Fabrinet (NYSE:FN) executives said demand across data center interconnect, datacom, automotive and industrial markets remains strong, with the company expanding manufacturing capacity to support what Chairman and CEO Seamus Grady described as substantial multi-year growth opportunities.
Speaking at Rosenblatt Securities’ “The Age of AI” conference following the company’s earnings report, Grady said data center interconnect, or DCI, products including 400ZR, 800ZR and ZR+ optical technologies have become a major driver of growth. He said the business reached a $1 billion annualized revenue run rate at the end of the fiscal year after starting from only a few million dollars in revenue relatively recently.
DCI Demand Seen Extending for Years
The company’s DCI business is spread across multiple customers, according to Grady, and Fabrinet manufactures both pluggable modules and component content used in those products. He said the combination makes the business relatively “sticky.”
Fabrinet is also working with several customers on multi-rail technologies, though Grady said it was too early to discuss customer product plans publicly. He described multi-rail as a potential growth driver in future years.
Datacom Diversification and Contract Manufacturing Strategy
Grady said Fabrinet is broadening its datacom customer base beyond NVIDIA through direct hyperscale customers and merchant transceiver manufacturers. The company is already shipping to both groups, he said, and expects a second merchant transceiver customer to begin production in the December quarter.
He said the initial opportunities with non-NVIDIA datacom customers are primarily in 800-gigabit short-reach transceivers, with a transition to 1.6T products expected later.
Fabrinet has decided to remain a pure-play contract manufacturer rather than become an original design manufacturer, or ODM. Grady said the company could access certain short-term opportunities by designing and owning products, but that approach could harm relationships with existing customers such as Ciena, Cisco and Nokia.
“We believe there’s more than enough growth for us to work on as a pure-play contract manufacturer,” Grady said. He added that Fabrinet has won business in some cases because competitors chose to become ODMs, a move that some customers did not favor.
The company’s new data center reporting category will include DCI, hyperscale transceivers, merchant transceivers and high-performance computing. Grady also pointed to potential opportunities with quantum-computing customers, noting that future systems will require optical connectivity to move workloads.
New Opportunities in Automotive, Industrial and Optical Switching
In automotive, Grady cited new programs with an existing customer in electric-vehicle charging as well as an emerging ramp in lidar. Fabrinet’s lidar strategy was to work with a broad group of customers while the market developed, he said, and the company is now seeing several companies emerge with potentially meaningful volumes and demand.
Grady also said Fabrinet has secured industrial-laser wins with customers it has served in the past. The industrial laser market has historically been slower to outsource manufacturing, but he said companies are increasingly pursuing strategic outsourcing rather than using outside manufacturers only for overflow capacity.
Optical circuit switching, or OCS, is currently small for Fabrinet but could become a significant revenue contributor, Grady said. The company has shipped some product and expects activity to begin ramping over the next 12 to 18 months. Fabrinet also serves the low-Earth-orbit satellite market, which Grady described as significant, rapidly growing and supported by multiple major customers.
Grady said near-packaged optics and co-packaged optics could provide higher-margin work because the products involve more packaging and testing value-add and less material content than traditional contract-manufacturing programs. Fabrinet’s relationship with Raytech is expected to support precision packaging capabilities for NPO and CPO, with Raytech planning to establish an operation on a Fabrinet campus in Thailand.
Capacity Expansion and Capital Spending
Fabrinet ended its fourth quarter with an annualized revenue run rate of about $5.3 billion and currently has capacity for roughly $5.8 billion of revenue, Grady said. Building 10 is expected to add as much as $3.5 billion of capacity when fully available, while a new Nava Nakorn facility and the recently acquired Santa Clara operation are each expected to add about $250 million.
Collectively, those projects would bring capacity to approximately $9.8 billion in the March quarter, an 85% increase from the level at the end of the fiscal year, according to Grady. He said potential future Buildings 11 and 12 could each add about $2.1 billion of capacity, though the company has not announced those projects.
CFO Csaba Sverha said capital expenditures totaled about $250 million in the past fiscal year and are expected to remain near that level in fiscal 2027 as the company completes Building 10 and adds equipment. He said Fabrinet remains comfortable financing growth through cash flow and its balance sheet, while also recently signing a $75 million term loan with a Thai bank to support expansion in Thailand.
Grady said Fabrinet’s fiscal 2026 revenue growth was 36% and that it was “not beyond the bounds of possibility” for fiscal 2027 growth to exceed that rate, while emphasizing that the statement was not guidance. He said the company’s priorities are maintaining capacity ahead of demand, securing necessary components and continuing its execution for a growing and increasingly diversified customer base.
About Fabrinet (NYSE:FN)
Fabrinet is a global provider of advanced optical packaging and precision optical, electro‐mechanical and electronic manufacturing services (CEM). The company specializes in complex manufacturing processes for original equipment manufacturers (OEMs) in communications, data center, industrial, instrumentation and medical markets. Key capabilities include high‐precision fiber alignment, micro‐assembly, testing and diagnostics, and integration of electro‐optic subassemblies.
Incorporated in 2000, Fabrinet operates under a corporate structure headquartered in Singapore with additional regional offices and design centers in the Americas, Europe and Asia.
