Jabil (JBL) Q1 2026: AI Revenue Surges 35% as Cloud and Data Center Wins Expand Margin Leverage
Jabil’s first quarter delivered broad-based outperformance, anchored by a $900 million upward revision in intelligent infrastructure revenue, driven by AI and cloud demand. Segment momentum and disciplined execution are translating into higher margins and a raised full-year outlook, with ongoing investments in capacity and vertical integration positioning the company for durable growth into fiscal 2027. Investors should focus on Jabil’s expanding AI exposure, conservative guidance philosophy, and the impact of new service capabilities from recent acquisitions.
Summary
- AI-Driven Demand Shift: Intelligent infrastructure revenue outlook raised sharply on hyperscaler and data center wins.
- Margin Expansion Signals: Mix, utilization, and disciplined execution drive core margin improvement above prior targets.
- Pipeline Strength: Management signals robust, diversified growth visibility into fiscal 2027 and beyond.
Performance Analysis
Jabil’s Q1 results exceeded expectations across revenue, operating income, and earnings per share, underscoring the strength of its diversified portfolio and operational discipline. Intelligent infrastructure led the upside, with revenue outperformance attributed to accelerated cloud and data center infrastructure (DCI) demand, especially from a second hyperscale customer in Mexico and robust data center power operations in Memphis. Segment-level performance was broad: regulated industries delivered steady 4% year-over-year growth, while connected living and digital commerce benefited from automation and robotics program strength.
Margins expanded meaningfully, with core operating margin up 110 basis points in regulated industries and 40 basis points in intelligent infrastructure, reflecting improved mix and capacity utilization. The company generated $272 million in adjusted free cash flow, maintaining balance sheet strength and supporting continued share repurchases. Inventory days remained within target, and capital expenditures were modest, supporting a full-year free cash flow outlook of $1.3 billion.
- Cloud and DCI Acceleration: Recent program wins and vertical integration drove $600 million of incremental revenue in cloud and data center infrastructure.
- Networking Upside: Next-generation liquid-cooled platform demand in India lifted networking and comms outlook by $300 million.
- Healthcare Steadiness: Drug delivery and chronic disease management platforms continue to anchor regulated segment margins and cash flow.
Jabil’s revenue and margin guidance for fiscal 2026 were raised, with intelligent infrastructure now expected to represent a significant share of growth and margin leverage.
Executive Commentary
"The strength we're seeing here clearly validates our strategy by designing and delivering fully integrated systems that combine compute, networking, power distribution, and advanced cooling. We materially shorten deployment timelines and reduce total cost for customers, precisely what is required as AI capacity scales."
Mike Destor, Chief Executive Officer
"Our performance underscores the value of our diversified portfolio and our consistent execution. Intelligent infrastructure led the way with impressive growth, while regulated industries and connected living and digital commerce delivered steady results in line with or above our outlook."
Greg Hebert, Chief Financial Officer
Strategic Positioning
1. Intelligent Infrastructure: AI and Hyperscaler Expansion
AI-driven demand is fundamentally reshaping Jabil’s intelligent infrastructure business, with the segment’s outlook raised by $900 million for fiscal 2026. Key drivers include new program wins with a second hyperscale customer in Mexico—focused on AI storage racks—and ongoing momentum in data center power and networking, particularly next-gen liquid-cooled platforms in India. The Hanley Energy acquisition, power and energy management services, will add $200 million of revenue and create a recurring services stream, while expanding Jabil’s vertical capabilities in modular power distribution for next-generation data centers.
2. Regulated Industries: Margin Stability and Pipeline Depth
Regulated industries, including healthcare, automotive, and renewables, continue to provide margin stability and steady growth. Healthcare remains a core growth engine, with strong demand in drug delivery (including GLP-1 and continuous glucose monitors) and chronic disease management. Management flagged a healthy M&A pipeline to further verticalize and add capabilities, reinforcing healthcare’s multiyear growth profile. Automotive exposure is being managed conservatively, with investments in powertrain-agnostic and software-defined vehicle solutions positioning Jabil for future upside as program wins ramp in 2027 and beyond.
3. Connected Living and Digital Commerce: Automation as Offset
Connected living and digital commerce (CLDC) is navigating planned customer pruning, but automation, robotics, and warehouse programs are providing incremental upside. While the segment is expected to be down 11% year-over-year, digital commerce and advanced automation are offsetting declines, and management raised full-year CLDC guidance by $100 million. The focus remains on selective growth and margin preservation.
4. Vertical Integration and Services: Strategic M&A
Recent acquisitions in liquid cooling (Micros) and power management (Hanley) are expanding Jabil’s vertical integration, enabling it to offer full-system solutions and recurring services. This deepens customer relationships and supports higher-margin, stickier revenue streams, especially in data center infrastructure and healthcare.
5. Conservative Guidance and Capital Allocation
Jabil continues its pattern of conservative guidance, with management emphasizing prudence despite strong upside signals across segments. Capital allocation remains balanced, with $300 million in share repurchases this quarter and a commitment to maintaining capital efficiency and margin expansion as growth accelerates.
Key Considerations
This quarter marks a strategic inflection for Jabil, as AI-driven demand, vertical integration, and disciplined execution converge to drive both top-line and margin expansion. Investors should weigh the durability of these drivers, the company’s approach to capacity management, and the evolving mix across segments.
Key Considerations:
- AI Revenue Concentration: AI-related business now represents approximately 35% year-over-year growth, magnifying both opportunity and cyclicality risk.
- Capacity and Utilization: Factory retrofits for liquid cooling and new facilities in North America and India are ahead of schedule, supporting future growth.
- Recurring Services Upside: Hanley Energy acquisition introduces a services model, opening new maintenance and deployment revenue streams.
- Healthcare M&A Pipeline: Management is actively pursuing capability-driven M&A to further verticalize and grow the healthcare segment.
- Margin Leverage: Improved mix, higher utilization, and SG&A leverage are supporting margin expansion above historical ranges.
Risks
AI and cloud infrastructure demand is inherently cyclical, and Jabil’s increased exposure amplifies sensitivity to hyperscaler spending patterns, deployment timing, and technology transitions. Automotive and renewables remain conservatively guided, and supply chain or power constraints at customer sites could impact revenue recognition. Currency, interest expense from M&A, and evolving consignment models also introduce variability. Investors should monitor execution risk as the company ramps new programs and integrates recent acquisitions.
Forward Outlook
For Q2 2026, Jabil guided to:
- Total revenue of $7.5 billion to $8 billion, with intelligent infrastructure up 42% year-over-year.
- Core operating income between $375 million and $435 million, and core diluted EPS of $2.27 to $2.67.
For full-year 2026, management raised guidance:
- Revenue outlook to approximately $32.4 billion (up $1.1 billion from prior).
- Core operating margin to 5.7% (up 10 basis points).
- Core EPS to $11.55 (up $0.55).
- Adjusted free cash flow of more than $1.3 billion, unchanged.
Management cited visibility into all three segments, ongoing margin leverage, and a healthy pipeline as drivers of the improved outlook. Guidance remains appropriately conservative, with upside potential as capacity expansions and new program wins materialize.
- AI, cloud, and data center demand remain the primary growth engines.
- Healthcare and automation provide margin and cash flow stability.
Takeaways
Jabil’s Q1 2026 marks a step-change in growth visibility and margin profile, as AI, cloud, and services expansion unlock new scale and leverage.
- AI and Cloud Outperformance: $900 million upward revision in intelligent infrastructure is a direct result of new hyperscaler wins and vertical integration, setting the stage for sustained outperformance.
- Margin and Cash Flow Strength: Improved mix, utilization, and disciplined cost management are driving margin expansion and supporting robust free cash flow, enabling continued investment and buybacks.
- Watch for Pipeline Conversion: Investors should monitor the ramp of new programs, integration of Hanley Energy, and healthcare M&A activity as key levers for further upside.
Conclusion
Jabil’s first quarter demonstrates the power of its diversified, AI-enabled business model, with intelligent infrastructure leading a broad-based beat and guidance raise. Margin expansion, disciplined execution, and a robust pipeline underpin a positive outlook, though cyclical risks and integration of new capabilities warrant ongoing scrutiny.
Industry Read-Through
Jabil’s results signal a sustained wave of AI and cloud infrastructure investment, with hyperscaler demand driving both hardware and services opportunities across the supply chain. Thermal management, power distribution, and automation are emerging as critical differentiators for electronics manufacturing services (EMS) providers. Competitors will need to accelerate vertical integration and capability expansion to compete for high-margin, recurring service contracts. Healthcare and regulated industries remain a defensive anchor, but the industry’s center of gravity is shifting decisively toward AI-driven data center and networking solutions.