Fabrinet Stock Rises 9% in 3 Months: Should You Buy, Sell or Hold?

Fabrinet FN shares have surged 9.2% in the past three months, significantly outperforming the Electronics - Miscellaneous Components industry’s growth of 2.5% and the broader Computer and Technology sector’s decline of 0.6%.

The rise in share price can be attributed to the better-than-expected second-quarter fiscal 2026 results. Fabrinet delivered strong second-quarter fiscal 2026 non-GAAP earnings of $3.36 per share, which beat the Zacks Consensus Estimate by 3.07%. Revenues of $1.13 billion surpassed the consensus mark by 5.03%. The figure jumped 36% year over year and 16% sequentially. Strength in Fabrinet’s telecom, datacom and high-performance computing (HPC) business is aiding in the company’s overall revenue growth.

The stock also outperformed its industry peers, including nVent Electric NVT, American Superconductor AMSC and Universal Display OLED. In the past three months, shares of nVent Electric have gained 5.1%, while American Superconductor and Universal Display shares have plunged 7.2% and 20.6%, respectively.

3-Month Price Return Performance

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This outperformance of Fabrinet shares raises the question: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.

Optical Communications Momentum Drives Fabrinet’s Growth

Fabrinet is witnessing strong growth in its optical communications business. Revenues from the Optical communications business reached $833 million, rising 29% year over year and 11% on a sequential basis in the second quarter of fiscal 2026. Optical communications remained the largest contributor to Fabrinet’s business and played a key role in pushing total revenues to a record $1.13 billion for the second quarter.

The telecom business was the biggest driver of optical communications growth. Telecom revenues surged 59% year over year to $554 million and grew 17% on a sequential basis as demand across multiple customers remained strong. Revenues from data center interconnect products reached $142 million, rising 42% on a year-over-year basis. Here, growth is being driven by rising shipments of coherent optical modules, particularly 400ZR and 800ZR modules used in data center interconnect networks.

Datacom performance also showed improvement during the second quarter. Datacom revenues totaled $278 million, increasing 2% on a sequential basis. Management expects the Datacom segment to witness continued sequential growth, backed by strong demand where the company continues to ship significant volumes of high-speed transceivers used in large data center networks.

Looking ahead, Fabrinet expects telecom and datacom markets to show strong growth in the third quarter of fiscal 2026. Strong demand for optical products used in telecom and data center networks is expected to support further growth in the optical communications segment. The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a year-over-year increase of around 33.1% and 18.5%, respectively.

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Strong HPC Demand Boosts Fabrinet’s Prospects

Fabrinet is seeing strong growth in its HPC business. The company’s HPC business generated revenues of $86 million in the second quarter of fiscal 2026, up 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 is contributing 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. 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 customers. The above-mentioned factors show that continued investment in AI infrastructure could support further growth in Fabrinet’s HPC business.

Valuation: FN Trades Below Sector and Peers

Fabrinet is currently trading at a lower price-to-sales (P/S) multiple, below the Zacks Computer and Technology sector. FN’s forward 12-month P/S ratio sits at 3.58X, significantly lower than the sector’s forward 12-month P/S ratio of 6.21X.

Forward 12-Month P/S Valuation

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FN stock trades at a lower P/S multiple compared with its peers as well, including nVent Electric, American Superconductor and Universal Display. At present, nVent Electric, American Superconductor and Universal Display have P/S multiples of 3.82X, 3.99X and 6.33X, respectively.

Conclusion: Buy Fabrinet Stock Right Now

Fabrinet is benefiting from strong demand in its optical communications and HPC businesses, which is driving its overall revenue growth. The company is witnessing strong growth in telecom, datacom and AI-related infrastructure, which is expected to contribute positively to its prospects in the near term.

Further, the company’s reasonable valuation offers downside protection as well, making the stock an attractive buy for investors looking for stability and steady upside.

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

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

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