Optical communications ODM leader Fabrinet (FN.US) Q4 revenue increased 45% year-on-year to a record high. The share of data center revenue broke 50% for the first time, but plummeted nearly 7% after the market

The Zhitong Finance App learned that after the US stock market on Monday, Fabrinet (FN.US), the largest ODM manufacturer in the optical communications industry, announced the results for the fourth fiscal quarter of the 2026 fiscal year ending the end of June. The company's revenue and profit for the current quarter both exceeded market expectations, and the guidance for the next fiscal quarter was higher than analysts' forecasts; however, the stock price fell sharply in after-market trading, indicating that the market is repricing its high valuation and future growth rate.

According to financial reports, Fabrinet achieved revenue of US$1,316 million in the fourth fiscal quarter, up 45% from US$909.7 million in the same period last year, higher than market expectations of about US$1.27 billion, and set a revenue record for the 12th consecutive quarter.

Non-GAAP earnings per share were $4.10, higher than analysts' average expectations of $3.81, and surpassed approximately 7.61%; non-GAAP net profit was $149.1 million. According to GAAP guidelines, the company's net profit for the fourth quarter was US$139.3 million, equivalent to US$3.83 per diluted share; net profit for the same period last year was US$87.2 million, or US$2.42 per diluted share.

Looking at the full fiscal year, Fabrinet's revenue for fiscal year 2026 reached US$4.64 billion, up 36% from US$3.42 billion in fiscal year 2025; adjusted net income per diluted share for the full year was US$14.09, up from US$10.17 in the previous fiscal year.

In terms of profitability, the company's non-GAAP gross margin was 12.2%, down 0.3 percentage points from 12.5% in the same period last year, but increased 0.1 percentage points from month to month. The non-GAAP operating margin reached 10.9%, the highest level in three years. The return on capital rose to 40.6%, up from 38.2% in the same period last year; the return on capital for the full year of FY2026 was 38.9%.

Data center accounts for more than half of revenue for the first time

Changes in the revenue structure were the core highlights of this quarter. Data center revenue for the fourth fiscal quarter reached US$669 million, accounting for 51% of total revenue, up 68% year over year. This segment covers products such as optical transceivers, data center interconnects, high-performance computing components, silicon photonics, and co-packaged optics (CPO), and mainly benefits from AI infrastructure and hyperscale data center construction requirements.

The communications infrastructure business contributed $413 million, accounting for 31% of revenue, up 40% year over year, but only 1% month-on-month. This segment includes optical and networking products in telecommunications and enterprise networks.

Automotive, industrial and other business revenue was US$234 million, accounting for 18% of total revenue, up 8% year on year and 9% month on month.

Management emphasized that performance growth was not focused on a single product category or customer. In fiscal year 2026, Cisco (CSCO.US), Nvidia (NVDA.US), Nokia (NOK.US), and Amazon (AMZN.US) each accounted for at least 10% of the company's revenue, accounting for more than 40% of the company's revenue.

CEO Seamus Grady said, “Our fourth quarter was an excellent end to a strong and successful fiscal year. This quarter's revenue hit a record high of $1,316 million, which not only exceeded our guideline range, but also increased 45% over the same period last year.” He also pointed out that customer visibility has extended to the end of 2027 and beyond, and that there is “no end in sight” of current demand.

As of the end of the fourth fiscal quarter, Fabrinet held $875.8 million in cash and equivalents, zero debt, $2.5 billion in shareholders' equity, and $1.03 billion in working capital. However, due to heavy capital expenditure, the company's free cash flow for the quarter was negative.

The company is advancing a number of capacity expansion projects. Thailand's Building 10 is expected to be completed in early 2027. After completion, it will add 3 billion to 3.5 billion US dollars in revenue and production capacity; the newly acquired Navanakorn site and Santa Clara expansion project will each add 200 million to 250 million US dollars in production capacity. Management expects total potential production capacity to increase to $12.5 billion to $14 billion in the future, which is about three times the current volume of revenue.

Currently, Fabrinet has more than 20,000 employees and more than 4 million square feet of manufacturing area around the world. Production bases are distributed in Thailand, China, New Jersey, California and Israel, and has precision optical and electronic packaging capabilities.

For the first fiscal quarter of fiscal year 2027, Fabrinet expects a revenue range of $1,375 billion to US$1,425 million, with a median value of US$1,405 million, an increase of about 43% year-on-year in median terms; the non-GAAP earnings per share guidance range is US$4.10 to US$4.25, with a median value of US$4.18. This guidance was also higher than analysts' previous expectations for revenue of around $1.32 billion and earnings per share of $3.99.

CFO Csaba Sverha said the company is “gaining momentum” into the 2027 fiscal year and is more confident than ever before in the long-term outlook. Management expects data center demand to remain strong; optical transceivers, data center interconnects, and high-performance computing applications will continue to grow; communications infrastructure and automotive, industrial, and other businesses are also expected to maintain healthy growth.

Although financial reports and guidance surpassed expectations, Fabrinet's stock price fell more than 7% after the market. Over the past 12 months, Fabrinet's stock price has accumulated a cumulative increase of about 81.5%, and the price-earnings ratio has reached 51.35 times. Some analysts believe that the stock's relatively fair value is already too high. Investors may be re-evaluating valuations, and in particular, high growth expectations are fully reflected in stock prices.

In addition, the company still faces some challenges that need attention: four major customers account for a high share of revenue, and there is a risk of customer concentration; management admits that some product categories may be affected by supply chain restrictions; overall gross margin is relatively low at about 12%; and capital expenses due to capacity expansion made free cash flow negative for the quarter. Emerging opportunities such as near-package optics (NPO), co-packaged optics (CPO), and optical cross-connect products are still in their early stages and have yet to have a substantial financial impact.

However, judging from long-term trends, Fabrinet is still in an advantageous position in fields such as AI infrastructure, data center construction, and optical network upgrades. The company's zero-debt balance sheet, continuously expanding manufacturing capacity, and deep ties with major OEM customers support it in implementing a long-term growth strategy.