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    Fabrinet (FN)

    Q3 2024 Earnings Summary

    Reported on Apr 14, 2025 (After Market Close)
    Pre-Earnings Price$188.83Last close (May 6, 2024)
    Post-Earnings Price$209.82Open (May 7, 2024)
    Price Change
    $20.99(+11.12%)
    • Robust datacom growth and pipeline expansion: The company reported 150% year-over-year growth in datacom revenue with strong sequential performance, driven by robust demand for 800-gig products and an active pipeline for 1.6 terabit solutions, which are additive to existing offerings.
    • Strong operational execution and capacity expansion: The firm's expansion in Building 9 is progressing ahead of schedule, ensuring it can swiftly meet increasing demand. Additionally, the potential for low-risk capacity additions further positions the company for sustained growth.
    • Emerging opportunities in telecom and AI connectivity: Despite a short-term softness in traditional telecom, there is optimism from multiple customer engagements in 400ZR/ZR technology, and demand for high data rate products in AI applications remains robust, underlining a positive market trend.
    • Extended Telecom Weakness: The Q&A revealed that telecom revenue continues to be a soft spot, with expectations for inventory digestion potentially lasting into mid-2025, which could affect overall performance.
    • Uncertain Ramp for Next-Generation Products: There is uncertainty regarding the precise timing and magnitude of the ramp for 1.6 terabit products, which adds risk to future revenue projections in datacom.
    • Capacity Expansion Risk: Although additional capacity is viewed as a low-risk investment, the substantial CAPEX of ~$55–$60 million per new facility—with a slight margin headwind—could become a disadvantage if anticipated demand fails to materialize.
    1. Telecom Outlook
      Q: Why will telecom soften sequentially and for how long?
      A: Management expects telecom to remain soft due to ongoing inventory digestion, with recovery likely delaying until early to mid-2025 while DCI and ZR engagements offer some promise for the future.

    2. Datacom Growth
      Q: What is the underlying datacom growth excluding 100-gig?
      A: Besides phasing out 100-gig, datacom showed strong performance with 150% YOY and 6% sequential growth, supported by robust 800-gig demand and anticipated future contributions from 1.6T products, though timing remains uncertain.

    3. AI Connectivity
      Q: How does 1.6T impact the existing 800-gig market?
      A: The view is that 1.6T is additive rather than cannibalizing 800-gig, based on a clear mathematical approach that aligns with evolving product architectures and growing AI connectivity needs.

    4. Optical vs. Copper
      Q: Is there any cannibalization between AOC-based optical and copper?
      A: Management noted that there is no observed cannibalization; 800-gig demand remains strong while the newer 1.6T products complement rather than replace existing optical interconnects, with copper serving its specific market segment.

    5. Customer Design Wins
      Q: Are customer design wins expanding for 800-gig and 1.6T?
      A: There are early-stage engagements beyond the main customer, indicating a broadened design win pipeline that supports continued strength in 800-gig and positions the company well for the upcoming 1.6T ramp.

    6. Capacity Timeline
      Q: What is the timeframe from decision to operational ramp for new capacity?
      A: When a decision is made to expand, management expects a facility to be up and running in approximately 18 months, ensuring a swift execution of capacity enhancements.

    7. Facility Expansion
      Q: What are the current plans for increased capacity or expansion?
      A: While Building 8 is already full, expansion at Building 9 is progressing ahead of schedule, and additional capacity is being closely evaluated, indicating a proactive approach to meet future demand.

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