In This Article:
Release Date: May 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Fabrinet (NYSE:FN) reported strong third-quarter revenue of $872 million, exceeding their guidance range.
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The company achieved a non-GAAP earnings per share of $2.52, also surpassing expectations.
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Telecom revenue grew significantly, up 42% year-over-year and 17% from the previous quarter.
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Automotive revenue saw substantial growth, increasing by 76% year-over-year and 24% from Q2.
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Fabrinet (NYSE:FN) announced a new commercial relationship with Amazon Web Services, expected to boost revenue starting in fiscal year 2026.
Negative Points
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Datacom revenue experienced a decline, down 18% year-over-year and 16% from Q2, due to product transitions at a large customer.
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Gross margin was impacted by a $4 million contra revenue from the Amazon warrant, reducing it by 40 basis points.
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The company anticipates some short-term margin headwinds due to new product ramps and startup costs.
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Sequential growth in non-optical communications is expected to moderate, particularly in the automotive segment.
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The 1.6T product ramp is still in its early stages, with the bulk of the ramp expected in the future.
Q & A Highlights
Q: Can you explain the decline in Datacom revenue and its relation to 800GB sales? A: (Chaba, CFO) The decline in Datacom is primarily due to product transitions at a large customer. The 800GB sales decline is offset by strong growth in the Data Center Interconnect (DCI) segment, which falls under the below 800GB category. We still have 400GB programs in Datacom, which are tapering off now.
Q: What factors contributed to the lower gross margins this quarter, and what is the outlook for the next quarter? A: (Chaba, CFO) The gross margin was impacted by a $4 million warrant with Amazon, affecting it by about 40 basis points. Without this, margins would have been consistent with the previous quarter. For Q4, we anticipate some short-term margin headwinds due to new product ramps, but these are expected to be temporary.
Q: Can you provide more details on the 1.6T ramp and its impact on future quarters? A: (Seamus Grady, CEO) The 1.6T ramp is largely ahead of us. We've shipped some qualification builds, but the bulk of the ramp will occur in the second half of the year. We are gearing up to support our customers as they prepare to launch these products.
Q: How does the new relationship with Amazon Web Services impact your business, and what is the nature of the services provided? A: (Seamus Grady, CEO) We are starting with a specific product family and expect to expand over time. The agreement with Amazon does not exclude any products, and we are already engaged with two product types. The revenue from this partnership will ramp in fiscal 2026.