Add to Google Preferred Sources1
Optical communications ODM leader Fabrinet reported fiscal 2026 fourth-quarter results, with revenue of $1.316 billion, up 45% year-over-year, marking its 12th consecutive record quarter. Non-GAAP EPS of $4.10 beat market expectations on both top and bottom lines. The company for the first time broke out data center as a standalone revenue category, which contributed $669 million in the quarter, up 68% year-over-year and representing 51% of total revenue, with DCI annualized revenue approaching $1 billion. Management unveiled an ambitious capacity expansion roadmap, planning to scale annualized revenue capacity from the current $5.3 billion to between $12.5 billion and $14 billion, encompassing multiple projects including Thailand’s Building 10, the Navanakorn new site, and the Santa Clara campus. CEO Seamus Grady stated that customer demand visibility now extends to the end of 2027, and that accelerated growth in fiscal 2027 is “not out of the question.” NPO is viewed as a nearer-term opportunity than CPO. The company guided fiscal 2027 first-quarter revenue of $1.375 billion to $1.425 billion, with the midpoint representing 43% year-over-year growth.
Key Elements
Optical communications ODM leader Fabrinet (FN.US) reported fiscal 2026 fourth-quarter results, with both revenue and profit beating market expectations and marking its 12th consecutive quarter of record revenue. More notably, the company restructured its revenue classification for the first time, breaking out data center as its largest revenue source, contributing $669 million in the quarter and surpassing 50% of total revenue for the first time. Management also unveiled an ambitious capacity expansion blueprint, planning to scale annualized revenue capacity from the current $5.3 billion to between $12.5 billion and $14 billion, positioning for the explosive growth in AI compute demand.
Fabrinet’s fourth-quarter revenue reached $1.316 billion, up 45% year-over-year, exceeding the market consensus of approximately $1.27 billion. Non-GAAP EPS came in at $4.10, 7.6% above the analyst consensus of $3.81. Full-year revenue was $4.6 billion, up 36% year-over-year; full-year non-GAAP EPS was $14.09, up 39% year-over-year.
Chairman and CEO Seamus Grady stated bluntly on the earnings call: “Based on the market demand we are currently seeing, accelerated growth in fiscal 2027 is not out of the question.” He noted that customers have already shown the company a demand picture extending to the end of 2027 and beyond, with demand showing “no end in sight.”
Data Center Becomes the Largest Revenue Source
Fabrinet made a significant adjustment to its revenue classification this quarter, re-categorizing products that were previously dispersed across multiple segments to better align with actual end-market deployment locations. The new three categories are: Data Center, Telecom Infrastructure, and Automotive, Industrial & Other.
Data center revenue in the fourth quarter was $669 million, up 68% year-over-year and 13% sequentially, representing 51% of total revenue. The segment encompasses three key drivers: data center interconnect (DCI), high-performance computing (HPC), and transceivers. DCI annualized revenue has already approached $1 billion, making it the largest growth engine.
Telecom infrastructure revenue in the fourth quarter was $413 million, up 40% year-over-year, representing 31% of total revenue, with growth spanning telecom systems, satellite communications, and telecom components. Automotive, industrial and other revenue was $234 million, up 8% year-over-year and 9% sequentially, driven primarily by EV charging infrastructure products.
The following table shows Fabrinet’s fourth-quarter performance across its three business segments:
| Business Segment | Revenue ($M) | YoY Growth | % of Total Revenue |
|---|---|---|---|
| Data Center | 669 | 68% | 51% |
| Telecom Infrastructure | 413 | 40% | 31% |
| Automotive, Industrial & Other | 234 | 8% | 18% |
Note: Data center revenue encompasses three sub-categories: DCI, HPC, and transceivers, with DCI annualized revenue already approaching $1 billion.
On customer concentration, four customers each accounted for more than 10% of revenue in fiscal 2026: Cisco (20%), NVIDIA (16%), Nokia (11%), and Amazon (11%). Nokia joined the 10% club for the first time, driven by smooth business integration following the Infinera acquisition. Grady said the Infinera business continues to grow and the Nokia business is also very strong, adding that “the partnership with Nokia is just getting started.”
Capacity Expansion: The Path from $5.3 Billion to $14 Billion
Capacity is the most closely watched supply-side variable in the optical communications supply chain. Fabrinet’s current annualized revenue run rate is approximately $5.3 billion, but management has mapped out a plan to expand capacity to between $12.5 billion and $14 billion — roughly 2.4 to 2.6 times current levels.
Grady detailed the specific path of capacity expansion on the earnings call. The Pinehurst campus has completed the conversion of 120,000 square feet of office space into production space, adding $200 million to $300 million in capacity. Building 10 at the Chonburi campus in Thailand is expected to be completed in early 2027, adding 2 million square feet of production area and contributing $3 billion to $3.5 billion in capacity.
The newly acquired Navanakorn site has officially commenced operations, adding 200,000 square feet of production area with approximately $200 million to $250 million in capacity at full utilization. The new campus in Santa Clara, California — located less than a mile from the existing Fabrinet West facility — includes approximately 130,000 square feet of production floor space, which will more than double the scale of Silicon Valley operations and contribute approximately $200 million to $250 million in capacity. Additionally, Chonburi still has space to build two more facilities of 1.2 million square feet each, with each capable of adding $1.8 billion to $2.1 billion in capacity.
Grady noted that beyond the increase in building area, the continued improvement in revenue per square foot also amplifies the effect of capacity expansion. DCI products are small in size but high in revenue density, and combined with product mix optimization and improved space utilization, the company can create more value from the same footprint.
NPO Positions for a New Growth Wave
On the technology roadmap front, near-package optics (NPO) was explicitly identified by management as a nearer-term opportunity than co-packaged optics (CPO). Grady explained that NPO sits between pluggable modules and CPO, and the company has already manufactured tens of millions of pluggable modules, with manufacturing and packaging capabilities constituting a core advantage.
“As NPO scales to 6.4T, 12.8T and beyond, manufacturing complexity and yield will become critical — and that is exactly where our decades of accumulated expertise create a moat,” Grady said. The company is working with a small number of customers on CPO technology development and has already produced components, while the partnership with Raytek was described as “critical,” with the latter expanding packaging capacity within the Thailand campus.
Optical circuit switching (OCS) was similarly characterized as a “fantastic opportunity.” Grady noted that OCS manufacturing technology is highly similar to existing products, and the company already has a first-mover advantage. OCS shipment volumes remain very small today, but management expressed confidence about participating in large-scale capacity expansion in the future.
Multi-rail high-density optical systems represent another emerging growth opportunity. These platforms package and manage fiber pairs into highly integrated optical systems, with high manufacturing intensity and substantial value-added content. Grady said the company is actively collaborating with customers on multiple programs.
In the low Earth orbit satellite segment, Fabrinet already serves two of the largest players in the space plus one or two emerging companies, with products that “play squarely to the company’s strengths.”
Supply Chain Challenges and Policy Variables
Supply chain constraints remain a practical bottleneck to growth. Management acknowledged that demand for certain components exceeds current supply, but the supply chain team “has been working hard to secure the supply needed,” and potential supply shortfalls have already been factored into growth expectations.
Regarding the proposed U.S. ban on new transceiver imports from China, Grady said “nothing has been decided yet.” If implemented, the company as a contract manufacturer for non-Chinese suppliers could theoretically benefit, but he also cautioned: “A lot of the transceivers used in data centers come from China, and an outright ban would bring the entire industry to a halt.”
On the financial front, fourth-quarter non-GAAP gross margin was 12.2%, up 10 basis points sequentially and down 30 basis points year-over-year. Operating expenses represented only 1.3% of revenue, driving non-GAAP operating margin to 10.9%, a three-year high. Fourth-quarter operating cash flow was $55 million, capital expenditures were $92 million, and free cash flow was negative $37 million, reflecting the intensity of capacity investments.
The company’s fourth-quarter non-GAAP earnings excluded two special items: a non-cash gain of approximately $56.7 million from the remeasurement of the Raytek investment, and a provision of $57.4 million related to Thailand’s implementation of a supplementary tax under the OECD global minimum tax framework.
Looking ahead to the first quarter of fiscal 2027, Fabrinet expects revenue between $1.375 billion and $1.425 billion, with the midpoint representing 43% year-over-year growth; non-GAAP EPS is expected between $4.10 and $4.25. Management noted that typical seasonal expense patterns in the first quarter will temporarily pressure margins, but revenue growth will still deliver operating leverage.
Notably, Fabrinet shares fell more than 7% in after-hours trading. The stock has gained approximately 81.5% over the past 12 months, trading at a P/E ratio of 51.35x, and some investors may be reassessing valuation levels. Additionally, concentration risk with four major customers accounting for over 40% of revenue combined, a relatively low gross margin of around 12%, and capital expenditure pressure from capacity expansion remain key areas of market focus.
Once added, BigGo Finance appears first in Google Search Top Stories, so you get the broadest, most up-to-the-minute, and most comprehensive global financial news first.
