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FN Q3 Earnings Beat Estimates, Revenues Up on Strong Telecom & HPC
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Key Takeaways
FN delivered Q3 FY2026 EPS of $3.72 and revenues of $1.214B, both topping consensus estimates.
Optical Communications made 73.2% of FN sales; telecom hit a record $628.3M, with DCI surging 90%.
Fabrinet cited datacom bottlenecks in lasers, memory and ASICs.
Fabrinet (FN - Free Report) delivered strong third-quarter fiscal 2026 results, supported by broad-based program momentum. Non-GAAP earnings were $3.72 per share, up 47.6% year over year and beat the Zacks Consensus Estimate by 3.91%. Quarterly revenues rose 39.3% year over year to $1.214 billion, topping the consensus mark by 1.56%.
Strength in Optical Communications remained the key engine, with data center interconnect (DCI) revenues reaching $196.9 million in the reported quarter, reflecting 90.4% year-over-year growth.
FN Posts Record Revenue With Optical Still Dominant
Optical Communications remained the company’s largest business (73.2% of revenues), generating $888.7 million of revenues in the quarter, which was up 35.3% year over year.
Within Optical Communications, the mix tilted further toward Telecom. Management attributed the quarter’s strong optical performance to robust demand across a wide range of telecom products, even as certain datacom shipments were constrained by component availability.
Fabrinet Sees Telecom Momentum Outweigh Datacom Constraints
Telecom revenues climbed to a record $628.3 million in the reported quarter (up 54.7% year over year), extending the company’s recent momentum in the category. DCI was a notable contributor, with management highlighting strong longer-term DCI trends and continued program activity with major industry participants.
Datacom revenues were $260.4 million (up 3.7% year over year) and were pressured by broader component and material supply constraints. On the earnings call, Fabrinet noted that demand exceeded what it was able to ship, citing bottlenecks across multiple inputs, including lasers, memory and certain ASICs. The company emphasized that the issue was supply-driven rather than demand-driven and expects volatility to persist in the near term.
FN Highlights New Datacom Programs and CPO Progress
While Datacom shipments were constrained in the quarter, management pointed to tangible progress on customer diversification. Fabrinet said it has completed qualification and begun shipping two datacom transceiver programs directly to a hyperscale customer, with an initial ramp expected to start in the fourth quarter and build through fiscal 2027.
The company also discussed co-packaged optics (CPO) as a strategic focus area. Management said it is working on multiple CPO programs with three customers and is already shipping in small volumes, with most of the revenue opportunity still ahead. Fabrinet also disclosed a minority investment in Raytek Semiconductor to deepen capabilities in advanced wafer-level packaging technologies that support CPO manufacturing solutions.
Fabrinet’s Non-Optical Segment Expands on HPC Ramps
Non-Optical Communications (26.8% of revenues) contributed $325.6 million, reflecting continued expansion beyond the optical franchise. The figure jumped 51.6% year over year. High-Performance Computing (HPC) was a key driver, producing $106.7 million of revenues as Fabrinet supported customers transitioning to newer product generations.
On the call, management indicated the current HPC ramp is tracking to customer expectations, though the timing to reach a $150 million quarterly milestone has shifted by roughly a quarter due to the nature of the technology transition. Fabrinet also noted follow-on program awards with the same customer, suggesting a broader scope over time as it adds capacity aligned with customer growth plans.
FN Maintains Profitability and Invests for Growth
Non-GAAP gross margin was 12.1% in the reported quarter, while non-GAAP operating margin was 10.7%, reflecting operating leverage. Gross margin expanded 10 basis points (bps) year over year, while operating margin grew 50 bps.
Selling, general & administrative expenses as a percentage of revenues declined 50 bps year over year to 2% in the reported quarter.
Management cited foreign exchange dynamics as a key margin headwind and noted that new program ramps can create short-term inefficiencies, which it expects to improve as programs mature.
Fabrinet ended the reported quarter with $945.9 million in cash and cash equivalents and zero total debt, supporting ongoing capacity expansion.
Capital spending remained elevated as the company advanced construction on Building 10 and expanded capacity for growth programs.
FN Offers Positive Q4 Fiscal 2026 Guidance
For the fourth quarter of fiscal 2026, Fabrinet guided revenues of $1.25-$1.29 billion and non-GAAP earnings of $3.72-$3.87 per share, while acknowledging the near-term supply-constrained environment in parts of Datacom.
Zacks Rank & Stocks to Consider
Currently, Fabrinet sports a Zacks Rank #1 (Strong Buy).
Diodes, Docebo and Keysight Technologies are set to report their quarterly results on May 7, 8 and 19, respectively. Year to date, shares of Diodes and Keysight Technologies have jumped 120.3% and 72.9%, respectively, while Docebo has dropped 4.5%.
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FN Q3 Earnings Beat Estimates, Revenues Up on Strong Telecom & HPC
Key Takeaways
Fabrinet (FN - Free Report) delivered strong third-quarter fiscal 2026 results, supported by broad-based program momentum. Non-GAAP earnings were $3.72 per share, up 47.6% year over year and beat the Zacks Consensus Estimate by 3.91%. Quarterly revenues rose 39.3% year over year to $1.214 billion, topping the consensus mark by 1.56%.
Strength in Optical Communications remained the key engine, with data center interconnect (DCI) revenues reaching $196.9 million in the reported quarter, reflecting 90.4% year-over-year growth.
FN Posts Record Revenue With Optical Still Dominant
Optical Communications remained the company’s largest business (73.2% of revenues), generating $888.7 million of revenues in the quarter, which was up 35.3% year over year.
Fabrinet Price, Consensus and EPS Surprise
Fabrinet price-consensus-eps-surprise-chart | Fabrinet Quote
Within Optical Communications, the mix tilted further toward Telecom. Management attributed the quarter’s strong optical performance to robust demand across a wide range of telecom products, even as certain datacom shipments were constrained by component availability.
Fabrinet Sees Telecom Momentum Outweigh Datacom Constraints
Telecom revenues climbed to a record $628.3 million in the reported quarter (up 54.7% year over year), extending the company’s recent momentum in the category. DCI was a notable contributor, with management highlighting strong longer-term DCI trends and continued program activity with major industry participants.
Datacom revenues were $260.4 million (up 3.7% year over year) and were pressured by broader component and material supply constraints. On the earnings call, Fabrinet noted that demand exceeded what it was able to ship, citing bottlenecks across multiple inputs, including lasers, memory and certain ASICs. The company emphasized that the issue was supply-driven rather than demand-driven and expects volatility to persist in the near term.
FN Highlights New Datacom Programs and CPO Progress
While Datacom shipments were constrained in the quarter, management pointed to tangible progress on customer diversification. Fabrinet said it has completed qualification and begun shipping two datacom transceiver programs directly to a hyperscale customer, with an initial ramp expected to start in the fourth quarter and build through fiscal 2027.
The company also discussed co-packaged optics (CPO) as a strategic focus area. Management said it is working on multiple CPO programs with three customers and is already shipping in small volumes, with most of the revenue opportunity still ahead. Fabrinet also disclosed a minority investment in Raytek Semiconductor to deepen capabilities in advanced wafer-level packaging technologies that support CPO manufacturing solutions.
Fabrinet’s Non-Optical Segment Expands on HPC Ramps
Non-Optical Communications (26.8% of revenues) contributed $325.6 million, reflecting continued expansion beyond the optical franchise. The figure jumped 51.6% year over year. High-Performance Computing (HPC) was a key driver, producing $106.7 million of revenues as Fabrinet supported customers transitioning to newer product generations.
On the call, management indicated the current HPC ramp is tracking to customer expectations, though the timing to reach a $150 million quarterly milestone has shifted by roughly a quarter due to the nature of the technology transition. Fabrinet also noted follow-on program awards with the same customer, suggesting a broader scope over time as it adds capacity aligned with customer growth plans.
FN Maintains Profitability and Invests for Growth
Non-GAAP gross margin was 12.1% in the reported quarter, while non-GAAP operating margin was 10.7%, reflecting operating leverage. Gross margin expanded 10 basis points (bps) year over year, while operating margin grew 50 bps.
Selling, general & administrative expenses as a percentage of revenues declined 50 bps year over year to 2% in the reported quarter.
Management cited foreign exchange dynamics as a key margin headwind and noted that new program ramps can create short-term inefficiencies, which it expects to improve as programs mature.
FN Balance Sheet Supports Ongoing Capacity Expansion
Fabrinet ended the reported quarter with $945.9 million in cash and cash equivalents and zero total debt, supporting ongoing capacity expansion.
Capital spending remained elevated as the company advanced construction on Building 10 and expanded capacity for growth programs.
FN Offers Positive Q4 Fiscal 2026 Guidance
For the fourth quarter of fiscal 2026, Fabrinet guided revenues of $1.25-$1.29 billion and non-GAAP earnings of $3.72-$3.87 per share, while acknowledging the near-term supply-constrained environment in parts of Datacom.
Zacks Rank & Stocks to Consider
Currently, Fabrinet sports a Zacks Rank #1 (Strong Buy).
Some better-ranked stocks in the broader Zacks Computer and Technology sector that are set to report their quarterly results are Docebo (DCBO - Free Report) , Diodes (DIOD - Free Report) and Keysight Technologies (KEYS - Free Report) . Each of the three stocks carries a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Diodes, Docebo and Keysight Technologies are set to report their quarterly results on May 7, 8 and 19, respectively. Year to date, shares of Diodes and Keysight Technologies have jumped 120.3% and 72.9%, respectively, while Docebo has dropped 4.5%.