Jabil (JBL 1.23%) may not be a household name for investors looking to capitalize on the rapid adoption of artificial intelligence (AI), but a closer look at the company's recent results will make it clear that it is benefiting big-time from this technology.
Jabil is a contract electronics manufacturer that serves multiple industries, ranging from automotive to semiconductor equipment to networking to data centers. The company is now witnessing a nice acceleration in growth thanks to the fast-growing deployment of AI data center hardware, which is leading to an increase in demand for the company's cloud data center-focused offerings such as rack integration services.
This explains why Jabil delivered solid quarterly results recently and also raised its full-year guidance. Let's take a closer look at the company's numbers and see why it would be a good idea to buy this stock right now.
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Jabil stock has received a nice AI-powered boost
Jabil released its fiscal 2025 third-quarter results (for the three months ended May 31) on June 17. The company's revenue increased by 16% from the year-ago period, while earnings shot up 35% year over year. Even better, Jabil has raised its full-year revenue forecast to $29 billion from the prior estimate of $27.9 billion.
It now expects fiscal 2025 earnings to land at $9.33 per share from the earlier expectation of $8.95 per share. Jabil management remarked on the latest earnings conference call that it is witnessing an increase in demand for "complex server and rack integration, advanced networking, innovative power, and cooling solutions" on account of the growing deployment of AI data centers.
CEO Mike Dastoor said AI infrastructure demand is accelerating. The company estimates its AI revenue is on track to jump by 50% this year to $8.5 billion. AI, therefore, is set to account for almost 30% of Jabil's top line in fiscal 2025. Not surprisingly, the company plans to invest $500 million in shoring up its cloud and AI data center infrastructure manufacturing services in the long run.
Jabil intends to spend this money on bolstering its ability to design and manufacture complex AI server racks that can meet the growing power requirements and liquid-cooling needs in data centers. Importantly, the AI server market is expected to grow at an annual pace of 34% through 2030, so it won't be surprising to see AI moving the needle in a bigger way for the company.
What's more, Jabil points out that its annual capex won't increase because of the $500 million investment that it is planning, which should lead to an improvement in the company's profitability going forward. Not surprisingly, Jabil's earnings estimates have received a nice boost for the current and the next couple of fiscal years.
JBL EPS Estimates for Current Fiscal Year data by YCharts
Investors can still expect solid gains from this AI stock
Jabil stock has clocked respectable gains of 45% so far in 2025. That's well above the 1% increase in the tech-laden Nasdaq Composite index this year. The important thing to note is Jabil isn't all that expensive despite its recent surge. The stock has a forward price-to-earnings ratio of less than 20. That's a discount to the Nasdaq-100 index's average forward earnings multiple of 29 (using the index as a proxy for tech stocks).
Jabil's bottom-line growth is set to accelerate over the next couple of years. So, it won't be surprising to see this AI stock trading at a richer valuation in the future because of the improvement in its growth profile. Even if Jabil trades at 25 times earnings after a couple of years and achieves the $12.57 per share earnings that consensus estimates are projecting, its stock price could hit $314.
That would be a 50% jump from its current stock price. However, don't be surprised to see the stock doing better than that as it has the potential to deliver stronger growth, which could lead the market to reward it with a higher multiple. All this makes Jabil a top growth stock to buy right now.
