Executive Summary
Fabrinet posted a strong QQ3 2025 results package, with revenue of $872 million and non-GAAP EPS of $2.52, both above guidance. The quarter was characterized by a rebound in Optical Communications driven by Telecom leadership, offset by near-term softness in Datacom as a large customer undergoes a product transition. Automotive within Non-Optical Communications led growth outside Optical, with Automotive up 76% YoY. The company also announced a direct AWS relationship, supported by a warrant for up to 1% of outstanding shares, signaling a strategic, multiyear growth driver that should begin to contribute meaningfully in FY2026. Fabrinet continued to deploy capital discipline (cash and short-term investments ~$951M; free cash flow of ~$45M; $35M in share repurchases in the quarter) and progressed Building 10 to meet longer‑term capacity needs. Management guided Q4 revenue of $860–$900 million and diluted EPS of $2.55–$2.70, acknowledging near-term margin headwinds from ongoing product ramps while emphasizing several durable growth catalysts. The combination of a resilient balance sheet, a clear multiyear growth runway (including 1.6T Datacom ramp, 400ZR/DcI momentum, Ciena win ramp, and the AWS relationship), and a favorable telecom cycle underpins an upbeat longer‑term investment thesis. However, investors should monitor: timing and magnitude of new program ramps (notably 1.6T and AWS), Datacom recovery timing, tariff risk exposure, and the ability to translate non-Optical growth into sustained margin expansion.
Key Performance Indicators
Key Insights
Revenue: $871.8M (YoY +19.2%; QoQ +4.6%); Gross margin: 11.72% (GAAP 12% reported; a ~40bp drag from Amazon warrant contra-revenue). Operating margin: 9.05%; Net margin: 9.32%; EBITDA: $78.856M; Non-GAAP net income: $91.0M; EPS (diluted): $2.52; Weighted shares: 36.094–36.327M; Cash & ST investments: $951M; Free cash flow: $45.38M; Operating cash flow: $74.19M; Capex: $28.51–$29.0M; Share repurchases: $35.0M; Cash at period end: $306.9M; Total assets: $2.619B; Total liabilities: $0.712B;...
Financial Highlights
Revenue: $871.8M (YoY +19.2%; QoQ +4.6%); Gross margin: 11.72% (GAAP 12% reported; a ~40bp drag from Amazon warrant contra-revenue). Operating margin: 9.05%; Net margin: 9.32%; EBITDA: $78.856M; Non-GAAP net income: $91.0M; EPS (diluted): $2.52; Weighted shares: 36.094–36.327M; Cash & ST investments: $951M; Free cash flow: $45.38M; Operating cash flow: $74.19M; Capex: $28.51–$29.0M; Share repurchases: $35.0M; Cash at period end: $306.9M; Total assets: $2.619B; Total liabilities: $0.712B; Total stockholders’ equity: $1.907B; Total debt: ~$5.7M; Net cash position (approx): ~$945M (cash + ST investments minus debt). Revenue mix: Optical Communications $657M (Telecom $406M, Datacom $251M); Non-Optical Communications $215M; Automotive $129M; Industrial Laser $40M; Other $45M. Optical Communications data rates: 800G+ revenues $236M; below 800G $284M; non‑speed‑rated $137M. Key guidance: Q4 revenue $860–$900M; diluted EPS $2.55–$2.70.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
871.80M |
19.17% |
4.58% |
| Gross Profit |
102.18M |
12.37% |
1.32% |
| Operating Income |
78.86M |
10.59% |
-0.93% |
| Net Income |
81.29M |
0.46% |
-6.17% |
| EPS |
2.26 |
1.35% |
-5.83% |
Key Financial Ratios
operatingProfitMargin
9.05%
operatingCashFlowPerShare
$2.06
freeCashFlowPerShare
$1.26
Management Commentary
The QQ3 call underlined several strategic macro themes. Management highlighted that the quarter benefited from a robust Telecom trajectory within Optical Communications, with Telecom revenue of $406M (62% of Optical Communications and up 42% YoY, 17% QoQ), driven by DCI and 400ZR-related demand. They also stressed a near-term Datacom softness linked to a large customer product transition, but with an expectation of a return to growth as 1.6T ramp progresses. Quote themes include: 1) 1.6T ramp remains “in front of us” with qualification builds already in place and the bulk of the ramp expected later this year into FY2026; 2) AWS partnership expands Fabrinet’s addressable market in hyperscaler manufacturing with a warrant for up to 1% of shares and an expectation of revenue contribution beginning in FY2026; and 3) the company continues to view Building 10 as a critical capacity expansion to support long-term growth. Management also provided a balanced margin narrative: gross margin was impacted by a one-time $4M Amazon contra-revenue (~40bp), and they anticipate near-term margin headwinds from ramp starts but expect these to be transitory as new programs ramp. The long-run thesis remains intact with an implied 18% YoY growth at the midpoint of Q4 guidance and a multi-year ramp across 1.6T, Ciena, and AWS. Quotes for investor takeaway: Seamus Grady on overall strength and guidance: “We had a very strong third quarter with revenue of $872 million, which was above our guidance range.”; Csaba Sverha on gross margin conditioning and Amazon impact: “Gross margin in the third quarter was 12%, but would have been consistent with Q2 levels if not for the contra-revenue impact.”; AWS partnership quote (Seamus Grady) highlighting the warrant and long‑term revenue potential: “During the quarter, we also announced a new commercial relationship with Amazon Web Services... warrant purchase agreement for up to 1% of our outstanding shares.”
We had a very strong third quarter with revenue of $872 million, which was above our guidance range.
— Seamus Grady
Gross margin in the third quarter was 12%, but would have been consistent with Q2 levels if not for the contra-revenue impact.
— Csaba Sverha
Forward Guidance
Management provided a clear near-term outlook and a constructive longer-term trajectory. Near-term: Q4 revenue guidance of $860–$900M and diluted EPS guidance of $2.55–$2.70, reflecting ongoing startup costs from new program ramps but guided by a favorable telecom cycle and the tailwinds from 1.6T Datacom ramp and DCI/400ZR momentum. They cautioned that margin headwinds could accompany ramp starts but framed these as temporary and ramp-driven catalysts for 2026. Longer term: multiple growth vectors are expected to contribute into FY2026 and beyond, including: (1) 1.6T Datacom ramp that remains largely in front of us; (2) telecom/DcI and 400ZR kinetics in Optical Communications; (3) Ciena-driven initiatives and other telecom wins; (4) AWS collaboration scaling in FY2026 with potential revenue expansion beyond initial qualification; (5) Building 10 expansion to meet capacity needs. Our assessment: The guidance implies a solid, above-market growth trajectory with margin normalization as new programs mature. Key factors to monitor include ramp timing and yield improvements on 1.6T, AWS revenue progression and category classification updates, sensitivity to tariff risk and global macro conditions, and the completion timeline of Building 10. If these catalysts activate as projected, Fabrinet should sustain robust revenue growth into FY2026 with improving margin leverage, supported by substantial cash generation and a disciplined capital program.