Fabrinet falls despite Q4 beat; Q1 gross margin may see pressure; component shortage a headwind

[Fabrinet West headquarters in Silicon Valley]
Sundry Photography/iStock Editorial via Getty Images

Shares of Fabrinet (NYSE:FN [https://seekingalpha.com/symbol/FN]) fell about 10% premarket on Tuesday despite fourth quarter results and fiscal first quarter outlook beating estimates.

The company's fourth quarter ended June 27 saw revenue grow about 20% year-over-year to $909.7M, while non-GAAP EPS jumped [https://seekingalpha.com/news/4486736-fabrinet-non-gaap-eps-of-2_65-beats-by-0_02-revenue-of-909_69m-beats-by-27_68m] about 10% year-over-year to $2.65. Both top and bottom line numbers beat estimates.

"Our fourth quarter was exceptional, capping off a remarkable year with strong momentum. We achieved record quarterly revenue of $910 million, exceeding our guidance range. Through excellent execution, our non-GAAP EPS also reached a new all-time high," said [https://seekingalpha.com/pr/20204229-fabrinet-announces-fourth-quarter-and-fiscal-year-2025-financial-results#hasComeFromMpArticle] Fabrinet's CEO Seamus Grady.

Regarding tariffs, Grady said [https://seekingalpha.com/article/4814655-fabrinet-fn-q4-2025-earnings-call-transcript] on the company's earnings call that the company has not seen any meaningful impact from the tariffs.

"For us, we haven't seen any meaningful impact to date from the tariffs. First, bear in mind, our shipping terms with our customers dictate that the receiver or the customer is responsible for the tariffs. So we don't bear the cost of the tariffs," said Grady.

Grady added that the company's products, both in the optical communication space and the non-optical communication space, are not necessarily shipped directly to the U.S. as they may be shipped to Asia or Europe or elsewhere to another contract manufacturer for higher-level assembly.

"So in many cases, the products we make, they don't ship directly into the U.S. So thus far, we have not seen any significant impact from tariffs, thankfully," noted Grady.

Regarding the company's customers, Grady said, "the big impact is with our main customer on the 200 gig per lane, again, which impacts both 800 gig and 1.6, but there are -- again, there are other customers we're working with on both 800 gig and 1.6 actually, but they're not meaningful in terms of revenue in the current quarter."

In addition, Grady also talked about component shortage.

"I think on the impact of the component shortage, in datacom, we're not going to quantify that, Tim, but it's -- I'll put it this way, it's meaningful enough for us to call it out. We would be up fairly significantly were it not for that issue. We're not going to quantify it, but it's a substantial enough headwind for us this quarter," said Grady.

OUTLOOK

Fabrinet's CFO Csaba Sverha said that the fiscal first quarter may see some pressure on the near-term gross margin due to product ramps.

"Again, we do anticipate that this product ramps will put some pressure on the near-term gross margin. So going into Q1, we expect a mild headwinds. But Q4 was strong, and it's not particularly because of Building 10," added Sverha.

Sverha noted that the company's Building 10 expenses are not in the numbers and that Building 10 is a future event. "So we don't see any gross margin headwinds from Building 10 context."

The company expects first quarter revenue to be in the range of $910M to $950M (midpoint at $930M) versus consensus estimate [https://seekingalpha.com/symbol/FN/earnings/estimates?period=quarterly] of $915.34M.

Fabrinet expects non-GAAP EPS to be between $2.75 and $2.90 (midpoint at $2.83) versus consensus estimate of $2.74.

MORE ON FABRINET

* Fabrinet 2025 Q4 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4814656-fabrinet-2025-q4-results-earnings-call-presentation]
* Fabrinet (FN) Q4 2025 Earnings Call Transcript [https://seekingalpha.com/article/4814655-fabrinet-fn-q4-2025-earnings-call-transcript]
* Fabrinet Q4 Preview: Boosting Growth Through Partnership With AWS; Initiate With Buy [https://seekingalpha.com/article/4813611-fabrinet-q4-preview-boosting-growth-through-partnership-with-aws-initiate-with-buy]
* Fabrinet outlines $910M–$950M Q1 revenue target as growth accelerates with AWS partnership and 1.6T product ramp [https://seekingalpha.com/news/4486773-fabrinet-outlines-910m-950m-q1-revenue-target-as-growth-accelerates-with-aws-partnership-and]
* Fabrinet Non-GAAP EPS of $2.65 beats by $0.02, revenue of $909.69M beats by $27.68M [https://seekingalpha.com/news/4486736-fabrinet-non-gaap-eps-of-2_65-beats-by-0_02-revenue-of-909_69m-beats-by-27_68m]