Fabrinet Q4 FY2025 earnings call

Key Points

• Fourth quarter was excellent with revenue above guidance, record non-GAAP earnings. Full year 2025 was a record year with 19% revenue growth.
• Navigated product transition at a major datacom customer, established partnership with AWS, began construction on Building 10, returned $126 million to shareholders.
• Fiscal 2026 starts with strong momentum; optical communications had strong growth, telecom up 46%, DCI at 12% of revenue. Datacom down y-o-y but up q-o-q. Non-optical communications had 41% y-o-y growth.
• Future changes in reporting categories: will no longer report revenue by data rate starting next quarter, discontinue silicon photonics breakout in Q1 as it's captured under DCI.

Fourth quarter revenue was $910 million, above guidance range. Optical communications revenue was $689 million, up 15% y-o-y and 5% q-o-q. Telecom revenue was $412 million, up 46% y-o-y and 1% q-o-q, with DCI revenue at $107 million (12% of overall revenue). Datacom revenue was $277 million, down 12% y-o-y but up 10% q-o-q. Non-optical communications revenue was $221 million, up 41% y-o-y and 3% q-o-q. Full year fiscal 2025 revenue reached $3.4 billion, a 19% increase, with non-GAAP EPS at $10.17.

Fiscal Q1 2026 Guidance

• Anticipates total revenue $910M-$950M. Earnings per diluted share between $2.75 and $2.90.
• Datacom revenue expected to dip sequentially due to component supply constraints, but temporary. Non-optical communications expected strong growth from new HPC program.
• Q1 margins impacted by annual merit increases and new product ramps, but optimistic about mid-5% gross margin target and operating leverage.

• Component supply constraints affecting datacom revenue, which are temporary but will take time to resolve (e.g., a few specific components causing constraints).

Q: Could you take a shot at quantifying the impact of the component shortages on datacom?

A: Impact is meaningful, but not quantified; would be up significantly without the issue.

Q: I wonder what might be driving the sharp growth in 800 gig and above telecom?

A: Mix of datacom and telecom growth, including strong growth in DCI and other 800-gig telecom products