Fabrinet 2025 Q3 Earnings Misses Targets Amidst 0.5% Net Income Growth

Fabrinet (FN) reported its fiscal 2025 Q3 earnings on May 06th, 2025. The company's revenue of $871.80 million fell short of the estimated $882.31 million. Non-GAAP EPS also missed expectations, coming in at $2.52 compared to the anticipated $2.57. Despite these misses, Fabrinet raised its guidance for Q4, forecasting GAAP net income per diluted share of $2.32 to $2.47 and non-GAAP net income per diluted share of $2.55 to $2.70, signaling confidence in future performance.

Revenue
Fabrinet's total revenue for fiscal 2025 Q3 witnessed a 19.2% increase, reaching $871.80 million compared to $731.53 million in 2024 Q3. This growth was significantly driven by the optical communications segment, which generated $657.23 million. Additionally, the automotive, lasers, and other segments contributed $214.57 million, collectively achieving the total revenue of $871.80 million.

Earnings/Net Income
Fabrinet's EPS saw a slight increase of 1.3%, rising to $2.26 in 2025 Q3 from $2.23 in 2024 Q3, demonstrating continued earnings growth. Net income increased by 0.5% to $81.29 million from $80.92 million in the previous year's quarter, reflecting stable profitability. The marginal EPS growth indicates a steady performance but not significant improvement.

Price Action
The stock price of Fabrinet climbed 5.05% during the latest trading day, edged down 1.30% over the most recent full trading week, and surged 18.71% month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing Fabrinet shares post-revenue raise quarter-over-quarter and holding for 30 days yielded a modest 2.03% return over the past five years. This significantly underperformed the benchmark's 83.12% return, highlighting the strategy's inefficiency. The low Sharpe ratio of 0.05 indicates poor risk-adjusted returns. Furthermore, the strategy suffered a maximum drawdown of -12.32%, underscoring its vulnerability to potential losses. The combination of low returns and high risk suggests a need for reevaluation of such investment strategies.

CEO Commentary
Seamus Grady, Chief Executive Officer of Fabrinet, highlighted a robust performance in the third quarter, achieving record revenue of $872 million, exceeding guidance expectations. He noted strong growth in the telecom sector that counterbalanced a predicted decline in datacom revenue. The company also delivered non-GAAP EPS above guidance, reflecting effective execution by the team. Looking forward, Grady expressed optimism and confidence in Fabrinet's ability to sustain strong performance through the fourth quarter and into fiscal year 2026.

Guidance
Fabrinet anticipates fourth quarter revenue to range between $860 million and $900 million. The expected GAAP net income per diluted share is projected between $2.32 and $2.47, while non-GAAP net income per diluted share is forecasted to fall between $2.55 and $2.70. This guidance is based on approximately 36.3 million fully diluted shares outstanding.

Additional News
In recent developments, Fabrinet announced no major mergers or acquisitions but highlighted significant changes in its institutional investment landscape. Wellington Management Group LLP significantly reduced its holdings, removing 502,801 shares in Q4 2024. Conversely, Norges Bank and Capital Research Global Investors substantially increased their positions, adding 432,435 and 363,228 shares respectively. These shifts reflect diverse investor sentiment and strategic realignment among major stakeholders. Additionally, Fabrinet has been actively repurchasing shares, with a notable buyback of 103,475 ordinary shares in recent months, indicating confidence in its long-term growth prospects.