FN FY2026 Q4 Earnings Call Transcript
Date: 2026-08-17
Source: Financial Modeling Prep

Operator: Good afternoon. Welcome to Cybernet Financial Results Conference Call for the Fourth Quarter of Fiscal Year 26. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions on how to participate will be provided at that time. As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Garo Toomajanian, vice president of investor relations.
Garo Toomajanian: Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's financial and operating results for the fourth quarter of fiscal year 26. Which ended June 26, 2026. With me on the call today are Seamus Grady, chairman and chief executive officer and Csaba Sverha, Chief Financial Officer. This call is being webcast, and a replay will be available on the Investors section of our website. Located at investor.fabrinet.com. During this call, we will present both GAAP and non GAAP financial measures. Please refer to the Investors section of our website for important information including our earnings press release and investor presentation, which include our GAAP to non-GAAP reconciliation, as well as additional details of our revenue breakdown. In addition, today's discussion will contain forward looking statements about the future financial performance of the company. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. These statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise them in light of new information or future events except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings in particular the section captioned Risk Factors in our Form 10 Q filed on 05/05/2026. We will begin the call with remarks from Seamus and Csaba Sverha, followed by time for questions. I would now like to turn the call over to Fabrinet's Chairman and CEO, Seamus Grady. Seamus?
Seamus Grady: Thank you, Garo. Good afternoon, everyone, and thank you for joining our call today. We are delighted to report an outstanding fourth quarter that ended a remarkable year of accelerating year over year revenue growth. And we are enthusiastic that our momentum will extend in the first quarter and through fiscal year 27. Fourth quarter revenue of $1.316 billion increased 45% year over year. And exceeded the top end of our guidance range. This revenue upside flowed through to the bottom line, with non-GAAP EPS of $4.10 which was also above our guidance range. We were pleased to see success from multiple sustainable growth drivers simultaneously supporting our business, as we closed out fiscal 26. And we are excited to anticipate an even stronger fiscal 27. For all of fiscal 26, revenue was an impressive $4.6 billion increasing 36% from fiscal 25. And with strong execution, net income grew even faster than revenue. Producing non GAAP EPS of $14.09 for the year. what is most noticeable to us is that this performance did not come from any 1 product category or customer. But from increasing demand trends across numerous customers in multiple markets. Particularly evident at customers addressing the data center market as well as those serving the communications infrastructure market. Demand from these markets continues to increase. Which makes us optimistic about the long term durability of these trends. Before we get into the details of our results, I would like to highlight a change in the way we will be reporting our revenue breakdown going forward. As complex optical and electronic products become more and more prevalent inside, across, and between data centers, it is evident that hyperscalers and other data center service providers are the ultimate customers of many of the products we manufacture. Including some of those that have been characterized as telecom products in the past. At the same time, communications infrastructure continues to be an important part of our business. Driven by general purpose, longer reach products with broader applications that are not specific to data centers. Therefore, in order for our revenue breakdown to better reflect the end markets we ultimately serve, going forward, we will focus on 3 revenue categories. Number 1, data centers, Number 2, communications infrastructure. And number 3, automotive, industrial, and other revenue. In addition to being better aligned with the markets we ultimately serve, this also simplifies our reporting. We will continue to provide color on trends within all of these categories to extend our transparent revenue reporting practices. And to help investors better understand the underlying drivers of our business. I would now like to talk about capacity. As you know, we have been rapidly increasing our manufacturing footprint in order to stay ahead of rising demand. And we are excited to report a number of milestones. At Building 10 in our Chonburi campus, we remain on track to complete Building 10 by early 27. Which will add a total of 2 million square feet to our footprint. We have already qualified 250 thousand square feet on the 1st Floor of this facility and we expect a similar amount on the 3rd Floor to be qualified this quarter. At our Pinehurst campus, we have completed the conversion of 120 thousand square feet of office space into manufacturing space. We have also completed the acquisition of our new site in Navanacorn earlier in the fourth quarter. And we are happy to report that this building has just been commissioned adding another 200 thousand square feet of space. In addition to these capacity increases in Thailand, we have also been focused on expanding our footprint at Fabrinet West. Our Santa Clara operations are primarily focused on helping customers many of which are in the same neighborhood. Bring new products to market. Since Fabrinet West is an on ramp to Bangkok, success here is measured by how efficiently we transfer production of products to Thailand for higher volume low cost manufacturing at scale. To support increasing demand for these new product introduction and related services, we recently completed the acquisition of a campus at Great America Place in Santa Clara. Less than a mile away from our existing facility on Patrick Henry Drive. This campus consists of 2 office buildings and a large manufacturing space approximately 130 thousand square feet. That will more than double our Silicon Valley footprint and help support our long term growth. Looking back at fiscal 26, it was a remarkable year. With accelerating revenue growth and record profits. More importantly, we have set the stage for another incredible year in fiscal 27. As our strategy plays out. In addition to increasing demand across our existing business, we will see our growth bolstered by recent program wins as we continue to pursue further opportunities across our key markets. In summary, this is an incredible time at Fabrinet, we benefit from our focus on complex high growth markets. And we are proud to be winning more than our fair share of the opportunities. With accelerating year over year revenue growth, we are enthusiastic about the strong demand trends we are seeing and confident in our ability to extend our strong track record into the New Year. Now I would like to turn the call over to Csaba for more details on our fourth quarter results and our outlook for the first quarter of fiscal 27. Csaba?
Csaba Sverha: Thank you, Seamus, and good afternoon, everyone. We delivered an excellent fourth quarter with year over year revenue growth accelerating to 45% and continued strong earnings growth. Revenue reached a record $1.316 billion above the high end of our guidance range. We also continue to generate operating leverage, resulting in record non-GAAP EPS of $4.10 which also exceeded our expectations. As Seamus described, we have updated revenue mix reporting to better reflect the end markets we serve and that our customers' products are ultimately deployed. The investor deck posted on our website provides a 12-quarter history under the new reporting structure along with the reconciliation of our Q4 results to the prior categories. This change is purely presentational and has no impact on total revenue in any period. Now turning to the details beginning with data center revenue. This category includes optical and interconnect products deployed within data centers, including data center networking with an expanded view of DCI high performance computing, and other AI infrastructure applications. Data center revenue was $669 million in the fourth quarter, representing growth of 68% from a year ago, and 13% from Q3. This is now our largest category, representing 51% of total revenue. PCI products were the largest contributor to data center growth in the fourth quarter. With an annualized revenue run rate exceeding $1 billion High performance computing, or HPC, also made a contribution to data center and its solid growth in the quarter. Looking ahead, we expect the momentum we saw in the fourth quarter to continue into fiscal 27. Supported further by the new transceiver wins we discussed last quarter. Moving to communications infrastructure. This category includes optical and networking products used in telecommunications and enterprise networks. Excluding products specific to data center applications. Revenue was $413 million an increase of 40% from a year ago and 1% from Q3, representing 31% of total revenue. Growth was broad based across customers and end markets. Including telecom systems, satellite communications, and telecom components. We remain optimistic about the long term growth outlook for this market and expect continued strength in fiscal 27. Turning now to automotive, industrial, and other category. Revenue was $234 million up 8% from a year ago and 9% from Q3. Representing 18% of total revenue. The improving sequential growth was primarily driven by EV charging infrastructure products with a smaller contribution from growth at certain LiDAR customers. Overall, we are extremely excited about the growth trajectory and the broad based trends in demand across the customers and end markets we serve. As I discussed the details of our P&L, all expense and profitability metrics will be presented on a non-GAAP basis unless otherwise noted. Gross margin in the fourth quarter was 12.2%, a 10 basis point improvement from Q3 and a 30 basis point decline from a year ago. We continue to demonstrate strong operating leverage operating expenses representing just 1.3% of revenue. This produced an operating margin of 10.9%, our highest level in 3 years. I will remind you that our growth model does not require significant incremental operating expense. And we therefore expect continued operating leverage as revenue grows. Interest income was $7 million and we saw a foreign exchange revaluation gain of $1 million in Q4. Income tax was CAD 3 million in the quarter. GAAP net income was $139 million or $3.83 per diluted share. Non GAAP net income was $149 million or $4.10 per diluted share. In calculating our Q4 non GAAP earnings, we excluded 2 items that we believe provide useful information to investors in assessing our results and comparability across periods. First, we recorded an approximately $56.7 million noncash gain from remeasuring our investment in Raytec. This was an accounting gain on an existing investment and did not generate cash for the business. We intend to apply the same treatment consistently to the future gains or losses from remeasurement of this investor. Second, we recorded $57.4 million provision related to Thailand's top up tax regime under the OSCE, the Global Minimum Tax Framework. The provision reflects the first year application of the new framework and is based on the rules in effect that our fiscal year end. No cash was paid in fiscal 26 in connection with this. Thailand's regulatory environment for this tax remains in transition as implementing regulations, guidance and related investment support measures continue to evolve. As a result, future tax expense and any related benefits could vary over time, and we intend to apply a consistent approach while the transition continues. For the full fiscal year, revenue was a record $4.6 billion up 36% from fiscal 25. Non GAAP EPS was $14.09, an increase of 39% from a year ago. In 2026, continue to diversify our customer base. With 4 customers representing 10% or more of total revenue. These were Cisco at 20% NVIDIA at 16%, Nokia at 11%, and Amazon at 11% of total revenue. Turning to our balance sheet. We ended the fourth quarter with cash and short term investments of $876 million down $70 million from the end of Q3. Operating cash flow for the quarter was $55 million capital expenditures increased to $92 million with ongoing construction of Building 10 in Chonburi and the purchase of our new campus in Navanakorn for $11 million. Free cash flow was an outflow of $37 million in the quarter. For the full year, operating cash flow was $257 million. Free cash flow was $4 million This reflects our disciplined capital allocation strategy and our continued investment in capacity to support long term growth. We believe reinvesting in the business remains 1 of the most attractive uses of our cash. Supporting continued growth by generating strong ROIC. In the fourth quarter, we did not repurchase a meaningful number of shares. However, our share repurchase program remains active. With approximately $169 million available at the end of the quarter under our current authorization. Turning to our fiscal Q1 27 guidance. As we look to the first quarter, we entered a new fiscal year with strong momentum across the business. In the data center market, we anticipate strong broad based growth across transceivers, DCI, and high performance computing products. We expect growth from both established programs and newer wins. Providing multiple growth engines for the company. In communications infrastructure, we also expect healthy growth supported by continued strong demand across a broad range of systems, components and other programs. We are also optimistic that we will see growth in automotive, industrial, and other. In total, we expect first quarter revenue to be between $1.375 and $1.425 billion representing year over year growth of 43% at the mid midpoint. While our usual first quarter expense seasonality will create a temporary margin headwind, we expect to continue generating operating leverage as revenue grows. As such, we anticipate EPS to be between $4.10 and $4.25. While we only guide 1 quarter at a time we think it is important to convey that we are more confident than ever in our longer term outlook Customers provide us with visibility that goes into fiscal 27 and beyond. While these longer term customer forecasts are not order commitments, they reinforce our confidence in the durability of the very strong demand trends we are seeing. In summary, our outstanding fourth quarter result kept a remarkable year for the company. With revenue increasing 36% and EPS growing 39%. We entered fiscal 27 with strong momentum driven by growing demand across existing programs, meaningful contributions from new program ramps, and additional capacity coming online to support continued growth. Operator, we are now ready to open the call for questions.
Operator: Thank you so much. Press star 1 on your telephone and wait for your name to be announced. To remove yourself, press star 1 again. 1 moment for our first question. It comes from Christopher Rolland with Susquehanna. Please proceed.
Christopher Rolland: Hi. This is Yasha on for Christopher Rolland. Thank you for taking my question. So I wanted to ask on datacom. It was down slightly sequentially in the quarter. So can you help us understand the dynamics there? How much of that was component supply versus any program transition or demand timing? And as we look into September and how should we think about the shape of Datacom recovery? Do the constraints ease in any way to frame, like, sequential or year over year growth?
Csaba Sverha: Hi. This is Csaba. Let me let me take that question first. So we are transitioning to our new revenue categories, as we mentioned in our prepared remarks. So if you were to look at or to reconcile our Q4, our datacom was somewhat flat. Obviously, this is a combination of everything that you have mentioned. When we are looking at this category in our data center business in the future quarter, we do anticipate this to, be up sequentially in our Q1 guidance. So the demand environment remains pretty robust and accelerating. So we are very optimistic about this subcategory that we are now going to report inside our data center revenue category.
Christopher Rolland: Thank you. And then my second question is on I think previously you had talked about a $150 million quarterly run rate for September. So is that still the expectation for next quarter or maybe has the timing there kind of shifted? And I think in your prepared remarks, you highlighted new transceiver wins with this customer. So any additional color there? Is this for 800 gig, 1.6T, or any other color on, like, applications?
Seamus Grady: This is Seamus. Our HPC business continues to perform I would say, ahead of expectations. We demonstrated good sequential growth in the quarter. As you know, a number of programs with the major hyperscaler continues to ramp We are in the process of ramping the customer's next generation silicon platform and we are installing additional capacities to support both the technology transition as well as additional products and capacity. That we are adding additional products that we will be manufacturing. We remain on track with the customer, and we expect that business to continue to grow You mentioned the let's say, the transceiver business as well with that particular customer. So we are we are excited to be expanding our data center transceiver business with a number of new customers and programs We expect these programs to see we expect these programs to start ramping as soon as this quarter. With the hyperscaler direct program among the first to launch, the 1 you mentioned. We do expect 1 of the merchant programs to begin in the December quarter. And the others to get off the ground in early calendar 2027. This is all pretty consistent with our prior expectations for a meaningful ramp over the course of the fiscal year. Supporting our very strong growth trends.
Operator: 1 moment for our next question, please. It comes from George Notter with Wolfe Research. Please proceed.
George Notter: Hi, guys. Thanks very much. I wanted to ask about some of capacity additions in the business. Obviously, we are getting ready to wrap up Building 10 in the next few months. I am just curious on your thoughts around Building 11 I think, Seamus, if you go back in time, I think you admitted at 1 point that maybe you started Building 10 a little bit too late. I guess I am just wondering how you think about the triggers now for Building 11 and then longer term capacity additions?
Seamus Grady: No. I think we started Building 10, as it turns out, at exactly the right time. Either by excellent planning or good luck or a combination of both. Yeah. We continue to expand our capacity ahead of the demand. And investing in capacity growth is very important use of the cash. And we are really rapidly expanding our manufacturing footprint to support the strong customer growth that we are seeing. And to make sure we have sufficient capacity for the new programs Just to kind of frame it a little bit, we ended fiscal 25. If you take Q4, revenue of $1.32 billion, multiply that by 4, you get about 5.3. So we are we are at a run rate of $5.3 billion, so a little bit ahead of what we had originally thought, you know, was the capacity. So 5.3 billion run rate as we exit Q4 And we have if you like, land capacity and plans in place to bring that capacity up to between 12.5 and 14 billion over the coming years. And let me just explain how we get from 5.3 to potentially 14. Again, we finished FY 2026 at a run rate of 5.3. With the space we converted in Pinehurst recently, that would take us up to about between 5.5 and 5.8. We converted some office space into manufacturing. That takes up to, you know, 5.5 to 5.8 Building 10 will add 3 to $3.5 billion of capacity. So that would take us to between 8.5 and 9.3. I know that is a pretty broad range. But it really does depend on the mix and the and the products that we are making for our customers. So, like I said, Building 10 will add about 3 to 3.5, taking us up to between 8.5 and 9.3. We have already started to produce in some of just started, you know, to produce in some of Building 10. But, you know, the vast bulk of that capacity add is in front of us. The Navanakorn factory that we recently purchased that will start contributing from Q1 onwards and at full capacity that building has capacity for about another 200 to $250 million. Santa Clara, the new campus, again, it is very much mix dependent, but if you just take the kind of the average revenue per square foot and apply it that Santa Clara campus without a about 200 to $250 million of additional capacity. And then we have room to build 2 more factories in Chonburi each of about 1.2 million square feet. With revenue capacity of about $1.8 billion to $2.1 billion. Dollars So if you add up all of that and you take the run rate exiting Q4, and then you add the low and the high of each of those additions, you get between $12.5 billion and $14 billion And we continue to look for more land to expand. So we have been very fortunate. We have been able to keep expanding ahead of the demand and we plan to continue to do that. We are going to be expanding and will continue to expand aggressively. Over the next few years.
George Notter: Got it. Super. And then I think last quarter would you discussed this, I think you kind of circulated or centered on a an $11.5 billion revenue run rate. If I have that correct. These numbers are obviously higher. Is it just the difference is a piece of this, I think, is Nava, but are there-- Csaba would be another piece. Are there other components in this also or no?
Seamus Grady: Yeah. I think it is it is a combination of we are adding more, you know, more space. More square footage, of course, between Nava and the other the other capacity additions we talked on Santa Clara, of course. But also, you know, our revenue per square foot is increasing. We are actually increasing our revenue per square foot. We are doing we are doing more with less. We find we seem to always find ways to make sure we never we never turn away revenue. We do not we do not disappoint the customer. So we always find ways to get the you know, the product out. So our revenue per square foot has been increasing as well as our square footage has been increasing. So both have been increasing. Thank you.
Operator: Thank you, George. Thank you. 1 moment for our next question. It comes from Joseph Lima Cardoso with JPMorgan. Please proceed.
Joseph Cardoso: Hey, good afternoon, and thanks for the question. Maybe just 1 on discussion in recent weeks around CTO and MPO. and maybe more specifically about the NPO opportunity. You know, it seems like it is materializing a bit sooner than what maybe the industry or at least maybe investors had been thinking about. And I am just curious, just given the combination of the recent relationship that you have with Raytec, how are you thinking about Fabrinet's ability to address these type of opportunities? I guess, CPO and NPO, but I am just curious if NPO is looking like it is something that maybe is happening earlier for you guys and maybe to a greater magnitude than what was thought of quarter or 2 ago? And then I have a quick follow-up.
Seamus Grady: Sure. Thanks, Joe. Yeah. So, you know, NPO technology sits somewhere between pluggables pluggable modules and CPO. As you know, we have built tens of millions of pluggable modules over the years, so we have clearly demonstrated that expertise. We are working on you know, CPO today with a handful of customers, and we are already building devices all albeit not yet at full scale volumes. And you know, since NPO, as you said, NPO combines elements of both, we feel we are very well positioned to be the leader in manufacturing and packaging. And your package optics devices. As NPO scales to 6.4T, 12.8T terabit and beyond, the manufacturing complex complexity and yield becomes increasingly important. It becomes critical. And, you know, for decades, our core strength has been transforming advanced photonics components into reliable high volume systems. So that is really what we do. that is our that is our sweet spot. it is probably too early to talk about let's say, revenues and margins from those opportunities and customers as they depend on program specifics, but rest assured, we are very much involved in all of the technologies you mentioned. And NPO, I think, probably represents a more near term opportunity than CPO from what we have seen with our customers. Our partnership with Raytec, we think, will be very important for us and will really be instrumental in allowing us to unlock the potential of the demand we are seeing Raytec will be adding capacity in Thailand in our campus So we really feel it is important for us to have all of the packaging capabilities that are required to produce these products of the future under our roof. Either in our own production lines or in partnership with Raytec. So we are we are pretty excited about those opportunities, Joe.
Joseph Cardoso: No. No. Thank you. Very interesting. And then maybe just as my follow-up, you know, you listed as a 10% customer, which maybe for me was a bit of surprise. I thought maybe Sienna would be on that list. But maybe just speaking to Nokia, how much of this is a function of the Infinera business that you have had as a large customer, at least historical, versus maybe additional business that you have subsequently won as a function of the, you know, the combination of those 2 companies together. Just curious if you are actually seeing the business, you now winning bigger or more opportunities from the combined entity or if it is more just a function of what you would done historically with Infinera in a kind of rising-tide situation? Thanks.
Seamus Grady: it is a little bit of both. You know? I mean, I do not wanna go into too much details on any 1 specific customer, but I think I can I can safely say, you know, our first objective, and it is something we do not necessarily control, was to make sure that we do everything possible that when Nokia acquired Infinera that the Infinera business you know, stays robust and sometimes in these situations when the when the big company acquires a smaller company, there can be product rationalizations and things like that? And through no fault of your own, you can end up losing business. That did not happen in this case. You know, the Infinera products, I think, are instrumental, seem to have very strong demand. So the Infinera business has been rising. And then, of course, the Nokia business is going very strong as well, our relationship with Nokia is very good. We historically have done a little bit of business with them, but they were not a big customer for us historically. So really, that reputation that we had and that we continue to have with the Infinera folks has really stood us in good stead, and we feel we are well positioned and starting to, as you say, to make some breakthroughs in winning business with Nokia. So we are we are pretty excited about that relationship. Yeah. There rose to be more than a 10% customer. And we are really just we feel getting started with Nokia, we feel there is a huge amount of potential there to continue to grow that relationship. Got it. Appreciate all the color.
Operator: Thank you, Joe. You are welcome. Thank you. Our next question comes from Timothy Long with Barclays. Please proceed.
Analyst: Thank you. Yes. 2, if I could. You are to hit some of this again. Seamus, I know you do not wanna talk too much about customers, but, obviously, NVIDIA's a reported 1 with 10% and pretty decline in the year, understanding there is a lot of you know, component issues that have plagued that business. Just curious of, you know, kind of current update on competitive landscape there, particularly as you know, the newer programs that you guys tend to lead are a little bit more mature now. So just curious how I appreciate that business should overall go up a little up next quarter. But curious about the how you view the competitive landscape particularly as, you know, some of the nodes have matured? And then I have a follow-up after that.
Seamus Grady: Yeah. I mean, we are we are obviously not gonna get into too much specifics on any 1 customer, but I will say that, you know, we are very pleased with our data center performance in Q4 and we are optimistic that we would see sequential growth in the first quarter, both with long standing customers, like the 1 you mentioned, and newer customers. Contributing to that growth. You know, with respect to any specific parts or components, I do not want to speak on behalf of our customer or our suppliers. In these kind of 3 way relationships, especially for some of these high profile components. But our supply chain team has been doing an excellent job managing these relationships. And, you know, we have continued to get our share of the components we need Demand, yeah, demand for certain components is higher than the available supply and you know, we are working very hard to mitigate that and make sure we get what we need. And as always, we have taken any potential gaps in supply into account in our guidance. And you know, expectations for growth in all in all 3 major revenue categories, including the data center business. Okay. Great. And then, you know, maybe back to the HPC. You mentioned some kind of newer opportunities there as well. I was wondering if you could just you know, give us a little bit more color on types of products, or and any color you can give us or scale of what that could do to the business. It seems like, got off to a pretty good start, and the ramp has been pretty good through 4 quarters. Just curious what, you know, other programs could be added to that to keep that business growing? Yeah. I mean, the products we are we are we are talking about are really follow on products from previous generation products, and we have also won some additional products That relationship is going very well. it is well ahead of our expectations and on track to continue to grow for some time to come. You know, that is HPC is now included in our data center category. We will not be breaking out HPC as a separate category in future, but it is part of our data center category along with you know, the datacom products and also DCI and HPC. Those products are really what drives the data center revenue for us. But back to your question on HPC, know, with AWS, this is going very well. We are very happy with the relationship. We believe the customer is too, and we just continue to focus on doing a great job for them, and that is that is the best way for us to win new business is to do an excellent job with the with the business that we have for that is our focus. Okay. Thank you very much.
Operator: Thank you, Timothy. Thank you. Our next question is from Steven Fox with Fox Advisory.
Steven Fox: Hi. Thanks, and good afternoon. Hi. I was wondering. I was wondering if you could talk a little bit about the system integration business doing full system with some of the telecom networking OEMs and how that is going. I believe you had talked about 1 major program and maybe there were others in the works, but any update there would be appreciated. And then I have a follow-up.
Seamus Grady: Yeah. I mean, we have we have a number of products that we make for our customers where we do the complete network system. The sweet spot for us, Steven, is where we do a lot of the component content maybe first and then work our way up through you know, start off with components, then do the let's say, PCBAs, and then subsystems and subassemblies all the way up to complete network systems. So it is for us and for our customers, it is very important that we have sufficient component content that we are making in order for it to be attractive for the customer and also sticky from our point of view that we are doing a lot for the customer more than just assembling systems. So that is really been our focus. that is how we have had some success with that with a number of our customers. Probably the first foray into that business for us was with the Infinera, now Nokia business, when Infinera acquired Coriant several years ago, We have also brought on significant Cisco complete network system business and we are working on 1 or 2 others. They take time. They take a long time to come to fruition. And we usually start with the components and work our way up from there. So we are working very diligently on that, and you know, we hope to have 1 or 2 to add in the in the coming quarters.
Steven Fox: that is helpful. And then just on your comments about us being able to improve revenue, per square foot, it sounds like there is some interesting details. I do not know. Maybe you wanna share or do not. But beyond mix, like, can you give us an idea of how you are sort of getting more out the door than maybe we would have expected 90 days ago?
Seamus Grady: Well, I mean, if you look at, you know, the nature of the products and the business that is growing for us, You know, DCI, of course, has been really good for us. And, you know, DCI products are generally physically small in form factor, and revenue dense. So, you know, as we have shipped more as we have been shipping more complex products to our customers, that revenue per square foot metric And that is not to be all and end all. it is a function of better mix but also improved efficiencies and better utilization of space. So there is a number of factors that go into it. Not any 1 factor, but in broad sense, it is a combination of more, you know, more complex products and, therefore, more revenue dense products. And also better space utilization and efficiency improvements for pretty relentless about finding savings and finding you know, better ways to utilize space and save on space because space is at a premium. So it is a it is a combination of both. So Great. that is very helpful. Thank you.
Operator: Thank you. Our next question comes from the line of Ryan Kuntz with Needham and Company. Please proceed.
Ryan Koontz: Great. Thanks. I wanted to ask about the telecom and DCI business, which continues to put up really, really strong numbers. Do you think you are seeing yet impact from scale-across projects, number 1? And number 2, when do you think you will see some impact from the new multi rail amplifier densification? Is that a new market opportunity for you? Thanks.
Seamus Grady: Thanks, Ryan. Yeah. We believe we are seeing both scale out and scale across in our business. Again, bear in mind, our customers do not necessarily share with us their plans for where all of the products we make for them are going to end up. But we believe, yes, we are we are participating in both you know, scale up, scale out, and scale across, but specific to DCI, scale out and scale across. For the you asked about the multi rail product. You know, multi-rail architectures that they package and manage fiber pairs as a as a highly integrated optical system creating really more photonics integration and manufacturing complexity Per deployment. So they are they are quite complex and difficult. These platforms are they are highly manufacturing intensive. there is a lot of value add and complexity that goes into producing these products. You have dense fiber routing and management, high volume fusion splice and connectorization, and a whole array of precision optical manufacturing technologies and assembly processes that we are really very good at. We are actively engaged with customers on programs that leverage our strengths in these areas. Especially in photonics integration and packaging. And, you know, we see multi rail programs as a really good fit for us. They are right in our sweet spot. They are complex. They are difficult to make. They require many process steps, which are which these process steps are really our secret sauce, if you like. So we are we are we are heavily engaged on a number of multi rail programs with our customers. Again, not really our place to announce them, but rest assured, we are heavily engaged with a number of customers on these programs. And we are we are very excited about them. Thanks, Seamus.
Ryan Koontz: And then maybe just a question on your recasting of the segment here. You say telecom is kinda gonna stay in communication infrastructure, that is everything it is really rack based. Should we think of it that way? So it is line systems and rack based transponders. As opposed to, you know, DCI, which I assume is all pluggable stuff that the split that we are gonna see here?
Csaba Sverha: Yeah. Hi, Ryan. This is Csaba. So let me clarify what is going into the communication infrastructure. So I think the best way to think about it is where our products or our customers' products are being deployed So that is the number 1 distinction. Whenever we see a product that goes and end up in a data center or a hyperscale infrastructure, we would categorize them under data center. And then the rest of the business that traditionally has been telecom, most of them would be, network systems, but also some of them, the common longer term, long reach products will be also falling into this category. So it is not a 1-fit-all but the number 1 thumb rule is that wherever the product's getting deployed if it is a data center or hyperscale, then it goes in the data center. Everything else goes into the communication infrastructure that is supporting that. Understood. Thanks, Adam.
Operator: You are welcome. Thanks, Ryan. Our next question comes from Karl Ackerman with BNP Paribas. Thank you.
Karl Ackerman: Hi, Seamus. On Datacom, have you seen have you seen higher interest from hyperscale customers seeking to diversify away from Chinese transceiver suppliers? And as you address that question, do you have the laser supply commitments needed to support the upcoming 1.6T server transceiver ramp in the next few months? And I have a follow-up, please.
Seamus Grady: Yeah. I mean, the component supply, as I said in the earlier comments, it is it is factored into our guidance. We are not going to go into specifics beyond that. You know, the proposed ban on new transceivers from China, I guess, it is not yet a done deal. It remains to be seen what will happen. We do not manufacture for any Chinese providers and are we are, of course, more focused on Western providers. So, you know, in theory, that could be a positive as long as materials and components are available. It could be a positive should be a positive for us, but I think it is early days. Like I said, it is not a done deal, and so it is a lot. there is a lot to be unpacked before that actually comes to fruition. You know? A lot of the transceivers that go into these data centers are coming from China. So if you just put a you know, a block on a ban on transceivers coming from China, the whole goes to a halt. He decides whether it is good or bad for Fabrinet. So I think it is by no means a done deal, and we will see we will see what happens. Yep. Well, thank you for that.
Karl Ackerman: Within comms infrastructure, how are you thinking about the opportunity to address LEO satellites today? Could you discuss your visibility there visibility there relative to your, earlier view this year? Thank you.
Seamus Grady: Yeah. We include that in our in our telecom infrastructure category. Have a number of customers we are engaged with there. Know, primarily the 2, I would say, major players in that space, and there is 1 or 2 others who are looking to get into that space that we also do business with. But, you know, for us, it is a it is a really good fit. Because the technology is right in our sweet spot. We have the customers today, so if that business ramps we feel we are very well positioned to work. You know, we are making these products. We have been making them for a number of years. For 1 customer in particular. Particular and now a couple of other customers. So and they are, again, they are right in our sweet spot. They are very straightforward, if you like, for us to make these products. They really fit well with our capabilities. So know, we feel good about our position there. We have the 2 big players and as I say, there is 1 or 2 smaller ones who were we are also working with. We think it is a lot of potential for us. Thank you.
Operator: Thank you, Karl. Thank you. Our next question comes from the line of Mike Genovese with Rosenblatt Securities.
Mike Genovese: Hi. This is Amol stepping in for Mike. I was wondering if you can touch on the progress and mainly the timing for 1.16 driving revenue from your largest datacom customer.
Seamus Grady: Yeah. that is not something we are going to update the markets on this call. This is a this is a Fabrinet call. You have to talk to NVIDIA about the NVIDIA product launches. that is not something we would be disclosing to that level of detail.
Mike Genovese: Got it. Got it. Understood. And then just a Just with the inventory jump, I am assuming it is relative to supply constraints in the upcoming ramp. Is there anything else there?
Csaba Sverha: it is mainly regarding the Well, I think the inventory jump has to do, obviously, with the revenue growth. So if you look at from other perspective, we are position positioning material, continue to support our customers. The material constraints are something that we have been used to in the past several years, so those would not be a meaningful increase in our inventory. So the inventory increase has to do with our growth and then the positioning for future ramps. With the customers. Got it. Thank you.
Operator: You are welcome. Thank you. 1 moment for our last question. It comes from the line of Timothy Savageaux with Northland Capital Markets.
Timothy Savageaux: Hey. Good afternoon. And congrats on the results. And also congrats on growing mid-30s, with NVIDIA down 20%-plus for the year. I think that is rest of the business up nearly 60% on that basis. So, that is quite impressive. Just to cut just a couple of quick questions. First, on as you look for Q1 27 guidance, I imagine data centers the primary driver, but within the 3 drivers that you mentioned, DCI, transceivers, high performance compute, and noting that you had a really huge quarter with Cisco and DCI, and that was evident in their results. Can you kind of give us a sense of among those categories, I imagine it is transceivers that is going to drive the majority of the growth, but I would love to get your any color on that.
Seamus Grady: Well, really, first of all, thanks, Timothy. I think you hit the nail on the head. You know, we finished if you like, a 10 year spell from up to 2024, 17% compound annual growth, and then we had 19% compound annual growth in FY 2025 and then 36% in FY 2026 with 45% year on year growth in Q4. So we are we are pretty happy with the with the growth trajectory that we are on. Also, you know, if you look at our performance over the last while, we have had 12 consecutive quarters of record revenues. And, 6 consecutive quarters of accelerating year over year growth. So it is been a we have been on a very nice trajectory for the last while. Within the data center business, and, you know, we think it makes sense to categorize these particular products into data center because you know, DCI the transceivers, of course, are inside the data centers. And then high performance compute is also essentially a data center product and DCI. Are between the data centers. You know, the growth in all 3, we think, is robust. HPC continues to grow. We will not be breaking them out individually going forward. But, you know, HPC continues to be very strong for us. We are we are doing very well. And we have a number of other customers that we are focused on that are not in the revenue yet, but we are we are working on The transceiver business, a combination of our main customer, but also success we are getting with hyperscale direct and also merchant business. That is just beginning to get going as well. And we feel very good about that. And, of course, DCI, you know, DCI has been a real success story for us. I think, Csaba, did we say in our prepared remarks run rate on DCI is about a billion dollars?
Csaba Sverha: Thank you, Seamus. Yeah. So, actually, our DCI business reached the close to $1 billion run rate. And if you look at our Q4 numbers, our DCI business was equivalent to our historical datacom business. So that is that is a meaningful growth and continues to grow.
Seamus Grady: And if you look at each of those categories, I suppose, especially, you know, DCI and the transceiver, demand is just insatiable. it is extremely robust. And the demand is coming to us and coming at us from several directions. You know? Our DCI, of course, we have we have really all the main players in DCI. Transceiver business, you know, historically, we have had our main customer, but now we have these other growth factors to layer on top of that, both merchant and hyperscale direct. And then high performance compute just continues to go from strength to strength, so you know, we feel very good, Timothy, about our overall position in the data center business. And what is interesting is the customers are giving us visibility well out into know, the end of 2027 and beyond. That does not mean they are giving us firm orders, but they are giving us visibility. And there looks to be, you know, no end in sight to the demand from the customers. We feel we feel very good about that.
Timothy Savageaux: Well, that is a perfect segue to my next question, which is you have mentioned accelerating growth several times, including in response to that quick question. Although I would note at the middle of the range, that might break your streak, but I imagine you are not heading for the middle of the range. Still in the high 4 or still in the forties, in terms of year over year growth. But given that lengthy list, of demand drivers and the capacity additions, is it within the bounds of reasonableness to, to think about annual growth in fiscal 27 accelerating from what you saw in 2026, especially maybe given the lack of that headwind from your largest customer?
Seamus Grady: Yeah. I think, that is a that is a good point and a good question. I think, of course, you know, the standard answer, Timothy, we guide 1 quarter at a time. However, based on the picture we have right now, it is not beyond the bounds of possibility. And that is that is, you know, that is not something we would ever say. I suppose we always we guide 1 quarter of time, that is what we are going to continue to do, but based on the demand we are seeing, certainly, the demand is there you know, that we could see another year of accelerating growth. it is just a it is just a staggering demand picture we are seeing from our customers, and the thing that is particularly satisfying for us is the trust that the customers are placed And obviously, the revenue is great. Do not get me wrong. but it is really the trust the customers are placing us there. You know, they are trusting us with their most important products, their leading edge products, and we are, you know, we are we are on a ramp with several of these customers. That is just amazing. So yeah, I think it is not beyond the bounds of possibility, Timothy, to answer to answer your question.
Timothy Savageaux: Great. And let me close by adding maybe 1 other growth driver that I do not know that is been discussed, and that is optical cross-connects, OCS. And, you know, we heard last week, you know, big ramp there from the industry leader, but also, you know, I think plans to move from strictly internal to working with contract manufacturers I wonder if you might be able to give us an update on you know, what you think the timing might be there for you or the opportunity And does that lie in fiscal 27 as well?
Seamus Grady: Yeah. I mean, you know, obviously, OCS remains a great opportunity for us. it is right in our wheelhouse. it is you know, the manufacturing technology is very similar products that we are already making for our customers. So we already feel like we have a bit of a head start. So no real change in our optimism on OCS you know, to but they there are incremental opportunities for us and that, you know, for us, OCS is quite small today. We are shipping some product, but it is quite small. So I think the big ramp that maybe has been in has been talked about, we are pretty confident we will participate in that. So we feel very good about OCS, and I think it could be a bigger, much bigger and more meaningful category for us in the future. The specifics of our customers' ramp, we leave that to them to talk about. But I think we are well positioned. Got it. Thanks.
Operator: Thank you. And this will conclude our Q and A session for today. I will pass it back to Seamus Grady for closing.
Seamus Grady: Thank you. Thank you for joining our call today, and we delivered an outstanding performance in Q4 with continued top line acceleration that ended a tremendous year for the company. We are entering fiscal 27 better positioned than at any other point in our history. To continue delivering strong growth in response to the increase in demand that we are experiencing across our business. With our deep domain expertise and increasing capacity, we expect to extend our manufacturing leadership as a trusted partner for our customers' most complex products. We look forward to sharing more excellent results with you in the future and to seeing those of you who will be attending the Rosenblatt conference tomorrow and the Wolf conference in September. Thanks again. Goodbye.
Operator: And thank you all for participating, and you may now disconnect.