Can Fabrinet's Optical Packaging Momentum Deliver Sustainable Growth?

Fabrinet’s FN position as a leading optical packaging specialist has become increasingly strategic as the industry transitions to higher bandwidth requirements and advanced data center architectures. The company’s expertise in precision optical assembly and packaging technologies places it at the center of infrastructure developments reshaping global connectivity.

Demand for optical packaging is expected to remain strong, fueled by artificial intelligence workloads and cloud computing expansion. This trend is evident in Fabrinet’s results, with optical communications revenue reaching $689 million in the fourth quarter of fiscal 2025, up 15% year over year and accounting for 76% of total revenue. Within this segment, telecom climbed 46% to $412 million, with data center interconnect contributing $107 million, or about one quarter of the total. 

The complexity of modern optical packaging is expected to increase further as networks migrate to higher speeds. Next-generation transceivers require tighter precision, efficient thermal management and smaller form factors that conventional manufacturing often cannot deliver. This sophistication supports premium revenue streams, with 800 gigabit and faster products generating $313 million in the quarter, up 21% from the prior year.

High-performance computing is also expected to expand demand for advanced optical packaging, as these systems require higher precision and integration than conventional applications. Fabrinet’s decision to classify HPC as a distinct revenue category reflects recognition of its unique requirements and growth potential. The Zacks Consensus Estimate for optical communications revenue for the first quarter of fiscal 2026 is pegged at $699.92 million, up 11.8% year over year, reinforcing expectations that optical packaging strength will continue to drive Fabrinet’s growth momentum.

Optical Component Rivals Intensify Market Competition

Fabrinet’s positioning in optical packaging overlaps with efforts by Lumentum Holdings LITE and Coherent Corp COHR to capture similar demand trends in data infrastructure. Lumentum Holdings is advancing coherent optical modules and photonic integration platforms designed for bandwidth-intensive telecom and hyperscale applications. Coherent Corp is expanding capabilities in lasers, optical engines and integrated components that support migration to 800G and beyond. Fabrinet, Lumentum Holdings and Coherent Corp are well positioned to benefit from the same drivers of artificial intelligence workloads, cloud computing expansion and high-performance computing, where optical packaging is becoming increasingly central.

Fabrinet’s Share Price Performance, Valuation and Estimates

Fabrinet’s shares have jumped 64.7% in the year-to-date (YTD) period, outperforming the Zacks Electronics-Miscellaneous Components industry and the Zacks Computer and Technology sector’s increase of 34.3% and 18.2%, respectively.

Fabrinet’s YTD Price Performance

From a valuation standpoint, Fabrinet stock is currently trading at a forward 12-month Price/Sales ratio of 3.05X compared with the industry’s 2.08X. Fabrinet has a Value Score of C.

Fabrinet's Valuation

The Zacks Consensus Estimate for Fabrinet’s first quarter fiscal 2026 earnings is pegged at $2.83 per share, which has been revised upward by 10 cents over the past 30 days. The estimate indicates 18.41% year-over-year growth.

Fabrinet Price and Consensus

Fabrinet price-consensus-chart | Fabrinet Quote

Fabrinet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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