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Jabil (JBL +12%) is trading sharply higher following its Q3 (May) report this morning. It reported its largest core EPS beat in four years while revenue grew a healthy 15.7% yr/yr to $7.83 bln, well ahead of analyst expectations, and ending a string of seven consecutive top line yr/yr declines. Also, the mid-point of Q4 (Aug) was above expectations. Jabil also announced it will invest $500 mln over the next several years to expand its footprint in the Southeast US to support cloud and AI data center infrastructure customers.

• The upside in Q3 was largely driven by cloud and data center infrastructure. Also, both its Capital Equipment & Connected Living end markets saw higher than expected demand in Q3. EMS companies are known for having thin margins, so it was good to see Jabil's core operating margin expand to 5.4% from 5.2% a year ago.
• Its strongest growth came from its Intelligent Infrastructure segment, where revenue jumped 51% yr/yr to $3.4 bln. Growth continues to be driven by strong demand in its AI-related cloud and data center infrastructure business, including power, cooling and server rack offerings. Capital equipment was also strong in Q3 as the need for testing gear remains robust. This growth was offset slightly by lower demand in networking and communications end market due to softer 5G.
• Regulated Industries segment revs were flat yr/yr at $3.1 bln and in-line with prior guidance. This reflects ongoing softness in the EV and Renewable end markets, partially offset by growth in healthcare. Connected Living & Digital Commerce segment revenue was $1.3 bln, slightly higher than prior guidance, but still down 7% yr/yr due to softness in consumer-driven products, offset by growth in warehouse and retail automation.
• In terms of guidance, Jabil expects RI segment revs will be $2.9 bln, down 5% yr/yr, as it maintains a prudent near-term outlook on the EV and renewable markets. II segment revs are expected to be $3.3 bln, up 42% yr/yr, driven by broad-based AI-related growth in cloud data center infrastructure and capital equipment. And finally, its CL & DC segment is expected to see a 21% yr/yr decline in revs to $1.3 bln.
• Regarding the $500 mln investment, Jabil is in the final stages of site selection and expects it to be operational by mid-calendar year 2026. Recall that Jabil recently acquired Mikros Technologies, a provider of liquid cooling and thermal management offerings, so this investment builds on that. Mikros Technologies serves a wide range of industries, including AI data center infrastructure, energy storage, and semiconductor testing.

Clearly, investors are impressed with Jabil's huge Q3 beat and robust guidance this morning and that was despite tariffs and heightened geopolitical uncertainty. Jabil is benefitting from high growth secular trends such as AI and industrial automation. There are clearly some weak spots in terms EVs and 5G, but Jabil is offsetting that by really leaning into AI and Data Centers. Its Intelligent Infrastructure segment is now its largest segment and it's seeing huge growth. And the $500 mln investment shows that Jabil will keep growing this segment.