Fabrinet (NYSE:FN) reported first-quarter fiscal 2027 revenue and non-GAAP earnings that exceeded its guidance range, driven by broad-based demand across data center, communications infrastructure, and automotive and industrial markets.
Revenue for the quarter ended Sept. 25, 2026, rose 51% year over year and 12% sequentially to $1.474 billion. Chairman and Chief Executive Officer Seamus Grady said the company recorded its highest top-line growth rate in 10 years, supported by continued momentum in data center interconnect, data center transceivers and high-performance computing.
Non-GAAP diluted earnings per share reached a company record of $4.34, while non-GAAP net income totaled $157 million. On a GAAP basis, Fabrinet reported net income of $103 million, or $2.86 per diluted share.
Data Center Products Lead Growth
Data center revenue increased 78% from a year earlier and 16% from the prior quarter to $777 million, representing 53% of total revenue. Chief Financial Officer Csaba Sverha said growth was broad-based across transceivers, data center interconnect and high-performance computing.
Communications infrastructure revenue rose 35% year over year and 8% sequentially to $444 million, supported by telecom systems, components and satellite communications programs. Automotive, industrial and other revenue increased 20% from a year earlier and 8% from the fourth quarter to $253 million. Sverha said laser-market demand was the largest sequential contributor within that category.
Grady said the company’s growth was not attributable to a single customer or one-time event. Instead, he cited expanding demand across multiple customers, industry segments and both existing and newly ramping programs.
“The growth vectors, if you like, are multiple and across really all aspects of our business,” Grady said during the call.
Second-Quarter Outlook Calls for Further Growth
For the second quarter of fiscal 2027, Fabrinet forecast revenue of $1.6 billion to $1.65 billion, which would represent 43% year-over-year growth at the midpoint. The company expects non-GAAP earnings per share of $4.77 to $4.92.
Management expects data center revenue to remain the primary growth driver, supported by expansion in data center interconnect and transceiver programs as well as new program wins. The company also expects sequential and year-over-year growth in communications infrastructure and in automotive, industrial and other revenue.
Grady said merchant transceiver and hyperscale direct-transceiver programs are beginning to ramp. Fabrinet is also installing capacity for optical circuit switches and multi-rail systems. The company expects near-packaged optics, or NPO, programs to begin contributing revenue toward the latter half of fiscal 2027, while co-packaged optics, or CPO, opportunities appear to be further out.
Management said it views pluggable optics, NPO and CPO as complementary technologies rather than mutually exclusive alternatives. Grady said Fabrinet is increasingly engaging with customers during the early design stages of products, allowing the company to help develop manufacturable processes with predictable yields.
Margins, Cash Flow and Capital Allocation
First-quarter non-GAAP gross margin was 12.1%, down 10 basis points sequentially and 20 basis points year over year. Sverha attributed the sequential decline primarily to annual merit increases and the year-over-year decline primarily to foreign-exchange headwinds. Non-GAAP operating margin was 10.8%, down 10 basis points from the prior quarter but up 20 basis points from a year earlier.
The company expects efficiencies and operating leverage to support incremental margin improvement in the second quarter. Sverha said early-stage program ramps can pressure gross margin because the company hires in advance of customer demand, though those effects generally fade after a short period. He added that Fabrinet does not anticipate additional foreign-exchange headwinds in the second half of fiscal 2027 based on current hedges.
Fabrinet ended the quarter with $757 million in cash and short-term investments, down $119 million from the end of the prior quarter. Operating cash flow was $21 million, while capital expenditures were $159 million, including the $77 million acquisition of a second Santa Clara campus and spending on capacity expansion. Free cash flow was an outflow of $137 million.
During the quarter, Fabrinet repurchased about 77,000 shares at an average price of approximately $380 per share, spending $29 million. The board subsequently authorized an additional $103 million for repurchases, bringing the remaining authorization to $200 million. Sverha said the company’s first capital-allocation priority remains funding growth investments, followed by allocating surplus cash flow to its Rule 10b5-1 repurchase plan and opportunistic buybacks.
Capacity Expansion Continues
Fabrinet is expanding manufacturing capacity to support customer demand. During the first quarter, the company completed the purchase of a new Santa Clara site, more than doubling its Silicon Valley capacity. It is also nearing completion of Building 10 at its Chonburi, Thailand campus, a facility that will add more than 50% to its global footprint. Portions of Building 10 have already begun generating initial revenue.
Grady said Fabrinet expects total revenue capacity to reach about $10 billion by January, compared with approximately $5.8 billion at the end of fiscal 2026. Building 10 is expected to add about $3.5 billion of revenue capacity, while the Navanakorn site and expanded Santa Clara footprint add approximately $400 million and $300 million, respectively.
The company plans to begin construction of Building 11 in Chonburi once Building 10 is completed in January. Building 11 is expected to add about 1.5 million square feet and approximately $3 billion of incremental revenue capacity, with completion expected near the end of fiscal 2028. Grady said Fabrinet is also evaluating additional sites and facilities to bring on capacity before Building 11 is finished.
About Fabrinet (NYSE:FN)
Fabrinet (NYSE: FN) is a provider of outsourced manufacturing services for complex optical, electronic and electromechanical products. The company works with original equipment manufacturers and other technology companies to design, manufacture, assemble, test and distribute products used in optical communications, industrial lasers, automotive applications, medical devices and other advanced technology markets.
Its capabilities include precision optical packaging, optical and electronic assembly, printed circuit board assembly, electromechanical manufacturing, engineering support, supply-chain management and testing.
