Core Insights - Fabrinet (FN) reported non-GAAP earnings of $3.36 per share in Q2 fiscal 2026, exceeding the Zacks Consensus Estimate by 3.07% and reflecting a year-over-year increase of 28.7% [1][8] - Revenues reached $1.13 billion, marking a 35.9% year-over-year growth, the fastest since the IPO, and surpassing consensus estimates by 5.03% [1][8] Segment Performance - Optical Communications accounted for 73.5% of total revenues, down from 77.6% in the same quarter last year [2] - Datacom revenues decreased by 7% year-over-year to $278.1 million, while Telecom revenues increased by 59.3% year-over-year to $554.4 million [2] - Non-Optical Communications represented 26.5% of revenues, up from 22.4% in the previous year [2] Non-Optical Communications Growth - Non-Optical Communications segment revenues grew by 61% year-over-year to $300.3 million [3][4] - Within this segment, Automotive revenues rose by 12.3% to $117 million, Industrial Laser revenues increased by 10.4% to $41.4 million, and Other revenues grew by 26.2% to $56.4 million [3][4] Operating Performance - Gross profit expanded by 35.4% year-over-year to $140.3 million, with gross margin remaining flat [5] - Non-GAAP operating profit reached $123.4 million, reflecting a 30-basis-point improvement in operating margin to 10.9% [5] Financial Position - As of December 26, 2025, cash and cash equivalents and short-term investments totaled $960.8 million, slightly down from $968.8 million as of September 26, 2025 [6] - The company generated $46.3 million in cash flow from operating activities in the reported quarter, down from $102.6 million in the previous quarter [6] - Non-GAAP free cash flow turned negative at $5.3 million, a decrease from $57.3 million in the prior quarter [6] Q3 Guidance - For Q3 fiscal 2026, Fabrinet expects revenues to be between $1.15 billion and $1.20 billion, with non-GAAP earnings projected between $3.45 and $3.60 per share [9]

Revenue and Geographic Distribution - The percentage of revenues generated from locations outside North America decreased from 55.3% in Q3 2024 to 53.1% in Q3 2025, primarily due to increased revenue from U.S. customers [120]. - For the six months ended December 26, 2025, the percentage of revenues from outside North America decreased from 58.4% to 54.9% [121]. - The company generates revenues from three geographic regions: North America (46.9%), Asia-Pacific and others (43.4%), and Europe (9.7%) for Q3 2025 [123]. Financial Performance - Revenues for the three months ended December 26, 2025, increased by $299.3 million, or 35.9%, to $1,132.9 million compared to $833.6 million for the same period in 2024 [156]. - Revenues from optical communications products were $832.6 million, representing 73.5% of total revenues, with a year-over-year increase of $185.4 million, or 28.7% [156]. - Revenues from non-optical communications products increased by $113.8 million, or 61.1%, to $300.3 million, driven by high demand for high-performance computing and growth in automotive revenue [156]. - Gross profit for the six months ended December 26, 2025, was $254.1 million, compared to $199.9 million for the same period in 2024, reflecting an increase of 27.1% [151]. - Operating income for the three months ended December 26, 2025, was $114.4 million, representing an increase of 43.7% compared to $79.6 million for the same period in 2024 [151]. - Net income for the six months ended December 26, 2025, was $208.6 million, compared to $164.0 million for the same period in 2024, marking a 27.1% increase [151]. - The company’s total revenue for the six months ended December 26, 2025, was $2,111.0 million, up from $1,637.8 million in the same period in 2024, reflecting a growth of 28.9% [156]. - Revenues increased by $473.2 million, or 28.9%, to $2,111.0 million for the six months ended December 26, 2025, compared to $1,637.8 million for the same period in the prior fiscal year [157]. - Revenues from optical communications products increased by $306.0 million, or 24.0%, to $1,579.5 million, representing 74.8% of total revenues for the six months ended December 26, 2025 [157]. - Revenues from non-optical communications products increased by $167.2 million, or 45.9%, to $531.5 million, representing 25.2% of total revenues for the six months ended December 26, 2025 [157]. - Gross profit for the six months ended December 26, 2025, increased by $54.2 million, or 27.1%, to $254.1 million, representing 12.0% of revenues [161]. - Operating income increased by $52.1 million, or 33.3%, to $208.6 million, representing 9.9% of revenues for the six months ended December 26, 2025 [165]. - Net income for the six months ended December 26, 2025, was $208.6 million, or 9.9% of revenues, compared to $164.0 million, or 10.0% of revenues for the same period in the prior fiscal year [172]. Expenses and Costs - The company expects SG&A expenses for fiscal year 2026 to increase compared to fiscal year 2025, mainly due to higher information technology and employee costs [128]. - Employee costs are anticipated to rise due to increasing wages in Thailand and the PRC, which may impact profit margins [126]. Cash and Investments - Cash, cash equivalents, and short-term investments totaled $960.8 million as of December 26, 2025, compared to $934.6 million as of December 27, 2024 [175]. - As of December 26, 2025, the company had cash, cash equivalents, restricted cash, and short-term investments totaling $961.5 million, compared to $934.2 million as of June 27, 2025 [184]. - Cash provided by operating activities decreased to $148.8 million for the six months ended December 26, 2025, compared to $199.1 million for the same period in the prior fiscal year [179]. - The company recorded a foreign exchange loss of $5.3 million for the six months ended December 26, 2025, compared to a loss of $3.1 million for the same period in the prior fiscal year [169]. - A decline in overall interest rates by 10 basis points would have resulted in a decrease of approximately $0.5 million in interest income for both the six months ended December 26, 2025, and December 27, 2024 [184]. - The company’s short-term investments as of December 26, 2025, are held in various financial institutions with a maturity limit not exceeding three years, and all securities are rated A1, P-1, F1 or better [190]. Currency and Risk Management - The company has significant currency rate exposure to changes in the exchange rate between the Thai baht, RMB, and the U.S. dollar, impacting gross profit margins and cash flows [188]. - The majority of the company’s revenues are denominated in U.S. dollars, while a substantial portion of expenses is paid in Thai baht and RMB [187]. - The company continues to monitor the financial performance of suppliers and customers to mitigate credit risk exposure [190]. - The company has not used derivative financial instruments in its investment portfolio and does not anticipate material risks due to changes in market interest rates [184]. - The company recorded an unrealized gain of $1.2 million related to derivatives not designated as hedging instruments for Q3 2025 [136]. - The company recorded an unrealized loss of $0.1 million related to derivatives for the six months ended December 26, 2025, compared to a loss of $1.0 million for the same period in 2024 [137]. - The company recorded an unrealized loss of $0.1 million and $1.0 million for the six months ended December 26, 2025, and December 27, 2024, respectively, related to derivatives not designated as hedging instruments [189]. - A 10% weakening of the U.S. dollar against the Thai baht and RMB would have resulted in a decrease in the net dollar position of approximately $14.5 million and $9.4 million as of December 26, 2025, and June 27, 2025, respectively [189]. Strategic Initiatives - The company plans to diversify revenue sources and execute acquisitions to enhance market presence [114]. - The company is a global leader in advanced optical packaging and precision manufacturing services for complex products [115]. - The company anticipates maintaining favorable pricing on services despite expected price decreases for manufactured products over time [118]. - The company began construction of a new manufacturing facility of approximately 2.0 million square feet at its Chonburi campus, with a total expected cost of approximately $132.5 million [178]. Taxation - The effective corporate income tax rates for subsidiaries as of December 26, 2025, were 25% in the PRC, 21% in the U.S., 25% in the U.K., and 23% in Israel [147]. - The corporate tax exemption for income generated from certain projects in Thailand is available through June 2026, with additional benefits extending to 2031 for specific products [146].

Core Insights - Fabrinet (FN) reported quarterly earnings of $3.36 per share, exceeding the Zacks Consensus Estimate of $3.26 per share, and up from $2.61 per share a year ago [1] - The company achieved a revenue of $1.13 billion for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 5.03%, compared to $833.61 million in the same quarter last year [3] Earnings Performance - The earnings surprise for the quarter was +3.17%, and the company has consistently surpassed consensus EPS estimates over the last four quarters [2] - In the previous quarter, Fabrinet had an earnings surprise of +3.18%, with actual earnings of $2.92 per share against an expected $2.83 [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $3.46, with expected revenues of $1.14 billion, and for the current fiscal year, the EPS estimate is $13.29 on revenues of $4.39 billion [8] - The estimate revisions trend for Fabrinet was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [7] Industry Context - Fabrinet operates within the Zacks Electronics - Miscellaneous Components industry, which is currently ranked in the top 17% of over 250 Zacks industries, suggesting a favorable industry outlook [9] - The performance of Fabrinet's stock may be influenced by the overall industry outlook, as top-ranked industries tend to outperform lower-ranked ones significantly [9]

Core Viewpoint - Fabrinet reported record earnings and revenue for Q2 FY2026, significantly exceeding analyst expectations, yet the stock fell 10% in after-hours trading due to profit-taking by investors [1][3]. Financial Performance - The adjusted earnings per share (EPS) for Fabrinet was $3.36, surpassing the analyst estimate of $3.25 by $0.11 [3]. - Revenue reached $1.13 billion, exceeding the consensus estimate of $1.08 billion and representing a 35.9% increase from $833 million in the same quarter last year [3]. - The non-GAAP gross margin was 12.4%, consistent with the same period last year, while the non-GAAP operating margin improved from 10.6% to 10.9% year-over-year [3]. Future Guidance - For Q3, Fabrinet provided strong guidance, expecting revenue between $1.15 billion and $1.2 billion, above the consensus estimate of $1.133 billion [3]. - The company anticipates adjusted EPS in the range of $3.45 to $3.60, also exceeding the analyst expectation of $3.44 [3]. Strategic Drivers - The company's performance was driven by multiple key strategic projects within its business segments, with management expressing confidence that these drivers will continue into Q3 [4].

Financial Data and Key Metrics Changes - The company reported a record revenue of $1.13 billion for the second quarter, representing a 36% increase year-over-year and a 16% increase from the prior quarter [5][9] - Non-GAAP EPS reached a new record of $3.36 per share, exceeding guidance despite foreign exchange headwinds [5][11] - Gross margin improved to 12.4%, a 10 basis point increase from Q1, while operating margin reached 10.9%, up 30 basis points from both Q1 and the previous year [11][12] Business Line Data and Key Metrics Changes - Optical Communications revenue grew 29% year-over-year and 11% sequentially, totaling $833 million [9][10] - Telecom revenue surged to a record $554 million, up 59% from last year and 17% from Q1, with DCI revenue increasing 42% year-over-year [9][10] - Non-Optical Communications revenue was $300 million, a 61% increase from a year ago and 30% from Q1, driven by high-performance computing products [10][11] Market Data and Key Metrics Changes - The company experienced strong demand in telecom, particularly in DCI modules, which saw a 42% year-over-year growth [6][10] - Datacom revenue showed a sequential increase of 2%, with a year-over-year decline narrowing to 7% as demand strengthens [6][10] - Automotive revenue grew 12% year-over-year but slightly declined sequentially, while industrial laser revenue increased by 10% year-over-year [6][11] Company Strategy and Development Direction - The company is focused on strategic capacity expansion, with the construction of Building 10, a 2 million sq ft facility, on track for completion by the end of 2026 [7][8] - The company is converting office space into manufacturing space at its Pinehurst campus to support anticipated growth [7][8] - The management is pursuing new opportunities across all business areas, with a strong emphasis on execution and capacity expansion [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth trends across all major business areas, with the exception of automotive [7][13] - The company anticipates revenue growth in telecom, datacom, and HPC, while expecting a modest decline in automotive revenue [13] - Management highlighted the importance of operational execution and strategic capacity expansion to meet increasing demand [8][13] Other Important Information - The company ended the quarter with cash and short-term investments of $961 million, with capital expenditures of $52 million reflecting ongoing construction and capacity enhancements [12] - The company repurchased over 12,000 shares at an average price of $387 per share during the quarter [12] Q&A Session Summary Question: HPC customer ramp and production lines - Management indicated they are a little over halfway to fully ramped volume, expecting revenue from the HPC program to exceed $150 million when fully ramped [15][16] Question: Co-packaged optics and optical circuit switches - Management is working on co-packaged optics programs with three different customers and is excited about the potential of optical circuit switches [19][22] Question: Datacom transceivers supply constraints - Management confirmed they have been supply-constrained in Datacom but are making progress with a second source for lasers to alleviate constraints [26][27] Question: Telecom revenue mix - Management noted that the growth in telecom was primarily driven by DCI, with satellite communications also contributing [30] Question: New customer opportunities in telecom - Management is pursuing both new and existing customers, focusing on transceivers for hyperscalers and merchant vendors [42][43] Question: Hyperscale business ramp and margins - Management expressed confidence in growing the business further, with multiple programs ramping and a strong performance expected [51][52] Question: Currency impact on EPS - Management indicated a similar impact from foreign exchange headwinds in the upcoming quarter, with expectations to offset through operating leverage [53][56] Question: Capacity additions and timelines - Management confirmed that the Pinehurst capacity addition is happening now, with significant demand from legacy customers [89][91]

Financial Data and Key Metrics Changes - Revenue for the second quarter reached a record $1.13 billion, representing a 36% increase year-over-year and a 16% increase from the prior quarter [5][10] - Non-GAAP EPS was $3.36, exceeding guidance despite a $3 million foreign exchange revaluation loss [10][12] - Gross margin improved to 12.4%, a 10 basis point increase from Q1, while operating margin reached 10.9%, up 30 basis points from both Q1 and the previous year [12] Business Line Data and Key Metrics Changes - Optical Communications revenue grew 29% year-over-year and 11% sequentially, totaling $833 million [10][12] - Telecom revenue surged 59% year-over-year and 17% from Q1, reaching $554 million, with DCI revenue increasing 42% year-over-year [5][10] - Non-Optical Communications revenue was $300 million, up 61% year-over-year and 30% from Q1, driven by high-performance computing products [11][12] Market Data and Key Metrics Changes - Demand in the telecom sector remains strong, particularly in DCI modules and Datacom, with expectations for continued growth [8][10] - Automotive revenue grew 12% year-over-year but saw a slight decline from Q1, while industrial laser revenue increased 10% year-over-year [7][12] Company Strategy and Development Direction - The company is focused on strategic capacity expansion, with the construction of a new 2,000,000 sq ft facility on track for completion by the end of 2026 [8][9] - Continued investment in high-performance computing and co-packaged optics is expected to drive future growth [22][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth trends across all major business areas, with expectations for continued strong performance in Q3 [9][15] - The company anticipates revenue growth in telecom, Datacom, and HPC, while expecting a modest decline in automotive revenue [15][92] Other Important Information - The company ended the quarter with cash and short-term investments of $961 million, with capital expenditures of $52 million reflecting ongoing capacity enhancements [13][14] - A share repurchase program remains active, with $169 million available under the program [14] Q&A Session Summary Question: HPC customer ramp and production lines - Management indicated they are a little more than halfway to fully ramped volume, expecting revenue from the HPC program to exceed $150 million when fully ramped [18][19] Question: Co-packaged optics and optical circuit switches - Management is working on co-packaged optics programs with three different customers and sees significant potential in optical circuit switches [22][25] Question: Supply constraints on Datacom transceivers - Management confirmed they have been supply-constrained but are making progress with a second source for lasers, which should alleviate some constraints [30][32] Question: Telecom revenue growth and satellite communications - Management noted that growth in telecom was primarily driven by DCI, with optimism about both satellite communications and DCI business [34][40] Question: New customer opportunities in telecom - Management is pursuing both existing and new customers, emphasizing their role as a pure contract manufacturer without competing products [46][47] Question: Timeline for transceiver designs for hyperscalers - Management indicated they are quarters away from meaningful revenue from new transceiver designs, having worked on them for over 18 months [49][50] Question: Currency impact on EPS - Management expects similar foreign exchange headwinds in Q3, with a projected 20-30 basis point impact on gross margin [58][60] Question: Capacity additions and Pinehurst campus - Management confirmed that the Pinehurst campus is converting office space into manufacturing space, adding about 120,000 sq ft of capacity [93][94]

Financial Data and Key Metrics Changes - Revenue for the second quarter reached a record $1.13 billion, representing a 36% increase year-over-year and a 16% increase from the prior quarter [4][9] - Non-GAAP EPS was $3.36, exceeding guidance despite a $3 million foreign exchange revaluation loss [9][11] - Gross margin improved to 12.4%, and operating margin reached 10.9%, reflecting strong top-line growth [11][12] Business Line Data and Key Metrics Changes - Optical Communications revenue grew 29% year-over-year and 11% sequentially, totaling $833 million [9][10] - Telecom revenue surged 59% year-over-year and 17% from Q1, reaching $554 million, with DCI revenue increasing 42% year-over-year [4][10] - Non-Optical Communications revenue was $300 million, up 61% year-over-year and 30% sequentially, driven by high-performance computing products [10][11] Market Data and Key Metrics Changes - Datacom revenue was $278 million, showing a 2% sequential increase, while the year-over-year decline narrowed to 7% [10] - Automotive revenue grew 12% year-over-year but slightly declined sequentially as anticipated [5][11] - Industrial Laser revenue increased 10% year-over-year and 4% sequentially, contributing $41 million [11] Company Strategy and Development Direction - The company is focused on strategic capacity expansion, with the construction of Building 10, a 2 million sq ft facility, on track for completion by the end of 2026 [6][8] - The company is pursuing new opportunities across all business areas, particularly in telecom and high-performance computing [5][6] - The company aims to maintain execution excellence while scaling operations to meet increasing demand [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth trends across all major business areas, with expectations for continued strong performance in Q3 [8][13] - The company anticipates revenue growth in telecom, datacom, and HPC, while expecting a modest decline in automotive revenue [13] - Management highlighted the importance of executing well to capture growth opportunities and maintain competitive advantages [17][52] Other Important Information - The company ended the quarter with cash and short-term investments of $961 million, with capital expenditures of $52 million reflecting ongoing construction and capacity enhancements [12] - The company repurchased over 12,000 shares at an average price of $387 per share during the quarter [12] Q&A Session Summary Question: HPC customer ramp and production lines - Management indicated they are a little more than halfway to fully ramping the HPC program, expecting revenue to exceed $150 million when fully ramped [16][17] Question: Co-packaged optics and optical circuit switches - Management confirmed they are working on co-packaged optics with three different customers and are excited about the potential of optical circuit switches [19][22] Question: Datacom transceivers supply constraints - Management acknowledged supply constraints in Datacom but noted progress with a second source for lasers, which should alleviate some issues [27] Question: Telecom revenue growth drivers - Management stated that the growth in telecom was primarily driven by DCI, with optimism about both satellite communications and core telecom systems [30][31] Question: New customer opportunities in telecom - Management is pursuing both existing and new customers, emphasizing their role as a pure contract manufacturer without competing products [43][44] Question: Capacity additions and timelines - Management confirmed that the Pinehurst campus is being repurposed to add 120,000 sq ft of manufacturing space, with strong demand from legacy customers [91][92]

COMPANY OVERVIEW 2 February 2, 2026 1 Disclaimer This presentation and the accompanying oral presentation contain "forward-looking" statements that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information concerning our business plans and objectives, potential growth opportunities, competitive position, industry enviro ...

Fabrinet (NYSE:FN) shares dropped in Monday's extended trading after the company released its second-quarter earnings report. Here's a look at the key figures from the quarter. FN stock is moving. Watch the price action here.The Details: Fabrinet reported quarterly earnings of $3.36 per share, which beat the consensus estimate of $3.25.Quarterly revenue came in at $1.13 billion, which beat the Street consensus of $1.08 billion and was up from $833.61 million in the same period last year.“We delivered an exc ...

BANGKOK, Thailand – February 2, 2026 – Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, today announced its financial results for its second fiscal quarter ended December 26, 2025. Seamus Grady, Chairman and Chief Executive Officer of Fabrinet, said, "We delivered an exceptional second quarter with record revenue and earnings that significantly exceede ...