Can Data Center Interconnect Fuel Fresh Upside for FN Stock?

Fabrinet FN is ramping its exposure to Data Center Interconnect (DCI), a segment poised to gain prominence as hyperscalers scale infrastructure to meet accelerating AI and cloud workloads. DCI forms the optical backbone linking distributed data centers, and next-generation deployments increasingly demand compact, high-bandwidth modules, areas where Fabrinet’s optical packaging expertise gives it an edge.

In the fourth quarter of fiscal 2025, DCI revenues reached $107 million, accounting for 26% of telecom revenues and 12% of total revenues. For the first time, Fabrinet reported DCI as a standalone sub-segment within optical communications, signaling long-term confidence in its growth trajectory. As the industry shifts toward 800 GB and 1.6 TB transceivers, the underlying complexity in design, thermal control and integration is expected to rise, creating premium opportunities for high-precision suppliers like Fabrinet. 

The Zacks Consensus Estimate for total revenues in the first quarter of fiscal 2026 is pegged at $929.74 million, suggesting 11.7% year-over-year growth. The consensus mark for Optical communications revenue is pegged at $699.92 million, up 17.3% year over year. DCI’s momentum, fueled by AI-driven infrastructure scaling, is expected to lift both shipment volumes and complexity-driven pricing over time.

With demand visibility improving and DCI now tracked independently, Fabrinet is well-positioned to benefit from long-cycle architectural shifts in global data infrastructure. This emerging tailwind could unlock fresh upside potential over the coming quarters.

Fabrinet Faces Stiff Competition

Fabrinet faces competition from peers like Coherent COHR and Lumentum LITE, both of which are increasing their focus on the data center interconnect (DCI) opportunity. Coherent is ramping investment in high-speed transceivers and integrated photonic platforms to support 800-gigabit and 1.6-terabit infrastructure builds. Lumentum is enhancing its DCI portfolio with compact, thermally efficient modules tailored for short-reach, high-throughput environments. While Coherent’s advantage lies in system-level integration, Lumentum remains focused on precision manufacturing at scale. As hyperscalers accelerate AI data center upgrades, Coherent and Lumentum are emerging as key rivals to Fabrinet in the evolving DCI supply chain.

Fabrinet’s Share Price Performance, Valuation and Estimates

Fabrinet’s shares have jumped 62.9% in the year-to-date (YTD) period, outperforming the Zacks Electronics-Miscellaneous Components industry and the Zacks Computer and Technology sector’s increase of 35.2% and 20.3%, respectively.

Fabrinet’s YTD Price Performance

From a valuation standpoint, Fabrinet stock is currently trading at a forward 12-month Price/Sales ratio of 3.01X 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 six 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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