Last week, Jabil (NYSE:JBL) signed a non-binding agreement with Adani Enterprises to form a 50:50 joint venture in India. The venture would build AI racks, servers, storage and networking equipment for data centers, serving customers in India and abroad. It follows an earlier announcement that the two companies intended to form a strategic alliance.
But the deal is only a framework, and no investment amount has been disclosed. The bigger story is what it says about Jabil itself. The company spent years making other firms’ electronics on contract, and it now builds more of the hardware inside AI data centers. The question is whether that shift lifts profit as much as sales. So far it has, but on a thin margin, and the stock’s price leans on adjusted earnings. Jabil is one of the 10 Best Stocks to Buy with High Return Potential.
A Slow Grower Speeds Up
Jabil builds products that other companies put their own names on, for customers in AI infrastructure, automotive, healthcare and defense. For most of the past five years, that made it a steady, slow-growth manufacturer, with revenue growing about 4.2% a year. Fiscal 2026 changed that. Revenue reached $36.0 billion, up 21%, and CEO Mike Dastoor said Jabil supported significant growth in AI infrastructure while bringing new factory capacity online. He also pointed to expanding customer relationships and committed business supporting that new capacity.
Guidance points to even faster growth, with fiscal 2027 revenue expected at $44.5 billion, up 24%. Dastoor said the Adani agreement would help Jabil bring its rack-level data center products to more of the biggest cloud companies. That is why a framework with no price tag still matters. Investors who want more growth names can see our ranking of 10 Best Aggressive Growth Stocks to Buy According to Wall Street Analysts.
Photo by Arturo Añez on Unsplash
Thin Margins Leave Little Cushion
The catch is how little Jabil keeps from each sale. Over the past 12 months, its net profit margin was 2.90%. With a margin that thin, a small rise in costs can erase a large share of profit. That risk grows as the company builds more capacity to chase AI orders.
Management expects the margin to improve. Its fiscal 2027 outlook calls for a core operating margin of 6.1%, so each sales dollar is meant to carry slightly more profit than it does now.
Adjusted earnings also tell a rosier story than standard accounting. Jabil’s fiscal 2026 core earnings per share were $13.09, compared with $9.75 on a standard accounting basis. The gap is wide, and the multiples below rest on the adjusted number. Even so, earnings per share grew about 16.3% a year over the past five years, far faster than sales, so profit has been outrunning revenue.
What Investors Are Paying for That Growth
Jabil trades at 15.67 times estimated fiscal 2027 earnings. That is about 27% below the sector median of 21.53 and only about 4% above Jabil’s own five-year average of 15.06. Yet consensus estimates call for earnings per share to grow 35.15% in that same year, well above the pace of the past five years.
So the price asks for little beyond the past. For someone holding the stock today, that means owning a business guided to faster growth while paying close to the old multiple. The discount to the sector fits a company that keeps so little of each sales dollar. If you’re looking for cheaper AI names, check out 10 Undervalued AI Stocks to Buy Now.
The Adani venture shows where Jabil is heading, but it is still a plan, not a result. The number to watch is the 6.1% core operating margin Jabil expects in fiscal 2027. With margins this thin, extra sales only help if more of each dollar turns into profit.
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This article is originally published at Insider Monkey.
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