Jabil vs Celestica 2026: Two Paths to ROIC Excellence in AI Infrastructure

Last Updated: January 24, 2026 Data Currency: JBL Q1 FY2026 10-Q (January 9, 2026), CLS Q3 2025 10-Q (October 27, 2025). JBL SEC Filings | CLS SEC Filings

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Why Do Two EMS Giants Generate Such Different Returns on the Same Dollar?

What is EMS? Electronics Manufacturing Services (EMS) companies like Jabil, Celestica, and Flex manufacture electronic products on behalf of original equipment manufacturers (OEMs). Think of them as the factories behind the brands — Apple designs the iPhone, but contract manufacturers assemble it. The sector is characterized by thin margins (typically 2-5%), high capital turnover, and intense competition on cost, quality, and scale.

EMS has historically been a commodity-like business. Companies compete on cost, scale, and operational efficiency. So when we see Jabil generating 29% ROIC and Celestica achieving 39% ROIC — returns that rival software companies — the natural question is: how?

The answer isn't that one company is simply "better" than the other. DuPont decomposition reveals they've optimized for fundamentally different competitive positions.

ROIC Formula: NOPAT Margin × Capital Turnover

This decomposition separates returns into two sources:

• NOPAT Margin: How much profit is extracted from each revenue dollar
• Capital Turnover: How efficiently capital generates revenue

Component	JBL	CLS	Ratio
ROIC	29.3%	39.4%	CLS 1.3x
NOPAT Margin	2.26%	8.76%	CLS 3.9x
Capital Turnover	12.97x	4.5x	JBL 2.9x

Table: DuPont decomposition reveals opposite strategies. CLS wins on margin; JBL wins on turnover.

The Strategic Implication: Jabil has built a velocity machine — processing nearly 13x its invested capital through revenue each year. Celestica has built a value-capture machine — extracting 4x the profit margin from each dollar of sales. Both work. But they carry different risks.

For more on ROIC methodology, see our ROIC Complete Investor Guide.

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How Does Jabil Generate 29% ROIC with Just 3.4% Margins?

Most investors would dismiss a 3.4% operating margin as insufficient for superior returns. Yet Jabil converts this thin margin into 29% ROIC through extreme capital efficiency.

The Velocity Model Explained

Jabil's capital turnover of 12.97x means every dollar of invested capital generates nearly $13 of revenue annually. At 2.26% NOPAT margin:

2.26% × 12.97x = 29.3% ROIC

This velocity comes from:

1. Asset-Light Manufacturing: JBL minimizes fixed asset investment relative to throughput
2. Working Capital Discipline: Negative working capital (-$164M) means customers and suppliers effectively finance operations
3. Scale Economics: $8.3B quarterly revenue spreads fixed costs across massive volume

Intelligent Infrastructure Is Driving Growth

JBL's AI exposure comes through the Intelligent Infrastructure segment, which grew 54% YoY:

Driver	Growth	Context
Cloud & Data Center	+48%	Primary growth engine
Capital Equipment	+6%	Secondary contributor
Connected Living	-11%	Consumer headwind
Regulated Industries	+4%	Steady

Table: Segment breakdown shows AI-driven infrastructure outperforming. Source: JBL 10-Q.

The Hanley Energy Group acquisition (announced October 2025) strengthens JBL's data center power infrastructure capabilities — a strategic bet on the AI capex buildout.

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How Does Celestica Achieve 39% ROIC — The Highest in EMS?

Celestica's 39.4% ROIC places it among the best capital allocators in industrial manufacturing, not just EMS. The source is fundamentally different from Jabil's.

The Value Capture Model Explained

CLS achieves 8.76% NOPAT margin — nearly 4x Jabil's 2.26%. Combined with normal capital turnover:

8.76% × 4.5x = 39.4% ROIC

Why Does CLS Have 3.9x the Margin?

The margin advantage isn't random. It reflects deliberate strategic positioning:

1. Segment Mix Toward High-Complexity Work

CLS's Connectivity & Cloud Solutions (CCS) segment operates at 8.3% margins and grew 43% YoY. This segment focuses on:

• Hyperscaler networking equipment (+18% sequential)
• AI/ML compute platforms (+9% sequential)
• High-performance storage solutions

These aren't commodity assemblies — they're complex, precision manufacturing where quality and reliability command premium pricing.

2. Customer Quality Over Quantity

CLS discloses that three customers each represent >10% of Q3 2025 revenue. While this creates concentration risk (discussed below), it also indicates deep, integrated relationships with major hyperscalers. These customers likely value CLS's engineering capabilities enough to pay margin premiums.

3. Operating Leverage

CLS's SG&A efficiency is notable — as CCS revenue scaled 43% YoY, operating expenses grew more slowly, expanding margins. The fixed cost base leverages better with higher-margin revenue.

CCS Segment Metrics	Value
Revenue Growth YoY	+43%
Operating Margin	8.3%
Margin Improvement	+70 bps
Sequential Networking Growth	+18%
Sequential AI/ML Growth	+9%

Table: CLS CCS segment showing AI-driven margin expansion. Source: CLS 10-Q.

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What Are the Hidden Risks Investors Should Monitor?

Both companies have structural risks that standard analysis often misses. Our filing intelligence flagged several concerns.

JBL Hidden Risk Matrix

Risk Factor	Details	Severity
Leverage	8.24x Net Debt/EBITDA with 3.4% margins	High
Amazon Warrant	Cashless exercise option, vesting tied to payments	Moderate
Goodwill Impairment	$1,020M accumulated impairment on $1,907M balance	Moderate
ASR Agreements	Final share delivery based on VWAP — obscures dilution timing	Moderate
Customer Concentration	"Small number of customers" — not quantified	Unknown

Table: JBL risk factors from accounting quality analysis.

The Leverage Math: JBL generates ~$550M quarterly EBITDA. At 8.24x Net Debt/EBITDA, that's ~$4.5B in net debt. With 3.4% operating margin on $8.3B revenue, operating income is ~$283M quarterly. Interest expense runs ~$34M quarterly. The coverage ratio is adequate now — but thin margins leave no room for operational hiccups.

The Goodwill Story: JBL carries $1,907M in goodwill with $1,020M already impaired. This suggests a history of acquisitions that didn't meet expectations. The Hanley acquisition adds to this balance, and investors should monitor integration success.

CLS Hidden Risk Matrix

Risk Factor	Details	Severity
Customer Concentration	3 customers each >10% of revenue	High
TRS Earnings Volatility	-$113.3M FVA impact in Q3 2025	Moderate
Segment Concentration	CCS is primary growth/margin driver	Moderate
Tax Disputes	Romania and Thailand disputes, potential material impact	Low-Moderate

Table: CLS risk factors from accounting quality analysis.

Understanding TRS Hedging: CLS uses Total Return Swap agreements to hedge cash flow exposure from stock-based compensation. The -$113.3M fair value adjustment in Q3 reflects share price movements, not operational performance. This creates GAAP earnings volatility but actually represents sophisticated risk management — CLS is protecting cash flows rather than leaving SBC exposure unhedged.

The Concentration Trade-Off: Three customers >10% is significant concentration. If any major hyperscaler relationship deteriorates, revenue impact would be material. However, this concentration likely enables the deep integration that supports CLS's margin premium. The risk and the advantage are connected.

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Where Does Flex Fit? The EMS Benchmark

Flex provides useful context for evaluating JBL and CLS performance. At 15% ROIC, FLEX represents "good" EMS — profitable, steady, but not exceptional.

Metric	JBL	CLS	FLEX
ROIC (Q)	29.3%	39.4%	15.0%
Operating Margin	3.4%	10.2%	4.7%
NOPAT Margin	2.26%	8.76%	3.7%
FCF Margin	2.8%	2.8%	4.0%
Revenue Growth YoY	+19%	+28%	+4%
Management Tone	Confident	Confident	Cautious
Hidden Liabilities	Low	Moderate	Moderate

Table: FLEX serves as sector benchmark. Both JBL and CLS significantly outperform on ROIC despite similar FCF margins.

FLEX Context: Management's "cautious" tone in filings contrasts with JBL/CLS confidence. FLEX faces unresolved Brazil tax disputes and took a $41M Ukraine missile strike charge. While FLEX maintains strong liquidity and achieved four consecutive quarters of 6%+ adjusted margins, its growth trajectory (+4% vs JBL's +19% and CLS's +28%) suggests less AI tailwind capture.

The Takeaway: JBL and CLS aren't just "good" EMS companies — they're exceptional capital allocators operating at nearly 2x (JBL) and 2.6x (CLS) the sector benchmark.

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What's the Bull Case for Each Stock?

JBL Bull Case

1. Capital-Light at Scale: 12.97x turnover means massive revenue on modest capital base
2. Diversification: Multiple segments reduce single-customer dependency
3. AI TAM Expansion: Intelligent Infrastructure +54% growth with long runway
4. Proven Execution: Raising guidance reflects operational strength
5. Acquisition Optionality: Hanley Energy expands data center capabilities

CLS Bull Case

1. Highest ROIC in EMS: 39.4% demonstrates exceptional capital efficiency
2. Margin Leadership: 10.2% operating margin — 3x JBL — provides cushion
3. Lowest SBC Dilution: 0.49% vs 0.76% means less shareholder dilution
4. Hyperscaler Relationships: Deep integration with major cloud customers
5. AI/ML Compute Ramp: +9% sequential growth in emerging high-value category
6. Positive FY2026 Outlook: Management provided forward confidence

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What's the Bear Case for Each Stock?

JBL Bear Case

1. Leverage Fragility: 8.24x Net Debt/EBITDA with 3.4% margins — thin cushion
2. Margin Compression Risk: Velocity model amplifies margin impact
3. Acquisition Track Record: $1,020M goodwill impairment suggests integration challenges
4. Hidden Dilution: Amazon warrant + ASR agreements obscure true share count trajectory
5. Connected Living Headwind: Consumer segment declining 11%

CLS Bear Case

1. Extreme Concentration: 3 customers >10% — hyperscaler relationship loss would be material
2. TRS Volatility: Fair value adjustments create GAAP earnings noise
3. Segment Dependency: CCS carries most of the growth and margin story
4. Smaller Scale: $3.2B quarterly revenue vs JBL's $8.3B — less diversification
5. Tax Dispute Exposure: Romania and Thailand matters could crystallize

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What Should Investors Watch Going Forward?

JBL Monitoring Checklist

• Leverage Trajectory: Is Net Debt/EBITDA declining from 8.24x?
• Intelligent Infrastructure Margin: Can AI growth improve segment profitability?
• Hanley Integration: Is acquisition delivering expected synergies?
• Connected Living Stabilization: Has consumer segment bottomed?
• Amazon Warrant Dilution: Any updates on vesting or exercise?

CLS Monitoring Checklist

• Customer Diversification: Are new customers being added to reduce concentration?
• CCS Margin Sustainability: Can 8.3% margins hold or expand?
• AI/ML Compute Growth: Is +9% sequential growth accelerating?
• TRS Effectiveness: Is hedging achieving intended cash flow stability?
• Tax Dispute Resolution: Any updates on Romania/Thailand matters?

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The Bottom Line: Two Valid Strategies, Different Risk Profiles

Both Jabil and Celestica have built exceptional businesses in what's traditionally a commodity sector. The DuPont decomposition reveals they've achieved this through fundamentally different strategies:

Jabil has optimized for velocity — turning capital over 13x annually to compensate for thin margins. The risk is leverage: at 8.24x Net Debt/EBITDA, there's minimal cushion for margin compression.

Celestica has optimized for value capture — extracting 10.2% operating margins through high-complexity hyperscaler work. The risk is concentration: three customers >10% means relationship dependency.

The data suggests CLS offers superior metrics (higher ROIC, faster growth, lower SBC) at what appears to be a discount to JBL. The concentration risk is real but may not fully justify the valuation gap.

For investors comfortable with customer concentration, CLS offers the highest capital efficiency in EMS. For those prioritizing diversification, JBL provides broader exposure — but watch the leverage.

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This analysis is for informational purposes only and does not constitute investment advice. ROIC calculations use standardized methodology; company-reported metrics may differ. Always conduct your own due diligence before making investment decisions.