Fabrinet (FN) Q1 2025 Earnings Report

Revenue: $804.23m; YoY +17.32%; QoQ +6.77% | Gross Profit: $99.03m; Gross Margin 12.31% (QoQ +20 bps) | Operating Income: $76.94m; Operating Margin 9.57% (QoQ flat) | Net Income: $77.39m; Net Margin 9.62% | Diluted EPS: $2.13; GAAP EPS $2.14; Non-GAAP EPS $2.39 | Cash & ST Inv: $909.0m; Net Cash Position: -$395.8m (net cash) | Operating Cash Flow: $83.18m; Free Cash Flow: $63.0m | Capex: $20.0m; Free Cash Flow Yield per Share: $1.74 | Balance Sheet: Total Assets $2.44B; Total Liabilities $0.612B; Shareholders’ Equity $1.8266B | Liquidity/Leverage: Current Ratio 3.66; Quick Ratio 2.90; Debt/Capitalization ~0.27% (very low); Tax Rate: GAAP 4.2% (guide mid-single digits) | Guidance: Q2 Revenue $800–$820m; EPS $2.44–$2.52; gross margin under pressure from Thai baht but offset by operating leverage; Datacom/Telecom/Auto growth expected; 1.6 ramp tied to Blackwell, with some ramp expected in Q2.

Key management themes from QQ1 call and Q&A:
- Strategy and growth drivers: Datacom growth (+36% YoY) led by Nvidia-designed transceivers; 1.6 Tbps ramp anticipated once Blackwell ramps; Nvidia remains the sole designed transceiver source for Fabrinet’s biggest Datacom program. Quote: “In Optical Communications, Datacom revenue grew 36% from a year ago, driven mainly by optical interconnect products for AI applications.”
- Market conditions and product mix: Telecom posted YoY growth for the first time in six quarters, with DCI and telecom systems underpinning improvements. Quote: “We are encouraged by the results of our Telecom business in the quarter, which saw year-over-year revenue growth for the first time in six quarters.”
- Capacity and operations: No capacity constraints at 800G, 400G, or 1.6T speeds for the primary Datacom customer; manufacturing readiness to support ramps. Quote: “No capacity constraints at any of the speeds at 800 gig, 400, 1.6, we have no capacity constraints for our main customer there.”
- Automotive/Non-optical growth: Auto revenue exceeded $100m for the first time; EV charging infrastructure momentum; industrial lasers strength. Quote: “Non-optical communications saw strong growth in the first quarter at $178 million, up 17% from a year ago ... driven mainly by EV charging infrastructure programs in the automotive market.”
- Expansion plans and capital allocation: Building 10 construction progress with footprint expansion >50% to support multi-year growth; modest buyback activity expected with $200m remaining in authorization. Quote: “We are optimistic that construction will begin by the end of the calendar year on this facility, which will increase our total footprint by more than 50%.”

FN is positioned for a constructive intermediate-term investment thesis grounded in (i) high-value optical interconnects with Nvidia-driven Datacom growth, (ii) an upcoming 1.6 Tbps transceiver ramp contingent on Blackwell, (iii) steady Telecom/DAC system revenue and share gains in automotive/ DC laser markets, and (iv) a solid balance sheet capable of funding expansion (Building 10) and potential buybacks. QQ1 2025 results show strong top-line growth (YoY +17.3%), healthy profitability (operating margin ~9.6%, net margin ~9.6%), and robust cash flow generation (FCF $63m) despite FX headwinds. The company’s guidance for Q2 (revenue $800–$820m; EPS $2.44–$2.52) implies continued momentum, albeit with margin pressure from Thai baht that management expects to offset via operating leverage. Comparatively, Fabrinet trades at a premium to several peers (P/S ~10.8x, P/E ~28x, P/FCF ~138x, P/B ~4.8x), reflecting a combination of its niche leadership in Nvidia-driven Datacom, its sizable cash balance, and strong visibility around the 1.6T ramp and auto/laser opportunities. Benchmarking against selected peers (e.g., PLXS, JBL, ROG, APH, SANM) shows Fabrinet commands a higher price-to-sales and higher EV/EBITDA in the group, indicating higher perceived growth optionality but also a need to monitor execution risk and currency exposures. Key catalysts to watch include: (1) the pace and cadence of 1.6 ramp and Blackwell qualification/production, (2) Nvidia program demand stability and any shifts toward merchant transceivers, (3) sustainability of auto/LASER and EV-charging demand, and (4) currency dynamics (Thai baht) impacting gross margins. The 9-month timeline to begin meaningful Sienna revenue adds optionality but should be weighed against the near-term earnings trajectory. Overall, FN’s QQ1 performance and forward guidance support an optimistic but disciplined investment stance, with upside potential driven by continued Datacom growth and 1.6 ramp, provided execution remains on plan and FX headwinds remain manageable. Investors should stay attentive to ramp timing, customer-mactory decisions on external components, and the robustness of the auto/DCI demand pull.