Fabrinet ((FN)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Fabrinet’s latest earnings call painted a picture of a robust start to fiscal year 2026, characterized by record revenues and earnings. The company reported significant growth in the telecom sector and the successful launch of a high-performance computing program. Despite these achievements, challenges such as declines in datacom and automotive revenues, along with a slight decrease in gross margin, were acknowledged. Nevertheless, the outlook for the second quarter remains positive, with expectations of continued growth.
Record Revenue and Earnings
Fabrinet’s first quarter revenue reached an unprecedented $978 million, marking a 22% increase from the previous year and an 8% rise from the fourth quarter. The company’s non-GAAP earnings were $2.92 per share, surpassing the guidance ranges, showcasing a strong financial performance.
Telecom Revenue Surge
The telecom sector was a standout performer, with revenue hitting a new record of $412 million. This represents a 59% increase from a year ago and a 15% rise from the previous quarter, driven primarily by the demand for data center interconnect products.
High-Performance Computing Program Launch
Fabrinet introduced and ramped up its first high-performance computing (HPC) program, which contributed $15 million to the quarter’s revenue. This program is expected to scale significantly over the coming quarters, indicating a promising new revenue stream.
Strong Growth in Optical Communications
Optical Communications revenue totaled $747 million, up 19% from a year ago and 8% from the fourth quarter. This growth was driven by strong demand in the telecom sector, further solidifying Fabrinet’s position in the market.
Datacom Revenue Decline
Despite overall growth, datacom revenue experienced a decline, decreasing by 17% from a year ago and 1% from the previous quarter. This was attributed to longer lead times for critical components, highlighting a challenge in the supply chain.
Automotive Revenue Decrease
Automotive revenue was reported at $122 million, down 5% from the fourth quarter, although it was up 19% from a year ago. This indicates a mixed performance in the automotive sector.
Gross Margin Decline
The first quarter saw a slight decline in gross margin, which fell by 30 basis points from the fourth quarter to 12.3%. This was attributed to foreign exchange headwinds and seasonal impacts, affecting the overall profitability.
Positive Outlook for Q2
Looking ahead, Fabrinet provided an optimistic guidance for the second quarter, with expected revenue between $1.05 billion and $1.1 billion. This represents a 29% growth from a year ago at the midpoint. The anticipated earnings per share are projected to be between $3.15 and $3.30, indicating continued strong performance.
In summary, Fabrinet’s earnings call highlighted a strong start to fiscal year 2026, with record revenues and significant growth in key sectors such as telecom and high-performance computing. While challenges in datacom and automotive revenues were noted, the company’s positive outlook for the second quarter suggests continued growth and expansion. Investors and market watchers will be keen to see how Fabrinet navigates these opportunities and challenges in the coming months.