Fabrinet Q3 Earnings Call Highlights

Key Points

• Fabrinet reported record fiscal Q3 revenue of $1.214 billion (up 39% YoY) and non‑GAAP EPS of $3.72, beating guidance, and guided Q4 revenue of $1.25 billion to $1.29 billion with EPS of $3.72–$3.87.
• Growth was driven by Optical Communications—Telecom and Data Center Interconnect surged (DCI revenue of $197 million, +90% YoY)—while Datacom shipments were constrained by broad component shortages despite “exceptionally strong” demand; Fabrinet has qualified two 800G hyperscaler programs that should ramp into fiscal 2027 and expects multiple merchant ramps.
• Fabrinet is investing to support future demand, including a roughly $32 million private placement in Raytek Semiconductor to advance co‑packaged optics, buying an eight‑acre Thailand campus for $11 million, and progressing on Building 10 to add about 2 million square feet of capacity.

Fabrinet NYSE: FN reported record fiscal third-quarter results as management pointed to accelerating demand across parts of its optical and non-optical portfolio, while also flagging component shortages that limited Datacom shipments.

Quarterly results topped guidance as growth accelerated

Chairman and CEO Seamus Grady said the company delivered “an outstanding financial performance” in the quarter ended March 27, 2026, with revenue above the company’s guidance range at a record $1.214 billion, representing 39% year-over-year growth. Non-GAAP earnings per diluted share came in at a record $3.72, also above guidance, reflecting what Grady described as continued strong execution.

Chief Financial Officer Csaba Sverha said revenue increased 7% sequentially from the prior quarter. He attributed the earnings outperformance to “strong execution and FX evaluation tailwinds.”

Optical Communications: Telecom surged, while Datacom was constrained by supply

Optical Communications revenue totaled $889 million, up 35% from a year ago and 7% sequentially, according to Sverha. Within that segment, Telecom revenue was a record $628 million, climbing 55% year-over-year and 13% from the prior quarter.

Grady highlighted particularly strong performance in Data Center Interconnect (DCI). “Data Center Interconnect revenue grew a robust 90% from a year ago and 38% from Q2,” he said, adding that Fabrinet believes “strong, longer-term DCI growth trends remain firmly intact.” Sverha quantified DCI module revenue at $197 million.

Datacom revenue, however, reflected what management described as supply constraints rather than demand conditions. Datacom revenue was $260 million, up 4% year-over-year but down 6% sequentially, which Sverha said was driven by “broadening component and material supply constraints.”

Grady said underlying demand in Datacom “remains exceptionally strong” and “far exceeded what we were able to ship,” adding that “it’s not demand risk, it’s supply constraints.” In response to a question from Wolfe Research’s George Notter, Grady said the constraints are not limited to one item and cited “lasers, memory… and also certain ASICs.” He said Fabrinet expects supply volatility to continue near term and anticipates the imbalance will persist into the fourth quarter, while remaining optimistic conditions will improve over time.

Datacom strategy: new hyperscaler and merchant wins

Grady said Fabrinet is continuing to support strong demand from its largest Datacom customer while expanding into new channels, including direct hyperscaler engagement and merchant vendor partnerships. He said the company “successfully completed qualification” and has “already begun shipping two Datacom transceiver programs directly to a hyperscale customer,” with an initial ramp expected to start in the fourth quarter and volumes expected to ramp through fiscal 2027.

On the call, Grady clarified that both hyperscale programs are 800G products for scale-out applications, though for different uses. In response to a question from Northland Capital Markets’ Tim Savageaux, Grady said he expects the programs to reach full ramp “probably middle… of fiscal 2027.”

Grady also said Fabrinet expects to qualify and ramp multiple merchant transceiver programs, including several for data center scale-out applications. He expects production to begin in the second half of the calendar year, aligning with early fiscal 2027, with additional ramps progressing into the second half of the fiscal year.

When asked by Needham’s Ryan Koontz about the company’s disclosure threshold for program wins, Grady said Fabrinet generally does not discuss wins until it has been awarded the business with “contracts in place,” “purchase orders,” and customer qualification and approval, adding that it prefers to wait because not all early-stage opportunities turn into real demand.

Non-Optical Communications: HPC ramp continued; automotive moderated

Non-Optical Communications revenue reached $326 million, up 52% year-over-year and 8% sequentially. Sverha said the performance was “primarily by continued momentum in our HPC program,” which generated $107 million in revenue, up 25% from the prior quarter.

Grady said the HPC program is ramping in line with customer expectations, though not “in a perfect straight line,” and noted the company has been awarded follow-on business that expands Fabrinet’s manufacturing scope for the customer’s accelerated computing infrastructure. However, he said reaching the $150 million quarterly revenue milestone for HPC is now expected to be “pushed out by maybe one quarter” due to the technology transition, while adding that the longer-term trajectory is “stronger” and that Fabrinet expects growth beyond that level.

Automotive revenue declined slightly to $115 million, while Industrial Laser revenue rose to $44 million, according to Sverha.

Margins, cash flow, capital allocation, and capacity expansion

On profitability, Sverha said third-quarter non-GAAP gross margin was 12.1%, up 10 basis points year-over-year but down 30 basis points sequentially, primarily due to foreign exchange headwinds. Operating expenses declined to 1.4% of revenue, resulting in a non-GAAP operating margin of 10.7%. Interest income was $7 million, and the company recorded a $7 million foreign exchange evaluation gain. The effective GAAP tax rate was 6.7%.

Fabrinet ended the quarter with $946 million in cash and short-term investments, down $60 million sequentially. Operating cash flow was $53 million, capital expenditures were $64 million, and free cash flow was an outflow of $11 million.

Sverha said Fabrinet completed a private placement investment in Raytek Semiconductor in April, investing approximately $32 million for 20 million shares, representing about a 14% position. Management described Raytek as a Taiwan-based provider of advanced wafer-level packaging technologies and said the investment supports Fabrinet’s push into co-packaged optics (CPO) manufacturing solutions.

In addition, the company expects to complete the purchase of an eight-acre campus in the Navanakorn Industrial Estate in Thailand early in the fourth quarter for $11 million. Sverha said the site includes an existing 200,000-square-foot building that is being renovated for clean room manufacturing, with plans to begin utilizing the space early next quarter.

On shareholder returns, Sverha said Fabrinet did not repurchase a meaningful number of shares in the quarter but ended with approximately $169 million available under its authorization.

Grady also detailed ongoing capacity expansion, including construction progress on Building 10 in Chonburi, Thailand, which is expected to add 2 million square feet to Fabrinet’s existing 3.7 million square feet. He said part of Building 10 is expected to be ready by the following month, with an additional floor commissioned by the end of September and completion still targeted for January.

Fourth-quarter outlook calls for continued growth

For the fiscal fourth quarter, Fabrinet guided for revenue of $1.25 billion to $1.29 billion, implying approximately 40% year-over-year growth at the midpoint. Sverha said the company expects revenue to increase across all major product categories, with Datacom growth “more measured” due to continued component availability constraints. Non-GAAP EPS is expected in a range of $3.72 to $3.87, and gross margin dynamics are expected to be similar to the third quarter, with ongoing operating leverage.

About Fabrinet NYSE: FN

Fabrinet is a global provider of advanced optical packaging and precision optical, electro‐mechanical and electronic manufacturing services (CEM). The company specializes in complex manufacturing processes for original equipment manufacturers (OEMs) in communications, data center, industrial, instrumentation and medical markets. Key capabilities include high‐precision fiber alignment, micro‐assembly, testing and diagnostics, and integration of electro‐optic subassemblies.

Incorporated in 2000, Fabrinet operates under a corporate structure headquartered in Singapore with additional regional offices and design centers in the Americas, Europe and Asia.

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