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01/11 13:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a positive sentiment with strong growth in FY '25, optimism for FY '26, and strategic expansions like Building 10. Despite component shortages, the company is proactive and expects temporary impacts. New partnerships, like with Amazon, and strong demand in telecom and datacom are promising. Share repurchases indicate confidence. However, some uncertainties remain, such as component shortages and lack of full-year guidance, slightly tempering the outlook.
Q4 2025 Revenue $910 million, up 21% year-over-year and 4% from Q3. The increase was driven by strong growth in Optical communications revenue and telecom revenue.
Full Year Fiscal 2025 Revenue $3.4 billion, up 19% year-over-year. Growth attributed to strong execution, a significant product transition at a major datacom customer, and record highs in telecom business.
Q4 2025 Non-GAAP EPS $2.65, a new quarterly record. Includes a $4 million or $0.10 per share FX revaluation loss.
Full Year Fiscal 2025 Non-GAAP EPS $10.17, an all-time high. Includes an $0.11 headwind from noncash contra revenue and a $0.26 impact from FX revaluation losses.
Q4 2025 Optical Communications Revenue $689 million, up 15% year-over-year and 5% from Q3. Growth driven by telecom revenue and demand for data center interconnect products.
Q4 2025 Telecom Revenue $412 million, up 46% year-over-year and 1% from Q3. Growth driven by data center interconnect products.
Q4 2025 Datacom Revenue $277 million, down 12% year-over-year but up 10% sequentially. Sequential growth driven by strong demand for new higher data rate products.
Q4 2025 Revenue from 800-gig and Faster Products $313 million, up 21% year-over-year and 32% sequentially. Growth driven by the ramp of new 1.6T datacom products.
Q4 2025 Non-Optical Communications Revenue $221 million, up 41% year-over-year and 3% sequentially. Growth driven by better-than-expected automotive revenue and stable industrial laser revenue.
Q4 2025 Automotive Revenue $128 million, experienced a modest quarterly decline following several quarters of rapid growth.
Q4 2025 Industrial Laser Revenue $40 million, stable year-over-year and sequentially.
Q4 2025 Other Revenue $53 million, up 38% year-over-year and 20% sequentially. Sequential increase reflects the absence of a noncash contra revenue item recorded in Q3.
Q4 2025 Gross Margin 12.5%, better than anticipated due to operational efficiencies offsetting impacts from large project ramps.
Q4 2025 Operating Income $97 million, a record with an operating margin of 10.7%, a 50 basis point improvement from Q3.
Q4 2025 Operating Cash Flow $55 million, with capital expenditures of $50 million primarily driven by Building 10 construction costs and new program ramps.
Q4 2025 Free Cash Flow $5 million, reflecting capital expenditures and operational cash flow.
Fiscal 2025 Share Repurchases $126 million worth of shares repurchased, the highest ever in a single fiscal year.
1.6T transceivers: Volume shipments of 1.6T transceivers have begun, marking a major milestone. Demand trends for these products are expected to ramp up in fiscal 2026.
High-performance compute program: A prominent high-performance compute program is ramping up, contributing to growth.
Partnership with Amazon Web Services: A significant partnership with AWS was established, anticipated to be a meaningful revenue driver in fiscal 2026.
Telecom and datacom growth: Telecom revenue increased 46% year-over-year, driven by data center interconnect products. Datacom revenue is entering a growth phase for 1.6T products.
Building 10 construction: Construction began on Building 10, adding 2 million square feet of capacity. Options to accelerate its completion are being evaluated to meet increasing customer demand.
Operational efficiencies: Gross margin improved to 12.5%, with operational efficiencies offsetting project ramp impacts.
Revenue reporting changes: Starting Q1 fiscal 2026, revenue reporting will no longer include data rate and silicon photonics categories, aligning with industry transitions.
Share repurchase program: $126 million was returned to shareholders through buybacks in fiscal 2025, with $174 million available for repurchases in fiscal 2026.
Component Supply Challenges: The surge in demand for datacom products has created temporary component supply challenges, which could impact production and revenue in the near term.
Datacom Revenue Dip: Due to supply constraints for critical components, a sequential dip in datacom revenue is expected in Q1 of fiscal 2026.
Automotive Revenue Softness: Near-term softness in automotive revenue is expected to continue into Q1, potentially impacting overall revenue growth.
Margin Pressure: Seasonal margin pressure from annual merit increases and temporary inefficiencies from new product ramps could impact profitability in Q1.
Capital Expenditure Increase: Accelerating the construction of Building 10 to meet growing customer demand could temporarily increase capital expenditures, impacting cash flow.
Revenue Expectations: Total revenue for Q1 fiscal 2026 is expected to be in the range of $910 million to $950 million, reflecting healthy year-over-year and sequential growth.
Telecom Revenue: Very strong revenue growth trends are expected to continue into Q1 fiscal 2026, driven by ramping system programs.
Datacom Revenue: A sequential dip in datacom revenue is anticipated in Q1 fiscal 2026 due to near-term supply constraints for critical components. However, these issues are expected to be temporary, and demand for next-generation products remains strong.
Non-Optical Communications Revenue: Strong growth is anticipated in Q1 fiscal 2026, primarily driven by a new high-performance computing (HPC) program. A new revenue category called HPC will be introduced to reflect this growth.
Automotive Revenue: Near-term softness experienced in Q4 fiscal 2025 is expected to continue into Q1 fiscal 2026, but a return to normalized growth trends is anticipated in the future.
Industrial Laser Revenue: Revenue is expected to remain relatively flat in Q1 fiscal 2026.
Gross Margins: Margins in Q1 fiscal 2026 will face seasonal pressure due to annual merit increases and temporary inefficiencies from new product ramps. However, gross margins are expected to remain within the mid-5% target range, with improvements anticipated over time.
Earnings Per Share (EPS): Earnings per diluted share for Q1 fiscal 2026 are expected to be between $2.75 and $2.90.
Capital Expenditures: Quarterly capital expenditures could temporarily increase if the company accelerates the construction of Building 10 to meet growing customer demand.
Share Buyback Program: Fabrinet returned $126 million to shareholders through its buyback program in fiscal year 2025. The company repurchased 108,000 shares at an average price of $206 per share in the fourth quarter, amounting to a total cash outlay of $22 million. This marks the highest amount spent on repurchases in a single fiscal year. Fabrinet enters fiscal 2026 with $174 million available for further repurchases.
The earnings call presented mixed sentiments. Strong revenue growth in telecom and HPC segments is positive, but concerns arise from datacom supply constraints and margin pressures. The Q&A revealed unclear responses about key growth drivers and component shortages, raising uncertainties. Despite optimistic guidance, the lack of clarity and unchanged share repurchase strategy suggest a cautious outlook. Consequently, the stock price is likely to remain stable in the short term, resulting in a neutral sentiment.
The earnings call reveals a positive sentiment with strong growth in FY '25, optimism for FY '26, and strategic expansions like Building 10. Despite component shortages, the company is proactive and expects temporary impacts. New partnerships, like with Amazon, and strong demand in telecom and datacom are promising. Share repurchases indicate confidence. However, some uncertainties remain, such as component shortages and lack of full-year guidance, slightly tempering the outlook.
The earnings call summary presents mixed signals: positive developments like the Amazon partnership and high telecom revenue are offset by concerns over declining gross margins and management's reluctance to provide detailed guidance on ASP trends and other specifics. The Q&A reveals uncertainties about margin opportunities and product transitions, leading to a cautious outlook. Given these factors, the stock is likely to remain relatively stable, with no major catalysts for significant movement in either direction.
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