Fabrinet specializes in high-precision optical and electronic manufacturing for complex products, including optical communication components, automotive parts, medical devices, and industrial lasers. Their services span the full manufacturing process, from design and engineering to packaging, assembly, and testing. Fabrinet operates facilities and engineering resources in Thailand, the U.S., China, and Israel.

Fabrinet is serving growing industrial markets:

  • Telecom and Datacom Optical Communications: Optical communication parts are in high demand as companies outsource manufacturing to save costs and boost efficiency, driven by the growth of data centers and online services. The challenge lies in finding skilled manufacturing partners with secure IP protection.
  • Automotive: Fabrinet supports cutting-edge automotive tech, including EV chargers, LIDAR, advanced lighting, and sensors for safety, performance, and navigation, all tailored for the future of vehicles.
  • Industrial Lasers: Fabrinet produces high-performance lasers for industries requiring precision, offering models like ultrafast, solid-state, and gas lasers for tasks like material processing and metrology.
  • Medical and Other Components: Fabrinet provides reliable tools for medical diagnostics, precision measurement, and advanced instrumentation, meeting strict industry standards for quality and accuracy.

Fabrinet's optical communications portfolio includes high-precision components like transceivers, modulators, and optical amplifiers, as well as advanced systems such as ROADM, silicon photonics, line cards, and network systems, all key for data transmission and network infrastructure.

In the first quarter of fiscal 2025, Fabrinet reported revenue of $804.2 million, up from $685.5 million in the same quarter of 2024. GAAP net income increased to $77.4 million from $65.1 million, with earnings per diluted share reaching $2.13, compared to $1.78. Optima's communications revenue saw strong growth, rising to $626.3 million from $533.3 million, while non-optical communications revenue increased to $177.9 million from $152.2 million.

In fiscal year 2024, Fabrinet reported revenue of $2.88 billion, with a net income of $296.2 million and earnings per diluted share of $8.10, marking strong year-over-year growth. Analysts project revenue to reach $4.55 billion by 2027, alongside an EBITDA of $580.6 million, maintaining a steady margin of 12-13%. Net income is also expected to continue this upward trend, climbing to $459 million by 2027.

Fabrinet is trading at 30.2x earnings for 2024, with P/E ratios of 24.3x, 20.6x, and 17.6x for 2025, 2026, and 2027, respectively. These valuations align with market averages when compared to key competitors like Amphenol (38.26x), Jabil (19.53x), and TE Connectivity (18.75x). With a market cap of $9B, one of the smallest in its sector, the company appears to have significant room for growth in the coming years.

  • Optical communications revenue has shown a clear upward trend (accounting for 78% of sales), particularly in the Datacom segment (from 19% to 53% of sales), which surged from $92.7 million in F1Q23 to $328.9 million by F1Q25 - a reflection of strong, sustained demand for data infrastructure.
  • Non-optical segments (22% of sales) have had mixed performance: automotive revenue dipped from $86.8 million to a low of $73.6 million in F3Q24 but then recovered to $102.7 million by F1Q25, possibly driven by renewed automotive tech demands. Industrial laser and other segments have remained steadier, showing gradual increases toward the end of the period.
  • Telecom (from 81% to 47%), however, saw a decline from $404.9 million in F1Q23 down to $279.8 million in F2Q24 but regained some ground, reaching $297.4 million by F1Q25 as demand began stabilizing.
  • With total revenue growing from $655.5 million in F1Q23 to $804.2 million in F1Q25, the data suggests a balanced but evolving demand across both optical and non-optical sectors, each responding to distinct market dynamics.

Among the company’s risks, we can highlight a few, such as:

  • Dependence on a Few Customers: In 2024 and 2023, two and four customers made up 48.5% and 55.9% of revenues, highlighting a heavy reliance on a few key clients. Nvidia alone contributed 35.1%, Cisco Systems4%, while Lumentum and Infinera accounted for less than 10% each. This concentration poses a risk, as any reduction in orders or unfavorable actions by these customers could have a significant impact on operations.
  • Impact of Industry Consolidation: Acquisitions by key players like Lumentum, Coherent, and Cisco since 2021 have reduced demand as these companies now handle more manufacturing in-house.
  • Reliance on Optical Communications: Optical products made up 79.4% and 75.9% of revenues in 2024 and 2023. Growth depends on expanding global networks, but factors like economic shifts, regulatory changes, and market overcapacity could slow progress and affect performance.

Fabrinet has built a strong position in precision manufacturing, driven by growth in optical communications and diversification into automotive, industrial, and medical markets. While financials show solid growth, reliance on key customers and market shifts in optical communications remain challenges to navigate.