0001408710-26-000016
SEC filingRevenue surged 39.3% to $1.21B driven by optical communications and high-performance computing, with operating margin expanding 90 bps to 9.9%.
For the three months ended March 27, 2026, Fabrinet posted robust results. Revenue rose 39.3% to $1.21 billion from $872 million in the prior-year period, driven by strong demand across both optical and non-optical end markets. Gross profit increased 41.2% to $144 million, with gross margin improving 20 basis points to 11.9%, as cost of revenues grew at a slightly slower pace (39.0%) than revenue. Operating income surged 52.1% to $120 million, with operating margin expanding 90 bps to 9.9%, aided by revenue scale and a decline in SG&A as a percentage of revenue (2.0% vs 2.5%). Net income rose 54.0% to $125 million, yielding a net margin of 10.3% versus 9.3% a year ago. The effective tax rate increased to 6.7% from 5.8%, primarily due to higher taxable income.
Revenue from optical communications totaled $888.7 million, up 35.2% YoY, representing 73.2% of total revenue. Telecom revenue grew 42.5% to $431.4 million, and datacenter interconnect jumped 90.5% to $196.9 million, while datacom was relatively flat at $260.4 million. Non-optical communications revenue reached $325.6 million, up 51.7%, led by high-performance computing (HPC) which more than doubled to $106.7 million from an undetermined base (prior-year HPC was not separately reported, but the category was likely included in 'Others'; the explicit breakout shows HPC as a new segment). Automotive revenue declined 10.8% to $115.5 million, partially offsetting the HPC growth. Industrial laser revenue increased 9.2% to $44.2 million.
Management expects the geographic revenue mix for the remainder of fiscal 2026 to remain consistent with the nine-month period, where 52.3% of revenue came from outside North America. SG&A expenses are anticipated to increase year-over-year due to higher information technology and employee costs. The company also highlighted its ongoing investment in capacity, with construction of a new 2.0 million square foot facility at Chonburi campus costing approximately $132.5 million. No specific quantitative revenue or margin guidance was provided, but the strong order momentum in optical and HPC suggests continued growth tailwinds.
As of March 27, 2026, Fabrinet held cash and cash equivalents of $356.6M and short-term investments of $588.7M, totaling $945.2M in liquid assets. The company has no debt outstanding, with a strong equity base of $2.30B. Inventory increased to $876.0M, up from $581.0M at June 27, 2025, driven by raw materials and work-in-progress buildup.
Fabrinet disclosed significant purchase obligations of $2.74B, primarily for inventory and other commitments in the normal course of business, generally expected to be fulfilled within one year. Additionally, capital expenditure commitments totaled $164.7M, including a $132.5M construction contract for a new manufacturing building in Thailand. Bank guarantees were immaterial at $3.0M.
During the nine months ended March 27, 2026, Fabrinet repurchased 13,766 shares for $5.2M at an average price of $379.99. The remaining authorization under the share repurchase program is $169.0M. No dividends were paid. The company had no outstanding debt under its credit facility. Capital expenditures (purchases of property, plant and equipment) totaled $160.6M, representing 4.8% of revenues. The company also entered into a construction contract for $132.5M.
Fabrinet operates as a single operating segment. Revenues for the nine months ended March 27, 2026 were $3.33B, up 32.5% year-over-year. Geographic mix: North America 47.7%, Asia-Pacific and others 42.3%, Europe 10.0%. By end market, optical communications (telecom, datacom, datacenter interconnect) accounted for 74.2% of revenues, while non-optical communications (automotive, high-performance computing, industrial laser, others) comprised 25.8%.
Net income for the nine months was $333.8M, exceeding operating cash flow of $201.8M, resulting in a cash conversion ratio of 60%. This divergence is primarily due to significant working capital investment: trade receivables increased $150.1M, inventories rose $297.4M, and other current assets grew $77.5M, partially offset by a $225.7M increase in trade payables and $91.2M in other payables. The substantial inventory build may indicate growth expectations or supply chain adjustments.
Capital expenditure of $160.6M represented 80% of operating cash flow, a high intensity level reflecting expansion. Financing activities included minimal share repurchases ($5.2M) and $24.4M in tax withholdings from restricted stock vesting, leading to net cash used in financing of $29.6M.
Overall, operating cash flow, while lower year-over-year, remains solid and covers capex and capital returns. Investors should monitor working capital trends and the pace of investment spend.