By Fabrinet shares fell sharply on Tuesday after the optical and electro-mechanical manufacturing company released its fiscal fourth-quarter 2025 results.
The company reported adjusted earnings per share of $2.65, edging past Wall Street’s forecast of $2.64 and marking a 9.96% increase compared with $2.41 per share in the prior year.
Revenue also came in ahead of expectations at a record $909.7 million, surpassing analyst estimates of $883.06 million.
The figure represented a 20.76% year-on-year rise from $753.3 million.
Chief executive Seamus Grady attributed the performance to “growing demand across all areas of our business.”
Despite the earnings and revenue beats, Fabrinet’s shares dropped 11.86% on Tuesday, following a 0.81% decline the previous day.
Even with the sell-off, the stock remains up 30.83% year-to-date and 24.52% over the past twelve months.
Guidance and margin pressures
Looking ahead, Fabrinet provided guidance for its fiscal first quarter of 2026.
Management expects adjusted earnings per share in the range of $2.75 to $2.90, alongside revenue between $910 million and $950 million.
The midpoints of the ranges—$2.82 per share and $930 million in revenue—are closely aligned with Wall Street expectations of $2.81 per share and $929.9 million in revenue.
Chief financial officer Csaba Sverha cautioned investors about near-term challenges, highlighting “pressure on the near-term gross margin.”
Nonetheless, he noted the company’s record-setting performance in fiscal Q4 2025 as a positive indicator.
The company expects continued growth across its telecom, datacom, and high-performance computing segments, while remaining cautious about possible margin headwinds linked to new programme launches and rising costs from merit increases.
With a five-year compound annual revenue growth rate of 13% and analysts maintaining a broadly positive stance, Fabrinet shows strong long-term growth potential.
The strong results were supported by ongoing demand in the cloud computing sector.
Fabrinet, which supplies advanced electronics for technology companies, currently holds around 50% of the outsourced optical communications manufacturing market, according to Grady.
Analyst views and market outlook
Wall Street analysts maintain a generally favourable stance on Fabrinet.
The consensus rating stands at “Moderate Buy,” based on four Buy recommendations and two Hold ratings over the past three months.
The average price target is $334.80, suggesting a potential upside of 2.35% from current levels.
Brokerage activity following the results reflected both optimism and caution.
Barclays lifted its price target from $234 to $329, rating the stock at “Equal Weight.”
The firm commented that “optical demand continues to be strong with the high-performance computing business ramping into fiscal 2026, even with slower Datacom in Q1,” according to The Fly.
Meanwhile, a Rosenblatt analyst previously highlighted that contract wins from Amazon.com could serve as growth catalysts in the current fiscal year, which began in July.
The combination of record earnings, cautious guidance, and profit-taking appears to have weighed on investor sentiment in the short term.
However, Fabrinet’s strong market position and exposure to secular growth trends in cloud computing and high-performance optical communications continue to underpin a constructive long-term outlook.
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