Executive Summary
- Fabrinet delivered a record QQ2 2025 quarter with revenue of $834 million, up 17% year over year and 4% sequentially, and non-GAAP EPS of $2.61. The quarter demonstrated durable mix resilience across Optical Communications (notably telecom and 400ZR/DCI) and Non-Optical segments (automotive and industrial lasers). Management signaled confidence in continued momentum into Q3 and beyond, supported by strong demand signals and capacity expansion plans.
- The company announced a sweeping capacity upgrade via Building 10 (2 million additional square feet at the Chonburi campus), reflecting a long-term stance on scalable manufacturing for data-centric products. Share repurchase activity remained meaningful, with one-third of the $200 million authorization repurchased in Q2 and an additional $100 million approved by the Board for buybacks.
- Near-term dynamics feature: (1) a modest QoQ softness in datacom as next-generation products ramp; (2) solid telecom strength driven by DCI and system wins; (3) a 1.6T ramp that is expected to materialize later in calendar year; (4) FX headwinds pressuring gross margin, offset by operating leverage. The guidance implies continued record revenue trajectory in Q3, underpinned by telecom strength and automotive/laser growth, with datacom ramp timing remaining a key variable for the second half of FY2025.
Key Performance Indicators
Key Insights
Revenue: $834.0M; YoY +17%; QoQ +4% | Gross Margin: 12.1% (Q2) vs 12.7% (Q1) – FX tailwinds reversing into headwinds | Operating Income: $79.6M; Margin 9.55% | EBITDA: $107.9M; EBITDA Margin ~12.99% | Net Income: $86.6M; Net Margin ~10.39% | Diluted GAAP EPS: $2.38; GAAP EPS: $2.40 | Non-GAAP EPS: $2.61 | Shares: Weighted average diluted shares ~36.40M | Cash from Operations: $115.9M; CapEx: $21.9–22.0M; Free Cash Flow: $94.0M | Cash and Short-Term Investments: $935M; Cash End of Period: $40...
Financial Highlights
Revenue: $834.0M; YoY +17%; QoQ +4% | Gross Margin: 12.1% (Q2) vs 12.7% (Q1) – FX tailwinds reversing into headwinds | Operating Income: $79.6M; Margin 9.55% | EBITDA: $107.9M; EBITDA Margin ~12.99% | Net Income: $86.6M; Net Margin ~10.39% | Diluted GAAP EPS: $2.38; GAAP EPS: $2.40 | Non-GAAP EPS: $2.61 | Shares: Weighted average diluted shares ~36.40M | Cash from Operations: $115.9M; CapEx: $21.9–22.0M; Free Cash Flow: $94.0M | Cash and Short-Term Investments: $935M; Cash End of Period: $403.7M | Total Debt: $6.1M; Net Debt: -$397.6M (net cash) | Liquidity: Current ratio 3.32; Quick ratio 2.58; Cash Conversion Cycle ~68.5 days | Optical Communications Revenue: $647M (up 14% YoY, up 3% QoQ); Datacom $299M (up 4% YoY, down 9% QoQ); Telecom $348M (up 24% YoY, up 17% QoQ); 400ZR ~10% of total revenue; Non-Optical Revenue $186M (up 29% YoY, up 5% QoQ); Automotive +32% YoY; Industrial Lasers +24% YoY.|Anchor quotes from management emphasize: “Revenue of $834 million… record non-GAAP earnings per share of $2.61” and “Building 10… adding more than 50% to our total footprint.”
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
833.61M |
16.97% |
3.65% |
| Gross Profit |
100.85M |
14.17% |
1.84% |
| Operating Income |
79.60M |
15.33% |
3.46% |
| Net Income |
86.64M |
25.36% |
11.94% |
| EPS |
2.40 |
26.32% |
12.15% |
Key Financial Ratios
operatingProfitMargin
9.55%
operatingCashFlowPerShare
$3.21
freeCashFlowPerShare
$2.6
Management Commentary
Key management themes from the earnings call:
- Strategy/Market Position: Seamus Grady highlighted a multi-vector growth outlook supported by telecom, DCI, and 1.6T ramp, with positive momentum in next-gen datacom products and sustained telecom wins. He noted that Ciena ramp is an FY26 story, while other system wins are just beginning to ramp. Quote: “Our strong business momentum continued in the second quarter and represented a record quarter for both revenue and profitability… revenue of $834 million was an increase of 17% from a year ago and 4% from Q1. Our team executed well to produce record non-GAAP earnings per share of $2.61.” (Seamus Grady)
- Operations/Capacity: The Building 10 expansion is a material long-term capacity inflection, with the new 2 million square foot facility adding more than 50% to Fabrinet’s footprint. Quote: “last month we broke ground on Building 10, a new 2 million square foot facility at our Chonburi campus, adding more than 50% to our total footprint.” (Seamus Grady)
- Financial Discipline: Significant buyback activity evidence and guidance lift—Board-approved incremental buybacks; strong free cash flow; FX headwind offset by operating leverage. Quote: “During the second quarter, we repurchased more than one-third of our $200 million authorized for share repurchases, and our Board just authorized an additional $100 million for share buybacks.” (Seamus Grady)
- Product/Technology Economics: 400ZR now ~10% of revenue; 1.6T ramp remains a key tailwind, with Ciena ramp expected in FY26, and ongoing dogfooding/qualification for 1.6T. Quote: “By data rate, revenue from 800-gig and faster products was $257 million… 400ZR products… were very strong contributors to growth, reaching 10% of total revenue in the quarter.” (Csaba Sverha)
- Guidance Confidence: Q3 revenue guidance of $850–$870M and EPS of $2.55–$2.63; Datacom softness near-term due to product ramp; Telecom and Automotive expected to drive sequential gains. Quote: “For the third quarter, we expect total revenue to be between $850 million and $870 million… EPS in the third quarter to be between $2.55 to $2.63 per diluted share.” (Csaba Sverha)
Revenue of $834 million, an increase of 17% from a year ago and 4% from Q1, and record non-GAAP earnings per share of $2.61.
— Seamus Grady
Last month we broke ground on Building 10, a new 2 million square foot facility at our Chonburi campus, adding more than 50% to our total footprint.
— Seamus Grady
Forward Guidance
Outlook and catalysts for the next 6–12 months:
- Revenue trajectory remains robust with Q3 guidance targeting $850–$870M and concentrated upside from telecom/DCI-driven growth and automotive/industrial laser expansion. Management cites the ongoing ramp of next-gen datacom products and rising contributions from system wins (e.g., DCI-related and Ciena initiatives) as key growth levers.
- The 1.6T ramp is a central long-cycle driver; management emphasizes readiness to scale once customers launch, with a ramp timing generally “about one quarter before our customer wants to ship product.” The timing remains subject to customer launch schedules, but visibility remains strong.
- Capacity expansion via Building 10 is designed to support long-term growth; CapEx is expected to be higher in the near term with a 18-month lead time, implying a sustained capital deployment to support a roughly $2.4B per-year capacity uplift (2 million sq ft × ~$1,200 per sq ft of annual revenue).
- Potential headwinds include FX-driven gross margin compression and near-term datacom softness as next-gen products ramp; offset by operating leverage and better mix. The company notes potential tariff-related shifts could be favorable if manufacturing moves geographically, though the timing is uncertain. Key factors for investors to monitor: product ramp timing (especially 1.6T), qualification/lead times for EMLs and related components, customer concentration risk (Ciena/Major new wins), and macro demand for data-center networking.