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Jabil (JBL +9.5%) is sharply higher today after kicking off FY25 on a positive note. This company, which designs, engineers, and manufactures electronic circuit board assemblies/systems primarily for OEMs, posted a 16.6% yr/yr revenue decline in Q1 (Nov) to $6.99 bln. However, analysts were expecting an even bigger drop. Jabil also reported EPS upside, guided in-line for Q2 (Feb) and raised FY25 EPS and revenue guidance.

• Jabil underwent a substantial transformation in FY24. It sold its Mobility business for $2.2 bln, it saw growth in the AI datacenter sector but faced challenges in multiple other end markets. It also shuffled its reporting segments. Starting with today's Q1 report, it no longer uses its DMS and EMS segments. Instead, it reports using three new segments: Regulated Industries, Intelligent Infrastructure, and Connected Living & Digital Commerce.
• Turning to its Q1 results, its largest segment is Regulated Industries. RI segment revenue fell 7% yr/yr to roughly $3 bln due to continued weakness in Renewable Energy (primarily solar) and EV markets. Jabil expects Q2 segment revs to be down 8% yr/yr to $2.7 bln, reflecting continued softness in the Renewable Energy and EV markets. Throughout the solar downturn, Jabil has been working hard to better position itself as it waits for a recovery.
• Its Intelligent Infrastructure segment was its best performer, with revs up 5% yr/yr to $2.5 bln with growth driven by strong demand in its AI-related cloud data center infrastructure and capital equipment markets. Jabil expects yr/yr segment revenue growth to accelerate in Q2 to +8% to $2.4 bln, reflecting broad-based growth in Capital Equipment (AI is driving demand for semi fabrication and test equipment), Advanced Networking, Cloud and Data Center Infrastructure markets.
• Its Connected Living & Digital Commerce segment saw a big 46% yr/yr decline in revs to $1.5 bln due to its Mobility divestiture. Excluding the divestiture, revenue growth for the segment was approximately 12% yr/yr, reflecting strong growth across its digital commerce and warehouse automation markets. Jabil expects Q2 segment revs to decline 20% yr/yr to $1.2 bln, mainly due to its Mobility divestiture. Connected Living, which largely focuses on consumer oriented devices, remains under pressure. However, Jabil remains bullish on its digital commerce business, which is being driven higher by the automation of the retail and warehouse experience.
• Jabil addressed the potential impact of tariffs. While tariffs may impact customer demand, any changes in tariffs have historically been largely a pass through cost for Jabil. Most of its business in China is predominantly local or regional, with a very small portion being US-bound. Jabil also remains prepared for any shift of operations from Mexico to the US. Also, the US manufacturing footprint has never been bigger than it is today.

Overall, this was an impressive quarter for Jabil. We think investors are pleased not only with its Q1 outperformance, but also with its positive commentary about its Intelligent Infrastructure segment. We also think Jabil's comments on tariffs eased some concerns that investors had. The stock has been in a nice uptrend since early September and it got a boost after Trump's victory last month, presumably because Jabil appears to be better positioned than many EMS names in terms of China/Mexico exposure.