Goldman Sachs Reiterates Buy Rating on Jabil, Raises Target Price to $482

Overview

Goldman Sachs released a research report commenting on Jabil Inc.'s fiscal 2026 third-quarter results. The report notes that the company's revenue and profits both exceeded market consensus expectations, primarily driven by strong demand for artificial intelligence (AI) applications. Management guidance indicates that AI revenue will maintain rapid growth of approximately 50% in fiscal 2026 and 2027, while the increasing proportion of the high-margin Intelligent Infrastructure business is driving overall margin expansion. Based on this, Goldman Sachs maintains its 'Buy' rating and significantly raises its 12-month target price from $384 to $482.

Core views

Strong performance, broadly beating expectations. Jabil achieved revenue of $8.751 billion in fiscal 2026 Q3 (ended May), 2% higher than Goldman Sachs' expectation and 2% higher than the market consensus (FactSet). Non-GAAP core earnings per share, excluding share-based compensation (SBC), was $3.16, higher than Goldman Sachs' expectation of $3.12 and the market expectation of $3.10. Among these, the Automotive & Transportation segment within Regulated Industries performed better than guided, the Intelligent Infrastructure segment saw double-digit growth in capital equipment and cloud & data center infrastructure, and the Connected Living & Digital Commerce segment benefited from recovering consumer demand. AI drives growth engine, optimizing profit margin structure. The company expects AI-related revenue to reach $13.6 billion in fiscal 2026, a year-over-year increase of approximately 50%, an upward revision of about $500 million from the previous quarter's guidance. This growth is mainly attributed to new capacity additions and project ramp-ups, including winning a third hyperscale cloud service provider customer. More importantly, the Intelligent Infrastructure segment, which houses AI products, achieved an EBIT margin of over 6% in Q3, a significant year-over-year improvement, indicating that the company's growth is coming from a higher-margin business mix. Additionally, the company expects AI revenue to continue growing at approximately 50% in fiscal 2027, reaching about $20.4 billion. Optimistic guidance, raised earnings forecasts. The company provided strong guidance for fiscal 2026 Q4, with mid-point revenue of $9.6 billion, approximately 7% higher than Goldman Sachs' and market expectations; non-GAAP EBIT margin guidance is 6.4%. For the full year, revenue is expected to be approximately $35 billion, core EBIT margin 5.8%, and non-GAAP EPS $12.70. Based on higher revenue expectations, Goldman Sachs raised its EPS forecasts for fiscal 2026/2027/2028 to $11.45/$15.25/$18.25 (including SBC), respectively, and increased its 12-month target price from $384 to $482, keeping the valuation multiple unchanged at 27x.

Analysis framework

Goldman Sachs' analysis logic follows the path of 'performance verification - driver decomposition - forward-looking guidance assessment - valuation recalculation'. First, by comparing actual financial report data with market consensus (Street Consensus) and Goldman Sachs' internal models, it confirms the magnitude of the earnings beat. Second, it deeply decomposes the revenue contribution and margin changes of various end markets (such as Intelligent Infrastructure, Regulated Industries, etc.) to identify AI-related applications as the core growth driver, and that the increased proportion of high-gross-margin businesses has improved overall profitability quality. Third, combining management's guidance for AI revenue growth in FY26 and FY27 (~50% CAGR) and new customer expansion (third hyperscaler), it verifies the sustainability of growth. Finally, based on raised revenue and margin assumptions, it recalculates EPS for the next three years and derives a new target price using an unchanged 27x P/E multiple.

Methodology notes

• Valuation MethodPE/PEG valuation

  P/E Multiple Valuation Method

  Goldman Sachs uses the Price-to-Earnings (P/E) multiple method for valuation, multiplying the forecasted earnings per share by a specific multiple (here, 27x) to determine the target price. This method is suitable for companies with stable earnings growth, reflecting the market's pricing of their future profitability.

• Industry/Sector Analysis FrameworkVolume-Price Split

  End-Market Demand and Margin Decomposition

  The research report breaks down the company's total revenue into different end markets (such as Intelligent Infrastructure, Regulated Industries, etc.) and analyzes their revenue growth rates and margin changes separately to identify the true growth engines and sources of profit improvement.

• Event Gaming and Behavioral FinanceExpectation Gap/Expectation Management

  Analysis of Market Expectation Gaps in Performance and Guidance

  By comparing the differences between the company's actual performance and future guidance versus market consensus estimates (Street Estimate), it judges whether there is a positive or negative expectation gap, thereby explaining short-term stock price fluctuations and adjusting investment ratings.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Jabil Inc. (JBL.US)

  Direct beneficiary, a major provider of manufacturing and services for AI data center infrastructure

  Strengths

  High-speed growth in AI revenue (~50% CAGR), won a third hyperscale customer, Intelligent Infrastructure segment margin increased to over 6%, strong free cash flow (FY26 >$1.4bn).

  Weaknesses

  Mixed consumer electronics environment, some low-margin businesses may drag down overall performance.

  Comparison

  Relative to peers, possesses a broader solution portfolio (assembly, power cooling, network photonics, etc.) and deeper layout in the high-growth AI track.

  Risks

  Macroeconomic factors affecting revenue growth, loss of market share, changes in project mix, geopolitical uncertainty, free cash flow falling short of expectations.

Key data

• Q3 FY26 Revenue$8.751 billion2% higher than Goldman Sachs' expectation, 2% higher than market expectation
• Q3 FY26 Core EPS$3.16$0.04 higher than Goldman Sachs' expectation, $0.06 higher than market expectation
• FY26 AI Revenue Expectation$13.6 billionYear-over-year increase of approximately 50%, upward revision of $500 million from previous quarter's guidance
• FY27 AI Revenue ExpectationApproximately $20.4 billionExpected to maintain approximately 50% year-over-year growth
• Intelligent Infrastructure Q3 EBIT Margin> 6%Significant year-over-year improvement, driving overall margin improvement
• New Target Price$482Based on 27x P/E multiple, significantly raised from previous $384

Impact & implications

The research report believes that Jabil's leading position in the AI data center infrastructure sector is translating into tangible financial results, reflected not only in the rapid expansion of revenue scale but also in the increased proportion of high-margin businesses. Winning a third hyperscale customer and the cooperation framework with India's Adani Enterprises (although the main contribution will be in FY28) further solidifies its long-term growth logic. For investors, this means the company has the ability to achieve sustainable profit growth through diversified businesses and AI dividends amidst macroeconomic uncertainty, and the current valuation remains attractive relative to its growth potential.

Risks

• Revenue growth falling short of expectations (affected by macro factors, market share, and project mix)
• Margin expansion capability weaker than historical levels
• Geopolitical uncertainty
• Poor free cash flow performance

What to watch

• Whether AI-related revenue continues to maintain approximately 50% growth in FY26 and FY27
• Expansion of cooperation with the third hyperscale cloud service provider customer
• Whether the EBIT margin of the Intelligent Infrastructure segment can be maintained above 6%
• Final implementation of cooperation with Adani Enterprises and revenue contribution in FY28