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FN Rides on Surging Data Center Demand: Can It Outpace AAOI & LITE?
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Key Takeaways
FN's fiscal Q4 data-center revenues surged 68% y/y to $669 million, accounting for 51% of revenues.
DCI led Fabrinet's data-center growth, with its annualized revenue run rate topping $1 billion.
Fabrinet expects Building 10 to add $3-$3.5 billion of revenue capacity amid rising AI demand.
Fabrinet (FN - Free Report) is benefiting from accelerating demand across artificial intelligence (AI) and cloud data-center infrastructure. In the fourth quarter of fiscal 2026, data center revenues reached $669 million, surging 68% year over year and 13% sequentially, and accounted for 51% of total revenues. This momentum strengthens FN’s position in data-center optical infrastructure against Applied Optoelectronics (AAOI - Free Report) and Lumentum Holdings (LITE - Free Report) , which are also benefiting from rising demand for high-speed optical connectivity. Fabrinet’s data center portfolio includes networking, data center interconnect (DCI), high-performance computing (HPC) and other AI infrastructure applications.
DCI has emerged as a major growth engine for FN. It was the largest contributor to data center growth in the fourth quarter of fiscal 2026, with its annualized revenue run rate exceeding $1 billion. HPC contributed meaningfully as multiple programs with a major hyperscaler continued to ramp. Fabrinet is ramping the customer’s next-generation silicon platform and installing additional capacity to support the technology transition and additional products. New transceiver wins are expected to strengthen this momentum further. Management expects a hyperscaler-direct program to ramp first, followed by a merchant program later in the year and additional programs expected to begin in early calendar 2027. Customers are providing visibility through the end of 2027 and beyond, although management noted that this visibility does not represent firm orders.
Fabrinet is expanding capacity aggressively to support AI infrastructure demand. In the fourth quarter of fiscal 2026, Fabrinet said Building 10 in Chonburi is expected to add roughly $3-$3.5 billion of revenue capacity, increasing total capacity to $8.5-$9.3 billion. Including Nava Nakorn, the Santa Clara campus and two additional Chonburi facilities, management believes potential revenue capacity could eventually reach $12.5-$14 billion.
The growing contribution from data centers is also improving Fabrinet’s revenue mix. Data centAer products represented 47.9% of fiscal 2026 revenues, up from 46.2% in fiscal 2025, while total revenues increased 35.7% to $4.64 billion. Fabrinet is participating in next-generation optical architectures. The company is already working on co-packaged optics (CPO) with several customers and views near-packaged optics (NPO) as a potentially nearer-term opportunity.
FN Faces Tough Competition
Lumentum is strengthening its AI data-center position through cloud transceivers, optical circuit switching (OCS), pump lasers, EMLs, CW lasers and emerging NPO/CPO solutions. In the fourth quarter of fiscal 2026, Systems revenues reached $357 million, up 123% year over year and 30% sequentially, driven by cloud transceivers and OCS. Lumentum has begun shipping 1.6T transceivers and expects adoption to intensify through calendar 2027. OCS shipments doubled sequentially, while management expects its first triple-digit OCS revenue quarter in the first quarter of fiscal 2027.
Applied Optoelectronics is also scaling rapidly. Its second-quarter 2026 data center revenues surged 140.4% year over year to $107.7 million. 800G revenues increased more than tenfold, while capacity for 800G and 1.6T products is expected to exceed 650,000 units per month by year-end 2026 and 930,000 by year-end 2027. AAOI expects monthly data center transceiver revenues to reach about $471 million by mid-2027, including roughly $217 million from 800G and $164 million from 1.6T. The company has more than $200 million of 1.6T orders in hand, highlighting strong hyperscaler demand.
Shares of Fabrinet have declined 11.4% year to date against the broader Zacks Computer and Technology sector’s 22.8% growth.
FN Stock’s YTD Price Performance
Image Source: Zacks Investment Research
FN stock is trading at a discount, with forward 12-month price/earnings of 20.79X compared with the broader sector’s 21.36X. Fabrinet has a Value Score of C.
FN’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Fabrinet’s earnings is currently pegged at $4.19 per share, unchanged over the past 30 days, suggesting 43.49% growth.
View the Zacks #1 Rank List
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FN Rides on Surging Data Center Demand: Can It Outpace AAOI & LITE?
Key Takeaways
Fabrinet (FN - Free Report) is benefiting from accelerating demand across artificial intelligence (AI) and cloud data-center infrastructure. In the fourth quarter of fiscal 2026, data center revenues reached $669 million, surging 68% year over year and 13% sequentially, and accounted for 51% of total revenues. This momentum strengthens FN’s position in data-center optical infrastructure against Applied Optoelectronics (AAOI - Free Report) and Lumentum Holdings (LITE - Free Report) , which are also benefiting from rising demand for high-speed optical connectivity. Fabrinet’s data center portfolio includes networking, data center interconnect (DCI), high-performance computing (HPC) and other AI infrastructure applications.
DCI has emerged as a major growth engine for FN. It was the largest contributor to data center growth in the fourth quarter of fiscal 2026, with its annualized revenue run rate exceeding $1 billion. HPC contributed meaningfully as multiple programs with a major hyperscaler continued to ramp. Fabrinet is ramping the customer’s next-generation silicon platform and installing additional capacity to support the technology transition and additional products. New transceiver wins are expected to strengthen this momentum further. Management expects a hyperscaler-direct program to ramp first, followed by a merchant program later in the year and additional programs expected to begin in early calendar 2027. Customers are providing visibility through the end of 2027 and beyond, although management noted that this visibility does not represent firm orders.
Fabrinet is expanding capacity aggressively to support AI infrastructure demand. In the fourth quarter of fiscal 2026, Fabrinet said Building 10 in Chonburi is expected to add roughly $3-$3.5 billion of revenue capacity, increasing total capacity to $8.5-$9.3 billion. Including Nava Nakorn, the Santa Clara campus and two additional Chonburi facilities, management believes potential revenue capacity could eventually reach $12.5-$14 billion.
The growing contribution from data centers is also improving Fabrinet’s revenue mix. Data centAer products represented 47.9% of fiscal 2026 revenues, up from 46.2% in fiscal 2025, while total revenues increased 35.7% to $4.64 billion. Fabrinet is participating in next-generation optical architectures. The company is already working on co-packaged optics (CPO) with several customers and views near-packaged optics (NPO) as a potentially nearer-term opportunity.
FN Faces Tough Competition
Lumentum is strengthening its AI data-center position through cloud transceivers, optical circuit switching (OCS), pump lasers, EMLs, CW lasers and emerging NPO/CPO solutions. In the fourth quarter of fiscal 2026, Systems revenues reached $357 million, up 123% year over year and 30% sequentially, driven by cloud transceivers and OCS. Lumentum has begun shipping 1.6T transceivers and expects adoption to intensify through calendar 2027. OCS shipments doubled sequentially, while management expects its first triple-digit OCS revenue quarter in the first quarter of fiscal 2027.
Applied Optoelectronics is also scaling rapidly. Its second-quarter 2026 data center revenues surged 140.4% year over year to $107.7 million. 800G revenues increased more than tenfold, while capacity for 800G and 1.6T products is expected to exceed 650,000 units per month by year-end 2026 and 930,000 by year-end 2027. AAOI expects monthly data center transceiver revenues to reach about $471 million by mid-2027, including roughly $217 million from 800G and $164 million from 1.6T. The company has more than $200 million of 1.6T orders in hand, highlighting strong hyperscaler demand.
FN’s Share Price Performance, Valuation & Estimates
Shares of Fabrinet have declined 11.4% year to date against the broader Zacks Computer and Technology sector’s 22.8% growth.
FN Stock’s YTD Price Performance
Image Source: Zacks Investment Research
FN stock is trading at a discount, with forward 12-month price/earnings of 20.79X compared with the broader sector’s 21.36X. Fabrinet has a Value Score of C.
FN’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Fabrinet’s earnings is currently pegged at $4.19 per share, unchanged over the past 30 days, suggesting 43.49% growth.
Fabrinet Price and Consensus
Fabrinet price-consensus-chart | Fabrinet Quote
Fabrinet stock currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.