Fabrinet (NYSE: FN) stock jumped in premarket trading Tuesday after the company reported better-than-expected fiscal first-quarter results Monday and issued strong second-quarter guidance. Shares were up 11.28% at $350.20 during premarket trading on Tuesday, according to market data.
The optical components maker reported fiscal first-quarter revenue of $1.474 billion, up about 51% year over year and above Wall Street's estimate of $1.403 billion. Adjusted earnings rose to $4.34 per share, beating the analyst estimate of $4.19. Non-GAAP gross margin was 12.1%, while operating margin reached 10.8%.
This marked the company's 14th consecutive quarter of revenue growth and its seventh straight quarter of accelerating growth. That's a pretty remarkable streak for a company that makes the optical plumbing behind AI data centers.
Fabrinet's board also authorized an additional $103 million in share repurchases, bringing the program's aggregate authorization to $637.3 million. The company said $200 million remains available for repurchases.
Data Center Revenue Jumps 78%
Data center revenue surged 78% year over year and 16% sequentially to $777 million. The segment accounted for 53% of total revenue. Growth came from strong demand for optical transceivers, data center interconnects and high-performance computing products.
Communications infrastructure revenue climbed 35% year over year to $444 million, driven by demand for telecom components and satellite communications. Revenue from automotive, industrial and other markets increased 20% to $253 million, supported by strong laser demand and new manufacturing customers.
AI Infrastructure Demand Fuels Expansion
Fabrinet expects strong demand from data center customers to drive growth through fiscal 2027. The company is ramping production of optical transceivers for hyperscale data centers and expanding capacity for optical circuit switches and MultiRail systems. Several transceiver manufacturers are increasing production with Fabrinet, creating opportunities for additional revenue.
Fabrinet expects near-packaged optics programs to begin generating revenue in the second half of fiscal 2027. Co-packaged optics opportunities are expected to take longer. Management believes these technologies will complement existing pluggable optical products rather than replace them.
Despite industrywide component shortages, Fabrinet said it has secured enough supplies to meet customer demand. That's a key detail in a market where supply chain snarls have tripped up plenty of hardware makers.
Fabrinet Targets $16 Billion in Manufacturing Capacity
Fabrinet is expanding its manufacturing operations to support rising demand. Its Santa Clara facility will add $300 million in annual revenue capacity, while the Nava 1 campus will contribute another $400 million.
Building 10 at its Chonburi, Thailand, campus spans about 2 million square feet and will add $3.5 billion in capacity. Initial production has begun, with completion expected in January.
The company expects total annual revenue capacity to rise from $5.8 billion at the end of fiscal 2026 to about $10 billion by early January. Another planned facility is expected to add $3 billion in capacity and begin operations around mid-2028.
Including a potential Building 12, Fabrinet sees total capacity reaching $16 billion, up from its previous estimate of $14 billion. That's a lot of optical transceivers.
Strong Second-Quarter Outlook
Fabrinet expects second-quarter adjusted earnings of $4.77 to $4.92 per share, above Wall Street's estimate of $4.41. The company forecasts revenue of $1.6 billion to $1.65 billion, exceeding the $1.48 billion consensus estimate.
Management expects continued data center demand, new product launches and improving margins to support growth. Fabrinet also plans to increase capital spending in fiscal 2027 as it expands manufacturing capacity.
