supply and kind of cost elements that may be associated with getting that supply in light of everything that's happening? Thanks.

Supply chain constraints, they are definitely there. They're getting a little bit tighter. I think if you look at memory, anything with DDR4 and lower is being impacted. One good thing about growth, which is mainly in the Intelligent Infrastructure piece, is with hyperscalers. Hyperscalers will get their fair share of the allocation, and they're on DDR5 as well. A different sort of perspective from that angle. There's some level of PCB constraints that we're seeing.

All in all, though, I think the shortages that are out there, our supply chain team, and we've demonstrated this in the past, I think they do such a good job in getting components and especially in a constrained market, they're actually hedging their elements. I will say, we have sort of factored in any supply chain constraints into our guide already. There might be some level of consumer sort of impact. Again, that's all factored in into our guide. At this stage, I don't see anything major coming out of the Middle East situation. Of course, that continues to go on for months and years. It could have an impact on the consumer again.

Overall, the summarized version is, yes, there's constraints, but I think Jabil is doing really well with those constraints.

Our next question is from the line of Steven Fox with Fox Advisors. Please proceed with your questions.

Hi. Good morning. My first question was on the Intelligent Infrastructure operating margins. It seems like, Mike, you were coming off a peak capacity constraints in the quarter, and yet you still produced 40 basis points year-over-year improvements in margins, and the margins were better than I thought they were gonna be. Can you talk about the outlook for II margins going forward, especially now that you're ramping other capacity? And then I had a follow-up.

Sure. If you look at Intelligent Infrastructure, you've got to think of it as a portfolio. It's across multiple capabilities. We have the DCI piece, the servers and rack piece, which will be at enterprise-level margins. But if you look beyond that, the networking piece, the Silicon Photonics piece, some of the newer things that we're playing in. If you look at the power management piece, with our LV/MV gear and the in-row heat exchangers, if you think of the liquid cooling piece, those are at a greater margin. Overall, the trend in margins for Intelligent Infrastructure, I feel, will continue to evolve over time.

I'm expecting margin accretion for sure in Intelligent Infrastructure going forward. Of course, it will take some time to get all of this at scale, but the margins are absolutely moving in the right direction.

Are we past the peak drag in, like, all the manufacturing reconfigurations and capacity coming online? Like, does that ease in the next couple of quarters, or is there things I don't understand about that?

No. I think just to remind everyone, the retrofitting was done mainly to give us the optionality to liquid-cooled racks along with the air-cooled racks. We do feel liquid and air will be in the future. There will be a mix move back and forth. We're well prepared to do that. All of that retrofitting has now been completed. We weren't doing that in multiple locations. It was in our U.S. East Coast site. We're about two or three months ahead of schedule, and that's one of the reasons we have the confidence to take our numbers up a bit. Retrofit is behind us.

I think the retrofit will actually help our business going forward because liquid cooling power is gonna be an issue going forward, and liquid cooling will play more and more of an integral part in that Intelligent Infrastructure space and especially in the data center infrastructure end market.

Great. That's helpful. Just as a follow-up, it seems like Physical AI is not just a buzzword anymore. There's a lot of investment going on. Do you have any programs that you could sort of highlight or opportunity sets that you're looking at as, you know, as that becomes more of a real use case on the factory floor or in warehouses? Thanks.

Sure. Let me provide more of a general view on Physical AI and where Jabil comes in more so than individual program wins. First of all, I think Physical AI is in its very early commercialization stage. There's very little real-world deployment. Again, depends on what your definition of Physical AI is. Costs continue to remain high. Complexity is very high. One good thing about Jabil is we participate at a very early stage. There's almost a meeting of the hardware that we make with the experience that we're gaining. What do I mean by that?

If you look at the devices and machines that require AI in this, in the real world, if you think of retail, warehouse robots, autonomous vehicles, drones, industrial automation systems, robotics and humanoids, these are all areas that Jabil already plays in from a hardware standpoint. If you think of all the capabilities that you need to enable to make these, what we term as Physical AI, it's sensors and vision systems. We're talking about onboard sort of compute and control hardware, connectivity, power systems, liquid cooling, thermal solutions, motion, actuation, related sort of subsystems, complex electromechanical assemblies. Again, all these areas where Jabil has experience, and we've been doing this for the last few years.

I do think today Physical AI is, like I said, in a very early commercialization stage. I think it will start getting more and more material over the years as we progress in the evolution of that space. I think the main constraint today is the high cost and complexity, and that will come down over time for sure. I can't think of anyone better positioned than Jabil to play in this space.

Our next question is coming from the line of Samik Chatterjee with JP Morgan. Please proceed with your questions.

Hi, thank you. Thanks for taking my questions. Mike, maybe just going back to your earlier comments about the broader opportunities and engagements with hyperscalers, maybe if you can just expand that a bit further in terms of if you're seeing any opportunities with the Neoclouds, any ways to intersect that market, particularly as you maybe look at opportunities both across compute or networking. What are you seeing in terms of your opportunity to intersect the CapEx spend we are seeing from the Neoclouds market as well? Any thoughts there? I have a follow-up. Thank you.

Yeah, we're seeing really good positive momentum, obviously with hyperscalers. On the Neoclouds side as well, we're winning business. We're winning sort of business with high frequency sort of trade down requirements as well. It's well spread out, Samik, in terms of what we're going after. Again, I go back to the strategy. We're not focused on individual silos or products. We're providing system integration at the system level. It's across the board. We can help with server racks. We can help with power. We can help with liquid cooling. We can help with network switching, Silicon Photonics. There's a whole bunch of capabilities that we're providing.

I think what I like about the whole Intelligent Infrastructure space right now is, you know, if you go back three or four years ago, maybe a little bit concentrated. Today, it's extremely well-diversified. It's diversified with customers, it's diversified with products, it's diversified within our capability set, it's diversified with design, manufacturing at scale, et cetera. Very positive outlook for Intelligent Infrastructure.

Got it. Just maybe a follow-up related to your capital needs or CapEx needs going forward. I mean, we've seen some of your peers sort of announce pretty significant increases in CapEx. How do you think we should sort of overall think about the trajectory here, in terms of you mentioned demand is continuing to outstrip supply. Is there a lot of pressure to sort of maybe add new facilities, in the U.S. from your side? And then, as you think about sort of capital needs, is there also a need to sort of maybe retrofit more facilities towards liquid cooling, through H2O-cooled racks? Like, how are you thinking about that mix, and does that continue to evolve and drive some capital needs on that front as well?

I'll let Greg Hebard answer the CapEx piece. Before that, just on the Intelligent Infrastructure, the beauty of the Intelligent Infrastructure business, it's very asset light. It's asset light in nature. When we go in, we're not talking about complex equipment. We're talking, you know, we're talking about special flooring. Some of the capital expenditure we see on the EMS side, you don't need a lot of that on the Intelligent Infrastructure space. I think our expansion plans will obviously continue. There's definitely a big requirement. As the asset light nature of all our investments actually gives me a lot of comfort and is actually extremely positive for our Return on Invested Capital as well.

Greg, I don't know if you wanna add anything.

Hi, Samik. Just on CapEx, you know, we feel comfortable in how we're modeling 1.5%-2% going forward on CapEx to revenue. So even with all the capacity expansions and the growth we're seeing, we feel that's a good run rate.

Our next questions are from the line of Melissa Fairbanks with Raymond James. Please proceed with your questions.

Hey, guys. Congrats on another fantastic quarter, and happy birthday. I wanna give you a chance to talk about Regulated Industries for a change. In auto and transport, we have actually seen better than expected results and guide this year. We've heard some negative anecdotes coming out of China EV market, which I know historically has been where you've been exposed. Just wondering what kind of details you're seeing within auto, if this is programs that are ramping in the back half of the year that you won a while ago and have been delayed, or if you're still seeing better sell-through even in China.

Let me just start by talking a little bit about automotive. I think we were heavily invested on the EV side a few years ago. Since then, we pivoted our strategy to focus on capabilities on powertrain agnostic sort of platforms, which means we're focused on ICE, which means we're focused on hybrids, which means we're focused on EVs. What we're seeing with OEMs is they wanna go across the platforms. I don't think they wanna have individual programs in silos or buckets. They're looking for compute modules, et cetera, that go across all three of the different categories. That is paying dividends for us. I think we're continuing to see program wins on the ICE side. I talked about EV being actually a positive momentum for us in Q2.

You're right, China is a little bit slow, but it's other parts of the world that are actually showing some sign of recovery. Again, I did mention in my prepared remarks that we're gonna be very conservative and prudent, and till we see strong signs, we'll continue to do so. Overall, in Asia, in different parts ex China, we're definitely seeing some signs of improvement there.

Okay, great. In renewables and energy infrastructure, you know, we toured the site in St. Pete where you're doing some of the commercial and resi solar stuff. I'm wondering how much of the strength that you're seeing in the near term is driven by the upcoming expiration of the tax incentives or if you believe this is really true, you know, sustainable demand improvement.

One of the reasons we're seeing this sort of shift or increase in demand is more driven by the installs. I think previously there was a lot of focus on residential. We're now moving to a stage where commercial installations is taking on a much bigger role, and I think it's less tax incentive driven than the residential side. It is sustainable. Again, we're gonna continue to be conservative. We've seen renewables move to the right and then come back to the left. We're just being a little bit cautious there. Overall, it's actually a lot more sustainable than one would think, given the expiration of tax credits.

Okay, great. One last final one on healthcare and packaging. It's great to see that you're finally seeing a little bit of inflection point higher on the equipment side with the minimally invasive equipment and imaging systems. Just wondering how the margin profile differs on that side of the business versus a lot of the injectables and disposables.

It's definitely accretive. It's accretive to Enterprise for sure, but it's accretive to the healthcare and packaging end market or the way we break it out as well. I think some of the GLP-1s and the CGMs have the scale. The minimally invasive technologies are more capability-based and have the margins to go with it.

All right. Great. Thanks very much, guys.

Our next question is from the line of Luke Junk with Baird. Please go ahead with your question.

Good morning. Thanks for taking the questions. On the AI front, hoping we could just double-click on your Silicon Photonics trends in the quarter and maybe more importantly, your high-level outlook there. Certainly hearing more about higher speeds, CPO type things and scale out applications. Just curious on your updated perspective. Thank you.

Sure. Just as history, we acquired the photonics business from Intel a few years ago, and that business has done really well for us from a capability standpoint. I think you mentioned CPO. We're actually developing our capabilities across co-packaged optics, across near-package optics, co-packaged copper. We're going beyond just the co-packaged optics and silicon photonics piece. We're actually at OFC right now this week, and we're demonstrating our system integration capabilities. We're looking at next gen optics from 800G to 1.6T. We're looking at in the integrated advanced packaging solutions.

If you look at the cooling technologies that have to accompany some of these capabilities, we're well positioned to benefit from that. All in all, I think if you look at some of the newer technologies that we're now developing and starting to talk about and showcase at OFC, I feel really good about the whole Silicon Photonics piece over time.

Thank you. The next question is from the line of David Vogt with UBS. Please just use your questions.

Great. Good morning, guys. Thanks for taking the question. Just two for me. I know you don't get asked a lot about sort of the consumer digital commerce business, but given sort of the, what appears to be kind of stability in that business relative to where you thought it would be, you know, three months ago and even six months ago, can you give us a sense for how you're thinking about sort of that, you know, at least feels like a positive trajectory in that business relative to expectations a couple of months or even a couple of quarters ago? Then I'll give you my second question, you know, at the same time, Greg.

When we think about that business holistically, is there anything in that business that, you know, is inflecting higher that's going to drive better profitability, you know, whether it's in sort of warehouse automation, digital commerce? Just trying to get a sense for how we should think about the margin trajectory of that business relative to the strength that you've seen in like Intelligent Infrastructure and Regulated Industries. Thanks.

Digital commerce will continue to be with puts and takes, obviously, if you think of some of the areas that we play in, retail automation in particular, where we have digital shelf labels, shelf data and analytics. Look at, in the retail sort of sphere, you look at the checkout or on-the-go point-of-sale devices, handheld scanners, et cetera. Those will move around a little bit. They'll be up, they'll be down. The areas that I feel really good about is the warehouse automation. If you think about warehouse automation, in the early stage was AGVs and AMRs. We've been playing in that for a while. Today, its entire complex Automated Storage and Retrieval Systems, we're playing in that.

I expect this part of the business to continue to grow at double digits. The one that I talked about a little bit earlier was the robotics humanoids piece. We've started playing on the whole humanoids piece at a very early stage. If you think of all the capabilities that we've developed over that timeframe, that will come together. It's gonna be more a thing of the future, but when it hits, especially when the costs start coming down, I think the whole Physical AI piece where it just won't be a dumb robot or a dumb humanoid, it'll be an intelligent humanoid. That's coming at some point in time, and we're really well positioned to play in that as well.

Digital Commerce is actually. I do expect Digital Commerce to continue to grow at double digits going forward.

Yeah. Hi, David, this is Greg. Just on the margins, and just to complement what Mike was saying, you know, digital commerce is one of our highest margin end markets when you look at that succinctly. So it's absolutely accretive to Jabil. With the growth rates we're seeing, you know, we're really excited about that space from a margin perspective as well.

Greg, can I just follow up? Does that support your kind of confidence and Mike's confidence in 2027 margins getting, you know, on an upward trajectory towards 6%, sort of that mix shift also within CL&D, you know, CLDC?

Yeah. I think the whole 6% is a diversified mix. It's much bigger than digital commerce. Obviously, we're seeing some of the regulated markets making a comeback. We're seeing a capacity utilization go up. We're seeing Intelligent Infrastructure, pure scale and volume that's coming through, which will create some leverage as well. It's one of the points that will drive us to 6% and beyond. By the way, we're not happy with just looking at 6%. That's not the area of focus anymore. It's how do we go beyond 6% is where the management team is focused on right now.

Thank you. The next questions are from Luke Junk with Baird. Please just use your questions.

Thanks for taking the follow-up. Sorry for the hiccup there. Just in terms of launching off of the 6%+ margin thought. Mike, hoping you could just speak to AI and automation. I know you've outlined it as one of your strategic pillars in terms of internal uses of AI especially, and just hoping we could get an update on the internal cadence of using AI in your operations, especially maybe any focus areas as we're moving through fiscal 2026. Thank you.

Sure. We've been using AI in our operations for a while now, even before AI was actually a thing. I think that usage is just getting deeper and deeper in terms of inspections, in terms of quality, in terms of corrective actions. If you think about the breadth of operational experience that we have in our manufacturing sites, I think we have coverage for most problems in the world in manufacturing, and we have a solution for each of those problems. And the whole database, the actual corrective actions that we can take in one place based on learning from another site, and the way AI facilitates that is actually a big thing as well.

If you add AI at a corporate level within the functions, et cetera, that's going reasonably well. AI will continue to be something that we focus on. It's AI for internal consumption is the best way I describe that to the team here, and it's going really well is what I can say.

Thank you. At this time, I'll now turn the floor back to Adam Berry for closing remarks.

Jabil (JBL) Q2 2026 Earnings Call Transcript

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