Can AI Infrastructure Demand Accelerate Fabrinet's HPC Growth?

Fabrinet FN is seeing strong growth in its high-performance computing (HPC) business. Fabrinet's HPC business generated revenues of $86 million in the second quarter of fiscal 2026, rising from the previous quarter's $15 million. This represents a sequential increase of a whopping 473.3%, which reflects strong demand for FN's HPC products as hyperscale customers continue to invest in computing capacity and the ramp of HPC programs that support AI data center infrastructure.

The growth in HPC contributed significantly to the company’s non-optical communications segment. Fabrinet's non-optical communications segment posted revenues of $300 million, which increased 61% year over year and 30% on a sequential basis. This increase was primarily due to strong demand for HPC products, and looking ahead, management expects this business to continue growing as AI infrastructure spending increases.

Management stated that the current HPC program is still ramping up. Fabrinet is currently operating two fully automated production lines for this program, while additional lines are being qualified. Currently, the company is slightly more than halfway through the ramp. When the program is fully ramped, Fabrinet expects it to generate more than $150 million in revenues. The company expects to reach this level over the next few quarters as production capacity increases.

Fabrinet is also pursuing additional HPC opportunities. Management said its relationship with the current hyperscale customer is not exclusive, and the company is working to secure programs with other HPC customers. Continued investment in AI infrastructure could support further growth in Fabrinet’s HPC business. The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a year-over-year increase of around 33.1% and 18.5%, respectively.

How Competitors Fare Against Fabrinet

Fabrinet faces stiff competition from the likes of Coherent Corporation COHR and Lumentum Holdings LITE in the HPC and advanced optical manufacturing space.

Coherent recently launched Thermadite 800 liquid cold plates designed for cooling AI accelerators and HPC systems. Thermadite 800 offers thermal conductivity of 800 W/(m·K), which is about twice that of copper and can reduce chip temperatures by more than 15°C compared with conventional copper cold plates in high heat HPC and AI workloads. This launch enables Coherent to supply components that help manage heat in HPC and AI systems.

Lumentum mainly supplies the lasers, optical modules and networking components that enable high-speed data movement in HPC and AI data centers. Lumentum's optical transceivers and data interconnect solutions help transmit large volumes of data at high speeds, which is important for AI and HPC workloads.

Fabrinet’s Price Performance, Valuation & Estimates

Shares of Fabrinet have surged 36% in the past six months, outperforming the Zacks Electronics - Miscellaneous Components industry’s growth of 4.9%.

Fabrinet 6-Month Price Performance

Image Source: Zacks Investment Research

FN shares are overvalued, as suggested by the Value Score of F. In terms of the forward 12-month price-to-sales (P/S) multiple, Fabrinet shares are trading at 3.57X, higher than the industry’s average of 2.26X.

Fabrinet’s Forward 12-Month P/S Valuation

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Fabrinet’s fiscal 2026 earnings is pegged at $13.58 per share, up 2.2% over the past 60 days, suggesting a year-over-year increase of 33.5%.

Image Source: Zacks Investment Research

Currently, Fabrinet carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They include

Stock #1: A Disruptive Force with Notable Growth and Resilience

Stock #2: Bullish Signs Signaling to Buy the Dip

Stock #3: One of the Most Compelling Investments in the Market

Stock #4: Leader In a Red-Hot Industry Poised for Growth

Stock #5: Modern Omni-Channel Platform Coiled to Spring

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.

See Our Newest 5 Stocks Set to Double Picks >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Fabrinet (FN): Free Stock Analysis Report

Coherent Corp. (COHR): Free Stock Analysis Report

Lumentum Holdings Inc. (LITE): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research