The call welcomes participants to Jabil's third quarter fiscal year 2025 conference, highlighting the presence of the CFO and CEO. It notes the live streaming of the presentation and the availability of slides on the company's website. The discussion includes forward-looking statements regarding the business outlook, including net revenue and earnings expectations, with a disclaimer on potential discrepancies due to risks and uncertainties.

The enterprise level performance for the third quarter exceeded expectations, with significant growth in net revenue, core operating income, and earnings per share. The intelligent infrastructure business, particularly AI-related revenue, drove this success, alongside regulated and CLTC segments performing as planned. Revenue strength was mainly attributed to cloud and data center infrastructure, with higher-than-expected demand in capital equipment and connected living markets. Operating margins improved year over year, and core diluted earnings per share saw a 35% increase compared to the previous year. The regulated industries segment reported flat revenue year over year, reflecting softness in evol renewable end markets, partially offset by growth in other areas.

The healthcare segment's operating margin saw a sequential increase but a year-over-year decline due to below-normal profitability in evol and renewables. The intelligent infrastructure segment reported revenue growth driven by strong demand in AI-related cloud and data center infrastructure, offset slightly by lower networking and communications demand. The Connected Living and digital commerce segment revenue was slightly higher than expected, with a year-over-year decrease mainly due to softness in consumer products. Operating margins improved year-over-year due to restructuring actions and changing business mix. Cash flow from operations was strong, and the company is on track to generate over $1 billion in free cash flow for the year, exiting the quarter with a healthy balance sheet.

In Q3, the company repurchased $339 million of its shares, aiming to complete the current $1 billion share repurchase authorization in Q4. For Q4 FY 25, the revenue guidance by segment includes a decline in regulated industries revenue due to cautious outlook on renewable markets and potential impacts from US legislation. The intelligent infrastructure segment is expected to see strong growth driven by AI-related advancements in cloud data center infrastructure. The connected living and digital commerce segment is projected to see a decline, reflecting softness in consumer-centric products. Total company revenue for Q4 is forecasted in a specific range, with operating income and diluted earnings per share estimates provided. The company highlights its strategic alignment with high-growth trends such as AI and industrial automation, emphasizing its competitive position and resilience amid geopolitical uncertainties.

The speaker highlights the global team's remarkable dedication and execution amidst a complex geopolitical landscape, emphasizing the competitive advantage of localized manufacturing solutions. The third quarter saw strong results, particularly in cloud and data center infrastructure, with AI-related revenue projected to reach $8.5 billion, marking a 50% increase year-on-year.

A new site in the Southeastern US will be opened to support the growing demand for AI data center infrastructure, with an expected investment of $500 million over several years. This expansion aims to enhance design, architecture, and manufacturing capabilities for high-complexity AI racks and liquid cooling systems, diversifying revenue growth in the AI hyperscale space. Additionally, the company is focusing on digital commerce, robotics, automation, and healthcare segments for further growth, while monitoring potential impacts of US legislation on renewable energy markets. The full-year revenue guidance for fiscal 25 is raised to approximately $20 billion, with a focus on enhancing core margins, optimizing cash flow, and returning value to shareholders through share repurchases and targeted investments.

Jabil reported strong Q1 results with core EPS above guidance, driven by intelligent infrastructure performance. They announced increased US investments in AI and data center markets for future growth and plan to host their 8th annual Virtual Investor briefing in late September to outline fiscal year expectations for operating margins, core EPS, and adjusted free cash flow.

The company is experiencing significant growth in data center and cloud revenues, with AI-related revenues forecasted to reach $8.5 billion for fiscal 25. The team has performed well, achieving notable results in recent quarters. Different segments within intelligent infrastructure show varying revenue growth and margins: capital equipment is expected to be accretive with wafer fab equipment having a slightly higher margin, while cloud data center growth is explosive and beneficial for the company. Networking is anticipated to be slightly accretive, whereas communications, particularly EDG, are more dilutive to margins.

The discussion outlines strategies to increase operating margins from the current 5.4% to over 6%, emphasizing the importance of better capacity utilization, particularly in non-US geographies, leveraging sales, general, and administrative (SG&A) expenses as the company grows, and expanding into higher-margin businesses and vertical integration initiatives such as pharma filling and deeper end-to-end solutions with customers.

The company clarifies that Q3 sales strength was not significantly influenced by tariff-related buying pull-ins, particularly in capital equipment and cloud data center infrastructure. The guidance for sequential revenue moderation in Q4 doesn't factor in major tariff impacts due to the ongoing fluidity of the situation. Regarding the announced US expansion, it's driven by a diversified portfolio aimed at expanding the customer base, including hyperscalers and polo-based customers, with a focus on the AI ecosystem, encompassing liquid cooling and power management technologies.

The discussion focuses on the company's recent quarterly margins, particularly noting the flat margin of 5.3% despite an $800 million increase in revenue. Factors affecting margins include incremental investments and the mix impact due to the dilutive effect of the communications 5G side. Looking ahead, strategies for managing rapid growth are highlighted, including ensuring capacity expansion aligns with customer demand, engaging with potential customers, and capitalizing on opportunities in technologies like cloud data center, photonics, liquid cooling, and thermal and power management.

The investment in U.S. manufacturing is largely AI-driven, focusing on sectors like healthcare, intelligent infrastructure, and digital commerce. Despite tariff uncertainties, the company has regionalized its manufacturing base, minimizing impacts. Free cash flow is strong, with a commitment to returning value to shareholders through share buybacks. The company plans to continue this policy and expects to complete its current $1 billion share authorization program soon.

The quarter and guidance saw significant upside, driven by the intelligent infrastructure segment. The testing cycle for custom chip requirements with new technologies and AI-based infrastructure is expanding, contributing to growth. The cloud data center revenue increase was primarily due to successful server rack integration, facilitated by design, architecture, and engineering teams. The market is growing and accelerating, with the company winning market share. Future growth drivers include liquid cooling and power management. The transceiver business is experiencing good growth, with demand on the rise. The company acquired design and engineering capabilities through the photonics acquisition from Intel, enabling the building of transceivers. Demand is moving from 200G to 400G, with an uptick expected towards the end of the year or early next year.

The discussion centers around the Q4 guidance for regulated industries, connected living, and digital commerce, with a focus on the modest decline in the former two segments and the rapid growth in intelligent infrastructure. Prudence in guidance for regulated industries, particularly in evol and renewables, and in consumer living and digital commerce is noted, alongside a cautious approach to revenue guidance. The company highlights healthcare and digital commerce as growth areas, with specific mention of warehouse automation, handheld devices, and humanoid robots, indicating excitement about these sectors despite the conservative outlook.

The discussion focuses on the allocation of 500 million between capital and operating expenses for expanding manufacturing capacity. There's a consideration of whether to tilt manufacturing more towards the US or maintain international locations due to varying levels of utilization. The speaker emphasizes the regionalized nature of the current manufacturing base and the long-term nature of capital expenditures, noting comfort with the existing capital expenditure range.

The discussion focuses on the revenue opportunity and growth plans associated with a $500 million investment over the next couple of years, particularly in the cloud, data center, and networking sectors. Despite the dilution caused by 5G, the networking space is expected to see accretive margins and significant growth, with Protonix ramping up in the networking line item. The $500 million investment is crucial for capacity expansion to meet multiyear growth targets in intelligent infrastructure, although existing capacities are also being ramped up in various locations. The high potential for growth at the new site is emphasized, with significant revenue expected over multiple years. Additionally, the biggest risk to the company's strong position is queried, alongside the prioritization of M&A versus buybacks over the next year.

Despite some downward moves in specific markets, positive highlights include gains in new customers and minimal tariff impacts in the China business. The power business with the largest customer is performing well, offsetting lower car volume sales. The speaker emphasizes prudence in managing risks within the renewable energy and infrastructure line item, noting small hiccups rather than major concerns.

The company discusses its history of making capability-driven acquisitions, emphasizing recent purchases that open up significant opportunities. There's no current plan to alter the capital allocation methodology, with a focus on buybacks, although the board may renew the buyback authorization in July. The speaker notes that if a larger, highly accretive M&A opportunity arises, the company is well-positioned to execute due to its low debt-to-EBITDA ratio, indicating flexibility in leveraging additional debt if necessary.