0001408710-26-000008
SEC filingRevenue surged 35.9% YoY to $1.13B, driven by optical and non-optical demand, with gross margin stable at 12.2%.
For the three months ended December 26, 2025, Fabrinet reported revenue of $1,132.9 million, a 35.9% increase from $833.6 million in the same period last year. The growth was driven by broad-based demand across both optical and non-optical communications products. Gross profit rose 36.6% to $137.7 million, with gross margin slightly improving to 12.2% from 12.1%, as cost increases were in line with higher sales volume. Operating income surged 43.7% to $114.4 million, reflecting operating leverage, with SG&A expenses growing only 9.9% and declining as a percentage of revenue to 2.1% from 2.6%. Net income increased 30.0% to $112.6 million, though net margin contracted slightly to 10.0% from 10.4% due to a swing to a net foreign exchange loss of $3.2 million versus a gain of $4.0 million in the prior year.
Optical communications revenue reached $832.6 million, up 28.7% YoY, representing 73.5% of total revenue. Growth was led by telecom products and datacenter interconnect modules, partially offset by a decline in datacom products. Non-optical communications revenue jumped 61.1% to $300.3 million, driven by high-performance computing and automotive demand as short-term inventory absorption issues substantially subsided. Geographically, revenue from outside North America decreased to 53.1% of total from 55.3% in the prior-year quarter, reflecting stronger U.S. customer demand.
Management expects the portion of future revenue from outside North America for the remainder of fiscal 2026 to be in line with the 54.9% level seen in the first half. SG&A expenses for fiscal 2026 are expected to increase compared to fiscal 2025, primarily due to higher information technology and employee costs. The company continues to invest in capacity, with construction of a new 2.0 million square foot facility at its Chonburi campus underway, with an expected total cost of approximately $132.5 million. No formal quantitative revenue or earnings guidance was provided for the upcoming quarter.
As of December 26, 2025, Fabrinet held $319.9 million in cash and cash equivalents and $640.9 million in short-term investments, totaling $960.8 million in liquid assets. The company has no debt outstanding, with a $30 million credit facility undrawn. Shareholders' equity stood at $2.18 billion, driven by retained earnings of $2.30 billion. Inventory increased sharply to $798.9 million from $581.0 million at June 27, 2025, reflecting build-up for customer demand.
The company disclosed total purchase obligations of $1.94 billion as of December 26, 2025, primarily for inventory and other operational needs. These are typically fulfilled within one year. Additionally, capital expenditure commitments totaled $193.7 million, including a $132.5 million construction contract for a new manufacturing building in Thailand. Bank guarantees of $2.5 million and a contingent liability from a dismissed lawsuit are also noted.
During the six months ended December 26, 2025, Fabrinet repurchased 13,409 shares for $5.1 million under its share repurchase program, leaving $169.2 million of authorization remaining. No dividends were paid. Capital expenditures were $96.9 million (4.6% of revenue), primarily for capacity expansion. The company also issued a customer warrant to Amazon in March 2025, with 49,652 vested warrant shares still unexercised as of December 26, 2025.
The company operates as a single segment. For the six months ended December 26, 2025, total revenue was $2.11 billion, up 28.9% year-over-year. Optical communications contributed 74.8% of revenue, with telecom and datacom as largest subsegments. Non-optical communications (automotive, industrial laser, HPC) accounted for 25.2%. Geographically, North America led with 45.1%, followed by Asia-Pacific (45.2%) and Europe (9.7%). Long-lived assets are concentrated in Thailand ($414.4 million).
Operating cash flow of $148.8M fell short of net income of $208.6M, resulting in a cash conversion ratio of 71%. The gap was driven by significant working capital outflows: inventories increased $221.0M and trade receivables rose $42.8M, partially offset by a $147.2M increase in payables. Capex of $96.9M (65% of CFO) more than doubled YoY, indicating heavy investment in capacity. Free cash flow (not explicitly stated) would be $51.9M (CFO minus capex), covering share repurchases of $5.1M. Prior-year CFO of $199.1M exceeded net income of $164.0M, reflecting better working capital management. The YoY decline in CFO and surge in capex suggest a shift toward growth spending, which may pressure future cash generation.