Jabil Inc (JBL) Q3 2026 Earnings Call Transcript

Greetings, ladies and gentlemen, and welcome to the Jabil Third Quarter of Fiscal Year 2026 Financial Results Conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Adam Barry, Investor Relations. Thank you. Please go ahead.

Good morning, and welcome to JABIL's third quarter fiscal 2026 conference call. Joining me on today's call are Chief Executive Officer Mike Best-Or and Chief Financial Officer Greg Hebert. Please note that today's presentation is being live-streamed, and during our prepared remarks, we will be referencing slides. To view these slides, please visit the Investor Relations section of JABIL.com. After today's presentation concludes, a complete recording will be available on our website for playback. In addition, we will be making forward-looking statements during this presentation, including, among other things, those regarding the anticipated outlook for our business, such as our currently expected fourth quarter and full fiscal year 2026 net revenue and earnings. These statements are based on current expectations, forecasts, and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. An extensive list of these risks and uncertainties are identified in our A report on Form 10-K for the fiscal year ended August 31, 2025, and on other filings with the SEC. Cable disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or all over to Greg.

Good morning, everyone, and thank you for joining our call today. Before getting into the details, I want to take a moment on how the quarter came together. We feel very good about Q3 being strong, our teams executed well, and we delivered ahead of expectations, EPS. The side in the quarter was broad-based across the portfolio, and I'll walk through the segment details shortly. Just as important, margins were strong and free cash flow was robust, giving us good momentum as we move into Q4. Third quarter, revenue was approximately $8.8 billion, up 12% year-over-year and $250 million above the midpoint of our outlook. It was $445 million. Core operating income was $504 million, and core operating margin was 5.8%. Core diluted earnings per share was $3.16, up 24% year-over-year, 3.2%, 4% year-over-year, and above our outlook for the quarter, primarily driven by automotive and transportation, where demand was stronger than we expected. Core operating margin was 5.6%, up 21% year-over-year, reflecting continued strong demand and performance in line with our outlook for Apple equipment and cloud and data center infrastructure were both double digits, while networking and communications was up more than 50%, supported by a strong networking ramp in India. Three, into Q4, we expect another meaningful step up in revenue across all 3N markets. Supported by continued strength in AI-related programs, the margin for the segment was 6.1%, up 80 basis points over connected living and digital commerce revenue was $1.4 billion, Of 5% year-over-year, relative to our Q3 outlook, the upside came largely from connected living, where consumer-related demand was better than the cautious assumptions we had embedded in the guide. Our operating margin for this segment was 4.9%. Strong profitability, cash flow from operations was $535 million, and net capital expenditures were $176 million, $359 million. On working capital, inventory days were 8 deposits from customers. Inventory days were approximately 68, 55 to 60, our targeted range. And adjusted free cash flow of more than $1.4 billion, more than 1.3. Q3 with $1.4 billion in cash of 1.3 times. And we remain fully committed to maintaining our investment-grade credit. During the quarter, we repurchased approximately $291 million of sharing, $1 billion share fully complete in Q4. This reflects continued stability in health care and packaging, ongoing improvement in renewables, and automotive and transportation performance. For intelligent infrastructure, we expect revenue of approximately $4.9 billion. Full sequential step-up from Q3, reflecting continued strength in AI-related programs, and in connected living and digital commerce. of approximately $1.4 billion. Digital commerce growth continues to reflect a mixed consumer environment, although one that has performed better than our more cautious. At the enterprise level, we expect Q4 revenue to be in the range of $9.2 billion to 16%, $89 million to $604. This implies a core operating margin of approximately $6. Core diluted earnings per share to be in the range of $3.80 to $4.20. Fourth quarter net interest expense to be approximately $80 million, finished to the year with continued revenue growth, margin expansion, and free cash flow generation. For fiscal 2026, we now expect revenue of approximately 1% per share of approximately $12.70, more than 1.4. Q3 delivered stronger of our diversified portfolio, the momentum and intelligent infrastructure, and the disciplined execution of our teams around the world. Q4 and look ahead to fiscal 2027, consistent, profitable growth, margin expansion, and sustained. Who will share more on fiscal 2026 outlook and how we're thinking about the setup of 2027?

Today's call by thanking our teams around the world for delivering another strong quarter. And year-over-year growth on business of our scale requires tremendous focus, coordination, and execution across our global operations, operations, customer partnerships, and supply chain network. I want to thank all of our employees for their contributions and commitment to delivering these outcomes. At the enterprise level, we delivered ahead of our expectations across all of our key metrics, including revenue, margin, and our full-year AI-related revenue outlook is now meaningfully higher than what we laid out just 90 days ago. At the same time, we continue to see better-than-expected performances in areas of the portfolio that have previously been under pressure, including automotive and transportation, and connected living and digital commerce. We have to build a diversified model, one which relies on many large end markets, and we still believe that's the right model for our business today. The diversified model not only provides important synergies such as supply chain purchasing power and engineering, which is leveraged across end markets, but more importantly, we believe it also allows for more sustainable financial performance over longer periods of time, providing a natural hedge in different economic cycles. With that as a backdrop, let me now walk through fiscal 2026 by end market. You continue to feel very good about the business. I expect AI-related revenue to be approximately $13.6 billion in fiscal 2026. That is $500 million higher than our March outlook of $13.1 billion and up from $9 billion in fiscal 2025. This represents $4.6 billion of AI-related growth this year, or about 50% year-over-year. Growth reflects strong customer demand, quality execution from our team, and the capabilities we have built across compute, storage, networking, optics, power, cooling, Q3, by winning our third hyperscale customer. It looked a lot like what we saw in our second hyperscaler, where we started with a specific capability, executed well, and then expanded the conversation across the data center. That is an important part of the model. We can enter where we have a capability the customer needs, deliver with quality, and then expand as the relationship deepens. Attractive asset-like model for Javo, as evidenced by our CapEx expectations of 1.5 to 2%. We're expanding capacity in a disciplined way, tight to visible customer demand, while avoiding the product ownership and IP risk that can come with more OEM-like models. As revenue growth opportunities before us, I continue to like the return profile of the business, including strong free cash flows. The growth continues to get better. Auto was stronger than expected in the quarter, and we now expect auto revenue of approximately $4.4 billion in fiscal 2026, compared to a March outlook of $4.2 billion. Stronger than anticipated, we remain cautious on the auto market, given continued demand volatility. That said, stronger export demand from China, industry consolidation, and growth in powertrain agnostic platforms enabled us to exceed our prior outlook. We also continue to improve. We are seeing support from safe harbor projects, demand for power tied to AI and data center infrastructure, and a shift from residential towards commercial projects. The tone is better than it was earlier in the year. In healthcare, our long-term view of the opportunity has not changed. The product cycles are long, the margin profile is attractive, and the outsourcing of opportunities is still relatively immature. We continue to see good opportunities around drug delivery, net devices, and broader pharma capabilities. In connected living and digital commerce, we also saw better performance in the quarter. In connected living, the environment remains mixed, but performance was better than the cautious assumptions we had embedded in our outlook, driven primarily by connected devices. We now expect connected living revenue of approximately $2.7 billion in fiscal 2026, up $300 million from our March outlook. We expect digital commerce revenue of approximately $2.7 billion, up $100 million from our March outlook. Digital commerce remains one of our higher margin end markets with good opportunities in automation, robotics, retail, and warehouse technology. We're raising our fiscal 2026 outlook. We now expect revenue of approximately $35 billion up from our March outlook of $34 billion. That represents growth of roughly 17% year over year. We also now expect an improvement in core operating margin of 10 BIPs to approximately 5.8%. Core EPS of approximately $12.70 and adjusted pre-cash flow of more than $1.4 billion, up from a prior outlook of more than $1.3 billion. The model is working, and as a result, the business is rapidly growing. Margins are moving higher, and pre-cash flow expectations also are improving. When I look beyond fiscal 2026, I am extremely confident in Jabil's strategic position, significant opportunities ahead. While we will provide full-year guidance for FY27 in our annual virtual investor briefing in September, I thought it might be helpful to provide an early view of our AI-related revenue growth. As I mentioned earlier, in FY26, we anticipate our AI-related revenue will be approximately $13.6 billion. We're exiting the year with a stronger platform for growth and new capacity coming in line in North Carolina, Memphis, India, and other parts of the footprint. I expect AI-related revenue growth in FY27 in percentage terms to be similar to FY26. Impressive is that we expect to sustain this growth rate of a much larger revenue base. There are still a few things that will shape how the full year comes together between now and September. Goods component availability mix across the portfolio and the choices we make as we continue to prioritize margins, free cash flow, and returns. As these items firm up, it will help determine where the full year ultimately lands. Strong AI growth, improving mix, and continued discipline around free cash flows gives me confidence that Jibble can move core operating margin above 6% in fiscal 2027. Before we wrap up, one incremental opportunity I want to highlight is the AI infrastructure initiative we announced earlier this week with Adani Enterprises. In the early days, Adani Enterprises and Jabil are targeting a strategic alliance to build an AI data center infrastructure platform in India on multi-gigawatt manufacturing capacity for high-density AI racks and associated computing infrastructure. The platform is expected to manufacture next-gen liquid-cooled AI racks, systems, and networking equipment, and supporting infrastructure equipment required inside modern AI data centers, including power distribution, switchgear, and thermal management systems used by hyperscalers, co-location providers, and enterprise data center customers. The opportunity represents the potential to help establish a scaled AI infrastructure manufacturing platform in India, a market we believe will become increasingly important for both domestic and global AI infrastructure demand. There is still work to be done before a definitive framework is established, so we view this as a longer-term opportunity. If the partnership develops as we anticipate, fiscal 2028 is the more realistic starting point for meaningful contribution. We remain focused on executing our diversified strategy, investing in the right growth areas, and creating long-term value for our customers and shareholders. We look forward to updating you on our progress in the quarters ahead.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star 1 to register a question at this time. Today's first question is coming from Rupu Bhattacharya of Bank of America. Please go ahead.

Hi. Thanks for taking my questions. Mike, with today's guidance raised, you would have had two years of strong AI revenue growth. And like you said, the base is higher now for AI revenues. You know, a lot of companies are building GPU racks. What gives Jabil the right to win in this space? And you talked about the third hyperscaler, and you talked about the announcement with Adani Enterprises in India. How big a revenue driver could these be for Jabil? And I will follow up.

Thanks, Rupalu. So I feel our AI demand continues to be extremely strong. I think the holistic strategy that the team's focused on where we sort of enable customers to scale AI much faster by delivering fully integrated systems across compute, storage, networking, power, advanced schooling. We often sort of go in through one channel or one capability and expand the relationship by offering other end-to-end sort of solutions to customers. We actually won our second hyperscaler in exactly that way, and we actually just won our third hyperscaler, and the strategy will be exactly the same. So going really well from a strategy standpoint. In my prepared remarks, I talked about having a similar growth rate. You highlighted that, Drew Blue, and it's on a much, much higher revenue base. All three end markets are contributing to this. If you think of capital equipment, test obviously is a high performer there. With all the rapid evolution of chip technology, the test equipment demand is through the roof. I think WFE is making a little bit of a comeback, although we will always be a little bit prudent because WFE historically has always moved to the right a little bit. But there is definitely signs of recovery in WFD right now. And then if you look at DCI, our cloud infrastructure business, we're opening up new capacity in North Carolina. We're talking about Memphis, India, other parts of the footprint. We recently made the Hanley acquisition. That's bearing fruit as well. And don't forget that's at a higher margin. And then last but not least, networking, what we put the whole IntelliBand, Ethernet, demands going up, especially in India. We've sort of almost doubled our revenue over the last year in India there, partly because of this networking demand. And then the silicon photonics, we continue to play in that as well. So overall, very strong demand, very good strategy from Jabil. And you're seeing that in the numbers. As you've seen that in the results, a similar growth rate on such a large revenue base is quite impressive. As it relates to the India opportunity, before I say anything, I just want to say that we do not have a definitive framework in place yet, so we're still working on it. So I can't comment on financials or structure or anything like that. Having said that, if you think of a few things that stand out for me, we're talking about multi-gigawatt AI infrastructure manufacturing in India. We're talking about the world's highest population, and particularly the government that's helping push up and taking it a step further to make for the world as well. So really well aligned there. If you think of the offering that we're providing, it's a one-stop shop which would sort of appeal to hyperscalers and data center providers, with Adani being one of the largest conglomerates in India, very strong in infrastructure, providing power, and able to provide all the manufacturing expertise, which has been proved out in the U.S. So we're talking of racks. We're talking of NextGen liquid-cooled racks. We're talking of servers. We're talking about storage systems and networking equipment. And then you layer on the supporting infrastructure that we're building today in the U.S. as well in terms of switchgear, transformers, power distribution units, thermal management systems. All of that comes into play. So the opportunity is quite significant going forward. Again, I do want an FY28 event. And obviously, the main heating factor here would be a decent chunk of capacity, but the opportunity and the potential could be huge.

Okay. Thanks for all the details there, Mike. Since we're talking about capacity, maybe I have a follow-up for Greg. You know, you've been adding capacity. Does JGL now have enough capacity to support the strong AI and data center revenue growth that you're projecting for fiscal 27. And can you help investors understand how much revenue can the existing footprint support and which areas would the company plan to invest in and how does this impact free cash flow going forward? Thanks for all the details.

Yeah, good morning, Group Blue. Yeah, so as Mike mentioned just now and also in his prepared remarks, you know, revenue levels and percent.

Okay, thanks for all the details.

Thank you. Our next question is coming from Stephen Fox of Fox Advisors. Please go ahead.

Hi. Good morning, everyone. Just following up on a couple of those things, I was wondering if you can dial in a little bit more into the networking growth. Obviously, it's substantial here. How does that look into next year off of the guidance for AI revenues, and where is it coming from? And then I had a follow-up.

So the networking growth, we've already grown quite a bit in 26. I think that growth continues in 27, Steve. I think the IntelliBand, the Ethernet demand, all the switchgear that we're building in India, the silicon photonics piece coming together nicely. So there's a whole bunch of positives in that networking space, and I think the demand for that networking will be similar or better next year to PlaySix.

That's helpful. And then just as a follow-up, can you talk a little bit more, Mike, about margins for next year? I know you don't want to get too specific, but I would imagine the margins you're posting now still include some inefficiencies from plants you're ramping up. Like, when do we start to see you guys, you know, fully harvest, you know, the new capacity at efficient rates as you're adding sales? When can we sort of see better incrementals? Thanks very much.

So, you're actually spot on with the capacity coming through in stages. We don't, on 1st of September, it will phase in through the balance of this calendar year. And I expect a lot of the capacity to be on board by early calendar year next year. So you're right. There's definitely some level of ramp impact. Having said that, I feel really confident about 6% plus margins. And I do add the plus. I think if you look at the mix is getting better. Some of the end markets that we've had a little value capabilities. We're all getting from the operating leverage. You talked about utilization, capacity utilization getting better as we progress through 27. And then Hanley, where we made the acquisition a few months ago, it said double-digit margins. So all of that coming together very nicely from a margin standpoint. I think the point you made about ramps is important to keep in mind, though. So, my expectations are 6% plus margin for F.27.

Great. That's very helpful. Thank you very much.

Thank you. Our next question is coming from Samick Chatterjee of J.P. Morgan. Please go ahead.

Hi. Thank you for taking my question. This is N.P. on for Samick Chatterjee. So, my first question is regarding your intelligent infrastructure guide you've implied and acceleration in year-over-year growth relative to Fiscal 3Q. and then it's also higher than your implied guidance, which you had given previously. So, I just wanted you to double-click on whether this upside relative to prior expectations is driven entirely by the new hyperscaler customer, and then also any color on what capabilities you are currently ramping on with the new hyperscaler customer, and I have a follow-up.

Just for clarification, your question is about FY26 or the growth rate for FY27? I think Greg mentioned something in his prepared remarks around timing where we had some finished goods in the warehouse still at the end of Q3. Those will start flowing in Q4. I think there's about a couple of hundred million from Q3 extending into Q4, and then an incremental $300 million. It's not just related to the third hyperscaler. In RACS, I think Memphis is doing really well. So there's $500 million upside in the intelligent infrastructure guide for FY26, and it's spread out a little bit, so really, really happy to see that.

Got it. Thank you. And then for your fiscal 27 guide, you have said that AI growth continues at the similar percentage level, and also we are seeing acceleration in growth relative to your other end market. So does that be a fair assumption to say that overall fiscal 27 revenue growth should be at least in line with fiscal 26 or higher than that? Thank you.

So, look, I think we'll provide full-year guidance in September. My AI puts and takes on the other side. Margins, obviously, we'll continue to look at any pruning that we have to do. So I wouldn't revenue profitability in terms of – we will provide guidance, like I said, in September, and I would make sure that we don't get carried away with the numbers there.

Thank you, Michael.

Thank you. The next question is coming from Mark Delaney of Goldman Sachs. Please go ahead.

Yes, good morning. Thank you very much for taking my questions. I'm hoping you can share more color on what led to the win at the third hyperscaler. and any product capability in particular where JBL has had initial success?

It's across the data and infrastructure space. It's very similar to how we did the second hyperscaler. The second hyperscaler was in a different capability, and then we expanded way beyond that capability into all the other capabilities. So I would see this as a starting point, the third hyperscaler. I expect it to be in that couple hundred million dollar range for 27, rapidly expanding to billion dollar and then beyond in 28. So definitely a good sign. We've been working on this for a while, and it's finally come through in our Q3.

Thanks for that. And then in terms of the supply chain considerations for the 50% growth in AI-related revenue for next year, You already spoke a bit around your manufacturing and CapEx plans to support that, but could you speak a little bit more on the supply chain, including labor and parts supply? And given that some companies in the industry have run into parts and component shortages, maybe help investors to better understand to what extent there's any conservatism from a supply chain standpoint factored into that outlook for 50% growth next year.

No, so that's a really good point, Mark. I think we always, always appropriately ensure that we've factored in all these supply chain issues. There is a high demand for high bandwidth memory, as everyone's aware, high-end, high-density interconnect DCVs. Our high demand lead times have been extending. One good thing is obviously those get more than their fair share of some of these components. I think the DDR5s, I think the capacity is decent on that front, but the DDR4s and below, I think there will be some level of shortages, and we try our best to obviously factor in those delays. I think the key here on supply chain is our team is extremely focused, and I'll put our team up against anyone externally. I think if you look at the conversations are changing. It's not transactional. It's not about pricing. It's about strategy. It's about access. It's about allocation, long-term commitment. And, by the way, they've proved it out over many of the other teams.

Thank you.

Thank you. The next question is coming from Ruben Roy of Stiefel. Please go ahead.

Guys, this is the head saying on for Ruben Roy.

Four Q exits. Are you there now?

We can hear you now, but you broke up before that.

It was saying four Q exits at around 6.4% core margin. FY27 is being framed above 6%. And can you help us reconcile that? Is that just early conservatism, or is there genuine near-term margin drag from the onboarding of the third customer, you know, new capacity startup costs, and sort of just the ramp before it all scales? And, you know, what's the path back towards that 7% and higher?

Yeah, so typically, you know, Q4 is our highest margin quarter. You know, last year we were at 63%. We're going to beat it by 10 basis points for this Q4. at 6.4. Still a little bit early to talk about the shape of next year, but, again, feel good about continuing to improve on gross margins and getting leverage in SG&A to get, you know, 6% plus and higher from there.

For three years, you'll see the same level of seasonality with Q4 being the highest performing margin quarter.

And maybe then just on the Donnie piece of of what you mentioned. I guess without getting to financials, can you just help us understand the capital model? You know, a multi-gigawatt build sounds pretty capital intensive, and yet you're committed to sort of the 1.5% to 2% capex. And, you know, so is that structured, are you thinking of structuring that as a JV or is that partner funded? You know, how are you going to participate in those economics while keeping JVL asset light and avoiding the IP ownership risk that you've been careful to avoid up until now?

I just want to start again by saying, look, we do not have a definitive framework, so we haven't figured out structure and capital and all that. Having said that, I feel really good. If you look at our group in everything that we're going to do with the Adani group as well, it's manufacturing, it's manufacturing racks, it's manufacturing storage, next-gen liquid-cooled racks, transport. We've been doing that for the last three, four years now. So our CapEx, this is no different. I think just I still feel 2%. Don't forget our money is running. And that's the beauty of what I feel really good about on this venture.

Okay, helpful. Thank you, Mike. Thank you, Greg.

Thank you. The next question is coming from Melissa Fairbanks of Raymond James. Please go ahead.

Hey, guys. Thanks so much. I just wanted to start off by saying for Graham and Frank, congratulations on the first round win. I hope to see the Tartan Army down in Miami. I'm not sure if they're listening to the call. I was wondering, we've got a really strong guide for intelligent infrastructure, not surprising. Can you give us an update on the North Carolina facility? When can we expect revenue to start flowing through from that facility? And then I believe you also have first right of refusal of the parcel of land next door. Just wondering, you know, how we can think about that in terms of capacity expansion going forward.

Sure. Thanks, Phyllis. I'm sure Frank and Graham will appreciate your comments. They're probably still hungover from Saturday. Probably. Look, North Carolina facility remains on track. I think we've given a timeline of Q1, Q4, the end of this year, fiscal year. Nothing's changed on that front. We booked one customer. We're talking to others. I think, if you think about it, January would be probably the date by which we'd be fully ramped. Obviously, we'll have some level of 27, but January onwards, I would expect run rates to be in that $1 billion, $2 billion, $3 billion range over the next one, two, and three years. The potential is still the same, no major changes to our North Carolina piece. One of the things with the additional land next door, we're looking at facilities which are easier to get to, as in readily available. So we might have, you know, capacity coming online, which is already built out, 18 months of build-out, a slight lineup. But everything else remains exactly the same.

Okay, great. Then maybe shifting gears, looking at regulated industries. We'll give someone else a chance to shine. Glad to see the auto business is moving a tick higher for the year. I think the downtick in health care is maybe a little surprising. Wondering if you could give us some more color there.

I wouldn't put too much into that. Don't forget, we took it down by $100 million. Our daily $25 million, $130 million. And so the number of, the amount is not, it was just $100 million. And with rounding, it was even lower than that. So I wouldn't worry about it too much. Our long-term view of health care has not changed. Extremely sticky margin profile, highly attractive. If you think of GLP-1s, you think of drug delivery, you think of continuous glucose monitors, med devices, chronic disease management, all of that is still, I think, FY27 should show some level of growth again. And then don't forget, we'll have Croatia come online right at the end of FY27, so it's not going to be an FY27 event, but it will be coming online at the end of FY27, which means it will be an FY28 event. And then we continue to look at V2Vs, and so I think health care continues to be right at the center of our strategy going forward as well.

Okay, great. Thanks so much for the detail. Thanks, guys. That's all for me.

Thank you. Our next question is coming from Luke Yonka of Baird. Please go ahead.

Good morning. Thanks for taking the questions. Mike, hoping just to start with the preliminary 2027 AI view and hoping just to get a little color from a customer standpoint in terms of incremental contributions from your largest customer versus the second and third hyperscalers or maybe even seeing maybe some more materiality from Eoclouds in this guidance as well.

It's spread out across the board, Luke. I think the numbers are well diversified. Obviously, a hyperscaler will play a role in that. I talked about it. It won't be that material, but that's why 28 will get to a material number. But it's really well spread out. Capital equipment is doing well. If you look at DCI capacity coming online and then networking, it's almost like a really well-diversified portfolio within that's outperforming.

Understood. And then can we maybe flip that to the capacity view? So, certainly, Carolina, you know, part of this into fiscal 27, but can we talk about where you're able to push on capacity in some of the other key facilities, be it India, be it Memphis, kind of some of the big chunks to support with, obviously, several billion dollars in growth in total?

Yeah, no, so North Carolina obviously will play a part there. Like I said, we booked one customer. We're looking at multiple others. We'll provide more guidance on that in September. Memphis is coming along nicely. I think if you look at Memphis, they're going well. In Mexico, we've got networking going on right now, expansion going on in India. So it's all capacity utilization will quickly come online very fast. Again, I think Mark had asked that question about ramps. There will be some level of ramps that take place. You don't trigger them all in the same day, and they don't start performing from day one. So it will take some level of time. So Q1 of 27th to January onwards is the capacity to come online in the steps of different products, different customers.

Thank you. Our next question is coming from David Vogt of UPS. Please go ahead.

Great. Thanks, guys, for squeezing me in here. I've got two questions for Mike and Greg. So maybe, Mike, starting with you, when we think about the soft commentary around fiscal 27, particularly around AI and your margin, how much of that commentary is guided by your view of supply chain, component availability, and what your customers are seeing? And how is that taken into consideration from a margin perspective? Obviously, I would assume that you're building in a buffer there. I'll give you my second question at the same time, maybe for you as well. and maybe Greg could chime in. When I think about the third hyperscaler, I think you mentioned a couple hundred million dollars of revenue in fiscal 27. How should we square that with sort of the North Carolina facility coming online next year? Are you insinuating that we're going to have multiple customers in that facility, or is it just going to be that one customer? How do we think about sort of how that capacity is going to be allocated among your hyperscaler customers going forward?

So I think when you reference soft guidance, are you talking about 27, similar?

Yeah, I'm sorry. Yeah, just a commentary about 27 AI growth.

Yeah, and that's a similar growth rate percentage on a much, much higher revenue base. So it's a substantially bigger number in revenue dollar terms. so I wouldn't call it soft, but overall...

I mean, what I meant by soft, I didn't mean soft and soft performance. You're not giving the official quantitative guidance for 27. Preliminary guidance.

That's fair.

Preliminary guide.

All right.

That's fair. I think the reason I actually talked about it was to give an early indication. It wasn't meant to provide guidance. I didn't want to hijack our September call. we will have a virtual and master briefing in September so we will provide more guidance more supply chain absolutely is part of our thinking we're aware of where the shortages are and obviously any commentary that we provide for 27 will be will have some level of impact but that will already be built in So the numbers we talked about definitely have that built in. Like I said, a lot of the AI is to get their fair share and then some off components. So it is, look, it's an issue, but I don't lose that much sleep over it from the intelligent infrastructure standpoint. And I think we actually have our long-term strategy sessions in this, which go out a couple of years. So we'll provide both items in September.

And then on the third hyperscaler ramp versus the North Carolina capacity coming online, how do we think about that's going to be allocated to your hyperscaler portfolio?

So the third hyperscaler, like I said, is in the data cloud infrastructure space. We still – we booked one customer in North Carolina. We still – it would go. It might be North Carolina. It might be somewhere else. But that's a good problem to have, like we said, this capacity coming online in multiple jurisdictions, multiple factories, multiple buildings coming online. So I do think third hyperscaler is ready to go. It's just a matter of us trying to figure out exactly where to put it.

Where to put it. Thanks, Mike.

Thank you. The next question is coming from Kim Long of Barclays. Please go ahead.

Thank you. Two, if I could here, maybe I think you guys mentioned Hanley is going well. If you could just give us an update there kind of on, you know, both the power side and the more services side, how that's ramping and, you know, developing internally into a better business for you guys. And then second, if you could just touch on the storage business, I think, I'm not sure if you mentioned it that much, but curious how that's going. I think that's been a pretty good ramp. If you just kind of update on us on how that's going this year and the outlook into next year.

Sure. So I think just as a reminder, Hanley expands our capabilities in both power and then the service angle to that as well and going into one channel. So all going, our architecture, I talked about services. that bring, not only do we help deploy the gear in the data center, we help maintain it, we help service it, and that's a recurring revenue stream as well. So, Hanley overall going really well. The hyperscaler, I think you, that's going really well. I think I put an indication for FY27. I think when we started on that second hyperscaler journey a couple of years ago, a lot of us imagine it to be as critical and as big as it's turned out to be.

Thank you.

Thank you. This brings us to the end of today's question and answer session. I would like to turn the floor back over to Mr. Berry for closing comments.

Thank you very much for joining. This concludes our call. If you need further clarification, please reach out to us.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.