Fabrinet surges on record earnings as optical demand accelerates
Precision manufacturer beats expectations with 36% revenue growth, raises Q3 guidance
Fabrinet shares advanced 2.1% to $499.61 in Tuesday trading after the precision manufacturer announced record revenue and earnings for its fiscal second quarter that significantly surpassed Wall Street expectations, driven by what management characterized as exceptional execution across large strategic programs.
The Cayman Islands-based company reported revenue of $1.13 billion for the quarter ended December 26, 2025, marking a 35.9% increase from $833.6 million in the same period last year and exceeding the consensus analyst estimate of $1.08 billion. Non-GAAP diluted earnings per share reached $3.36, up from $2.61 a year earlier and beating analysts' projections of $3.25 per share. GAAP net income per diluted share rose to $3.11 from $2.38 in the prior year's quarter.
"We delivered an exceptional second quarter with record revenue and earnings that significantly exceeded our guidance ranges," said Seamus Grady, Chairman and Chief Executive Officer of Fabrinet. Grady attributed the outstanding performance to "multiple large, key strategic programs across our business" and highlighted that "excellent execution and strong operating leverage generated record earnings per share that was also above our guidance range."
The company's operating metrics showed improvement, with non-GAAP operating margins expanding to 10.9% from 10.6% in the year-ago quarter, while non-GAAP gross margins remained stable at 12.4%. These efficiency gains underscore Fabrinet's ability to scale production while maintaining profitability even as revenue accelerates.
Looking ahead, Fabrinet issued strong guidance for the third fiscal quarter, projecting revenue between $1.15 billion and $1.20 billion, which surpasses the consensus estimate of $1.133 billion. The company anticipates adjusted earnings per share in the range of $3.45 to $3.60, exceeding analyst expectations of approximately $3.44. The guidance indicates continued sequential growth, reflecting management's confidence that "the same business drivers that helped produce these results will extend into the third quarter."
Despite the strong quarterly performance and optimistic outlook, Fabrinet's shares experienced volatility in after-hours trading following the Monday afternoon announcement, tumbling as much as 15%. Market analysts attributed the sharp after-hours decline to investors "taking profits after the stock's recent gains." The stock had previously appreciated significantly, having more than tripled over the past year and reaching a 52-week high of $531.22.
The positive regular-session trading on Tuesday suggests investors are focusing on the company's fundamental strength and growth trajectory rather than short-term profit-taking pressure. Fabrinet now commands a market capitalization of approximately $17.5 billion.
Analyst sentiment surrounding Fabrinet remains largely positive heading into the earnings release. The stock holds a "Buy" consensus rating from analysts, with average one-year price targets ranging between $491 and $540 per share. Individual analyst forecasts span from $220 to $600, reflecting varying perspectives on the company's growth potential in the expanding optical communications market.
Recent analyst activity has been supportive. Barclays upgraded Fabrinet from "Equal-Weight" to "Overweight" in January 2026, while JPMorgan had previously upgraded the stock from "Neutral" to "Overweight" in August 2025, raising its price target to $345 from $318. These upgrades reflect growing confidence in Fabrinet's position as a key manufacturer for optical components used in data centers, telecommunications infrastructure, and emerging applications in artificial intelligence and high-performance computing.
Fabrinet provides advanced optical packaging and precision manufacturing services for electronic, electromechanical, and optical components, primarily serving the telecommunications and industrial sectors. The company operates state-of-the-art facilities across North America, Asia-Pacific, and Europe, positioning it to capture growing demand for sophisticated optical technologies in an increasingly connected world.
The company's strong performance comes amid accelerating demand for optical components driven by the expansion of cloud computing infrastructure, the buildout of 5G networks, and increasing adoption of artificial intelligence applications that require high-speed data transmission. Fabrinet's ability to secure and execute on large strategic programs across these growth markets has become a key competitive advantage.
As the company moves into the second half of its fiscal year, investors will be watching closely for signs that the strong growth momentum can be sustained. The third quarter guidance suggests management believes the current demand environment remains robust, though the stock's elevated valuation and recent volatility indicate that execution consistency will be critical to maintaining investor confidence.