Fabrinet stock rose in premarket trading on Tuesday after the optical components manufacturer reported better-than-expected fiscal first-quarter results and issued an upbeat outlook for the current quarter, supported by strong demand from data centre customers.
FN shares gained 9.44% to $344 in early Tuesday trading. Despite the rebound, the stock remained down 30.88% year to date.
For the fiscal first quarter ended September 25, Fabrinet reported record revenue of $1.474 billion, up 51% from a year earlier.
The figure exceeded Wall Street’s estimate of approximately $1.40 billion and the company’s own guidance.
Adjusted earnings reached a record $4.34 per share, beating analysts’ expectations of $4.19 to $4.20.
Non-GAAP gross margin was 12.1%, above the 12% market estimate, while operating margin stood at 10.8%.
Data centre revenue grows 78% as AI demand accelerates
Data centre revenue increased 78% year over year and 16% sequentially to $777 million, accounting for approximately 53% of Fabrinet’s total quarterly revenue.
The segment benefited from demand for optical transceivers, data centre interconnects and high-performance computing products.
Fabrinet manufactures optical packaging and precision optical, electronic and electromechanical components for original equipment manufacturers.
Chief executive Seamus Grady had highlighted the strength of customer demand during the company’s fiscal fourth-quarter earnings call in August, saying there appeared to be no end in sight to demand from customers.
Revenue from communications infrastructure increased 35% to $444 million, supported by demand for telecommunications components, optical networking products and satellite communications.
Revenue from automotive, industrial, medical and other specialised markets rose 20% to $253 million.
Fabrinet expands manufacturing capacity to meet demand
Fabrinet is increasing manufacturing capacity to support expected growth in AI infrastructure and optical connectivity.
The company is expanding its Santa Clara facility, which is expected to add $300 million in annual revenue capacity.
Its Nava 1 campus is expected to contribute another $400 million.
At its Chonburi campus in Thailand, Fabrinet is developing Building 10, which spans approximately 2 million square feet and is expected to add $3.5 billion in capacity.
Initial production has begun, with completion expected in January.
The company expects its total annual revenue capacity to increase from $5.8 billion at the end of fiscal 2026 to approximately $10 billion by early January.
A further facility is expected to add $3 billion in capacity and begin operations around mid-2028.
Including a potential Building 12, Fabrinet estimates that its total capacity could reach $16 billion, compared with its previous estimate of $14 billion.
The company also expects near-packaged optics programmes to begin generating revenue in the second half of fiscal 2027, while co-packaged optics opportunities are expected to take longer to develop.
Strong Q2 guidance and mixed analyst views
Fabrinet forecast second-quarter revenue of $1.6 billion to $1.65 billion, above the analyst consensus of approximately $1.48 billion.
The company expects adjusted earnings of $4.77 to $4.92 per share, compared with Wall Street’s estimate of $4.41.
Management expects data centre demand, product launches and improving margins to support growth.
Analysts offered differing views following the results.
Barclays lowered its price target to $496 from $739 while maintaining an Overweight rating, citing the contribution of the data centre business to the quarterly earnings beat.
JPMorgan analyst Joseph Cardoso raised his price target to $475 from $465 and maintained a Neutral rating.
The firm described the results as robust, pointing to strength across Fabrinet’s business segments.
Fabrinet’s board also authorised an additional $103 million in share repurchases, taking the programme’s aggregate authorisation to $637.3 million.
The company said $200 million remained available for buybacks.
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