Fabrinet Shatters Records with 36% Revenue Surge, Fueled by AI and Telecom Boom

By The Motley Fool
Monday, February 2, 2026 5:00 PM ET

Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision manufacturing, delivered a blockbuster second fiscal quarter, shattering revenue records and signaling robust demand in key technology sectors. The company's performance, detailed in an earnings call Monday, underscores its pivotal role in supplying the infrastructure for artificial intelligence and next-generation data networks.

For the quarter ended December 26, 2025, Fabrinet reported revenue of $1.13 billion, a staggering 36% increase year-over-year and a record for the company. Non-GAAP earnings per share also reached a new high of $3.36. This represents the fastest growth rate since Fabrinet's IPO over fifteen years ago.

"We had an excellent second quarter," said Seamus Grady, Chairman and CEO. "Multiple large key strategic programs across our business all contributed to our strong performance. The growth drivers are broad-based and durable."

Segment Performance: HPC Takes Center Stage

The standout story was the explosive growth in High-Performance Computing (HPC), a segment directly tied to AI infrastructure. HPC revenue soared to $86 million, up from just $15 million in the prior quarter. Grady indicated the company is "a little more than halfway" through ramping its first major HPC program, with a fully ramped target exceeding $150 million in quarterly revenue.

The telecom sector also showed remarkable strength, with revenue climbing 59% year-over-year to a record $554 million. Growth was led by Data Center Interconnect (DCI) modules, crucial for linking massive AI data centers. While datacom revenue saw a slight year-over-year dip, sequential growth resumed, suggesting a recovery in that market.

Betting Big on the Future: Capacity Expansion in High Gear

To meet what management calls "sustained and strengthening demand," Fabrinet is accelerating its capital investments. Construction of "Building 10," a massive 2-million-square-foot facility in Thailand, is on track, with 250,000 square feet being pulled ahead for completion by mid-2026. Concurrently, the company is repurposing office space at its Pinehurst, North Carolina campus to add approximately 120,000 square feet of manufacturing capacity.

"The downside risk for us is very small. The upside opportunity is huge," Grady remarked, highlighting the company's debt-free balance sheet and high return on invested capital as enablers for this aggressive expansion.

Forward Outlook and Strategic Positioning

For the third quarter of fiscal 2026, Fabrinet guided revenue to between $1.15 billion and $1.2 billion, projecting roughly 35% year-over-year growth at the midpoint. Non-GAAP EPS is expected to be in the range of $3.45 to $3.60.

CFO Csaba Sverha acknowledged persistent foreign exchange headwinds but expressed confidence in the company's ability to offset them through operating leverage. The guidance assumes continued growth in telecom, datacom, and HPC, with a modest sequential decline anticipated in the automotive segment.

Analysts on the call probed Fabrinet's role in emerging technologies like Co-Packaged Optics (CPO) and optical circuit switches. Grady confirmed active engagements with multiple customers on CPO, calling the technology "much more real than it's ever been," and positioned the company as a leader in making it a reality.

Expert Commentary: A Mix of Optimism and Scrutiny

David Chen, Portfolio Manager at TechGrowth Capital: "Fabrinet isn't just riding a wave; it's building the surfboard. The HPC ramp is validation of their technical moat in precision manufacturing. Their capacity expansion is a clear vote of confidence in multi-year demand cycles for AI and cloud infrastructure. This is execution at its finest."

Rebecca Shaw, Senior Analyst at ClearSight Research: "The numbers are undeniably impressive. However, the concentration risk is growing. That massive HPC jump is from essentially one program. While management talks of a robust pipeline, the near-term story is heavily tied to the execution and potential share gains within a single, albeit large, customer relationship. The market is pricing in perfection."

Marcus Johnson, Independent Manufacturing Sector Consultant: "The strategic pivot is complete. Fabrinet has successfully moved its growth engine from cyclical telecom builds to the core of the AI revolution. Their 'pure-play' contract manufacturing model is a key advantage, as hyperscalers don't want to compete with their suppliers. Building 10 is a bet that this isn't a one-quarter phenomenon."

Anya Petrova, Editor at The Skeptical Investor: "Let's not get carried away. A 36% revenue surge is unsustainable, and the guidance already hints at a sequential deceleration. They're pouring capital into new buildings based on demand that could evaporate if the AI investment cycle slows. Everyone is cheering the HPC pop, but no one is asking what happens if that customer decides to dual-source more aggressively or brings production in-house. The valuation assumes this growth is permanent. History suggests it rarely is."

Disclosure: The Motley Fool has no position in any of the stocks mentioned.