Fabrinet Q4 Revenue Beats Estimates on Data Center Strength

Fabrinet reported fourth-quarter fiscal 2026 revenue of $1.316 billion, a 44.6% year-over-year increase that exceeded market expectations by 2.64%. Non-GAAP earnings per share reached $4.10, rising 54.7% from the prior year and beating the consensus estimate by 6.49%. Despite these strong operational results, the stock has declined 22.3% in the month following the release, underperforming the broader S&P 500 index.

The company’s growth was primarily fueled by its data center segment, which generated $669 million in revenue, a 68% year-over-year increase. This category now accounts for 51% of total sales, with data center interconnect (DCI) revenue exceeding a $1 billion annualized run rate. Communications infrastructure contributed $413 million, up 40% year-over-year, while automotive and industrial segments added $234 million, reflecting a broad-based expansion across multiple end markets.

Data Center Demand Drives Revenue Mix

Data center revenues became the largest component of Fabrinet’s sales mix, surpassing previous leaders. The segment’s growth was driven by high-performance computing and DCI products. Management indicated that this momentum is expected to continue into fiscal 2027, supported by new program ramps involving hyperscaler-direct transceivers and merchant programs scheduled to begin in the December quarter.

Operating Leverage Boosts Profit Margins

Non-GAAP gross profit increased to $160.8 million from $113.9 million in the same quarter last year. Although non-GAAP gross margin decreased by 30 basis points to 12.2%, operating leverage improved significantly. Non-GAAP operating margin reached 10.9%, up 20 basis points year-over-year, marking the highest level in three years. Selling, general, and administrative expenses fell to 1.8% of revenues, a 60-basis-point reduction from the prior year.

Capacity Expansion Supports Future Growth

Fabrinet is expanding its manufacturing footprint to support projected demand. Building 10 at the Chonburi campus is on track for early 2027 completion, adding 2 million square feet and $3 to $3.5 billion in revenue capacity. This expansion will bring total capacity to approximately $8.5 to $9.3 billion. Additionally, the new Santa Clara campus has more than doubled the company’s Silicon Valley presence with 130,000 square feet of space.

According to reporting from GN markets/earnings (en-US), the company’s cash position stands at $346.71 million, while short-term investments total $528.34 million. However, free cash flow decreased significantly to $4.22 million in fiscal 2026, down from $207.29 million in the prior year, reflecting the capital intensity of its capacity build-out.