Fabrinet Reports Q1 Revenue of $1.474 Billion, Up 51%

Fabrinet (NYSE: FN ) reported first-quarter financial results on Monday. The transcript from the company's first-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Fabrinet reported first-quarter revenue of $1.474 billion, a 51% increase year-over-year, driven by strong demand across data center interconnect, transceivers, and high-performance computing. The company is significantly expanding its manufacturing capacity, including a new site in Santa Clara and the upcoming completion of Building 10 in Chonburi, with further plans to start Building 11. Guidance for the second quarter anticipates revenue between $1.6 billion and $1.65 billion, with non-GAAP EPS expected between $4.77 and $4.92.

Management highlighted new program wins, including hyperscale direct transceivers and optical circuit switches, and expressed confidence in the continued growth of data center and communications infrastructure revenues. Operational expansion is backed by a strong balance sheet, with strategic investments in growth while maintaining opportunistic share repurchases. Full Transcript OPERATOR Good afternoon and welcome to Fabrinet's financial results conference call for the first quarter of fiscal year 2027. At this time, all participants are in a listen-only mode.

Later, we'll conduct a question-and-answer session and instructions on how to participate will be provided at that time. As a reminder, today's call is being recorded. I'll now turn the call over to your host, Garo Toomajanian, VP of Investor Relations. Garo Toomajanian (Vice President of Investor Relations & Corporate Development) Thank you, operator, and good afternoon everyone.

Welcome to today's conference call to discuss Fabrinet's financial and operating results for the first quarter of fiscal year 2027 which ended September 25, 2026. With me on the call today are Seamus Grady, Chairman and Chief Executive Officer, and Chaba Sverra, Chief Financial Officer. This call is being webcast and a replay will be available at investor.fabrinet.com. During this call we will present both GAAP and non-GAAP financial measures.

Please refer to the Investors section of our website for important information including our earnings press release and investor presentation which include our GAAP to non-GAAP reconciliation as well as additional details of our revenue breakdown. In addition, today's discussion will contain forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations.

These statements reflect our opinions only as of the date of this call and we undertake no obligation to revise them in light of new information or future events, except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings, in particular the section captioned Risk Factors in our Form 10-K filed on August 18, 2026. We will begin the call with remarks from Seamus and Chaba, followed by time for questions. I would now like to turn the call over to Fabrinet's Chairman and CEO, Seamus Grady.

Seamus Grady (Chief Executive Officer) Thank you, Garo. Good afternoon everyone and thank you for joining our call today. We are off to an excellent start to fiscal 2027 with first quarter revenue that was well above our guidance range and represented another quarter of accelerating growth. First quarter revenue of $1.474 billion increased a remarkable 51% from a year ago and 12% from the fourth quarter with strong year-over-year and sequential growth from all three of our key revenue categories.

In addition to delivering our highest top line growth in 10 years, our revenue performance helped generate record non-GAAP earnings per share of $4.34, also well above the high end of our guidance range. Our impressive results are being driven by broad-based demand across multiple product areas including continued strong momentum for data center interconnect, growing demand for data center transceivers, and expansion in high performance computing. Looking to the second quarter, we expect new program wins and ramps in addition to growth from existing programs to further enhance our growth profile while also supporting our industry-leading margins.

We have discussed some of the new programs that we expect to contribute to our growth this year, in particular hyperscale direct transceivers and merchant transceivers. For the data center market, we are installing capacity to meet demand for optical circuit switches and multi-rail systems. We are also working with a number of customers on NPO and CPO opportunities and expect contributions from these programs toward the end of fiscal 2027. We continue to be extremely enthusiastic about these opportunities and their role in further scaling our business.

In order to support the rapidly increasing demand and new program wins across our business, we have taken a number of important steps. During the first quarter we completed our purchase of a new site in Santa Clara, more than doubling our capacity in Silicon Valley. We're already in discussions with a handful of customers about leveraging this additional capacity. In Thailand, we have been expanding at multiple sites.

We are just a few months away from completing Building 10, adding more than 50% to our global footprint. Having accelerated construction and qualification on portions of Building 10, we are already generating initial revenue from the facility. Our manufacturing expansion at Pinehurst and our new Navanakorn site, which is now up and running, are further helping us to stay ahead of increasing customer demand. However, even with this significant expansion we foresee the need for additional space based on rapid growth from current engagements combined with new programs that will be ramping in the quarters ahead.

As such, we have made the decision to begin construction of Building 11 at our Chonburi campus as soon as Building 10 is completed in January. Building 11 will add approximately 1.5 million square feet with incremental revenue capacity of approximately $3 billion. Even as we begin executing plans for Building 11, we are already exploring potential new sites to further support the unprecedented levels of customer activity we are experiencing. In summary, we delivered an excellent first quarter for a strong start to the fiscal year.

We are seeing growing demand across the markets we serve and remain focused on executing to meet the exacting needs of our customers. At the same time, we are rapidly scaling up our manufacturing capacity to meet anticipated demand from the pipeline of opportunities in front of us. All of this makes us more excited than ever about our prospects for continued profitable growth. Now I'd like to turn the call over to Chaba for more details on our first quarter results and our outlook for the second quarter of fiscal 2027.

Chaba Sverra (Chief Financial Officer) Thank you, Seamus, and good afternoon everyone. We are off to an excellent start to fiscal year 2027 with first quarter revenue that was well above our guidance range. Revenue of $1.474 billion grew 51% from a year ago for another quarter of accelerating revenue growth. These results flowed through to the bottom line, producing record non-GAAP EPS of $4.34, which was also well above our guidance range.

Looking at the details of the quarter, we had a very strong performance from data center products which grew 78% from a year ago and 16% from Q4 to $777 million, or 53% of total revenue. Growth in data center revenue was broad based, driven by strong demand across transceivers, data center interconnect and high performance computing. With continued momentum across all three categories, we continue to see growing demand and improving visibility from customers across the data center market, giving us strong confidence in our outlook for Q2.

Looking ahead, the full year also looks very promising, supported by continued growth in existing programs and additional contribution from new transceiver programs as they begin to ramp. Communications infrastructure revenue was $444 million, an increase of 35% from a year ago and 8% from Q4. Growth was broad based across a diverse range of customer programs and applications including telecom system components and satellite communications. Automotive, industrial and other revenue was $253 million, up 20% from a year ago and 8% from Q4.

In the first quarter, the laser market contributed the most to our sequential growth in this category as we make headway with customers who have historically focused on in-house manufacturing. As I discuss the details of our P&L, all expense and profitability metrics will be presented on a non-GAAP basis unless otherwise noted. Gross margin in the first quarter was 12.1%, a 10 basis point decline from Q4 primarily due to annual merit increases that take effect in Q1. Gross margin declined 20 basis points from a year ago primarily due to FX headwinds.

Operating expenses remained well controlled at 1.3% of revenue in the first quarter, consistent with Q4. As a result, operating margin was 10.8%, down 10 basis points sequentially, but up 20 basis points year over year. Our operating model continues to deliver leverage, with operating margin increasing from a year ago despite a slight decline in gross margin. Interest income was $6 million and we had a relatively small foreign exchange revaluation loss of $220,000.

Our non-GAAP tax expense was $6 million excluding a $20 million non-cash Pillar 2 top-up tax provision, resulting in a non-GAAP effective tax rate of 4%. Tax credits intended to mitigate the impact of Pillar 2 are progressing in Thailand but have not yet been implemented. As a result, we expect some variability in our reported tax expense over the coming quarters. In addition to the top-up tax provision, GAAP net income includes a $21 million non-cash unrealized loss related to our minority investment in Ratec, which is also excluded from our non-GAAP results.

GAAP net income was $103 million or $2.86 per diluted share. Non-GAAP net income reached $157 million or $4.34 per diluted share, marking another all-time high for the company. Turning to our balance sheet, we ended the first quarter with cash and short-term investments of $757 million, down $119 million from the end of Q4. Operating cash flow for the quarter was $21 million.

Capex increased to $159 million driven by investments in growth and capacity expansion. This included the $77 million acquisition of our second campus in Santa Clara, as well as continued construction costs associated with Building 10 in Chonburi and other capacity expansion initiatives. As a result, free cash flow was an outflow of $137 million in the quarter. In the first quarter we repurchased approximately 77,000 shares at an average price of approximately $380 per share for a total cash outlay of $29 million.

Since the end of the quarter, our board authorized an additional $103 million for repurchases, bringing the total remaining authorization to $200 million. Turning to our guidance for the second quarter of fiscal 2027, we are encouraged by the increasing demand trends that we are seeing across our business. We expect that our growth will again be led by data center revenue, with expansion from data center interconnect and transceiver programs, further bolstered by new program ramps that we expect to continue increasing over the course of the year.

Data center growth will be complemented by sequential and year-over-year growth in communication infrastructure as well as in automotive, industrial and other revenues. For the second quarter, we anticipate revenue to be in the range of $1.6 billion to $1.65 billion, representing year-over-year growth of 43% at the midpoint. From a profitability perspective, we expect to see efficiencies and leverage drive incremental improvement in margins. We anticipate non-GAAP EPS to be between $4.77 and $4.92.

In summary, our impressive first quarter results represent a strong start to fiscal year 2027 with multiple significant programs ramping over the next few quarters. We are also very optimistic that we can deliver a terrific second quarter with momentum extending through the rest of the fiscal year. Operator, we are now ready to open the call for questions. OPERATOR Thank you.

At this time we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please limit yourself to one question and a follow-up.

Please stand by while we compile the Q&A roster. And our first question comes from the line of Christopher Rowland of Susquehanna. Your line is now open. Christopher Rowland (Analyst at Susquehanna) Hi, thank you so much for the questions.

I guess my First one, like in your prepared remarks and also the press release, you talked about broad-based demand across multiple significant programs and then new product ramps further supporting growth. I guess first, the existing programs, were those specifically the hyperscale and merchant opportunity? And secondly, the new programs, was that OCS and MultiRail? And if you could provide any more color as to these new opportunities, the size, engagements, that would be great.

Seamus Grady (Chief Executive Officer) Hi. Yeah, the growth, Christopher, the growth we're seeing is pretty broad-based. The heartening thing from our point of view is it's across really all of the industries that we serve and all of the customers. You know, the growth has been very strong in our data center business, in our communications infrastructure business, and even our automotive and industrial and other business has been growing nicely.

And some of that growth is with the programs you mentioned. Our DCI business continues to be very strong and we're just starting to get going with the two programs that you mentioned, MultiRail and OCS. So the growth vectors, if you like, are multiple and across really all aspects of our business. You know, even though we've grown, as we said in the prepared remarks, we were up 51% compared to the same quarter a year ago.

We're looking at continued very strong momentum as we go into Q2. And a lot of these newer programs are really just beginning to get going. So we're pretty excited about what's in front of us. Christopher Rowland (Analyst at Susquehanna) Thank you, Seamus.

And maybe another one, just the NPO/CPO opportunity. I think there's a lot more discussion about early programs starting in late '27 maybe. If you can talk about the parts of that opportunity you might be able to supply. Is it just NPO?

Is it also HPC boards? And how big do you think this can be for you overall? Seamus Grady (Chief Executive Officer) Yeah, we have a number of NPO programs that we're confident we will start to see revenue from those towards the latter half of this fiscal year and also some CPO programs with several customers. You know, the nice thing I suppose about our business is it's not really either/or.

We've always said that NPO and CPO will be complementary to pluggables. So we see pluggables continuing for a long time. We probably see more immediate opportunities with NPO. CPO seems to be still a little bit further out, but we have several programs for both NPO and CPO.

We're finding as the years go by we're engaging much earlier with the customers. So we're getting involved right at the very early stage, in some cases at the concept stage with the customers and really helping the customers figure out how to build these remarkable products that they design. So our manufacturing expertise is a real benefit to our customers in that we're able to help them figure out how to make the products manufacturable with a predictable yield. So that's really being of benefit to us and our customers in that we're involved very early and really getting to see those latest and greatest products, in many cases years before they're being talked about.

So we're very excited about that. Christopher Rowland (Analyst at Susquehanna) Thank you, Seamus. Seamus Grady (Chief Executive Officer) Thank you, Chris. OPERATOR Thank you.

One moment for our next question. Our next question comes from the line of Carl Ackerman of BNP Paribas. The line is now open. Carl Ackerman (Analyst at BNP Paribas) Yes, thank you.

Seamus or Saba, could you speak to the main drivers of your December quarter outlook by segment? I guess in particular, you know, within data center, I think you've got a merchant transceiver program layering into your existing datacom scale-out transceiver business as well as a new customer ramping across coherent pluggables. So maybe discuss how you see the scale-out versus scale-across growth opportunity progressing. Thank you.

Seamus Grady (Chief Executive Officer) We don't guide by segments. We obviously talk about the segments when we report the quarter just ended. We don't break out the guidance by segment for the quarter in front of us. But I would say that the growth is broad-based and it's across really all the segments, including the programs that you just mentioned.

The merchant programs are beginning to get going, as with the hyperscale direct. We're ramping those currently. So, you know, we have several programs. Again, I wouldn't want to call out or give specific guidance in any one segment or any one product, but we're on track, I would say, to deliver good solid growth in Q2.

Carl Ackerman (Analyst at BNP Paribas) Got it. Thank you. Maybe for Saba, if I could sneak one more in, please.