Fabrinet (FN) Q2 2026 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Fabrinet, a provider of advanced optical packaging and precision manufacturing services. The report covers the three and six-month periods ended December 26, 2025 (Fiscal Q2 2026). Fabrinet operates as a single segment, serving markets including optical communications, automotive, industrial lasers, and high-performance computing (HPC).
Key Financial Metrics
| Metric (in thousands, except per share) | Three Months Ended Dec 26, 2025 |
Three Months Ended Dec 27, 2024 |
Six Months Ended Dec 26, 2025 |
Six Months Ended Dec 27, 2024 |
|---|---|---|---|---|
| Revenues | $1,132,888 | $833,608 | $2,111,016 | $1,637,836 |
| Gross Profit | $137,682 | $100,849 | $254,121 | $199,875 |
| Gross Margin | 12.2% | 12.1% | 12.0% | 12.2% |
| Operating Income | $114,401 | $79,597 | $208,594 | $156,535 |
| Net Income | $112,628 | $86,636 | $208,554 | $164,030 |
| Diluted EPS | $3.11 | $2.38 | $5.77 | $4.51 |
| Cash & Equivalents | $319,855 | $306,425 | $319,855 | $306,425 |
| Short-term Investments | $640,918 | $627,819 | $640,918 | $627,819 |
| Total Debt | $0 | $0 | $0 | $0 |
Liquidity: As of December 26, 2025, the company held $960.8 million in cash, cash equivalents, and short-term investments. There is no outstanding debt under the $30.0 million credit facility.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 35.9% year-over-year (YoY) for the quarter and 28.9% for the six-month period. This was driven by higher demand in both optical communications (Telecom and Datacenter Interconnect) and non-optical sectors (HPC and Automotive).
- Profitability: Operating income rose 43.7% YoY for the quarter. Net income increased 30.0% YoY for the quarter and 27.1% for the six-month period.
- Inventory Build: Inventories increased significantly to $798.9 million (from $581.0 million at the prior year-end), reflecting a strategic build-up to support anticipated higher demand in the subsequent quarter.
- Foreign Exchange: The company recorded a net foreign exchange loss of $3.2 million for the quarter, compared to a gain of $4.0 million in the prior year, primarily due to the revaluation of Thai baht assets and liabilities.
- Interest Income: Interest income decreased 23.9% YoY for the quarter due to lower weighted average interest rates (dropping from 4.2% to 3.8%) and a lower average cash balance.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Management expects SG&A expenses to increase in Fiscal 2026 due to higher IT and employee costs.
- Employee costs in Thailand and the PRC are expected to rise due to wage increases.
- The company anticipates that the portion of revenues from customers outside North America for the remainder of Fiscal 2026 will align with the first-half performance (approx. 55% of total revenue).
- Construction on a new 2.0 million square foot manufacturing facility in Chonburi, Thailand, is underway with an expected total cost of $132.5 million.
- Customer Concentration: Three customers accounted for 48.9% of revenues in the first six months of 2026. Loss of a key customer or order reductions 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 the PRC expose the company to political unrest, trade tariffs, and currency fluctuations (specifically Thai baht and RMB against the USD).
- Legal: A lawsuit filed in China regarding a 1997 investment in a subsidiary (Casix) was dismissed on jurisdictional grounds in November 2025, but the risk of future litigation remains.
Investor Verification Checklist
- Inventory Turnover: Verify the rationale for the $217.9 million increase in inventory over the last six months and assess the risk of obsolescence if demand forecasts are missed.
- Currency Hedging: Review the effectiveness of foreign exchange hedging strategies given the $3.2 million FX loss in the quarter and the 9.2% depreciation of the USD against the Thai baht since late 2023.
- Customer Concentration: Monitor the top three customers (48.9% of revenue) for any signs of order deferrals or margin pressure.
- Capital Expenditures: Track progress and cost overruns on the $132.5 million Chonburi campus expansion.
- Interest Rate Sensitivity: Assess the impact of declining global interest rates on future investment income, which dropped 18.9% YoY for the six-month period.