Key points
- Fabrinet's revenue rose 51%, beating its forecast
- Fabrinet's earnings outlook is about 10% above estimates at the midpoint
- Fabrinet's spending on property and equipment more than tripled
Fabrinet (FN) expects fiscal second-quarter revenue of $1.6 billion to $1.65 billion after sales rose 51% to a record $1.47 billion in the first quarter.
The optical parts manufacturer also forecast adjusted earnings of $4.77 to $4.92 a share, according to its November 2 earnings release. The midpoint is about 10% above the $4.39 average analyst estimate in Robinhood's data.
First-quarter adjusted earnings came to $4.34 a share, ahead of the $4.13 estimate. Revenue topped the $1.375 billion to $1.425 billion range Fabrinet forecast in August. Fabrinet shares were at $354.00 in after-hours trading as of 5:16 p.m. ET.
Fabrinet is spending heavily to add capacity
Fabrinet spent $158.7 million on property, plant, and equipment in the quarter ended September 25, about 3.5 times the $45.3 million it spent a year earlier, by our calculations. Cash from operations fell to $21.3 million from $102.6 million, as customers owed it more money at the end of the quarter. Free cash flow, as Fabrinet calculates it, was negative $137.4 million.
Seamus Grady, Fabrinet's chairman and CEO, said new product ramps added to growth. "We enter the second quarter with exceptional momentum that makes us confident that we can deliver another strong performance," he said in the release.
The board also added $103 million to Fabrinet's stock buyback, bringing the total authorization to $637.3 million.
Two charges cut Fabrinet's reported profit
Net income under standard accounting rose just 8% to $103.5 million, or $2.86 a share, below the $3.39 to $3.54 Fabrinet had forecast on that basis. Two items made the difference. Fabrinet took a $21.5 million loss on revaluing an investment in a private company, and it recorded $19.9 million of tax tied to Pillar Two, the global minimum tax rules. It excludes both from its adjusted figures.
Fabrinet's results come in a busy week for optical stocks
Fabrinet assembles optical components and modules for other companies, so its numbers offer a read on demand for the optical links inside AI data centers. On the same day, Marvell Technology (MRVL) agreed to buy Lumentum in a $115 billion all-stock deal. Lumentum said in October that its capacity for AI data center optics was sold out through early 2029.
