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SEC filingFabrinet posted record quarterly revenue of $1.13B, up 36% YoY, driven by optical communications and surging non-optical demand, with operating margin expanding to 10.1%.
In the three months ended December 26, 2025, Fabrinet achieved record quarterly revenue of $1,132.9 million, a 35.9% increase from $833.6 million in the prior year period. Gross profit rose 36.6% to $137.7 million, with gross margin slightly expanding to 12.2% from 12.1%, benefiting from higher volume absorption. Operating income grew 43.7% to $114.4 million, driving operating margin to 10.1% from 9.5%, as SG&A expenses increased only 9.9%—well below revenue growth—reflecting disciplined cost control. Net income increased 30.0% to $112.6 million, while net margin contracted modestly to 10.0% from 10.4% due to higher foreign exchange losses and lower interest income. The effective tax rate declined to 5.9% from 8.7%, aided by increased income not subject to tax.
Revenue growth was broad-based. Optical communications, representing 73.5% of total revenue, grew 28.7% YoY to $832.6 million, driven by strong demand for telecom products and datacenter interconnect modules, partially offset by a decline in datacom. Non-optical communications surged 61.1% to $300.3 million, now 26.5% of sales, fueled by high-performance computing products and a rebound in automotive revenue as inventory digestion ended. Geographically, North America revenue mix increased to 46.9% from 44.7%, while Asia-Pacific declined, reflecting stronger U.S. customer demand.
Management expects the geographic revenue mix for the remainder of fiscal 2026 to remain consistent with the first half, with non-North America share around 54.9%. SG&A expenses are anticipated to rise year-over-year due to increased IT and employee costs. The company continues to invest in capacity, with a new 2.0 million square foot facility under construction at the Chonburi campus, expected to cost approximately $132.5 million. Despite near-term inventory buildup, Fabrinet maintains a strong liquidity position with $960.8 million in cash and short-term investments and no debt, supporting its growth trajectory. Key risks include foreign exchange volatility (particularly Thai baht), wage inflation in Thailand and China, and reliance on sole-source suppliers, but no specific numeric guidance was provided.
As of December 26, 2025, Fabrinet had $319.9 million in cash and cash equivalents and $640.9 million in short-term investments, totaling $960.8 million. The company has no debt outstanding, with a credit facility of $30 million undrawn. Shareholders' equity stands at $2,184.8 million. Inventory increased to $798.9 million, up from $581.0 million at June 27, 2025, driven by growth in work in progress and finished goods.
Total purchase obligations amount to $1.94 billion as of December 26, 2025, primarily for inventory and other commitments in the normal course of business. Additionally, capital expenditure commitments total $193.7 million, including a construction contract for a new manufacturing building in Thailand with a contract price of $132.5 million. Bank guarantees of $2.5 million are outstanding.
During the six months ended December 26, 2025, Fabrinet repurchased 13,409 shares for $5.1 million. As of December 26, 2025, $169.2 million remained under the share repurchase program, which was increased by $100 million in January 2025. No dividends were paid or declared. Capital expenditures were $96.9 million (4.6% of revenue), primarily for property, plant, and equipment. No debt was issued or repaid.
Fabrinet operates as a single operating segment. Revenue by geographic region for the six months ended December 26, 2025: North America $952.8M (45.1%), Asia-Pacific and others $953.8M (45.2%), Europe $204.4M (9.7%). By end market: Optical communications $1,579.5M (74.8%), Non-optical communications $531.5M (25.2%). The company had three customers each contributing over 10% of revenue, together accounting for 48.9% of total revenue.
CFO for H1 FY2026 was $148.8M, down 25.3% from $199.1M in the prior year period, despite net income rising from $164.0M to $208.6M. This divergence reflects significant working capital outflows: inventories consumed $221.0M (vs. $26.0M in prior period), trade receivables grew $42.8M, and other current assets increased $68.1M. Capex intensity rose sharply to $96.9M (65% of CFO) from $42.2M (21% of CFO), indicating heavy investment in capacity. Share repurchases fell to $5.1M from $68.7M. The company did not pay dividends. Overall, cash generation quality weakened due to working capital build and elevated capex, which together consumed nearly all of CFO.