Q2 2024 Jabil Inc Earnings Call

Conference Centre: [music].

Operator: Greetings. Welcome to the Jabil second quarter of fiscal year 2024 earnings call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Jabil second quarter of fiscal year 2024 earnings call. At this time all participants are in a 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 on your telephone.

Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Adam Berry, Vice President, Investor Relations. Thank you.

Pat. Please note that this conference is being recorded I will now turn the conference over to Adam Berry, Vice President Investor Relations. Thank you you may begin.

Adam Berry: You may begin. Good morning, and thank you for joining Jabil's second quarter fiscal 2024 earnings call. Joining me on today's call are our Chief Financial Officer, Mike Dastoor, and Chief Executive Officer, Kenny Wilson. Over the next few minutes, Mike and I will review our Q2 results, update current demand trends, and provide new guidance for Fiscal 24. We will then turn the call over to Kenny, who will provide several of the building blocks that give us confidence in our strong outlook for Fiscal 25. Before we begin, please note that today's call is being webcast live. And during our prepared remarks, we will be referencing slides. To follow along with the slides, please visit Jabil.com in the investor relations portion of the website. At the conclusion of the call, the entirety of today's presentation will be posted for audio playback.

Good morning, and thank you for joining Jabil second quarter fiscal 2024 earnings call.

Adam Berry: Joining me on today's call are Chief Financial Officer, Mike desktop.

Adam Berry: And cheap Chief Executive Officer, Kenny Wilson.

Adam Berry: Over the next few minutes, Mike and I will review our Q2 results.

Adam Berry: Date current demand trends and provide new guidance for fiscal 'twenty four.

Kenneth S. Wilson: We will then turn the call over to Kenny who will provide several of the building blocks that give us confidence in our strong outlook for fiscal 'twenty five.

Kenneth S. Wilson: Yeah.

Kenneth S. Wilson: Before we begin please note that today's call is being webcast live.

Kenneth S. Wilson: And during our prepared remarks, we will be referencing slides.

Kenneth S. Wilson: To follow along with the slides please visit <unk> dot com within the Investor relations portion of the website.

Kenneth S. Wilson: At the conclusion of the call the entirety of today's presentation will be posted for audio playback.

Adam Berry: I now ask that you view the slides on the website and follow along with our presentation, beginning with the forward-looking statement. During this conference call, we will be making forward-looking statements, including, among other things, those regarding the anticipated outlook for our business. These statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainty 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 31, 2023, and in our 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.

Kenneth S. Wilson: I'd now ask that you view the slides on the website and follow along with our presentation beginning with a forward looking statement.

Kenneth S. Wilson: During this conference call, we will be making forward looking statements, including among other things those regarding the anticipated outlook for our business.

Kenneth S. Wilson: These statements are based on current expectations forecasts and assumptions.

Kenneth S. Wilson: Risks and uncertainties that could cause actual outcomes and results to differ materially.

Kenneth S. Wilson: An extensive list of these risks and uncertainties are identified in our annual report on Form 10-K for the fiscal year ended August 31st 2023, and our other filings with the SEC.

Kenneth S. Wilson: 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.

Adam Berry: With that, I'd now like to shift our focus to our second quarter results, where the team delivered approximately $6.8 billion in revenue, roughly in line with the guidance range we provided, as a majority of the businesses performed extremely well against the updated guidance we provided back in December. Core operating income for the quarter came in at $338 million, or 5% of revenue. This was up 20 basis points as a percentage of revenue year over year due to a strong mix of business led by automotive and health, while also supported by an ongoing mixed shift within our networking and storage and marketing. Net interest expense for the quarter came in higher than expected at $72 million, reflecting higher levels of inventory during the quarter. It's also worth noting that we successfully closed on the sale of our mobility business to BYD Electronics during the quarter for approximately $ As a result, GAAP operating income was approximately $1.1 billion, and our GAAP diluted earnings per share was $7.31, reflecting the substantial gain associated with the sale at the end of December. Core diluted earnings per share for the quarter were $1.68, five cents above the midpoint of our guidance range provided in December.

Kenneth S. Wilson: With that I'd now like to shift our focus to our second quarter results, where the team delivered approximately $6 $8 billion in revenue roughly in line, but the guidance range. We provided as a majority of the business has performed extremely well against the updated guidance we provided back in December.

Core operating income for the quarter came in at $338 million or 5% of revenue.

Kenneth S. Wilson: Yeah.

Kenneth S. Wilson: This was up 20 basis points as a percentage of revenue year over year due to a strong mix of business led by automotive and health care.

Kenneth S. Wilson: While also supported by an ongoing mix shift within our networking and storage end markets.

Kenneth S. Wilson: Net interest expense for the quarter came in higher than expected at $72 million.

Kenneth S. Wilson: Reflecting higher levels of inventory during the quarter.

Kenneth S. Wilson: It's also worth noting that we successfully closed on the sale of our mobility business to be Y D electronics during the quarter for approximately $2 $2 billion.

Kenneth S. Wilson: As a result, GAAP operating income was approximately $1 $1 billion and our GAAP diluted earnings per share was $7.31, reflecting the substantial gain associated with the sale at the end of December.

Kenneth S. Wilson: Core diluted earnings per share for the quarter was $1 68, five cents above the midpoint of our guidance range provided in December.

Adam Berry: Now turning to our performance by segment, McCoy. Revenue for the DMS segment came in at $3.4 billion, down approximately 16% from the prior year, driven almost entirely by year-over-year comparisons for the mobility divestiture. On a like-for-like basis, our DMS segment performed very well, led by approximately 11% growth in our automotive and transportation business. Core Operating Margin for this segment came in at 5.6%. 100 basis points higher than the same quarter from a year ago, reflective of the ongoing makeshift within our DMS business. Revenue for our EMS segment came in at $3.3 billion, down roughly 18% year over year, and roughly $100 to $200 million below our expectations for the quarter.

Kenneth S. Wilson: Now turning to our performance by segment in the quarter.

Kenneth S. Wilson: Revenue for the Dms segment came in at $3 4 billion down approximately 16% from the prior year driven almost entirely by year over year comparisons for the mobility divestiture.

Kenneth S. Wilson: On a like for like basis, our Dms segment performed very well led by approximately 11% growth in our automotive and transportation businesses.

Kenneth S. Wilson: Core operating margin for the segment came in at five 6% 100 basis points higher than the same quarter from a year ago.

Kenneth S. Wilson: Reflective of the ongoing mix shift within our Dms business.

Kenneth S. Wilson: Revenue for our EMS segment came in at $3 $3 billion down roughly 18% year over year, and roughly $100 million to $200 million below our expectations for the quarter.

Adam Berry: The majority of our year-on-year revenue decline within EMS was driven by our move to a consignment business within our cloud business and lower revenue in markets like 5G, renewable energy, and digital print, as expected. However, unexpectedly, and towards the end of the quarter, our 5G and renewables businesses were both negatively impacted by yet another decline in demand associated with those end markets. For the quarter, core margins for the EMS segment were 4.4%, down 70 basis points year over. Next, I'd like to begin with an update on our cash flow and balance sheet metrics as of the end of Q2, beginning with inventory, which came in nine days higher sequentially to 87 days, net of inventory deposits for our customers. Inventory days were 62, which was a quarter-on-quarter increase of four days. Our second quarter cash flows from operations came in at $218 million, while net capital expenditures totaled $170 million, resulting in $48 million in adjusted free cash flow during the quarter.

Kenneth S. Wilson: The majority of our year on year revenue decline within the EMS was driven by our move to a consignment model within our cloud business and lower revenue in markets like five G renewable energy and digital print as expected.

Kenneth S. Wilson: However, unexpectedly and towards the end of the quarter, our five G and renewables businesses were both negatively impacted by yet another decline in demand associated with those end markets.

Kenneth S. Wilson: For the quarter core margins for the EMS segment were four 4% down 70 basis points year over year.

Kenneth S. Wilson: Next I'd like to begin with an update on our cash flow and balance sheet metrics as of the end of Q2, beginning with inventory, which came in nine days higher sequentially to 87 days.

Kenneth S. Wilson: Net of inventory deposits for our customers inventory days were 62.

Kenneth S. Wilson: Which was quarter on quarter increase of four days.

Kenneth S. Wilson: Our second quarter cash flows from operations came in at $218 million, while net capital expenditures totaled $170 million, resulting in $48 million and adjusted free cash flow during the quarter.

Adam Berry: During the quarter, we repurchased 6.5 million shares for $825 million, leaving us with approximately $1.2 billion remaining on our current repurchase authorization as of February 29. With this, we ended the quarter with cash balances of $2.6 billion and total debt to core EBITDA levels of approximately 1.2 times. In closing, Q2 was largely a solid quarter. For starters, the divestiture of our mobility business and the allocation of those funds towards the share buybacks reflect the strategic intent of this management team to both reshape the business where appropriate while also maintaining healthy returns to shareholders. At the same time, the business is performing pretty admirably, despite considerable declines in two of the end markets we serve, as evidenced by our ability to deliver higher margins despite these headwinds.

Kenneth S. Wilson: During the quarter, we repurchased six 5 million shares for $825 million, leaving.

Kenneth S. Wilson: Leaving us with approximately $1.2 billion remaining on our current repurchase authorization as of February 29th.

Kenneth S. Wilson: With this we ended the quarter with cash balances of $2 $6 billion and total debt to core EBITDA levels of approximately 1.2 times.

Kenneth S. Wilson: In closing Q2 was largely a solid quarter.

Kenneth S. Wilson: For starters, the divestiture of our mobility business and the allocation of those funds towards the share buybacks reflect the strategic intent of this management team to both reshaped the business where appropriate while also maintaining healthy returns to shareholders.

Kenneth S. Wilson: Yeah.

Kenneth S. Wilson: At the same time the business is performing pretty admirably. Despite considerable declines in two of the end markets, we serve as evidenced by our ability to deliver higher margins. Despite these headwinds.

Adam Berry: And finally, I'll leave you with a bit of optimism as we look ahead to fiscal 25 and beyond. As we think about the adjacencies across the end markets we serve, it's becoming clear that there is a common theme forming among a number of the end markets specific to the surge of artificial intelligence and the impact it will have on our customers' businesses well into the future. And with this surge, there's a proliferation of data being created by EVs and autonomous vehicles that need to be harnessed.

Kenneth S. Wilson: And finally, I'll leave you with a bit of optimism as we look ahead to fiscal 'twenty five and beyond.

Kenneth S. Wilson: As we think about the adjacencies across the end markets. We serve it's becoming clear that theres a common theme forming among a number of the end markets specific to the surge of artificial intelligence and the impact it will have on our customers' business well into the future.

Kenneth S. Wilson: And with this surge there's a proliferation of data being created by EV and autonomous vehicles that needs to be harnessed.

Adam Berry: In the healthcare industry, we're in the early innings of getting our arms around the benefits of AI in the operating room. And in our cloud business, we're seeing significantly increased demand for our services related to AI specific to hardware manufacturing and design. And perhaps most exciting, this enthusiasm is beginning to turn into tangible results. For instance, our AI GPU volume in the first half of 2024 is 200 times that of the level in 2023.

Kenneth S. Wilson: In the health care industry, we're in the early innings of getting our arms around the benefits of AI in the operating room.

Kenneth S. Wilson: And in our cloud business, we're seeing significantly increased demand for our services related to AI specific to hardware manufacturing and design.

Kenneth S. Wilson: And perhaps most exciting this enthusiasm is beginning to turn into tangible results for instance, our AI GPU volume in the first half of 'twenty 'twenty. Four is 200 times that up to a level of 2023.

Adam Berry: So there's a lot to be excited about as we look a little bit further down the road. In a few minutes, Kenny will share his thoughts on Fiscal 25 and why he believes our original outlook of 1065 remains attainable despite a transitional Fiscal 24. But first, I'll hand the call over to Mike, who will provide more details on Fiscal 24, including an update on our growth outlook by the end of March. With that, thank you. I'll now hand the call over to Mike. Thanks, Adam. And good morning, everyone.

Kenneth S. Wilson: So there's a lot to be excited about as we look a little bit further down the road.

Kenneth S. Wilson: In a few minutes Kenny will share his thoughts on fiscal 'twenty five and why he believes our original outlook of $2 65 remains attainable. Despite the transitional fiscal 'twenty four.

But first I'll hand, the call over to Mike, who will provide more details on fiscal 'twenty four including an update on our growth outlook by end market.

Kenneth S. Wilson: With that thank you I'll now hand, the call over to Mike.

Mike: Thanks, Adam and good morning, everyone.

Adam Berry: Over the next few minutes, I plan to provide more information on the following. First, I'll walk you through our financial outlook for Q3 and updated outlook for FY24. Next, I'll provide an update on why we're confident in our growth opportunities for FY25. And then I'll provide an update on our accelerated share buyback execution plans, which are progressing ahead of schedule. With that, let's turn to the next slide for our third quarter guidance. Towards the end of our second quarter, we experienced a sudden slowdown within our 5G and renewable energy end markets, which we expect will continue through the second half of FY24 and result in lower than expected revenue for the last two quarters. Within our renewable energy business, the inventory correction that began in Q1 is now expected to persist through the balance of our fiscal year as customers in this end market lower their demand forecast towards the back half of February.

Mike: Over the next few minutes I plan to provide more information on the following.

Mike: First I'll walk you through our financial outlook for Q3 and updated outlook for FY 'twenty four.

Mike: Next I'll provide an update on why we are confident in our growth opportunities for FY 'twenty five.

Mike: And then I'll provide an update on our accelerated share buyback execution plans, which are progressing ahead of schedule.

Mike: With that let's turn to the next slide for our third quarter guidance.

Mike: Towards the end of our second quarter, we experienced a sudden slow down within a five G and renewable energy end markets, which we expect will continue through the second half of FY 'twenty four and result in lower than expected revenue for the last two quarters.

Mike: Within our renewable energy business the inventory correction that began in Q1 is now expected to persist through the balance of our fiscal year as customers in this end market lower demand forecast towards the back half of February.

Adam Berry: The Renewable Energy team has done an excellent job consolidating the supply chain within our current customer base, and we will have a higher overall share of our customers' business as we move towards the end of Q4. For 5G, towards the end of the quarter, infrastructure rollouts slowed quicker than expected, as faster growing markets like India substantially pulled back on all 5G infrastructure investment.

Mike: The renewable energy team has done an excellent job consolidating the supply chain within our current customer base and we will have a higher overall share of our customers' business as we move towards the end of Q4.

Mike: In <unk> towards the end of the quarter infrastructure rollouts slowed quicker than expected as faster growing markets like India substantially pullback on all five G infrastructure investments.

Adam Berry: As a result of these two market dynamics, for Q3, we expect total company revenue to be in the range of $6.2 billion to $6.8 billion. Core Operating Income for Q3 is estimated to be in the range of $325 million to $385 million. The GAAP operating income is expected to be in the range of $221 million to $301 million, and quarterly earnings per share is estimated to be in the range of $1.65. $2.05. Gap Delivery Earnings Per Share is expected to be in the range of $0.82 to $1.38. Net interest expense in the third quarter is estimated to be $75 million.

Mike: As a result of these two market dynamics for Q3, we expect total company revenue to be in the range of $6 $2 billion to $6 $8 billion.

Mike: Core operating income for Q3 is estimated to be in the range of $325 million to $385 million.

Mike: GAAP operating income is expected to be in the range of $221 million to $301 million.

Mike: Core diluted earnings per share is estimated to be in the range of $1.65 to $2.05.

Mike: GAAP diluted earnings per share is expected to be in the range of 82 cents to one dollar and 38 cents.

Mike: Net interest expense in the third quarter is estimated to be $75 million.

Adam Berry: Now moving on to full year guidance on the next slide. At a high level, with the exception of the near-term dynamics within our renewable energy and 5G markets, the majority of our expectations for revenue by end market this year remain largely in line with our thoughts in December. And finally, for the year, we continue to expect year-on-year growth across some of our core end markets, which are still experiencing year-on-year growth, notably in electric vehicles, healthcare, and AI cloud data centers. Moving to the next slide. Despite the revenue headwinds in the near term, we're confident that we've built Jabil to be more resilient as we've diversified across geographies, products, customers, and end markets. Because of this, we're not anticipating the same level of margin erosion traditionally seen in Paso Lodal.

Mike: Now moving on to full year guidance. So the next slide.

Mike: At a high level with the exception of the near term dynamics within our renewable energy and <unk> markets. The majority of our expectations for revenue by end market. This year remains largely in line with our thoughts in December.

Mike: Importantly for the year, we continue to expect year on year growth across some of our core end markets, which are still experiencing year on year growth, notably in electric vehicles.

Mike: Health care, and AI and cloud data centers.

Mike: Moving to the next slide.

Mike: Despite the revenue headwinds in the near term are confident the lethal jabil has to be more resilient as lean diversifies across geographies products customers and end markets.

Mike: Because of this we're not anticipating the same level of margin erosion traditionally seen in past slowdowns.

Adam Berry: Our diversified approach, global footprint, and strong relationships with customers give us confidence in weathering these near-term challenges. We're adapting, staying focused on margins and cash flow, and committed to delivering value. Notably, for FY24, we expect core operating margins to come in higher than we expected in December at 5.6%. Pre-reasons largely account for our ability to drive margins higher despite lower revenues. First, as our Agile model allows, we pushed our planned investments and costs that will plan to support new ramps in renewables in the back half of the fiscal year. Because of this, deleveraging is limited.

Mike: Our diversified approach global footprint and strong relationships with customers give us confidence in making these near term challenges.

Mike: We're adapting staying focused on margins and cash flow and committed to delivering value.

Mike: Notably at the FY 'twenty full we expect core operating margins to come in higher than we expected in December at five 6%.

Mike: Three reasons, not only account for our ability to drive margins higher despite lower revenue.

Mike: First as an agile model allows we pushed our planned investments and costs that were planned to support new ramps in renewables in the back half of the fiscal year.

Mike: Because of this deleveraging is limited.

Adam Berry: Second, we expect to offset lower revenue with fixed cost recoveries from 5G and renewable energy customers. And third, we made progress with our efforts to align our cost structure and footprint with our go forward business. All of this gives me confidence in our ability to deliver core operating margins of 5.6% in FY24 and positions us well for future margin expansion as we drive revenue growth higher on an optimized cost structure. Putting it all together for FY24 on the next slide. We expect our improved mix of business and optimization efforts will drive incremental operating leverage, thereby giving us the confidence to raise our core operating margin guidance to 5.6% for FY24 on revenue of $28.5 billion. We expect this dynamic to result in core EPS of $8.40, which is reflected by improved core operating income margin and accelerated share repurchase. And importantly for the year, we also remain committed to generating more than $1 billion in free cash flow. Moving to the next slide.

Mike: Second we expect to offset lower revenue with fixed cost recoveries from <unk> and renewable energy customers.

Mike: And third we made progress with our athletes to align our cost structure and footprint with our go forward business.

All of this gives me confidence in our ability to deliver core operating margins of five 6% in FY 'twenty, four and positions us well for future margin expansion as we drive revenue growth higher on an optimized cost structure.

Mike: Putting it altogether for FY 'twenty for in the next slide.

Mike: Yeah.

Mike: We expect our improved mix of business and optimization efforts will drive incremental operating leverage, thereby giving us the confidence to raise our core operating margin guidance to five 6%.

Mike: Our FY 'twenty four on revenue of $28 $5 billion.

We expect this dynamic resulted in core EPS of $8 40, which is reflected by improved core operating income margin and accelerated share repurchases.

Mike: Yeah.

Mike: Importantly for the year, we also remain committed to generating more than $1 billion in free cash flow.

Mike: Moving to the next slide.

Adam Berry: Overall, we feel good about the trajectory of our end market portfolio and are well positioned to drive growth in FY25, headlined by continued growth in automotive, healthcare, and AI data centers, along with anticipated recoveries in areas of our business that are contracting this year. Globally, both EV and hybrid platforms continue to outpace ICE unit growth rates, although all at a lower rate than we had originally anticipated at the beginning of the fiscal year. Our EV business is supporting a number of new vehicle platforms with multiple customers in areas such as next-gen compute and control modules, power conversion, battery management, LiDAR, and other sensors, as well as charging solutions. Additionally, we recently won new business in optical camera modules, where OEMs are pre-deploying optics hardware capabilities, enabling the rollout of different levels of autonomous driving through software updates.

Overall, we feel good about the trajectory of our end market portfolio and are well positioned to drive growth in FY 'twenty five headlined by continued growth in automotive health care and AI data centers.

Mike: Along with anticipated recoveries in areas of our business that are contracted this year.

Mike: Globally, both EV and hybrid platforms continue to outpace ice unit growth rates.

Mike: Albeit at a lower rate than we had originally anticipated at the beginning of the fiscal year.

Mike: Our <unk> business is supporting a number of new vehicle platforms with multiple customers in areas, such as Nextgen compute and control modules.

Mike: Our conversion battery management lighter and other sensors as well as charging solutions.

Mike: Additionally, we were recently awarded new business in optical camera modules, where Oems are print applying upticks hardware capabilities and they may roll out with different levels of autonomous driving for software updates.

Mike: Yeah.

Adam Berry: It is important to note the majority of the year on year growth we expect in EDs in FY25 will be driven by new programs and will be less reliant on volume growth with existing customers. These new platforms give us confidence in our expectations of another year of growth for EVs in FY25. Longer term, Jabil is well positioned to support both EV and hybrid technologies as they continue to take a larger overall share of overall vehicle unit growth globally.

Mike: It is important to note the majority of the year on year growth, we expect in Evs in FY 'twenty five would be driven by new programs and will be less reliant on volume growth with existing customers.

Mike: These new platforms gives us confidence and unexpected actions up another year of growth for E. D's, an FY 'twenty five.

Mike: Longer term jabil is well positioned to support both EV and hybrid technologies as they continue to take a larger overall share of auto unit growth globally.

Adam Berry: Within our healthcare business, we see a significant opportunity to offer critical solutions and capabilities to customers outsourcing complex tasks. Jabil's credibility in healthcare as the largest EMS provider in the space positions us well to take advantage of the growing outsourcing of manufacturing. In FY25, we anticipate another year of growth in our base business as we continue to explore opportunities in new capabilities and B2B transactions similar to our strategic collaboration from a few years ago. And in the data center space, there is a common theme emerging among a number of end markets related to the surge of investments in AI and ML. The pace of AI investments continues to accelerate, and Jabil is winning a fair share of this growing pie as we have positioned ourselves well to assist our customers build out next-generation AI data centers. Our teams are quickly diversifying and winning share across multiple end markets, in the AI data center infrastructure space, where we're seeing growth in AI GPU rack configuration. Accelerated Optical Switches for AI Backend Networking Applications, Silicon Photonics, Liquid Cooling Capabilities, and Power and Energy Storage.

Mike: Within our health care business, we see significant opportunity. It's also critical solutions and capabilities to customers outsourcing complex task.

Mike: You gave us credibility in health care is the largest EMS provider in the space positions us well to take advantage of the growing outsourcing of manufacturing trend.

Mike: In FY 'twenty five we anticipate another year of growth in our base business as we continue to explore opportunities in new capabilities and data V transactions similar to our strategic collaboration from a few years ago.

Mike: And in the data center space. There is a common painful arming them on a number of our end markets related to the surge of investments in AI and ml.

Mike: The pace of AI investments continues to accelerate and Jabil is winning our fair share of this growing pie as we have positioned ourselves well to assist our customers to build a next generation AI data centers.

Mike: Our teams are quickly diversifying and winning share across multiple end markets and the AI data center infrastructure space, we haven't seen growth in AI GPU rack configurations.

Mike: Salary optical switches for AI backend networking applications, silicon photonics liquid cooling capabilities and power and energy storage.

Adam Berry: Given our success to date in this space, we now expect AI-related net revenue across multiple end markets to be approximately $6 billion in FY25, or an increase of 20% year on year. However, within the semi-capitalized market, we continue to anticipate demand to remain muted for FY 24. However, overall market dynamics are expected to improve as commentary across the industry suggests recovery may be on the horizon, with the growing expectation that things will improve towards the end of this calendar year as fab utilization ticks higher and memory inventory normalizes. And in renewables, as we look to FY 25, while we expect this end market to recover very slowly, we're winning new business and market share, along with the aforementioned consolidation within our current customer base.

Mike: Given our success to date in this space, we now expect AI related net revenue across multiple end markets to be approximately $6 billion in FY 'twenty, five or an increase of 20% year on year.

Mike: Within the semi cap market, we continue to anticipate demand to remain muted for FY 'twenty four.

Mike: However, overall market dynamics are expected to improve as commentary across the industry suggests the company may be on the horizon with a growing expectation that things improve towards the end of this calendar year.

Mike: As fab utilization ticks higher and memory inventory normalizes.

Mike: And in renewables as we look to FY 'twenty five why do we expect this end market to recover very slowly we are winning new business and market share along with the aforementioned consolidation within our current customer base.

Adam Berry: Longer term, we remain well positioned to support secular growth in the renewable energy infrastructure space due to Jabil's unique combination of power engineering expertise, in-region manufacturing, and supply chain capabilities. Looking forward, we're excited about the underlying momentum across our diversified portfolio, and we are well-positioned to drive growth in FY25. Next, I'd like to provide an update on our share repurchase. In December, I outlined our intentions of executing a series of accelerated buybacks for the balance of the $2.5 billion repurchase authorization in FY24. I am happy to say that we're ahead of schedule with $825 million repurchased in Q2. This brings the year-to-date repurchase amount to 10.4 million shares for $1.3 billion, for an average purchase price just under $127 per share.

Mike: Longer term, we remain well positioned to support secular grew up in the renewable energy infrastructure space due to Jabil has a unique combination of power engineering expertise.

Mike: In region manufacturing and supply chain capabilities.

Mike: Looking forward, we're excited about the underlying momentum across our diversified portfolio and are well positioned to drive growth in FY 'twenty five.

Mike: Okay.

Speaker Change: Next I'd like to provide an update on our share repurchases.

Speaker Change: In December I outlined our intentions of executing a series of accelerated buybacks for the balance of the $2 $5 billion repurchase authorization in FY 'twenty four.

Speaker Change: I am happy to say that we're ahead of schedule with $825 million repurchased in Q2.

Speaker Change: This brings our year to date repurchase amount to $10 4 million shares for $1 $3 billion.

Speaker Change: Our average purchase price just under $127 per share.

Adam Berry: We fully anticipate completing the remaining $1.2 billion on our current repurchase authorization in FY24 and will continue to opportunistically optimize our repurchase. With the plan in place and progress to date, I expect WASO to be in the range of $123 to $126 million for FY24 and approximately $110 to $113 million in FY25. On the next slide in the summary for FY25, I'm excited about the underlying momentum across a diversified portfolio, and I'm confident that we're well positioned to drive multiple paths of growth in FY25 as a result of the following. Consolidation of Share in the Renewable Energy Space, with respect to the recovery of the SEMICAP and MUG.

Speaker Change: We fully anticipate completing the remaining $1 $2 billion on our current repurchase authorization in FY 'twenty for.

Speaker Change: And we will continue to opportunistically optimize our repurchases.

Speaker Change: But the plan in place and progress to date I expect <unk> to be in the range of 123 $226 million for FY, 'twenty, four and approximately $110 million to $113 million in FY 'twenty five.

Speaker Change: On the next slide in summary for FY 'twenty five.

Speaker Change: I'm excited about the underlying momentum across our diversified portfolio and I'm confident that we're well positioned to drive multiple paths of growth in FY 'twenty five as a result of the following.

Speaker Change: Consolidation of share in the renewable energy space.

Speaker Change: Expected recovery of the semi cap end market.

Adam Berry: Confirmed market share gains with multiple existing customers and new programs booked with new customers. And I am particularly excited about a silicon to solution strategy, which will help accelerate the infrastructure that will be required to fuel the AI ML macro trend in the market. This is borne out in the continuing transformation of our networking and storage end market, where we continue to replace legacy lower margin networking equipment with higher margin AI driven equipment. On top of all this, when you consider our optimized cost structure, we are well positioned to expand core margins to more than 5.7%. In addition, accelerated share repurchases and expected lower net interest expenses give me confidence in our ability to deliver a core EPS of $10.65 in FY25. In my view, Jabil is not just more diversified but also significantly more resilient than we were several years ago, due to our intentional efforts to invest in and align our resources with areas in key end markets, which offer higher returns and multi-year secular growth opportunities. Thank you for your time today and for joining us this morning.

Speaker Change: And from market share gains with multiple existing customers.

Speaker Change: New programs booked with new customers.

Speaker Change: And I am, particularly excited about our silicon solution strategy, which will help accelerate the infrastructure.

Speaker Change: That would be required to feel the AI ml macro trend in the market.

Speaker Change: This is borne out in the continuing mix shift of our networking and storage end market, where we continue to replace legacy lower margin networking equipment with higher margin AI driven equipment.

Speaker Change: On top of all this when you consider the optimized cost structure, we are well positioned expand core margins to more than five 7%.

Speaker Change: In addition accelerated share repurchases and expected lower net interest expenses gives me confidence in our ability to deliver core EPS of $10 65 in FY 'twenty five.

Speaker Change: In my view, but it is not just more diversified but also significantly more resilient than we were several years ago due to our intentional efforts to invest and align our resources with Erez in key end markets, which offer higher returns and multiyear secular growth opportunities.

Speaker Change: Thank you for your time today and for joining US. This morning, I'll now turn the call over to Kenny.

Kenneth S. Wilson: I'll now turn the call over to Kenny. Thank you, Mike. And thanks to everyone for joining us today. Fiscal 24 was always going to be a transitional year for Jabil.

Kenneth S. Wilson: Thank you, Mike and thanks to everyone for joining us today.

Kenneth S. Wilson: Fiscal 'twenty four was always going to be a transitional year for jabil.

Kenneth S. Wilson: One in which we've successfully completed the largest transaction in the company's history with a mobility sale and the subsequent efforts by our teams to optimize our footprint and cost structure for the go-forward company. While this transaction and the optimisation of our footprint were anticipated, the end markets flow down were not. As I have stated previously, the key attribute of our model is agility and our ability to quickly react and effectively absorb changes in revenue. At Jabil, we obsess about operations. We're working tirelessly to ensure that what is within our control is controlled well. Managing our factories to absorb such a marked slowdown does not happen by chance.

<unk> successfully completed the largest transaction in our company's history with the mobility sale and the subsequent efforts by our teams to optimize our footprint and cost structure for the go forward company.

Kenneth S. Wilson: Well this transaction on the optimization of our footprint, but anticipated the end market slowdown was not.

As I have stated previously the key attribute of our model is agility and ability to quickly react and effectively absorb changes in revenue.

Kenneth S. Wilson: At Jabil, we obsess about operations.

Kenneth S. Wilson: Working tirelessly to ensure that what is within our control we control well.

Speaker Change: Why don't you have factories to absorb such a marked slowdown does not happen by chance.

Kenneth S. Wilson: So it's pleasing to see our margins hold up. Additionally, dislocations like this provide opportunity for some consolidation, and it is reassuring to make progress with customers who trust us to allocate more of their spend to Jabil. In tandem with a focus on operational execution, we have been intentional in how we've shaped our commercial portfolio.

Speaker Change: So it is pleasing to see our margins hold up.

Speaker Change: Additionally, dislocations like this provides the opportunity for some consolidation.

Speaker Change: It is reassuring to make progress with customers, who trust us to allocate more of their spend to jabil.

Speaker Change: In tandem with our focus on operational execution, we have been intentional in how we've shaped our commercial portfolio.

Kenneth S. Wilson: The closing of the mobility deal was not a one-off event but part of a process where we look to align our capabilities, current and future, with markets exhibiting the desirable characteristics of long-term secular growth at appropriate margins and cash flows. The result of this allows us to help simplify the lives of our current and future customers while making appropriate returns, for example. In our recent history, this has seen us transition from low-tech electronics and automotive to EV and autonomous driving systems, including optical cameras; from BCBA manufacturing and healthcare to precision machining of customized implantables; from build-to-print servers to highly configurable AI data center racks; from simple network switches to liquid-cooled accelerated switching supporting AI applications.

Speaker Change: Because it gives them ability to deal with not a one off event, but part of our process, we will look to telling our capabilities current and future with market's exhibiting the desirable characteristics of long term secular growth at appropriate margins and cash flows.

Speaker Change: This allows us to help simplify the lives of our current and future customers, while making appropriate returns.

Speaker Change: For example.

Speaker Change: In our recent history. This has seen us transition from low take electronics and automotive to.

Speaker Change: So EV and autonomous driving systems, including optical cameras.

Speaker Change: For PCB manufacturing health care to precision machining of customized implantables.

Speaker Change: From both dependent servers through highly configured to AI data center rocks.

Speaker Change: From simple network switches to a liquid cooled accelerated switching supporting applications.

Kenneth S. Wilson: And from build-to-print in the telco space to having a seer at the table as we look to optimize the advanced packaging value chain for silicon photonics across multiple end markets. In short, we are continuously retooling the company to ensure we are ready to support the future needs of our customers.

Speaker Change: Yeah.

Speaker Change: From build to print in the telco space, so having a seat at the table as we look to optimize your advanced packaging value chain for silicon photonics across multiple end markets.

Speaker Change: In short we are continuously retooling the company to ensure we are ready to support the future needs of our customers.

Speaker Change: In addition to them ability deal another couple of proof points, where they have done in the quarter.

Speaker Change: Okay.

Kenneth S. Wilson: We are proud to have been awarded the new video security and optics business with Motorola Solutions, including two highly competent manufacturing sites in North America. This supports the focus on supply chain regionalization, where we see significant benefits from the ability to leverage our global footprint, coupled with the advantage of being domiciled in the U.S. and an AI data center infrastructure space. We're building low and medium voltage switchgear to support the proliferation of AI data centers. We were awarded a liquid-cooled accelerated network switching program, which will ramp up in fiscal year 25.

Speaker Change: We are proud to have been awarded a new video security and optics business with Motorola solutions, including two highly competent manufacturing sites in North America.

Speaker Change: This supports our focus on supply chain regionalization, or we see significant benefits from the ability to leverage our global footprint, coupled with the advantage of being domiciled in the U S.

Speaker Change: And then he datacenter infrastructure space.

Speaker Change: We are building low and medium voltage switch gear to support proliferation of AI data centers.

Speaker Change: We've been awarded a liquid cooled extrapolated network switching program, which were up in fiscal year 'twenty five.

Kenneth S. Wilson: We are already seeing the benefits of the addition of the Intel silicon photonics team with multiple wins in the pluggable transceivers. As I think about exiting this year as a more optimized company, coupled with the numerous opportunities across our commercial portfolio, I am confident in our ability to expand margins year on year while also delivering core EPS of $10.65 and free cash flow in excess of $1 billion. Note that in modeling fiscal year 25, we anticipate total revenues similar to fiscal year 23 levels, excluding the mobility divestiture. Importantly, we expect mix to be much improved as our business continues to trend toward markets benefiting from long-term secular trends. In closing, in the last 90 days, I have had the privilege of spending time with multiple customers and internal organizations, including the executive chief of Motorola Solutions, as we celebrated the new award.

Speaker Change: While already we are seeing the benefits of the Intel Silicon photonics team with multiple wins in the applicable transceiver space.

I was I think about exiting this year is a more optimized company coupled with the numerous opportunities across our commercial portfolio.

Speaker Change: I'm confident in that ability to expand margins year on year, while also delivering core EPS of $10 65, and free cash flow in excess of $1 billion.

Speaker Change: Note that in modeling fiscal year 'twenty five we anticipate total revenue similar to fiscal year 'twenty two levels, excluding the mobility divestiture.

Speaker Change: Importantly, we expect mix to be much improved as our business continues to trend toward markets benefiting from long term secular trends.

Speaker Change: In closing in the last 90 days I have had the privilege of spending time with multiple customers and internal organizations, including <unk>.

Speaker Change: Executive team about Motorola solutions as we celebrated the New award.

Speaker Change: The new additions to the Jabil team from neutron ex procured ability and Intel.

Kenneth S. Wilson: The new additions to the Jabil team from Retronics, Procurability, and Intel, and with our teams in Asia as we celebrated Chinese New Year with a long-held Jibo pig roast tradition. In Asia, it was also my honor to accept the Shingle Prize awarded to our healthcare site in Shanghai, the largest med device site to receive this award in the last 15 years.

Speaker Change: I'm going to have teams in Asia, as we celebrated Chinese new year, so long ago with Jabil gross tradition.

Speaker Change: Okay.

Speaker Change: Well in Asia was also my honor to accept the Shingo Prize awarded to our health care site in Shanghai, the largest med device say to receive this award in the last 15 years.

Speaker Change: As I reflect on all of this I believe it demonstrates that in addition to having the right capabilities.

Speaker Change: And the right end markets. We also have the right team to you by your actions everyday strengthened our unique global culture.

Kenneth S. Wilson: As I reflect on all of this, I believe it further demonstrates that in addition to having the right capability and being in the right end markets, we also have the right team to, by their actions every day, strengthen our unique global culture. All of this puts us on firm footing for fiscal 25 and beyond. Thank you for your interest in Jabil. I will now hand the call back to Adam. Thanks, Kenny.

Speaker Change: All of this puts us on firm footing for fiscal 'twenty five and beyond.

Speaker Change: Thank you for your interest in Jabil I went over hand, the call back to Adam.

Adam Berry: Thanks, Kenny So there was a lot here today and in closing I'd like to quickly summarize some of the key messages.

Adam Berry: Our second quarter results and our fiscal 'twenty four outlook are largely in line, but the guidance we provided back in December with.

Adam Berry: With the exception of the impact from two specific end markets, including renewable energy and five G wireless.

Adam Berry: So there was a lot here today, and in closing, I'd like to quickly summarize some of the key messages. Our second quarter results and our fiscal 24 outlook are largely in line with the guidance we provided back in December, with the exception of the impact from two specific end markets, including renewable energy and 5G wireless, and despite our lower outlook for fiscal 24.

And despite our lower outlook for 'twenty four.

Adam Berry: Positive demand signals in the market along with new wins.

Adam Berry: Higher core margins due to mix shift and the accelerated buybacks from the proceeds of the mobility transaction give us confidence in fiscal 'twenty, five which is why we chose to maintain our $10 65 core EPS target.

Adam Berry: Positive demand signals in the market, along with new winds, higher core margins due to mix shift and the accelerated buybacks from the proceeds of the mobility transaction, give us confidence in Fiscal 25, which is why we chose to maintain our $10.65 core EPS target. Thank you for your interest in Jabil. Operator, we're now ready for Q&A. Thank you.

Thank you for your interest in Jabil, operator, we're now ready for Q&A.

Speaker Change: Thank you we will now be conducting a question and answer session.

Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would 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, one moment. Please while we poll for your questions.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator: You may press star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for your question. Our first questions come from the line of Steven Fox with Fox Advisors. Please proceed with your questions. Hi, good morning.

Speaker Change: Our first questions come from the line of Steven Fox with Fox Advisors. Please proceed with your questions.

Steven Bryant Fox: Hi, Good morning, two questions from me if I could.

Steven Bryant Fox: First of all on the cuts within.

Steven Bryant Fox: <unk> and renewables are programs can you give us a sense for why you think this is the last time, you're going to have to come back and cut those numbers like what are the indications not just through the fiscal year, but you'd maybe the calendar year from customers on that front and then secondly on the better margins that you're targeting now I understand the mix shift.

Steven Bryant Fox: Two questions from me, if I could. First of all, on the cuts within the 5G and renewables programs, can you give us a sense for why you think this is the last time you're going to have to come back and cut those numbers? Like, what are the indications, you know, not just through the fiscal year but through maybe the calendar year from customers on that front? And then, secondly, on the better margins that you're targeting now, I understand the mixed shift, but maybe a little bit more color on, like, the biggest mixed shift drivers if we exclude the mobility mass from that. Thanks.

Steven Bryant Fox: But maybe a little bit more color on like the biggest mix shifts drivers if we exclude the mobility mass from that thanks.

Hi, Steven Thanks, Good morning.

Speaker Change: Let me take the question on on demand I've mentioned in Q1, when we see the broad based demand reduction that you know we've got a process, where we do we're pretty intimate with our customers in terms of your forecast looking at inventory and inventory in channels.

Speaker Change: You'll recall that right across all of our end markets with exception of the <unk> telco space in renewables and there's a couple of specifics there.

Kenneth S. Wilson: Hi Steven, thanks, good morning. Yeah, let me take that question on demand. I mentioned in Q1, when we saw the broad-based demand reduction that, you know, we've got a process where we are pretty intimate with our customers in terms of their forecast, looking at inventory, and inventory channels. We do that right across all of our end markets, with the exception of the 5G telco space and renewables. And there are a couple of specifics there. So Mike mentioned the India issue here. And I think what we see here is that although he said there was a substantial pullback, yeah, in effect, what happened was the rollout stopped with basically no input from them, from Reliance Investments. So, you know, when we look at that, there's no indication of that.

Speaker Change: Mike mentioned, the India issue here and I think what we see here is that what you said there was a substantial pullback yet and in fact, what happened was it all out sculpt with basically with no attitude from them.

Speaker Change: From the reliance in this instance.

Speaker Change: So when we look at that there's no indication of that and basically we big time to a number that we're going forward. So so we're comfortable that everything that was in the telco space, we've seen and we understood. This was just a gotcha and India were not forecasts and I'd expect that to recover and in this year. So should we think of it.

Speaker Change: Pretty safe.

Speaker Change: And the renewable space again, we'd be working with the customer through calendar Q4 into Q1.

Speaker Change: And what we decided to do there is that.

Speaker Change: They claim that the inventories in the channel.

That is all being sold through so should we be just don't plot and David just what they're going to ship and what we're seeing is that the inventory in China.

Kenneth S. Wilson: And basically, we've baked it into our number now going forward, so we're comfortable that everything else in the telco space we've seen and understood. This was just a gimmick in India.

Speaker Change: We haven't forecasted accompanying that she would also so it would be very very conservative also just as we look to 'twenty five.

Kenneth S. Wilson: We're not forecasting or expecting that to recover this year. So we think we're pretty safe there, and conservative. Also, just as we look to 2025, we've been very conservative, and we've modelled those run rates going forward in 2025. So when you look at what we're talking about for 2025, we don't expect these two end markets to recover. So we think we've been appropriately conservative.

We were being very conservative and we've modeled that goes on rates going forward any 25. So it's when you look at what we're talking about for 'twenty five we don't expect these to end market to recover so we think we're being appropriately conservative.

Speaker Change: Great and then on the margin question.

Speaker Change: Mhm.

Speaker Change: Hey, Steve Yes, so obviously the mix shift it doesn't have a huge impact.

Steve: We've replaced a lot of our legacy networking and storage business with.

Steve: Higher margin AI related business, there, obviously AI by itself in the cloud space, Although you don't see it in the revenue line.

Michael Dastoor: And then on the margin question. Hey Steve, yeah, so obviously the makeshift does have a huge impact. We've replaced a lot of our legacy networking and storage business with higher margin AI-related business there. Obviously, AI by itself in the cloud space, although you don't see it in the revenue line item because of the consignment effect. However, volumes are up considerably in that particular line item. So there's a big margin play coming through on the mixture, like you suggested.

Steve: A line item because of the consignment in fact are the volumes are up considerably in that particular line item. So that there's a big margin play coming through on the mix shift like you suggested.

Steve: Top of that we've done a lot of cost optimizations. If you go look back at our.

Steve: I think on the call maybe.

Steve: Earlier in the fiscal year were out we talked about.

Steve: Our stranded cost and footprint optimization restructuring that we've taken them now.

Michael Dastoor: On top of that, we've done a lot of cost optimizations. If you look back at our call earlier in the fiscal year, we talked about a stranded cost and footprint optimization restructuring that we'd taken then. The fruits of that are showing up in the second half of the year.

Steve: The fruits of that showing up in the second half of the year. Obviously, we had Q2 was it a little bit about <unk>.

Steve: In addition.

Steve: As for the cost optimization effort, but that's coming through.

Steve: And then if you look at if you look at some of the cost recoveries that we're getting from our customers even real even though revenues are down.

Michael Dastoor: Obviously, we had Q2 as a transition quarter for the cost optimization effort, but that's coming through. Then if you look at some of the cost recoveries that we're getting from our customers, even though revenues are down, we have been successful in getting cost recoveries because of the sudden nature of the cut. All of that plus Q3, and Q4 had some ramps in there.

Steve: We have been successful in getting cost recoveries because of the sudden nature of the offer.

Steve: So all of that plus you know in Q3 Q4 had some ramps.

Steve: In there obviously as the revenue gets pushed out we don't have to had those ramps and then I'll just remind you ramps at a much lower margin and those initial quarters out when they're moving up all of that revenue line item.

Michael Dastoor: Obviously, as revenue gets pushed out, we don't have to have those ramps. Just to remind you, ramps are at a much lower margin in those initial quarters when we're moving up on that revenue line item, so that gets pushed out a little bit as well. The combination of all that, Steve, gives us really good comfort.

Steve: That gets pushed out a little there's lots of combination of all that our team gives us really good comfort I think we'd said 5.3 to five 5% margin.

Steve: Previously, we've actually taken it up not just to the high end was taken a beyond that and we think it's gonna be more in the five 6%.

Michael Dastoor: I think we said 5.3% to 5.5% margin previously. We've actually taken it up not just to the high end. We've taken it beyond that, and we think it's going to be more in the 5.6% range, and we feel really good about that. I have a follow-up to that also, Steve. We've been talking about this, obviously, with yourself.

Speaker Change: Our range and we feel really good about that yeah, I don't have a follow up to that also Steve.

Steve: Yeah, we've been talking about this and obviously with yourself, but.

Speaker Change: But I think slide 17 is a pretty good pictorial view of why we're confident that our our margins in the longer term.

Speaker Change: The Bureau bus because historically.

Speaker Change: We would be in the server space here.

Kenneth S. Wilson: I think slide 17 is a pretty good pictorial view of why we're confident that our margins in the longer term will be robust. Historically, we would have been in the server space here when I think back three, four, five years ago. What we've tried to show here is just how, as well as being vertical in terms of going to an asset-like rack assembly that's been hugely successful for us, Optical transceivers, so pluggable transceivers in this instance, that we got a lot of horsepower from the Intel deal that we just closed. And incidentally, I met with the Intel team in Singapore in January, and they've hit the ground running and are But then there are things like...

Speaker Change: When I think back 345 years ago.

Speaker Change: I think what we've tried to show here is just as real as being practical in terms of you know going to.

Speaker Change: Asset light Rocco Sam we've it's been choose a successful for us.

Speaker Change: You look at everything else.

Speaker Change: Those that were going from being a legacy enterprise switching to accelerated switching that they support.

Speaker Change: With the awards that we won recently.

Speaker Change: Optical transceivers so applicable transceivers in this instance that that you know that we got a lot of horsepower from the Intel deal that we just we just closed and incidentally I met with the Intel team in Singapore.

Speaker Change: And John Eudy, and in fact, because I'm running into are really making a huge difference which is great for us but in those things like.

Kenneth S. Wilson: The CDUs, the liquid-cooled racks, and also, we're now doing, as I mentioned, the low-voltage, mid-voltage, switchgear, and rack power distribution. So, historically, those are markets that we wouldn't have been playing in at all. But what we find is, from being a server player to now where we're getting multiple income streams in that space with things where a little bit of the data center is being disaggregated. It just gives us confidence.

Speaker Change: The.

Speaker Change: C D use the liquid cooled racks and also you.

Speaker Change: You know when they would do in a as I mentioned, the low voltage spent voltage switch gear and the rock power distribution. So pissed.

Speaker Change: Historically.

Speaker Change: That's market so we wouldn't be playing out at all but what we find is from being a sale of a player to know what we're getting multiple.

Speaker Change: Income streams and that that space with things, we are a little bit of the datacenter being disaggregated.

Speaker Change: It just gives us confidence when we're not when I say that were retooling the company. What I was talking about is we're leveraging things that we've done historically, well listen to our customers and we're finding other value added activities, where we can help them reduce their cost and can increase our margin. So.

Kenneth S. Wilson: When I said that we're retooling the company, what I was talking about was leveraging things that we've done historically. We're listening to our customers, and we're finding other value-added activities where we can help them, we can reduce their costs, and we can increase our margins. I think that kind of underpins what we try to do from a margin perspective to, you know, satisfy our customers' needs, grow our margins, and make that, you know, sustainable in the longer term. That's great.

Speaker Change: I think that kind of underpins what we tried to do from a margin perspective too you know.

Speaker Change: To satisfy our customers' needs grew our margins.

Speaker Change: And make that a sustainable in the longer term.

Speaker Change: Okay, Great. That's all very helpful. Thanks for that answer Youre welcome.

Rep loop: Thank you our next questions come from the line of Rep loop off the chart here with Bank of America. Please proceed with your questions.

Steven Bryant Fox: That's all very helpful. Thanks for that answer. You're welcome.

Ruplu Bhattacharya: Thank you. Our next questions come from the line of Ruplu Bhattacharya with Bank of America. Please proceed with your question. Hi, thank you for taking my questions.

Rep loop: Hi, and thank you for taking my questions.

Rep loop: I was trying to count how many times you mentioned in your prepared remarks, and then I just lost count So needless to say AI is a meaningful driver for demand in different end markets.

Michael Dastoor: You know, I was trying to count how many times you mentioned AI in your prepared remarks, and then I just lost count. So, needless to say, AI is a meaningful driver of demand and different end markets. Mike, is there a way to quantify how much revenue will come from AI over the next year or what the margin impact would be? And Kenny, can you delve a little bit more into what you're doing in the cloud business? What is Jabil's competitive advantage?

Rep loop: Mike is there a way to quantify how much revenue will come from <unk> over the next year or what the margin impact would be and Kenny can you delve a little bit more into what you're doing in the cloud business. What is jabil with competitive advantage a lot of people are going into AI in the data center. So how what how do you think.

Your competitive advantage against others and how do you see your cloud business revenue is growing over the next couple of years.

Kenneth S. Wilson: A lot of people are going into AI in the data center, so how do you think your competitive advantage stands against others? And how do you see your cloud business revenues growing over the next couple of years? Hey, Ruplu, just to be clear, I said AI 21 times in my report, so I did count.

Rep loop: Just to be clear I said 21 times in my reports I did count.

Rep loop: [laughter].

Rep loop: On the Oh.

Rep loop: On the on the AI piece.

Speaker Change: All right.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: So if you look at the if you look at my prepared remarks had real Blue I did talk about all the AI revenue I think we're gonna grow by about 20% to 25%.

Michael Dastoor: On the, on the AI piece. So, if you look at my prepared remarks, Ruplu, I did talk about AI revenue. I think we're going to grow by about 20-25%. We're about in the $4.5-5 billion range. We're going to be north of $6 billion in FY25, and that's across multiple end markets. Obviously, as Kenny mentioned, we'll be playing in the cloud data infrastructure space. We'll be playing in areas such as network switching. There's a whole bunch of business that we're switching from or replacing from our legacy network business to AI-related business. It's spread out, particularly in those two line items when we call them out on our revenue chart, but overall, about $6 billion plus.

Speaker Change: And and the poor and <unk> 5 billion range, but that'll be six north of $6 billion.

Speaker Change: In our in our FY 'twenty yeah.

Speaker Change: I've and that's across multiple end markets, obviously, yeah as Kenny mentioned will be playing in the cloud data infrastructure space, we're playing in and now in areas such as network switching out there's a whole bunch of business that was switching problem, replacing from a legacy network business to AI related out there.

Speaker Change: As I say.

Speaker Change: It's spread out, particularly in those two line items in the call them out or.

Speaker Change: On a revenue a shock, but overall overall about 6 billion loss, we actually feel that will continue.

Michael Dastoor: We actually feel that it will continue to grow in that 20-30% range over time as this proliferation of AI across different end markets just continues to expand. We expect it to start in the cloud space, and then as you work around the cloud space, it will gain more momentum. Then as you go forward, I'm talking a year or two years out, that will spread into all our other end markets as well because all that we do is mainly hardware. All hardware will benefit from the AI proliferation.

Speaker Change: To grow in that 20, 30% range over time as just proliferation.

Speaker Change: AI across different end markets just continues to expand its starting off when do you expect it to start in the cloud space and then as you look around the cloud space that we'll gain more momentum and then as you go forward now and I'm talking year two years out are even.

Speaker Change: That was spread into all our other end markets as well because all are all that we do is mainly hardware all hardware.

Speaker Change: <unk> will benefit from the AI proliferation.

And let me take your second question replay on you know Jabil is competitive advantage.

Kenneth S. Wilson: And let me take your second question, Ruplu, on Jabil's competitive advantage. First, what I would say is that growth in this area means that there's going to be a lot of work for a lot of people. So I think that's good.

Speaker Change: Firstly are you know what it was she is I think that the growth in this area means that theres going to be a lot of work for a lot of people.

Speaker Change: So I think that's good when when we look at our competitors I think there's enough work to go around.

Speaker Change: That said Ah.

Speaker Change: What we've tried to do as you know we tried to we tried to look at the world through the eyes of our customers and bigger life simpler.

Kenneth S. Wilson: When we look at our competitors, I think there's enough work to go around. That said, you know, what we try to do is, you know, we try to look at the world through the eyes of our customers and make their life simpler, and then if you look at it, there's a need in the data centers to be able to do silicon photonics transceiver. There's a need to be able to do power and switching, there's a need to be able to do servers, and there's a need to be able to do rack assembly.

Speaker Change: And then if you look at the need and the data centers to be to be able to do silicon photonics, Transceivers theres, a need to be able to do power and switching and there's a need to be able to do.

Speaker Change: Sand versus the need to be able to do it Rocco same way.

Speaker Change: What we find our customers look to do as their life becomes the more suppliers more and more complicated the life becomes.

Speaker Change: So if you have a credible supplier that can do multiple different activities that they're not as helpful. For them you take for example, if you can do plug in more transceivers, but you don't do lie in Cogs.

Speaker Change: And then do you want to pick that.

Speaker Change: The optical device on a line card that becomes an issue, whereas we have is we can do both of that so so we think the view for those guys to be able to be back to cool and to be able to integrate more services that that that becomes a play for lives is something that we've seen across automotive make mentioned the cameras that we're perfect producing in automotive for example.

Kenneth S. Wilson: What we find our customers look to do is their life becomes, the more suppliers you add, the more and more complicated their life becomes. The other thing that I think remains to be seen but I think is definitely not a negative but is definitely a positive is... We have a global footprint so we can leverage best practices and capabilities across the world, but being domiciled in North America is something we see as being helpful in the longer term from a secure supply perspective. So we think, putting all of that together, we feel that we're well positioned, and all we've got to do is perform. So we're pretty bullish on the long-term opportunities and growth in this area. Okay, thanks for that. And just as a follow-up, you know, I want to push you a little bit.

Speaker Change: So we think that that serves us well.

Speaker Change: The other thing that I think remains to be seen but I think as basically not a negative but a positive for sure.

Speaker Change: Yeah, we have a global footprint. So we can leverage best practices and the capabilities across the world, but being domiciled in North America.

We see as being held for the longer term.

Speaker Change: Your supply perspective.

Speaker Change: So we factored all of that together.

Speaker Change: We feel that we're well positioned and and all we got to do is perform so well.

Speaker Change: We're pretty bullish on the long term, our long term opportunities and growth in this area.

Speaker Change: Okay. Thanks for that and just as a follow up you know I wanted to push you a little bit I mean this is the second time in a row that youre cutting full year guidance I mean last time revenues you cut by twin have billion and this time it looks like ex the 400 million for the mobility business that take down is about 2.1 billion. So my question is.

Ruplu Bhattacharya: I mean, this is the second time in a row that you're cutting full year guidance. I mean, last time revenues were cut by two and a half billion. And this time, it looks like an extra 400 million for the mobility business, so the takedown is about 2.1 billion. So my question is really the same as I had last time, which is what gives you confidence in your guidance? And how can investors get confidence that you won't come in even lower for fiscal 24? For example, if renewables are weak, why can't it get even weaker?

Speaker Change: Really the same as I had last time, which is what gives you confidence in your guidance and how can investors get confidence that you won't come in even lower for fiscal 'twenty four. It for example, if renewables is weak, but I mean, why can't didn't get even weaker and then Mike just on the on the <unk> for next year, you know you talked about all these.

Ruplu Bhattacharya: And then Mike, just on the for next year, you know, you talked about all these drivers for margin improvement. My question would be, what can derail that? I mean, what are some of the risks to Jabil attaining that margin? And what should we look out for?

Speaker Change: Drivers for margin improvement.

Speaker Change: My question would be what can derail that I mean, what are some of the risk to jabil attaining that margin and what should we look out for thank you. So much for taking my questions.

Kenneth S. Wilson: Thank you so much for taking my question. Yeah, so let me take a step back, Ruplu, because we've reflected on that a lot. The relationships we've got with our customers are key and generally have been long term. In some instances, they've been multi-decade.

Speaker Change: Yeah. So yeah, so let me take a step back.

Speaker Change:

Speaker Change: Because we've reflected on that a lot.

Yes.

Speaker Change: The relationships, we've got with our customers is generally has been a long time in some instances has been multi decades.

Speaker Change: So it was a partnership there.

Speaker Change: Joined US connected we've got processes, where we see a forecast we look at inventory.

Kenneth S. Wilson: So we're a partnership there. We're kind of joined at the hip, connected. We've got processes where we share forecasts, we look at inventory. So we're pretty tight. We've got people at our sites, whether it's business development people, planners, et cetera, et cetera, that are involved in this. So this isn't just the top down.

Speaker Change: So what type of people that have sites, where there, especially at the valent people plateaus et cetera, et cetera that that involved the desk. So this isn't a top down as well.

Speaker Change: We both of us up from the bottom.

Speaker Change:

Speaker Change: And I can understand the question you know in Q1, we've seen a broad based reduction.

Speaker Change: If I look forward from what we won't be when we looked at Q2 across the majority of our end markets. What we expected was going to happen for the balance of the year as the shopping and so we're comfortable with that.

Speaker Change: And sometimes you got outlier like India for example, I mean, no one expected the with the rate of the.

Speaker Change: The deployment of of redo with in India that was just all of a sudden stop so so I think that in this instance that that becomes you know somebody you got to accept that sometimes things happen.

Kenneth S. Wilson: It's, it's, we, we, we bubble this up from the bottom. So I can understand the question. You know, in Q1, we saw a broad-based reduction. And, you know, if I look forward from what we... When we looked at Q2, across the majority of our end markets, what we predicted was going to happen for the balance of the year was happening, so we're comfortable with that. And sometimes you get an outlier, like India, for example. I mean, no one expected with the rate of the deployment of radios in India that it would just all of a sudden stop.

In the renewable space, we spent a lot of time with we've got more customers know who they are we had a six months ago.

Speaker Change: And we spent a lot of time with them.

Speaker Change: It's clear that.

Speaker Change: This slowdown and the rule of the inventory if you go out and channel has.

Speaker Change: It has been much slower than expected we've.

Speaker Change: We've taken our numbers we'd iron.

Speaker Change: But isn't that also.

Speaker Change: Is this mainly a residential play that's been solved we were pivoting so that where we are much more in the commercial side and that's been supported by our customers.

Kenneth S. Wilson: So I think that in this instance, that becomes something that you've got to accept that sometimes things like that happen. In the renewable energy space, we've got more customers now than we had six months ago, and we spend a lot of time with them.

Speaker Change: We're also winning market share and that's been a lot of consolidation to jabil and not space lately and if you if you read that.

Speaker Change: It seems like the commercial space in the U S is becoming more robust. So we will be building that in North America also so we're gaining share.

Kenneth S. Wilson: It's clear that the slowdown and the rollout of the inventory that got in-channel have been much slower than expected. We've taken our numbers way, way down. But in that also, the balance of our business, we think, is holding up, so we think we're really at the bottom here. But what I would like to add, though, a little bit to your question is—and I mentioned in my prepared remarks— We've got to be really, really good at controlling what we can control, that our businesses are, you know, taking a couple punches but staying remarkably resilient. So my message to investors would be that sometimes outliers happen, but I think we are improving our margins, and I think at 840 EPS, I think it demonstrates that our company is much more robust than it was historically.

We've taken our numbers down significantly.

The balance of our business, we think is holding up so.

Speaker Change: We think we we were really at the bottom here, but what I would like to do them a little bit to your question.

Speaker Change: As I mentioned in my prepared remarks.

Speaker Change: We got to be really really good at controlling what we can control.

Speaker Change: You know whether this has been a pillbox slowdown recession inventory correction, maybe you want to call it.

Speaker Change: If you look back in our company's history.

Speaker Change: You know them well.

Speaker Change: Last couple of things just happened that EPS is going down by 40% on margins by 100 basis points or more.

Speaker Change: Yeah, we we work really hard because as we mentioned in our prepared remarks to meet the company much more resilient and robust.

Speaker Change: So I think that we demonstrate that in spite of shops and a couple of other end markets that.

Speaker Change: That are our business has taken a couple of punches standard remarkably resilient. So my message to investors would be.

Speaker Change: Sometimes like everybody else, often but I think it's improving our margins.

Speaker Change: And I think at 840, EPS I think it demonstrates that our companies are.

Speaker Change: More to Boston It was historically.

Kenneth S. Wilson: Andrew, I'm going to answer your question in a slightly different way than you would have it. Obviously, you asked about the risk and what can go wrong and why the margin story holds good for us. Let me just try and answer it by talking about the $10.65. Why do I feel so strongly about that particular $10.65 number?

Speaker Change: Andrew I'm going to answer your question in a slightly different way than you would have it obviously you asked about the risk and what can go wrong and why the margin.

Story holds for us.

Speaker Change: Let me just try and answer it it's like talking about a $10 65 added because all all of that is factored into our $10 65, why do I feel so strongly about that particular $10 65 or out before that at least give you. Some building blocks. So if you look at what our interest cost as this year.

Michael Dastoor: Before that, let me just give you some building blocks. So if you look at what our interest cost is this year, we'll be in the high 200s. We expect next year to be in the mid-200s. So if you take an interest number of about $250 million for the building block there, and if you take WASO, we will have substantially completed the $2.5 billion project by FY24. In FY25, we'll continue a more normalized run rate of buybacks. So I expect WASO to be about $110 million to $113 million in FY25. Now based on these two numbers, if you take the incremental income that's needed to make $10.65, the numbers are around $130 million to $140 million in incremental income.

It will be in the high two hundreds out we expect next year to be in the mix.

Speaker Change: 200, and so if you take an interest a number over that 250 million or.

Speaker Change: The building block there are if you take last so we will have done.

Speaker Change: She's doing a $1 billion will be completed by FY 'twenty, four and FY 'twenty five we'll continue to a more normalized run rate of buybacks.

Speaker Change: So I expect <unk> to be about $110 million to $13 million.

Speaker Change: In FY 'twenty five.

Speaker Change: Based on these two numbers are if you take the incremental income that's needed to make $10 65, the numbers at around $130 million to $140 million of incremental income.

Michael Dastoor: I talked about some of the end markets, how we're sort of benefiting from some other macro trends that are coming into play right now. I talked about AI, and I talked about the different end markets in networking and storage and cloud, et cetera, where we're seeing this whole AI proliferation. And that alone, as I mentioned, is about a billion to a billion and a half in incremental revenue, net revenue, I should add as well, sort of net of any consignment effect that FY25 presents. We've talked about, I mentioned in my prepared remarks, the automotive industry, what we're seeing for FY25. And our assumption is not based on end market growth. Instead, our assumption is based on new program wins. We're talking about wins that we already have under our belts.

Speaker Change: I talked about sort of the end markets are.

Speaker Change: How how we're sort of benefiting from some other macro trends that are coming into play right now I talked about AI I talked about the different end markets.

Speaker Change: Storage and cloud et cetera, where we're seeing this whole AI proliferation and that that alone as I mentioned, it's about 1 billion until drilling and a half.

Speaker Change: The incremental revenue net revenue I should add as well.

Speaker Change: Sort of natural fitting inside when in fact that FY 'twenty five presents a we've talked about I mentioned in my prepared remarks automotive automotive.

Speaker Change: What we're seeing for FY 'twenty five and our assumption is not based on end market growth assumptions based on new program wins that we're talking about winds that we already have under the balance we've already.

Michael Dastoor: We've already booked those, and it's just a matter of delivering those next year, obviously. We're not expecting some big miracle there for the end market to change substantially. If it does, it'll actually be an opportunity for us.

Speaker Change: Those and it's just a matter of delivering those next year, obviously, we're not expecting some big.

Speaker Change: Medical therefore, the end market have changed substantially yeah. If it does will actually be an opportunity for us, but right now if you just assume a 10% even in this bad environment in FY 'twenty, four but close to 10%. So there's no reason to expect automotive to be substantially lower than 10% and then if you take health care are at maybe a five.

Michael Dastoor: But right now, if you just assume 10%, even in this bad environment in FY24, we're close to 10%. So there's no reason to expect the automotive industry to be substantially lower than 10%. And then if you take healthcare at maybe 5% growth, again, it's a very modest growth. If you add up this AI for automotive and healthcare alone, that's about $2 billion in revenue. You're talking about 5% to 6% margin, even more if you get leverage out of it. So at 6%, you're talking about 120 of that 130, 140 million incremental income that I mentioned is needed for the $10.65. It's already there in just these three end markets and the balance of all the end markets that I'm talking about, including semicap, which is, by the way, showing very strong signs of a recovery that's coming.

Speaker Change: 5% growth again, it's a very modest growth.

Speaker Change: Out of this AI automotive and health care alone.

Speaker Change: That's about $2 billion of revenue, you're talking about 5% to 6%.

Speaker Change: Margin, even more right. If you if you get if you get leverage out of itself at 6% you're talking 120 of the 130 of them 40 million incremental income that I mentioned as is needed for the $10 65.

Speaker Change: It's already there in just these three end markets and the balance of all the end markets and I'm talking about.

Speaker Change: Semi cap bar, which by the way is showing very strong signs of a recovery.

Michael Dastoor: It's not here, but a lot of customers have changed the way they talk about their own businesses, and that's changing quite a bit in the positive direction. So we do expect, not this year, we're not talking about calendar year 24, but in calendar year 25, we do expect a very high probability of a sharpish sort of recovery there. Renewables totally agree, it's slowing.

Speaker Change: It's coming it's not here, but a lot of customers have changed are the way they talk about their own businesses and that's changing quite a bit in the positive direction. So we do expect not this year, we're not talking about calendar year 'twenty four but in calendar year 'twenty five we do expect.

They had probably P F.

Speaker Change: Sharpish tells me that renewables totally agree it's slowing digital print and retail with the steady Eddie and then connected devices as the base in FY 'twenty four is so low that even a small little increase there you certainly see the 139 40, a minimum income that we're talking about is not difficult to get to.

Michael Dastoor: Digital print and retail is a steady eddy. And then connected devices, the base in FY24 is so low that even a small little increase there, you certainly see the $139.4 million of income that we're talking about is not difficult to get to. And then if you look at the margin play, obviously, there's this mix going on, this makeshift that we continue to talk about.

Speaker Change: And then if you look at the margin play obviously, there's mixed going on this mix shift that we continue to talk about and the cost optimization. You'll also have a full year impact of our cost optimization efforts that we've undertaken in FY 'twenty before so I hope I answered your question from a risk perspective look the risk is very low.

Michael Dastoor: And the cost optimization, you'll also have a full year impact of our cost optimization efforts that we've undertaken in FY24. So I hope I answered your question from a risk perspective. Look, the risk is very low.

Michael Dastoor: If you look at, if you break down the individual components of what we're talking about for FY25, the $10.65 sounds highly achievable. Okay, thank you for all the details. I appreciate it. You're welcome, Ruplu.

You look at if you break down the individual components of what we're talking about for FY, 'twenty, five or $10 65 sounds highly achievable.

Speaker Change: Okay. Thank you for all the details appreciate it.

Speaker Change: Welcome to the fourth.

Mark Trevor Delaney: Thank you. Our next questions come from the line of Mark Delaney with Goldman Sachs. Please proceed with your question.

Speaker Change: Thank you our next questions come from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.

Mark Trevor Delaney: Yes, hi, good morning, and thanks for taking my questions. I was hoping you mentioned an expectation to have about $6 billion in AI related revenue in fiscal 'twenty five he must better understand how you're defining AI related revenue and then maybe also help us understand out of that 6 billion. How much is coming from data center and then how much of some of these other end market opportunities, where you see some AI AI opportunities like health care.

Michael Dastoor: Thanks for taking my questions. The company mentioned an expectation to have about $6 billion of AI-related revenue in fiscal 25. Can you please better understand how you're defining AI-related revenue? And then maybe also help us understand out of that $6 billion, how much is coming from the data center? And then how much is some of these other end market opportunities where you see some AI opportunities like healthcare? Yeah, hey, Mark.

Speaker Change: Yeah, Hey, Mark so the blend of it as.

Michael Dastoor: So the blend of it is, I would say that probably just about north of half of it is data center related, maybe slightly, maybe two thirds of it. And the balance would be optics and advanced switching, really. So it's that kind of order of magnitude. And if I could just add, if you look at our data center revenue, and again, remind you, that's net revenue. It's net of our consignment. In fact, our gross volumes are growing at a really good pace. It's in that 25-30% growth range, which obviously doesn't show up in revenue, but it will show up in the margin because that is what we're adding value to. So I think the number by itself, just the revenue number, net revenue, can be a little misleading.

Speaker Change: I would say that probably just just north of half of it is.

Speaker Change: Datacenter related.

Maybe slightly maybe two thirds of it and the balance would be and upticks in advance.

Speaker Change: Advanced switching really it's that kind of order of magnitude and if I could just add that if you look at our data center revenue and again to remind you that net revenue.

Speaker Change: It's it's it's net of consignment.

Speaker Change: In fact, our gross volumes.

Speaker Change: At a really good base, that's in that 25, 30% growth range, obviously, it doesn't show up in revenue, but it will show up in the margin because that is what we're adding valuable so.

Speaker Change: I think the number by itself just the revenue number that revenue can be a little misleading now you've got to look through look at volumes volumes are going up 25, 30% are in that particular space.

Michael Dastoor: You've got to look through, look at volumes; volumes are going up 25-30% in that particular space. Okay, just to clarify, so would any rack for a hyperscaler be counted as AI, or does it need to have GPUs in it? Just trying to understand sort of the categorization of AI versus some of these other broader categories. No, it has to have some GPUs attached.

Speaker Change: Okay. That's helpful, but just to clarify so would any rack for hyperscale or be counted as AI or does it need to have gpus and im just trying to understand sort of the day the categorization of AI versus any other broader categories. No. It has to have some GPU attach most of our business now is shifting from the leg.

Michael Dastoor: Most of our business now has shifted from the legacy server business to AI-related GPUs, predominantly in our cloud. Yeah, we opened a new facility, like six months ago, that's pretty much all doing GPUs, like racks for. My other question was on margins. Mike, you mentioned fixed cost recoveries as one reason for the margin resiliency in Fiscal 24. Maybe you can help us speak to how secure the recoveries are. Is that something that you still need to go out and negotiate?

Speaker Change: Do you see a similar business to our AI related GPU be dominantly are in our in our cloud business.

Speaker Change: Okay.

Speaker Change: Yeah, We just just Bob just for you opened a new facility.

Speaker Change: Six months ago that that's pretty much all doing GPU like rocks for them.

Speaker Change: In that space.

Speaker Change: My other question was on margins, Mike you mentioned fixed cost recoveries as one reason for the margin resiliency in fiscal 'twenty. Four maybe you can help us speak to how secure the recoveries are or is that something that you still need to go out negotiate and then maybe talk a little bit around your optimism about your your ability to still achieve a 6% EBIT margin over there.

Michael Dastoor: And then maybe talk a little bit about your ability to still achieve a 6% even margin over the longer term. Yeah, the recoveries are already done, Mark. It's not based on a future event. It's already agreed upon. So it's very secure.

Speaker Change: Longer term thanks.

Mike: Oh, yeah. The recoveries are I've already gotten a model is not based on a future event. It's a it's already.

I need a partner so it's it's it's very secure.

Michael Dastoor: And can you repeat your second question? The ability to get to the 6% EBIT margin in the longer term, which is something I think you said could be achievable, I don't think you put a specific time frame on it, but to what extent do you think you're still tracking to eventually get a 6% or higher NAHGAP EBIT? Right, so we will exit at point 24 or 5.6, but being very sort of conservative, I think 5.7 plus for FY25. I think getting to six is not five years from now. It's maybe a year or so away from FY25.

Mike: Second question.

Mike: Your ability to get to the 6% EBIT margin in.

Mike: In the longer term, which is yesterday I think you've you said yeah. It could be achievable I don't think you've put a specific timeframe on it but you know to what extent do you think you are still tracking to eventually get a 6% or higher our non-GAAP EBIT margin right. So we will exit FY 'twenty floor at 5.6, but being very.

Mike: Sort of a conservative by saying $5 seven plus for FY 'twenty, five, but I think getting to six.

It's not five years from there maybe a year or so away from FY 'twenty five so we're getting closer and closer to that 6% are and I think the margin story is definitely in our favor right now it's all the business that we're seeing that.

Melissa Ann Dailey Fairbanks: So we're getting closer and closer to that 6%. And I think the margin story is definitely in our favor right now. It's all the business that we're seeing. That is all higher margin mix.

Mike: That is a that is a higher margin mix shift.

Unknown Executive: Thank you. Our next question has come from the line of Melissa Fairbanks with Raymond James. Please proceed with your question. Hey, guys. Thanks very much. I was wondering if we could dig into the expectations for healthcare. I know it's not quite as exciting as AI.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is come from the line of Melissa Fairbanks with Raymond James. Please proceed with your questions.

Melissa Ann Dailey Fairbanks: Hey, guys. Thanks, very much I I was wondering if we could dig into the expectations for health care I know, it's not quite as exciting as AI.

Unknown Executive: But we've heard from some of your peers that capital equipment investment has been challenged recently. I assume that's what's behind your lower full-year outlook. But you actually sound increasingly constructive about the overall business. Could you give us a little more color on what you're seeing there? Yeah, hey, Melissa. Yeah, yeah. I mean, we cannot break that up.

Melissa Ann Dailey Fairbanks: But we've heard from some of your peers that capital equipment investment has been challenged recently I assume that's what's behind your lower full year outlook.

But you actually some increasingly constructive about the overall business could you give us a little more color on what youre seeing there.

Speaker Change: Hey, Melissa Yeah, Yeah, I mean, we we kind of break that out.

Melissa Ann Dailey Fairbanks: And if I think about it I would break it up.

Melissa Ann Dailey Fairbanks: <unk>.

Melissa Ann Dailey Fairbanks: Made the bases farm.

Speaker Change: And also.

What we see in the first half of the year was was.

Speaker Change: Expectation is like a little bit softer because of inventory digestion.

Speaker Change: But we think that that recovers and kind of made the bases.

Speaker Change: At Farnborough, you mean pharma with a G O P. One we see that going really really strongly and so we think that that's you know we're pretty much run at our factories, obviously youre.

Unknown Executive: You know, if I think about how we break it up internally, you know, that there's med devices, pharma, and ortho. What we saw in the first half of the year was, Unknown Executive, Samik Chatterjee, Kenneth Wilson, David Vogt, Dong Wang, Frederic McCoy, Jabil Inc. Okay, great. That's all for me. I'll pass it along in case someone else has another question. Thanks, Melissa. All the best. Thank you. Our next questions come from the line of George Wong with Barclays. Please proceed with your question. Oh, hey, guys. Thanks for squeezing me in.

Speaker Change: Youre round the clock there and we think it made devices, we see some of the companies here and there and also was still a little bit soft, but getting better. So I think we're looking at like an 8% like a back half of a year is 8% stronger than the front half as Enbridge is digested and we're comfortable at.

Speaker Change: With that number. So so we think we are pretty comfortable that our health care business is going to continue I think Mike mentioned, 5% growth next year.

Speaker Change: We got enough can I answer to Fiat and opportunities for us to be comfortable with that as we go forward.

Speaker Change: Okay, Great. That's all for me I'll pass it along in case someone else ask the question. Thanks, Melissa for the best.

Speaker Change: Thank you our next questions come from the line of George Wang with Barclays. Please proceed with your questions.

Dong Wang: Oh, Hey, guys. Thanks for squeezing me in I, just want to double click on the AI.

George Wong: I just want to double click on the AI, you know, you talked about, you know, revenue growing 20-25% kind of approaching north of 6 billion in FY25. I just want to see if you can elaborate on the margin profile kind of within, you know, the specific subsegments within AI, you talked about, you know, the GPU rack, kind of, you know, the optics, you know, switching transceivers and the power, are you able to rank order, at least in high level, kind of how you think about margin structure, you know, in terms of packing order, you know, which specific for the element within the overall AI envelope will garner the highest margin kind of, Hey, so yeah, I, The AI piece, obviously, the different line items that we look at, I said earlier, it's in cloud, it's in networking and storage. The margin is north of enterprise level margin. It's different. The rank order would be roughly, sort of, photonics would be the highest margin.

Dong Wang: You talked about revenue growing 25% kind of approaching north of 6 billion. That's why 25 I just want to.

Dong Wang: See if you can elaborate on the margin profile kind of wording.

Dong Wang: The specific sub segments within <unk> you talk about you know that you Peel rack kind of you know the optics switching transceivers power are you able to rank order anything high level kind of how you think about module structure.

Dong Wang: In terms of a pecking order you know, which.

Dong Wang: In particular some of the elements within the overall.

Dong Wang: Envelope will garner the highest margin and kind of I suppose.

Dong Wang: So yeah I.

Dong Wang: The AI piece. So obviously the different line items that we look at I said earlier, it's in cloud networking and storage.

Margin is not at the enterprise level budge and it's different.

Dong Wang: The rank order would be roughly sort of photonics would be the highest margin AI switching here would be next switch and racks and racks as configuration integration et cetera. So.

Michael Dastoor: The AI switching gear would be next, the switch, and racks as configuration, integration, etc. So, overall, if you look at all these dynamics, the total margin is north of enterprise margins. So, again, that's what's giving us comfort for our margin in FY24. And that's what's giving us comfort for margins in FY25 as well. Gotcha. In terms of the customer base, you know, obviously, Amazon being one of the bigger players within the AI segment, can you kind of talk briefly about other, you know, kind of, you know, whether other hyperscalers are in there or maybe tier two, tier three cloud, any, you know, color there?

Dong Wang: Overall, if you look at all of these dynamics the total.

Dong Wang: Margin plays North of enterprise margins. So again, that's what's giving us comfort for our margin in FY 'twenty, four and that's what's giving us comfort or margins in FY 'twenty five as well.

Speaker Change: Gotcha. He comes up the customer base, you know, obviously, Amazon being a well with the bigger players within the segment can you kind of talk briefly other you know kind of who you know whether other hyperscale is in there or maybe tier two tier three clouds.

Speaker Change: Any color there.

Kenneth S. Wilson: Yeah, yeah, we got, we got it depends if you look at the predominant rack assembly, or you look at the proliferation of other capabilities. So, so we are supplying other hyperscalers across the whole blend of the capabilities that we talked about there, George. And I think the thing just to emphasize that, as Mike mentioned, look, we've been doing enterprise switches for multiple years, and as that becomes to some degree commoditized, we're pivoting the capability that we have there to the advanced switching area that really drives the AI GPU type model. So I think that, coupled with what we're doing in optics, means that we're comfortable that our margin profile is robust here. And I go back to the point I made with Steve about all the kind of DCI, the infrastructure stuff we're doing as well, which historically we hadn't done. So we think that there's a real rich profit pool here for us in the longer term. Okay, great. That's it for me. You've got it, George.

Speaker Change: Yeah, Yeah, we we got.

Speaker Change: We got it depends if you look at if you look at predominant.

Rocco, saying there you look at you look at the proliferation of other capabilities. So so so we are we are supplying another hyperscale is across the whole blend of all of the capabilities that we talk about.

Speaker Change: George and I think the other thing just to emphasize that.

Speaker Change: What Mike mentioned.

Speaker Change: We.

Speaker Change: We've been doing enterprise switches for multiple years.

Speaker Change: And as that becomes to some degree commoditized.

We've pivoted not keep it relatively behalf dear to get advanced switching.

Speaker Change: Switching area that really drives the.

Speaker Change: AIA GPU type model so.

Speaker Change: I think that coupled with what we're doing in optics means that we're comfortable that our margin profile.

Speaker Change: Is robust here.

Speaker Change: I go back to the point I mean, Steve about all the kind of D. C. IV infrastructure stuff, we're doing as well, which historically, we havent done.

Speaker Change: So we'd be Facebook or real rich profit pool here for us in the longer term.

Speaker Change: Okay, great. Okay. That's helpful.

Speaker Change: You got it George Thank you.

Adam Berry: Thank you. Thank you. Our next questions come from the line of Samik Chatterjee with JP Morgan. Please proceed with your question. Hi, this is MP for Samik Chatterjee.

Speaker Change: Thank you our next questions come from the line of Cemig Chatterji with J P. Morgan. Please proceed with your questions.

Samik Chatterjee: Hi, Suzanne.

Samik Chatterjee: <unk>. Thanks for taking my question I, just wanted to ask you to expand on the incremental weakness that youre seeing or the five decidedly is it relative to somebody going to type of customers or some particular region any any more color on that thank you. Yeah. So what we see is we have seen and if you look at the if you look at telco customer agenda.

Samik Chatterjee: Thanks for taking my question. I just wanted to ask you to expand on the incremental weakness that you are seeing on the 5G side. Like, is it relative to some particular set of customers or some particular region? Any more color on that?

Kenneth S. Wilson: Thank you. Yeah So what we see is, and if you look at telco customers generally, they pretty much all come out with a really, really soft, you know, outlook for calendar 24. We've baked most of that in, but there is some continued weakness there, and that's North America and also across the world. The biggest impact of 5G was the rollout in India, where, I mean, basically, the rollout stopped.

Samik Chatterjee: Okay.

Samik Chatterjee: These are pretty much old come out with a really really soft.

Samik Chatterjee: You look for for calendar 'twenty for.

Speaker Change: We picked most of that.

Speaker Change: But there is some some continued weakness there and that's that North American also across the world.

Speaker Change: The biggest impact on <unk> was with the rollout in India, where I mean basically the rule I've stopped so it's paused, we go to whether it's going to restart them.

Kenneth S. Wilson: So it's paused. We don't know when it's going to restart. But there's still a significant amount of radios that have got to be installed in the Indian market. So that demand doesn't go away. It's just paused. We are pretty much single-sourced in India. We build those radios in our facility in Pune.

Speaker Change: It's still a significant amount of a.

Speaker Change: Radio was up quite would be installed in the Indian market.

Speaker Change: So that that demand doesn't go away, it's just pause.

Speaker Change: We are pretty much single sourced in India, we build those ratios at our facility.

So again pretty what's been sort of a five that facility at our company for 20 some years.

Kenneth S. Wilson: We've had that facility in our company for 20-some years, so it has performed real well. We're doing a really nice job, and we're just waiting for the gates to reopen and to start to build and get that installed on the network. So that will come back. But we just didn't expect it to stop, I mean, completely stop, you know, with no future demand. We're taking demand out for the balance of the year.

Speaker Change: So that performed real well, we're doing a really nice job and we're just waiting for the the gates to reopen it has to stop to two youll bear with them and and all I would I'd get ought to be installed in the network. So I don't come back a.

Speaker Change: We just didn't expect it to stop I mean completely stock with no future demand wherever we're taking the the demand there for the balance of the year.

Adam Berry: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Adam Berry for closing remarks. Thank you for your interest in Jabil.

Speaker Change: Yeah.

Speaker Change: Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Adam Aron for closing remarks. Thanks for your interest in Jabil. Please reach out to US if you have any further questions. Thank you.

Operator: Please reach out to us if you have any further questions. Thank you. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Speaker Change: Hum.

Speaker Change: Hum.

Speaker Change: Hum.

Speaker Change: [music].

Yeah.

Speaker Change: Hum.

Speaker Change: Okay.