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AAOI vs. Fabrinet: Which AI Data Center Stock Is the Better Buy?
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Key Takeaways
AAOI's data-center revenues surged 140.4% year over year to $107.66 million in second-quarter 2026.
AAOI expects 800G revenues to grow nearly fivefold sequentially in the third quarter of 2026.
AAOI faces capacity and supply constraints, while Fabrinet is expanding manufacturing capacity aggressively.
Applied Optoelectronics (AAOI - Free Report) and Fabrinet (FN - Free Report) are notable players in the AI-driven optical networking and data-center infrastructure ecosystem. Applied Optoelectronics supplies high-speed 800G/1.6T optical transceivers, while Fabrinet provides advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers.
Applied Optoelectronics or Fabrinet — Which of these AI Data Center stocks has the greater upside potential? Let’s find out.
The Case for AAOI Stock
Applied Optoelectronics is benefiting from the strong momentum in the optical networking market, driven by surging demand for next-generation data center and CATV (cable TV) solutions. In the second quarter of 2026, Datacenter revenues reached $107.66 million, up 140.4% year over year and 32.3% sequentially. The business accounted for 56% of total revenues, supported by stronger shipments of high-speed optical transceivers used in AI-focused infrastructure.
Strong demand for 800G optical transceivers is further strengthening its position in the AI-driven optical connectivity market. In the second quarter of 2026, AAOI’s 800G revenues reached $12.8 million, accounting for 11.9% of data center revenues. The figure increased more than 10-fold year over year and more than doubled sequentially, highlighting the rapid adoption of its next-generation optical products.
Momentum is expected to accelerate further. AAOI expects 800G revenues to grow nearly fivefold sequentially in the third quarter of 2026, with management indicating that 800G will be the main contributor to sequential growth. Demand is currently outpacing AAOI’s ability to supply products, suggesting production capacity, not customer demand, is the primary near-term constraint. Forecast demand for 800G and 1.6T modules is expected to exceed production capacity through mid-2027.
Despite its expanding portfolio, AAOI is suffering from production capacity and key component supply constraints, which have limited its ability to meet surging customer demand for next-generation AI infrastructure products. AAOI also faced temporary setbacks in its 100G product line in the second quarter of 2026 due to a memory shortage affecting customers’ ability to source switches. This is likely to result in a $20-25 million revenue shortfall in the third quarter of 2026. Operating expenses were also higher than expected, due to increased shipping costs and elevated R&D spending to qualify new products.
The Case for FN Stock
Fabrinet is benefiting from strong AI-driven data-center demand as hyperscalers accelerate investments in high-speed optical connectivity, data-center interconnect (DCI) and high-performance computing (HPC). In fourth-quarter fiscal 2026, data-center revenues jumped 68% year over year and 13% sequentially to $669 million, accounting for 51% of total revenues. DCI was the largest contributor to growth, with its annualized revenue run rate exceeding $1 billion, while HPC also delivered solid growth.
Fabrinet is simultaneously expanding manufacturing capacity to support this demand. The company has begun qualifying Building 10 in Chonburi, with 250,000 square feet already qualified and a similar amount targeted in the first quarter of fiscal 2027. The full 2.0 million-square-foot building remains scheduled for completion in early 2027 and is expected to add $3-$3.5 billion of revenue capacity.
The company also converted 120,000 square feet at Pinehurst, commissioned a 200,000-square-foot Nava Nakorn facility, and acquired a Santa Clara campus with about 130,000 square feet of manufacturing space. Management estimates existing land and planned additions could raise revenue capacity from the current $5.3 billion annualized run rate to $12.5-$14 billion over time.
Fabrinet’s strong execution, capacity expansion and alignment with AI-driven data center trends suggest significant potential for further upside. The company guided fiscal first-quarter 2027 revenues to $1.375-$1.425 billion, implying approximately 43% year-over-year growth at the midpoint. Management expects broad-based data-center growth across transceivers, DCI and HPC, supported by existing programs and newer wins.
Price Performance and Valuation of AAOI and FN
In the year-to-date period, AAOI shares have surged 206.9%, outperforming Fabrinet shares, which have lost 11.4%. The outperformance in AAOI can be attributed to robust performance in both the data center and CATV businesses. The surge in AI infrastructure deployments requiring high-speed optical transceivers remains noteworthy. This demand is particularly strong for next-generation products such as 400G, 800G and 1.6T transceivers, which are essential for hyperscale data centers supporting AI workloads.
Despite Fabrinet’s expanding portfolio, component availability can still limit shipments, aggressive capacity investment raises utilization risk and customer concentration leaves results exposed to program shifts. Margin and tax variability add further uncertainty.
AAOI and FN Stock Performance
Image Source: Zacks Investment Research
Both AAOI and FN shares are currently overvalued, as suggested by a Value Score of F and C, respectively.
In terms of forward 12-month Price/Sales, AAOI shares are trading at 4.56X, higher than FN’s 2.22X.
AAOI and FN Valuation
Image Source: Zacks Investment Research
How Do Earnings Estimates Compare for AAOI & FN?
The Zacks Consensus Estimate for AAOI’s 2026 earnings is pegged at 79 cents per share, which has been unchanged over the past 30 days. This indicates a 403.85% increase year over year.
The Zacks Consensus Estimate for FN’s fiscal 2027 earnings is pegged at $18.56 per share, which has been unchanged over the past 30 days. This indicates a 31.72% increase year over year.
While both Applied Optoelectronics and Fabrinet are benefiting from strong AI-driven data-center demand, Fabrinet appears better positioned, supported by an expanding portfolio and aggressive capacity expansion. Its broad-based growth across DCI, HPC, and optical transceivers further strengthens its long-term prospects.
Despite AAOI’s expanding portfolio, intensifying competition from larger rivals, production capacity constraints and supply chain challenges remain headwinds that could hurt the company’s financial performance.
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AAOI vs. Fabrinet: Which AI Data Center Stock Is the Better Buy?
Key Takeaways
Applied Optoelectronics (AAOI - Free Report) and Fabrinet (FN - Free Report) are notable players in the AI-driven optical networking and data-center infrastructure ecosystem. Applied Optoelectronics supplies high-speed 800G/1.6T optical transceivers, while Fabrinet provides advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers.
Applied Optoelectronics or Fabrinet — Which of these AI Data Center stocks has the greater upside potential? Let’s find out.
The Case for AAOI Stock
Applied Optoelectronics is benefiting from the strong momentum in the optical networking market, driven by surging demand for next-generation data center and CATV (cable TV) solutions. In the second quarter of 2026, Datacenter revenues reached $107.66 million, up 140.4% year over year and 32.3% sequentially. The business accounted for 56% of total revenues, supported by stronger shipments of high-speed optical transceivers used in AI-focused infrastructure.
Strong demand for 800G optical transceivers is further strengthening its position in the AI-driven optical connectivity market. In the second quarter of 2026, AAOI’s 800G revenues reached $12.8 million, accounting for 11.9% of data center revenues. The figure increased more than 10-fold year over year and more than doubled sequentially, highlighting the rapid adoption of its next-generation optical products.
Momentum is expected to accelerate further. AAOI expects 800G revenues to grow nearly fivefold sequentially in the third quarter of 2026, with management indicating that 800G will be the main contributor to sequential growth. Demand is currently outpacing AAOI’s ability to supply products, suggesting production capacity, not customer demand, is the primary near-term constraint. Forecast demand for 800G and 1.6T modules is expected to exceed production capacity through mid-2027.
Despite its expanding portfolio, AAOI is suffering from production capacity and key component supply constraints, which have limited its ability to meet surging customer demand for next-generation AI infrastructure products. AAOI also faced temporary setbacks in its 100G product line in the second quarter of 2026 due to a memory shortage affecting customers’ ability to source switches. This is likely to result in a $20-25 million revenue shortfall in the third quarter of 2026. Operating expenses were also higher than expected, due to increased shipping costs and elevated R&D spending to qualify new products.
The Case for FN Stock
Fabrinet is benefiting from strong AI-driven data-center demand as hyperscalers accelerate investments in high-speed optical connectivity, data-center interconnect (DCI) and high-performance computing (HPC). In fourth-quarter fiscal 2026, data-center revenues jumped 68% year over year and 13% sequentially to $669 million, accounting for 51% of total revenues. DCI was the largest contributor to growth, with its annualized revenue run rate exceeding $1 billion, while HPC also delivered solid growth.
Fabrinet is simultaneously expanding manufacturing capacity to support this demand. The company has begun qualifying Building 10 in Chonburi, with 250,000 square feet already qualified and a similar amount targeted in the first quarter of fiscal 2027. The full 2.0 million-square-foot building remains scheduled for completion in early 2027 and is expected to add $3-$3.5 billion of revenue capacity.
The company also converted 120,000 square feet at Pinehurst, commissioned a 200,000-square-foot Nava Nakorn facility, and acquired a Santa Clara campus with about 130,000 square feet of manufacturing space. Management estimates existing land and planned additions could raise revenue capacity from the current $5.3 billion annualized run rate to $12.5-$14 billion over time.
Fabrinet’s strong execution, capacity expansion and alignment with AI-driven data center trends suggest significant potential for further upside. The company guided fiscal first-quarter 2027 revenues to $1.375-$1.425 billion, implying approximately 43% year-over-year growth at the midpoint. Management expects broad-based data-center growth across transceivers, DCI and HPC, supported by existing programs and newer wins.
Price Performance and Valuation of AAOI and FN
In the year-to-date period, AAOI shares have surged 206.9%, outperforming Fabrinet shares, which have lost 11.4%. The outperformance in AAOI can be attributed to robust performance in both the data center and CATV businesses. The surge in AI infrastructure deployments requiring high-speed optical transceivers remains noteworthy. This demand is particularly strong for next-generation products such as 400G, 800G and 1.6T transceivers, which are essential for hyperscale data centers supporting AI workloads.
Despite Fabrinet’s expanding portfolio, component availability can still limit shipments, aggressive capacity investment raises utilization risk and customer concentration leaves results exposed to program shifts. Margin and tax variability add further uncertainty.
AAOI and FN Stock Performance
Image Source: Zacks Investment Research
Both AAOI and FN shares are currently overvalued, as suggested by a Value Score of F and C, respectively.
In terms of forward 12-month Price/Sales, AAOI shares are trading at 4.56X, higher than FN’s 2.22X.
AAOI and FN Valuation
Image Source: Zacks Investment Research
How Do Earnings Estimates Compare for AAOI & FN?
The Zacks Consensus Estimate for AAOI’s 2026 earnings is pegged at 79 cents per share, which has been unchanged over the past 30 days. This indicates a 403.85% increase year over year.
Applied Optoelectronics, Inc. Price and Consensus
Applied Optoelectronics, Inc. price-consensus-chart | Applied Optoelectronics, Inc. Quote
The Zacks Consensus Estimate for FN’s fiscal 2027 earnings is pegged at $18.56 per share, which has been unchanged over the past 30 days. This indicates a 31.72% increase year over year.
Fabrinet Price and Consensus
Fabrinet price-consensus-chart | Fabrinet Quote
Conclusion
While both Applied Optoelectronics and Fabrinet are benefiting from strong AI-driven data-center demand, Fabrinet appears better positioned, supported by an expanding portfolio and aggressive capacity expansion. Its broad-based growth across DCI, HPC, and optical transceivers further strengthens its long-term prospects.
Despite AAOI’s expanding portfolio, intensifying competition from larger rivals, production capacity constraints and supply chain challenges remain headwinds that could hurt the company’s financial performance.
Currently, Fabrinet carries a Zacks Rank #2 (Buy), making the stock a stronger pick than Applied Optoelectronics, which has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.