Fabrinet Q2 FY2026 earnings call

Key Points

• Second quarter revenue was $1.13 billion, a new record, up 36% YOY and 16% QOQ. Non-GAAP EPS was $3.36, a new record.
• Optical communications: Telecom revenue hit a record, DCI modules showed strong growth, datacom had sequential growth.
• Non-optical communications: HPC revenue surged, automotive and industrial laser had growth.
• Capacity expansion: Construction of Building 10 (2 million square feet) on track, with ~250,000 square feet to be completed by mid-2026; Pinehurst campus repurposing into manufacturing space.

Optical communications revenue was $833 million in the second quarter, up 29% from a year ago and 11% from the prior quarter. Telecom revenue reached a new record at $554 million, increasing 59% from last year and 17% from Q1. DCI revenue was $142 million, growing 42% from a year ago and 3% from Q1. Datacom revenue was $278 million, down 7% year-over-year but up 2% sequentially. Non-optical communications revenue was $300 million, up 61% from a year ago and 30% from Q1. High-performance computing revenues soared to $86 million in the quarter. Automotive revenue was $117 million, up 12% from a year ago but down slightly from Q1. Industrial laser revenue grew 10% from a year ago and 4% from last quarter.

Forward-Looking

• Q3 revenue expected in the range of $1.15 billion to $1.2 billion, representing ~35% YOY growth at midpoint.
• Non-GAAP EPS expected in the range of $3.45 to $3.60, ~40% YOY growth at midpoint.
• Anticipate growth in telecom, datacom, HPC; modest decline in automotive.

Risks

• Foreign exchange headwinds impacting gross margin.
• Supply chain constraints for leading-edge telecom and datacom products.
• Uncertainties in ramping new products and winning new customers.

Q: Samik Chatterjee asks about the HPC ramp and CPO opportunities.

A: Seamus Grady responds that HPC is more than halfway to full ramp, expecting revenue north of $150M when fully ramped, and working on CPO with three different customers.

Q: Karl Ackerman inquires about datacom supply constraints and telecom mix.

A: Seamus Grady states datacom supply constraints are resolving with a second source approval, and telecom growth is broad across DCI, satellite, and network systems.

Q: Christopher Rolland asks about CPO switches and DCI dynamics.

A: Seamus Grady mentions excitement about CPO switches but limited detail, and DCI demand is strong with long-term durability despite some constraints.

Q: George Notter talks about new customer opportunities in telecom.

A: Seamus Grady discusses pursuing new opportunities with existing and new customers, leveraging contract manufacturing model.

Q: Steven Fox asks about EPS drag from currency and CPO programs.

A: Csaba Sverha explains ongoing exchange rate headwinds with similar impact expected in Q3, and CPO programs with multiple customers.

Q: Mike Genovese asks about datacom growth visibility and Building 10.

A: Seamus Grady highlights strong visibility and ongoing capacity expansions, including Building 10 and Pinehurst repurposing.

Q: Ryan Koontz inquires about Building 10 progress and Pinehurst capacity.

A: Seamus Grady states Building 10 construction is well underway, with ~250,000 square feet to be completed by mid-2026, and Pinehurst repurposing adding manufacturing space.

Q: Tim Savageaux asks about capacity pull-in and Pinehurst details.

A: Seamus Grady and Csaba Sverha discuss capacity additions driven by strong demand, with Pinehurst repurposing adding ~120,000 square feet of manufacturing space.