Jabil expects Q2 revenue between $7.5 billion and $8 billion as AI drives 35% growth and strategic acquisitions enhance operational capacity.

Altogether at the enterprise level, total company revenue for Q2 is expected to be in the range of $7.5 billion to $8 billion. Core operating income is expected to be in the range of $375 million to $435 million. GAAP operating income is expected to be in the range of $312 million to $382 million. Core diluted earnings per share is expected to be in the range of $2.27 to $2.67. GAAP diluted earnings per share is expected to be in the range of $1.7 to $2.19. We expect second quarter net interest expense to be approximately $69 million and full year interest expense to be approximately $270 million. The increase in interest expense next quarter reflects two key factors. First, additional debt associated with the anticipated acquisition of Hanley Energy Group, which we intend to fund through a combination of cash and new borrowings, and second, the anticipated refinancing of our existing Senior Notes maturing in April. Our core tax rate for Q2 and the full year is 21%. In closing, Q1 was a strong start to the year and we carried good momentum into Q2. Our results reflect the strength of our diversified portfolio and the consistency of our execution. As we move through the balance of the year. We remain focused on margin expansion, capital efficiency and sustained cash generation. With that, I'll turn the call back to Mike, who will offer additional color on fiscal 2026 and our updated guidance.

Thanks Greg and good morning everyone. I'd like to begin by personally recognizing and thanking our global team for their extraordinary effort they continue to deliver. I am extremely pleased with the strong start to fiscal 2026 which could not be accomplished without your focus, discipline and commitment to our customers. I see that dedication every day across our operations and I am sincerely grateful for everything the Jabil team continues to deliver. As Greg outlined, the first quarter was better than expected in both revenue and core margin, which ultimately drove core EPS to the high end of our guidance range. And while AI continued to be the primary driver of growth, it was great to see all of our three segments contribute to our better than expected performance. In summary, our Q1 results, I believe, reinforce the strength of the strategy we laid out in September and the value of our diversified model. And more importantly, we now expect this momentum to continue throughout fiscal 2026 and beyond into fiscal 2027. With that momentum as a backdrop, I'd. Now like to take a few minutes. To walk through each of our segments for FY26 beginning with intelligent infrastructure, we're raising our fiscal 2027 outlook by approximately $900 million, driven by higher revenue in both cloud and DCI as well as networking. Cloud and DCI is now expected to be up an incremental $600 million for the year to $9.8 billion. The stronger than expected outlook is primarily driven by recent program wins with our second hyperscale customer in Mexico and upside in our data center power business in Memphis. This also includes approximately $200 million associated with the Hanley Energy acquisition which we expect to close in January. Hanley strengthens our capabilities in modular power distribution and energy systems for next generation data centers. This will diversify our racks and server. Business into verticals that extend beyond computer, including power energy management and data center infrastructure services in our capital equipment End market demand has also remained very healthy and consistent with our expectations of year on year growth of 16%. We now expect our networking and comms end market to be up approximately $300 million for fiscal 2026 to $2.7 billion. This is supported by stronger demand for next gen liquid cooled platforms with meaningful demand increases in India as customers expand high speed interconnects including both Ethernet and Infiniband capacity to support the rapid growth in AI workloads. Altogether, we now expect AI related revenue of approximately $12.1 billion in fiscal 2026 which represents approximately 35% year over year growth, up from 25% originally expected in September. The strength we're seeing here clearly validates our strategy. By designing and delivering fully integrated systems that combine compute, networking, power distribution and advanced cooling, we materially shorten deployment timelines and reduce total cost for customers precisely what is required as AI capacity scales. On a separate note and as we discussed in September, we're in the process of retrofitting our east coast rack and silver factories to accommodate for liquid cooling and these efforts remain slightly ahead of schedule. Positioning jabil very well for the second half of fiscal 2026 and into fiscal 2027. In regulated industries, fiscal 2026 is tracking above our September expectations by roughly $100 million driven by better than expected results in renewables. Although we remain cautious with our outlook for the year, Automotive continues to perform as expected and we continue to focus on powertrain agnostic solutions in next gen vehicles. Importantly, over the longer term, we remain well positioned in both renewables and automotive markets as the team has consolidated share with existing customers in health care. Our business remains solid and aligned with our expectations for growth supported by continued strength in drug delivery platforms including GLP1 and continuous glucose monitors, as well as ongoing demand across diagnostics and minimally invasive technologies. Our pipeline remains healthy with good visibility into program ramps across drug delivery, chronic disease management and other regulated devices categories. Overall, we expect healthcare will be a. Durable multi year growth engine for jbo. Putting it all together we now expect our regulated segment to return to growth this year, representing nearly 40% of our revenue in fiscal 2026 and finally in Connected Living and Digital Commerce. Our outlook is also ahead of our expectations at the beginning of the year as we now anticipate approximately $100 million in incremental revenue for the year, driven primarily by broad based trend in automation, robotics and advanced retail warehouse programs. Altogether, we now expect CLDC to be down by roughly 11% year over year due to previously announced customer pruning in Connected Living, offset slightly by growth in Digital commerce. Given the strength of Q1 and the visibility we have across the business, we're raising our full year guidance for revenue, Core margins and Core eps for fiscal 2026, we now expect revenue of approximately $32.4 billion, an increase of $1.1 billion from our prior outlook. Importantly, we are also raising our margin expectations for the year. We now anticipate core operating margins of roughly 5.7%, a meaningful improvement of 10 basis points versus our earlier view. This improvement reflects strong mix, continued execution and the underlying leverage in our model as a result of both higher revenue and higher margins. We now expect core delivery earnings per share of $11.55 for the year, an increase of $0.55 from our previous estimate, and we continue to expect adjusted free cash flow of more than $1.3 billion consistent with the framework we outlined in September, which will allow us to continue to invest in future growth while continuing to return capital to shareholders. Across the company, our priorities remain the same profitable growth, diversified mix, margin expansion, consistent cash generation and strong commitment to buybacks which was evident in Q1. This focus is driving momentum across the business, allowing us to navigate changing market conditions, deliver consistent results and steadily build long term earnings power. To summarize, our first quarter results were better than expected and fiscal 2026 is now tracking well above our initial expectations. What's notable to me About a higher FY26 outlook is that it's broad based. All three segments are contributing with intelligent infrastructure leading the way. As we move forward, we remain focused on driving long term value for our shareholders. Before closing, I want to again thank our teams, customers and suppliers for their commitment and partnership. The Consistency in our results is a direct reflection of their efforts, and I am grateful for the trust they continue to place in Jabil. I also want to wish everyone a safe and healthy holiday season and a happy New Year. With that, I'll turn the call over to Adam. Thanks, Mike.

Operator. We're now ready for Q and A. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for your questions. Our first questions come from the line of Ruploo Bhattacharya with Bank of America. Please proceed with your questions.

Hi. Thank you for taking my questions. Mike, you raised the full year revenue guide by over a billion dollars. There's lots of things that are happening in the intelligent infrastructure space. The slides mention some new wins. Can you give us some more color on those? You know, there are a lot of new projects coming up as well, like OpenAI, AMD, Anthropic, AWS I. And do you think Jabil has the intent or the opportunity to benefit from some of those projects? And then there are other things you mentioned like retrofitting factories for liquid cooling and acquiring Hanley Energy Group. So maybe just lay out for us the impact of all of these factors. And overall, would you say the guidance for the fiscal year is still conservative?

Thanks, Ruploo. So I really think our intelligent infrastructure is outperforming. One of the reasons I think our AI strategy is working so well is because of the holistic view that we're taking of data centers. We're not just focused on single products or product lines. We're actually invested in design and engineering across the board, which allows us to cross pollinate, which allows us to cross sell, which allows us to use our liquid cooling capability with some of the silverx and other parts of our intelligent infrastructure business. So intelligent infrastructure performing really well. I think. In 25 our revenue was 9 billion. In September we'd taken it to 11.2, which was up 25%. We've now taken it up to 12.1, which is 35%. About a $900 million increase in that revenue level. I think out of the 900. Think of it in two. Bucke is the cloud and DCI bucket, which is up about 600 million. 200 million of that is handling and I'll touch on that in a minute. The balance is made up of upside on some recent wins that we had maybe during Q4 of last year with our second hyperscaler and that's in Mexico. It's all AI storage racks that we're manufacturing for that second hyperscaler. And then on the DCI business in. Memphis, I think there's a whole bunch of upsides there. The switchgear business is going really well. The INRO heat exchanges again going really well. So cloud and DCI up by 600 million in total. Networking in comms is up by about 300 million and that's mainly in India. Operations around air and liquid cooled switches, adapters, network adapters across Intelliband and the ethernet portfolio. So 900 million is a big number for us to be taking it up in a relatively short period of time. On Hanley, if I could just touch. On that, I think the revenues that we indicated in my prepared remarks is about $200 million for FY26. We expect it to complete in January. I would think of Handley as being. Modestly accretive in 26, 27 will be. When it's more accretive, it's. I think everybody knows it's. It's a power and energy management solutions company that we acquired. It's more a service services enabled business as opposed to manufacturing. And it gives us a really good. Sort of platform, not just for deployments but for maintenance as well, which will be an ongoing revenue stream. So overall, really happy with Hanley. Do I think guidance is conservative? I think it's appropriately conservative. We're seeing solid upsides everywhere and as. Is known, we're being appropriately conservative. The Europa.

Okay, thanks for the details there. For my follow up. If I can ask, you know, looking at operating margins, Jabil is going to be at 5.7% operating margin this fiscal year. So is it reasonable for investors to assume that operating margin can get above 6% in fiscal 27? What are the puts and takes there? And longer term, how high can operating margin go? Like with the current mix of business, do you see Jabil getting to 7% operating margin at some point? So just your thoughts on next year or what should we keep in mind in terms of operating margin progression and how high that can go over time?

We've still got three quarters left in. FY26, so we're just going to be focused on that. We'll provide guidance near the time for FY27 as you know we increased our margin from 5.6% to 5.7% which is about 30bps up from the 25 number. And that's for FY26 due to two. Or three reasons, which is mainly better mix. I think the mix is coming in. Stronger, better utilization of capacity. Our capacity utilization has gone up from. That 75% range closer to the 80% range and then SGA leverage as well. So I think overall the incremental revenue that we're seeing, the 1.1 billion that you referenced earlier, that's giving us some nice leverage. In FY27 we will be seeing a full year impact of Hanley, so there will be some level of accretion on the margin there and then we'll see continued leverage from the incremental revenues. The pipeline that I'm seeing, Ruplo, is extremely strong. It's been a long time since I've. Seen such a healthy pipeline. So I feel better about 6% than I ever have. I think if you're asking beyond six and getting to seven, of course we're not going to stop getting leverage, we're not going to stop getting efficiencies as. Soon as we hit 6%. So 6% is just a point in. Time on a march to a much higher number. Is it 27, 28, 29? I don't know. 6% though I feel really good about. At this stage for future.

Got it. Thanks for the details there. If I can sneak one more in. Looking at healthcare and packaging, for the last three, four years it's been mostly flat. This year it's growing low single digits to 5.6 billion. Any thoughts? Like, you know, you had talked about some further J and J type of deals and you've got this impact from Croatia. So just can you give us some more color on how you think that business can evolve? Is it still a low single digit business going forward or do you think it can accelerate? Thank you. Thanks for taking my questions.

So Croatia was going really well. I think we've always referenced sometime in 27, maybe second half. 27 is when it actually starts delivering some good returns. Again, just to remind you, the margin is higher in that GLP1 space. So Croatia going really well as opposed to on the whole deal piece. I do think the team is actively working all of that. They're currently engaged in B2B conversations, they're. Engaged in M and a sort of capability driven type of sort of deals as well. So it's an active sort of process that we're going through right now and we'll provide Updates again throughout FY26 in terms of what we're seeing out there from our deal. And again, just to remind you, the. Deals that we're looking at mainly would be to sort of add capabilities so that we can go vertical in the healthcare space. A bit like our GLP1 OSD transaction that we did last year where we added a capability on pharma, sort of filling, filling of the GLP1 itself, oral doses, et cetera. So there'll be more of those, more. Capability driven across the board where we operate.

Okay, thank you for all the details.

Thank you. Our next questions come from the line of Somiq Chatterjee with JP Morgan. Please proceed with your questions.

Hi, this is MP on for Somic Chatterjee. Thank you for taking my question. Firstly, congratulations on great results. My question is on second hyperscaler. I think you highlighted second hyperscaler driving upside to your intelligent infrastructure outlook for the year. How much of it is your better execution relative to your customer demand versus customer actually preponding their deployment plans? And then in the past you have highlighted $750 million of revenue scale for this business for FY26. How should we think about that scale now and then any color on the broader potential hyperscaler customers? Like how exactly those discussions are going. And then I have a follow up.

Yes, the upside on the second hyperscaler as I mentioned earlier on, is on the AI storage piece. We continue to get some upsides on that business. I'm not sure if that's pre deployment or it's just the demand has always been there. It's a matter of fulfilling it. We feel really good about upside even from there on some of these hyperscalers that we're in discussion with. So I think if you're looking at the revenue piece for the second hyperscaler roughly in that billion dollar range, I think earlier we'd said 750 so taken that up by some amount as so really good interest levels coming through. And we're not just stopping with the. Second hyperscaler, we're in discussions with even more hyperscalers. So pipeline again looking very strong.

Yep, thank you for the color there. And then my next question is around gross margins for this quarter. I think like despite the revenues being higher quarter over quarter from F4Q like gross margins were lower. Can you please help us understand the drivers for that? Thank you.

Yeah, so Q1, our gross margins were at 8.9%. You know, year over year it is up 10 basis points so typically we do have a little bit of a lower gross margins on the year. So really, really nothing there other than just mix in Q1 for the gross. Margin piece and something we've always sort. Of mentioned, 9 to 9.5% is the range for our gross margin. That's still the FY26 estimate.

Thank you. Thank you. Our next questions come from the line of Stephen Fox with Fox Advisors. Please proceed with your questions.

Hi, good morning. I had two questions if I could. I guess first of all, just switching gears on the healthcare business like you mentioned, Mike. It's been very steady. My understanding it's providing pretty good margins. For you guys as well. I guess off of all the growth you're seeing in cloud, what's the prospects for maybe investing more aggressively to accelerate that growth since it's such a good contributor to profitability? And then I had a follow up.

So, Steve, we're constantly evaluating M and. A activity in that space. We're constantly in discussions on V2Vs. So I think it's highly likely that we'll do something. We're obviously a conservative company from an M and A perspective, so we'll do all the right groundwork for that. But I feel like health care is such a steady business with higher margins, long, long product life cycles and steady cash flows that it's a great sort of offset from a diversification standpoint for us. And that is an area that I'm most excited about from a deal perspective. Great, that's helpful.

And then just on the cloud business, so a quarter ago you were warning us about that you still face some bottlenecks later in the year. Now you're ahead of schedule a little bit, which is great. And you're talking about what sounds like a bigger pipeline. So I'm just wondering how we sort of equate your ability to meet demand or meet the growth expectations of adding a new customer or existing customers with all the capacity you have or may need. Like, how are you planning out beyond this year for capacity in order to continue to grow that cloud business? Thanks.

When we talked about the retrofitting piece on the September call, it was mainly associated with our, with our hyperscaler factory on the east coast of the US A lot of the upside, when we talked about upside, that 900 million, some of it is in Mexico where we had some surplus capacity, some of it is in India where it's a combination of existing capacity and new capacity. As you know, North Carolina is coming up relatively soon in the next six, seven, eight months. And that were we're pre fitting, if you want to use that phrase, for liquid cooling. So we've got some decent, we've got some decent upsides. We're planning our capacity in that way. Memphis is another area I talked about that's seeing some really good growth as well. So we might expand there as well. So there's current expansion plans that we're. Looking at and those might be even sooner than the North Carolina facility. Again, it doesn't change our capex outlook. The capex outlook has been 1.5 to 2% revenue and that's going to remain consistent for FY26.

Great, thanks for that and thanks for all the visibility into your numbers. This is really helpful.

Thanks Steve.

Thank you. Our next questions come from the line of Reuben Roy with Stifel. Please proceed with your questions.

Yes, thank you. Mike, I wonder if you could spend a minute on just kind of longer term thinking around Hanley and I'm wondering, there's been a lot of discussion obviously around power and power distribution as the industry is trying to figure out how to get to 800 volt direct current. And if you think about this acquisition longer term, one of your competitors has been talking a lot about modularized power. Does this help you, do you think. In terms of content per rack and maybe gaining more server rack business by having this? Or is the strategy maybe a little bit different as you think about adding that into the mix? And also one follow up on that is would they own the design of the power distribution? I imagine that's the answer would be yes given the EBIT margins that you get. But any color on that would be helpful. Thank you.

So I'd like to call out a. Couple of transactions as it relates to that whole thermal management piece. Obviously Hanley is a service provider. I'll talk about that in a minute. But the liquid cooling acquisition we made with micros in 24 has also been a big game changer. I think thermal management thermal dissipation is not new to hyperscalers. Whether it's cooling at chip level or switch level or a component level or even at an infrastructure level with liquid heat exchanges. That's one of the reasons we invested in Micros. As we acquired a technology, we didn't acquire a product, we acquired a design and engineering team which is constantly pushing the boundaries for forward looking liquid cooling activities. So to me that whole Micros acquisition is a game changer. I think particularly as the thermal management piece becomes more critical, the ability to design the ability to engineer liquid cooling at chip level, at the network switch level, at different sort of parts and. Integrate into a full system. That's the big differentiator where Jabul steps in. As it relates to Hanley, it's more of a services organization. It's the provider of power and energy management solutions. I think the engineering expertise that we have in there is across power distribution, switchgear, energy monitoring, digital power management platforms. It allows us to go vertical as well. And I'll give you an example. Today we build low voltage, medium voltage switchgear in Memphis. Hanley will allow us to deploy, install. And then maintain those in data centers which previously was done by other parties. So if you sort of combine the whole server rack business with the ability. To deploy, install and maintain that is a highly accretive type of business for us. So Henley I think is a really good transaction. We sort of welcome the team. It hasn't closed yet. We expect it to close in that first week of Jan. So as soon as that takes place. Just like the Micros transaction has created so much opportunity for us, so does Hanley. And again it's in exactly the area that you talked about in. It's all around thermal management. And it's not a surprise to any hyperscale, it's not a surprise to anyone. Who has a data center that that's something that they need to address and they are addressing that. So I do think the two transactions will be highly well received.

That's a lot of detail. Thank you very much Mike. I hope this is a quicker follow up. Just on the capital equipment, I think you said that was in line with your expectations, maybe a little bit better. Is there any change I guess on your sort of thinking around overall spend in the capital equipment market relative to 90 days ago as you think about this year.

So the automated testing equipment side of. The business, the back end I think has been outperforming. It outperformed last year, it's outperforming this year and it'll continue to be. It will outperform the WFE site for sure. I think there's multiple DRAM stacking for high bandwidth memory that's creating more demand. One good thing we are seeing and. It'S forward looking so we haven't built. That into our forecast but there is some level of WFE improvements coming along as well with the whole AI compute expansion and the NAND factory sort of upgrades. So WFE think of that more as an opportunity. In the past we were like hey, WFE is going to be steady and static. We are Seeing some signs of improvements there. And until that happens. Those sort of. Expectations normally move to the right or to the left. So we haven't included that in our guide. But the WFE side could actually be some level of upside for us.

Great, thank you.

Thank you. Our next question has come from the line of Melissa Fairbanks with Raymond James. Please proceed with your questions. Hey guys, thanks so much for taking my questions. I wanted to start off by asking about automotive and transport. I see that, you know, you maintained the outlook for the full year down a little bit from last year. Just wondering if the mix of that business or any of kind of the geographical trends have changed. We have heard from some suppliers. Europe suppliers are being a little bit more cautious going into next year. Just wondering what the complexion of that business looks like in the near term.

So let me just start by saying. Automotive is an area that we continue to be appropriately conservative on. I think we're seeing relatively good performance. I think. Has it hit a bottom? I do feel like it has and there will be upside going forward. On automotive, is it a 26 event or a 2728 event? We just don't know the exact timing. So we're being appropriately conservative from an automotive standpoint. One of the things the team has. Done really well is invested in powertrain agnostic technologies. And what do we mean by that? It's software defined vehicles, it's adas. Those sort of programs go into any platform, whether it's hybrid or, or EVs or combustion engines. They're all. We're talking to all sorts of companies. And then if you factor in the. Whole tier one sort of the OEMs. Still want to own the design and. The IP as they wanted to with the EV platforms. That's a good opportunity for us EMS companies as well. And I think those program wins. We do expect we're in discussion again for 27, 28 and we're doing really well because there's a shift in the way that whole, the whole automotive space is working out, not just for EVs. It's now being extended to hybrids and ICE as well, or at least the concept is. So we continue to add some capabilities. And I do think 26. The best way to define 26 is a conservative year. In 27 we could see some upside. Don't forget a program in Automotive takes 12 to 18 months to win. So programs we're winning today will only show up in 27, 28.

Okay, great. Tell Steve. Keep up the good work. Maybe just a quick follow up, you know Everyone has to ask about at least one question on data center as you're ramping your second hyperscale customer. I know your lead hyperscale customer. A lot of that business goes through consignment. Just wondering how much if any of some of these new programs that you're ramping are on consignment and maybe gross revenue is actually coming in a little bit better than even what we're seeing on the net revenue side.

I think it's a little bit of a mix. I think the consignment model is more our largest customer. Perspective. Some of the other customers were still going through gross versus consignment discussions, but at this stage we're just factoring in gross levels. I do think that's more likely than consignment models popping up everywhere. I think that was more. That was specifically for that first hyperscaler. Will it apply across every single hyperscaler? I'm not sure. I think it's a wait and see approach.

Okay, great. Thanks so much, guys. Congratulations. Thank you.

Thank you. Our next question has come from the line of Mark Delaney with Goldman Sachs. Please proceed with your questions.

Yes, good morning. Thanks very much for taking the questions. Dable took up its view for AI growth this year to 35%. Realize you already spoke on your own capacity planning, but can you speak to any constraints your data center customers may face from the supply side, including having an enough power supply to their data center sites and to what extent you factored any constraints they may be seeing into your guidance?

Look, power setup constraint. The data centers is not a new thing. I think it's always been around and we've grown. I think, I can't remember the exact numbers. From 24 to 25 we grew exponentially. 25 to 26. Again, we're growing at 35%. And this is all while data center power issues continue to perforate. I think overall, like I said, the offering that we have, the solutions that we have, the design, engineering and including some level of liquid cooling across our offerings. Be it on the chair, be it on the rack servers, be it on. The networking switches, be it in the. Data center infrastructure itself, we're actually engaged with customers to address a lot of those heat, those heat questions. So I'm not seeing any major impact of slowdown. Like I said earlier, it's actually I've never seen such a healthy pipeline before. It is strong and it continues to be strong. I, I know people talk about AI bubbles. We're not seeing any of that at all. Very Helpful. Mike, last quarter you mentioned the possibility of winning a third hyperscale customer, and you spoke to that possibility again on the call today. Can you give more color on that, including what types of product or products you're hoping to sell to that CSP and when you think you may know if you've converted on that opportunity? We continue to have discussions. It's a little premature to talk about the products and the revenue. I think that was more, the last call was more of a, hey, this is our overall strategy. We're not just targeting one hyperscaler or two hyperscalers. There's definitely a third hyperscaler and a fourth hyperscaler, if so needed our offering. It's that design and engineering architecture capability. That'S driving a whole bunch of hyperscalers to us. And in a weird way, the discussion could start about a server in Iraq. And suddenly, before you know it, it's moved into liquid cooling. It's certainly moved into silicon photonics. It's moved into other parts of our. Data center infrastructure piece with heat exchangers. And some of the liquid cooling solutions that we're providing. So it's the offering that we have today that is driving hyperscalers to have these discussions with us. And like I said, it's not built. Into any of the numbers. We're not talking about our third hyperscaler. Yet in any of the numbers, but I think going forward, we're still in discussions currently.

Thank you. Thanks.

Thank you. Our next questions come from the line of Tim Long with Barclays. Please proceed with your questions.

Thank you. Two if I could as well. First we hopefully you could touch a little bit on that. The larger hyperscale customer wasn't really cited as a part of the strength here. So curious what kind of trends are going on there. I do think there's some product transitions in some of their compute platforms. So curious if that's impacting or if there's anything else going on there. And then secondly, just more broadly, a lot of movement around custom ASICs and XPUs. Curious how you see JBOL participating. Obviously TPU gaining a lot of traction in announcements at least over the last few months, how you see Javil playing in this whole XPU directly and related type of equipment. Thank you.

So when we talked about the whole. Retrofitting piece on the September call, we were specific on one site only. Like I said, the rest of the new business is coming in all different sites. The retrofitting is ahead of schedule. I do feel our second half will be stronger in terms of Getting it ready. I think originally we'd anticipated retrofit out to be a combination of Q2 and Q3. That might come in earlier in Q3, which would give us some level of upside there. The demand is there. It's crazy what we're seeing in terms of demand. So I have no concerns about the demand side. What was the second question? Just on xpus and custom Asics and the play directly into that product and peripheral, you know what it means for the rest of the Rack and Jabil's participation. Yeah. So I think we're relatively agnostic in. Terms of chips, in terms of what. We'Re doing and who we're doing it. With.

The, the custom chips or working. With multiple. Individual companies on those chips. I don't think one replaces another. It's all complementary in my view. So I see it more as an upside than a replacement. Okay, thank you. Thanks, Phil.

Thank you. Our next questions come from the line of David Boat with ubs. Please proceed with your questions. Great.

Thanks guys for taking my questions. So, Mike, maybe one for you and one for Greg. So you talked about strength in data center infrastructure, power networking. We're folding Handley into the numbers. We're seeing strength in the second hyperscaler above expectations. I guess what I'm trying to think through is how do you think about the second half of your fiscal year, particularly given, you know, what the growth implies is a fairly meaningful deceleration where the underlying demand probably doesn't support that view. Is that just a revrect issue? Is it a capacity issue? How should investors think about sort of the second half of the year, which kind of implies like a 10% growth dynamic? Is, is there enough capacity? And then maybe. Greg, I'll give you my question as well. You know, obviously you took up the full year numbers for revenue margin and EPS and left kind of the free cash flow outlook unchanged. I recognize that CapEx is probably going. To go up, I don't know, 50. To 100 million year over year. Anything else from a working capital perspective or timing perspective that impacts free cash flow this year versus your original expectations? Thanks.

So on the second half piece, I. Think with the 900 million that we've sort of added, a large part of that comes through in Q3 and Q4, Q2, I think we've taken that up by 300 or 400 million from our previous sort of indications. The retrofitting obviously had a little bit of impact on the Q2. We're continuing to win. We're continuing to win share. I Think if you look at last year, the comps from last year a little difficult to sort of match up with. We went from 0 to 60 literally in a matter of few seconds there where Q3, Q4 saw solid performance from. The previous Q1, Q2 where we didn't. Have some of the additional facilities that we took over from a competitor. So I would caution against doing comps. For Q3 and Q4 because that was. A huge growth number in Q3 and Q4, which was going from nothing to multiple buildings in that. In that facility. I feel, look, I think there's no rev rag. There's no other issues going on here. We're being conservative and I do think second half now reflects a much better picture than it did 90 days ago. And I think it'll continue to evolve through the year. We have a tendency of being conservative, appropriately conservative. So second half, I think bears some good upside for us as well.

Hey, David, it's Greg. So, on your free cash flow question. Yes, still sticking to our guidance of 1.3 billion plus for the year. Again, a real strong Q1 with 272 million. You're absolutely correct. You know, we do see capex slightly ticking up but still staying in our range. And we also do see working capital with the growth we're seeing in the back half of the year slightly going up as well. So what I'd say is our guide, we feel is prudent at this time and we'll continue to update as we go through the year.

Great. Thanks, guys.

Thank you. This now concludes the question and answer session. I would now like to turn the floor back over to Adam Berry for closing comments. Thank you. Thank you for your interest in Jabil. This now concludes our call. Thank you. This now concludes today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.