Fabrinet (FN) 10-Q Summary: Quarter Ended March 27, 2026
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 27, 2026, and the nine-month period ended on the same date. Fabrinet is a global provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services. The company operates as a single segment, serving markets including optical communications, automotive, industrial lasers, and high-performance computing (HPC). The fiscal year 2026 is a 52-week year ending June 26, 2026.
Key Financial Metrics
| Metric (in thousands, except per share) | Three Months Ended Mar 27, 2026 |
Three Months Ended Mar 28, 2025 |
Nine Months Ended Mar 27, 2026 |
Nine Months Ended Mar 28, 2025 |
|---|---|---|---|---|
| Revenues | $1,214,293 | $871,799 | $3,325,309 | $2,509,635 |
| Gross Profit | $144,339 | $102,183 | $398,460 | $302,058 |
| Gross Margin | 11.9% | 11.7% | 12.0% | 12.0% |
| Operating Income | $120,044 | $78,856 | $328,638 | $235,391 |
| Operating Margin | 9.9% | 9.0% | 9.9% | 9.4% |
| Net Income | $125,213 | $81,290 | $333,767 | $245,320 |
| Diluted EPS | $3.45 | $2.25 | $9.22 | $6.75 |
| Cash from Operations (9mo) | $201,758 | $273,272 | ||
| Cash & Equivalents (Balance Sheet) | ||||
| Total Assets | $3,508,986 | $2,831,432 | ||
| Total Liabilities | $1,204,275 |
Liquidity & Debt: As of March 27, 2026, the company held $356.6 million in cash and cash equivalents and $588.7 million in short-term investments. There is no outstanding debt under the $30.0 million credit facility. The company maintains a strong liquidity position with a current ratio of approximately 2.55.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 39.3% year-over-year (YoY) for the quarter and 32.5% for the nine-month period. This was driven by higher demand in both optical communications (up 35.2% for the quarter) and non-optical communications (up 51.7% for the quarter).
- Segment Performance:
- Optical Communications: Telecom and Datacenter Interconnect (DCI) revenues were primary growth drivers. DCI revenue surged 90.4% YoY for the quarter.
- Non-Optical: High-performance computing (HPC) revenue grew significantly, offsetting a decline in automotive revenue.
- Cost Structure: Cost of revenues increased in line with sales volume. Gross margin expanded slightly to 11.9% from 11.7% in the prior year quarter.
- Working Capital: Inventories increased significantly to $876.0 million (from $581.0 million at the prior year-end) to support anticipated demand. Trade accounts receivable also rose to $908.5 million.
- Foreign Exchange: The company recorded a net foreign exchange gain of $7.0 million for the quarter, compared to a loss of $2.7 million in the prior year, largely due to the revaluation of Thai baht assets and liabilities.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Management expects SG&A expenses to increase in fiscal year 2026 due to higher IT and employee costs.
- The company anticipates that the portion of revenues from customers outside North America for the remainder of fiscal 2026 will align with the 52.3% share seen in the first nine months.
- Capital expenditures are ongoing, including a new manufacturing building at the Chonburi campus with a total expected cost of approximately $132.5 million.
Risks and Contingencies:
- Customer Concentration: Four customers accounted for 58.1% of revenues in the first nine months of 2026. Loss of a key customer would materially impact results.
- Supply Chain: Reliance on single-source suppliers for critical materials and potential semiconductor shortages pose risks to production schedules.
- Geopolitical & Trade: Operations in Thailand and China expose the company to political unrest, currency fluctuations (Thai baht and RMB), and trade policy changes (tariffs).
- Tariff Refunds: Following a U.S. Supreme Court ruling on tariffs, the company is monitoring potential refunds but has not recorded a receivable as recovery is not yet considered probable.
Unusual Items:
- Subsequent Event: On March 25, 2026, Fabrinet entered an agreement to acquire a 16.0% equity interest in Raytek Semiconductor, Inc. for approximately $32.4 million. This investment will be accounted for at cost.
Investor Verification Checklist
- Customer Concentration: Verify the stability of the top four customers representing 58.1% of revenue and any recent changes in their order forecasts.
- Inventory Levels: Assess the $876 million inventory balance against current order books to evaluate the risk of obsolescence or write-downs.
- Currency Hedging: Review the effectiveness of hedging strategies given the significant exposure to the Thai baht and the recent depreciation of the U.S. dollar.
- Capital Expenditures: Monitor the progress and cost overruns of the $132.5 million Chonburi campus expansion.
- Tariff Impact: Track the administrative process for potential tariff refunds and the impact of new trade policies on cost of revenues.