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Fabrinet Grows on the Back of Data-Center Demand: What's Ahead?
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Key Takeaways
Fabrinet's data-center revenues jumped 68% year over year to $669M, accounting for 51% of Q4 sales.
Fabrinet is expanding capacity, with Building 10 expected to add $3-$3.5 billion in revenue capacity.
Fabrinet's fiscal 2027 and 2028 earnings estimates imply growth of 32.3% and 36.8%, respectively.
Fabrinet (FN - Free Report) is benefiting from robust data center demand, with data center interconnect (DCI), high-performance computing (HPC) and new transceiver programs supporting growth. Capacity expansion and emerging optical technologies provide additional opportunities as Fabrinet enters fiscal 2027.
Fabrinet’s data center revenues reached $669 million in the fourth quarter of fiscal 2026, up 68% year over year and 13% sequentially. The category accounted for 51% of quarterly revenues, becoming the company’s largest end market. DCI was the biggest contributor to data center growth, with its annualized revenue run rate exceeding $1 billion. HPC also contributed substantially as next-generation programs ramped up.
Fabrinet is additionally expanding capacity for HPC products and ramping a major customer’s next-generation silicon platform. The company expects the momentum to continue into fiscal 2027. A hyperscaler-direct transceiver program is scheduled to ramp in the first quarter, while one merchant transceiver program is expected to start in the December quarter and others in early 2027.
Fabrinet is expanding manufacturing capacity to accommodate rising demand. Building 10 at its Chonburi campus in Thailand is progressing toward completion in early 2027 and is expected to add $3-$3.5 billion in revenue capacity. The company has also commissioned a 200,000-square-foot facility at Nava Nakorn and acquired a manufacturing campus in Santa Clara, CA.
Advanced packaging opportunities in near-package optics (NPO) and co-packaged optics (CPO) could further strengthen its long-term growth prospects. Fabrinet is already building CPO devices for several customers, although volumes have not yet reached scale. Management views NPO as a nearer-term opportunity because it leverages existing capabilities in pluggable modules and advanced packaging.
How Competitors Fare Against FN Stock
Fabrinet faces stiff competition from the likes of Applied Optoelectronics (AAOI - Free Report) and Lumentum Holdings (LITE - Free Report) in the optical networking market.
Applied Optoelectronics is benefiting from the growing demand for its 400G and 800G products as global organizations are shifting from legacy data centers to AI-driven infrastructures. Applied Optoelectronics has also reduced its reliance on China, sourcing less than 10% of the value of its 800G and 1.6T components from China in the most recent quarter.
Lumentum is a provider of optical and photonic products serving cloud, artificial intelligence/machine learning (AI/ML), telecommunications, consumer and industrial end markets. Lumentum’s cloud and AI exposure is translating into sustained growth, with fourth-quarter fiscal 2026 revenues of $1.01 billion, up 109.3% year over year and 24.5% sequentially.
From a valuation standpoint, Fabrinet trades at a forward price-to-sales ratio of 1.97X, lower than the industry’s average of 3.39X.
FN Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for FN’s fiscal 2027 and 2028 earnings implies year-over-year growth of 31.7% and 20%, respectively. The estimates for fiscal 2027 and 2028 have remained unchanged for the past 60 days.
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Image: Bigstock
Fabrinet Grows on the Back of Data-Center Demand: What's Ahead?
Key Takeaways
Fabrinet (FN - Free Report) is benefiting from robust data center demand, with data center interconnect (DCI), high-performance computing (HPC) and new transceiver programs supporting growth. Capacity expansion and emerging optical technologies provide additional opportunities as Fabrinet enters fiscal 2027.
Fabrinet’s data center revenues reached $669 million in the fourth quarter of fiscal 2026, up 68% year over year and 13% sequentially. The category accounted for 51% of quarterly revenues, becoming the company’s largest end market. DCI was the biggest contributor to data center growth, with its annualized revenue run rate exceeding $1 billion. HPC also contributed substantially as next-generation programs ramped up.
Fabrinet is additionally expanding capacity for HPC products and ramping a major customer’s next-generation silicon platform. The company expects the momentum to continue into fiscal 2027. A hyperscaler-direct transceiver program is scheduled to ramp in the first quarter, while one merchant transceiver program is expected to start in the December quarter and others in early 2027.
Fabrinet is expanding manufacturing capacity to accommodate rising demand. Building 10 at its Chonburi campus in Thailand is progressing toward completion in early 2027 and is expected to add $3-$3.5 billion in revenue capacity. The company has also commissioned a 200,000-square-foot facility at Nava Nakorn and acquired a manufacturing campus in Santa Clara, CA.
Advanced packaging opportunities in near-package optics (NPO) and co-packaged optics (CPO) could further strengthen its long-term growth prospects. Fabrinet is already building CPO devices for several customers, although volumes have not yet reached scale. Management views NPO as a nearer-term opportunity because it leverages existing capabilities in pluggable modules and advanced packaging.
How Competitors Fare Against FN Stock
Fabrinet faces stiff competition from the likes of Applied Optoelectronics (AAOI - Free Report) and Lumentum Holdings (LITE - Free Report) in the optical networking market.
Applied Optoelectronics is benefiting from the growing demand for its 400G and 800G products as global organizations are shifting from legacy data centers to AI-driven infrastructures. Applied Optoelectronics has also reduced its reliance on China, sourcing less than 10% of the value of its 800G and 1.6T components from China in the most recent quarter.
Lumentum is a provider of optical and photonic products serving cloud, artificial intelligence/machine learning (AI/ML), telecommunications, consumer and industrial end markets. Lumentum’s cloud and AI exposure is translating into sustained growth, with fourth-quarter fiscal 2026 revenues of $1.01 billion, up 109.3% year over year and 24.5% sequentially.
FN’s Price Performance, Valuation and Estimates
Shares of Fabrinet have lost 19.3% year to date compared with the Zacks Electronics - Miscellaneous Components industry’s decline of 21.5%.
FN YTD Perormance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, Fabrinet trades at a forward price-to-sales ratio of 1.97X, lower than the industry’s average of 3.39X.
FN Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for FN’s fiscal 2027 and 2028 earnings implies year-over-year growth of 31.7% and 20%, respectively. The estimates for fiscal 2027 and 2028 have remained unchanged for the past 60 days.
Image Source: Zacks Investment Research
Fabrinet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.