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Can Optical Communications Momentum Drive Fabrinet's Revenue Growth?
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Key Takeaways
Fabrinet's optical communications revenues rose 29% Y/Y to $833M in Q2 FY26.
FN telecom revenues surged 59% to $554M, driven by strong customer demand.
Data center interconnect sales grew 42% as shipments of 400ZR and 800ZR modules increased.
Fabrinet (FN - Free Report) is witnessing strong growth in its optical communications business, which is aiding its overall revenue growth. Revenues from the Optical communications business reached $833 million, rising 29% year over year and 11% on a sequential basis in the second quarter of fiscal 2026. Optical communications remained the largest contributor to Fabrinet’s business and played a key role in pushing total revenues to a record $1.13 billion for the quarter.
The telecom business was the biggest driver of optical communications growth. Telecom revenues surged 59% year over year to $554 million and grew 17% on a sequential basis as demand across multiple customers remained strong. Revenues from data center interconnect products reached $142 million, rising 42% on a year-over-year basis. Here, growth is being driven by rising shipments of coherent optical modules, particularly 400ZR and 800ZR modules used in data center interconnect networks.
Datacom performance also showed improvement during the second quarter. Datacom revenues totaled $278 million, increasing 2% on a sequential basis. Management expects the Datacom segment to witness continued sequential growth, backed by strong demand where the company continues to ship significant volumes of high-speed transceivers used in large data center networks.
Looking ahead, Fabrinet expects telecom and datacom markets to rise sequentially and continue their growth in the third quarter of fiscal 2026. Strong demand for optical products used in telecom and data center networks is expected to support further growth in the optical communications segment. The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a year-over-year increase of around 33.1% and 18.5%, respectively.
How Competitors Fare Against Fabrinet
Fabrinet faces stiff competition from the likes of Lumentum (LITE - Free Report) and Coherent (COHR - Free Report) in the optical communications market.
Coherent and NVIDIA recently announced a multi-year strategic agreement to develop advanced optical technologies used in AI data centers. As part of the deal, NVIDIA has made a multibillion-dollar purchase commitment for Coherent’s laser and optical networking products. In addition, NVIDIA will invest $2 billion in Coherent to support research and development, expand manufacturing capacity and strengthen operations as the latter increases its U.S.-based production capabilities.
Lumentum has also entered into a multi-year strategic partnership with NVIDIA to develop advanced optical technologies used in AI data centers. Under the agreement, NVIDIA has made a multibillion-dollar purchase commitment for Lumentum’s advanced laser components. In addition, NVIDIA will invest $2 billion in Lumentum to support research and development, expand manufacturing capacity and strengthen operations as Lumentum builds a new fabrication facility in the United States.
FN shares are overvalued, as suggested by the Value Score of F. In terms of the forward 12-month price-to-sales (P/S) multiple, Fabrinet shares are trading at 3.79X, higher than the industry’s average of 2.32X.
Fabrinet’s Forward 12-Month P/S Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Fabrinet’s fiscal 2026 earnings is pegged at $13.58 per share, up 2.2% over the past 60 days, and marking a year-over-year increase of 33.5%.
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Can Optical Communications Momentum Drive Fabrinet's Revenue Growth?
Key Takeaways
Fabrinet (FN - Free Report) is witnessing strong growth in its optical communications business, which is aiding its overall revenue growth. Revenues from the Optical communications business reached $833 million, rising 29% year over year and 11% on a sequential basis in the second quarter of fiscal 2026. Optical communications remained the largest contributor to Fabrinet’s business and played a key role in pushing total revenues to a record $1.13 billion for the quarter.
The telecom business was the biggest driver of optical communications growth. Telecom revenues surged 59% year over year to $554 million and grew 17% on a sequential basis as demand across multiple customers remained strong. Revenues from data center interconnect products reached $142 million, rising 42% on a year-over-year basis. Here, growth is being driven by rising shipments of coherent optical modules, particularly 400ZR and 800ZR modules used in data center interconnect networks.
Datacom performance also showed improvement during the second quarter. Datacom revenues totaled $278 million, increasing 2% on a sequential basis. Management expects the Datacom segment to witness continued sequential growth, backed by strong demand where the company continues to ship significant volumes of high-speed transceivers used in large data center networks.
Looking ahead, Fabrinet expects telecom and datacom markets to rise sequentially and continue their growth in the third quarter of fiscal 2026. Strong demand for optical products used in telecom and data center networks is expected to support further growth in the optical communications segment. The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a year-over-year increase of around 33.1% and 18.5%, respectively.
How Competitors Fare Against Fabrinet
Fabrinet faces stiff competition from the likes of Lumentum (LITE - Free Report) and Coherent (COHR - Free Report) in the optical communications market.
Coherent and NVIDIA recently announced a multi-year strategic agreement to develop advanced optical technologies used in AI data centers. As part of the deal, NVIDIA has made a multibillion-dollar purchase commitment for Coherent’s laser and optical networking products. In addition, NVIDIA will invest $2 billion in Coherent to support research and development, expand manufacturing capacity and strengthen operations as the latter increases its U.S.-based production capabilities.
Lumentum has also entered into a multi-year strategic partnership with NVIDIA to develop advanced optical technologies used in AI data centers. Under the agreement, NVIDIA has made a multibillion-dollar purchase commitment for Lumentum’s advanced laser components. In addition, NVIDIA will invest $2 billion in Lumentum to support research and development, expand manufacturing capacity and strengthen operations as Lumentum builds a new fabrication facility in the United States.
Fabrinet’s Price Performance, Valuation & Estimates
Shares of Fabrinet have surged 46% in the past six months, outperforming the Zacks Electronics - Miscellaneous Components industry’s growth of 11.6%.
Fabrinet 6-Month Price Performance
Image Source: Zacks Investment Research
FN shares are overvalued, as suggested by the Value Score of F. In terms of the forward 12-month price-to-sales (P/S) multiple, Fabrinet shares are trading at 3.79X, higher than the industry’s average of 2.32X.
Fabrinet’s Forward 12-Month P/S Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Fabrinet’s fiscal 2026 earnings is pegged at $13.58 per share, up 2.2% over the past 60 days, and marking a year-over-year increase of 33.5%.
Image Source: Zacks Investment Research
Currently, Fabrinet carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.