Fabrinet reported second-quarter non-GAAP revenue of $600 million, up 35.9% year-over-year, driven by strong deliveries of optical transceivers and cables for data-center networks. Non-GAAP net income rose 28.7% to $85 million, or $3.36 per share, marking the company’s fastest top-line growth since its IPO. Management highlighted that non-AI product lines also contributed meaningfully to the beat, with industrial and traditional telecom segments growing 18% and 22% year-over-year, respectively.

Despite the robust quarter, Fabrinet flagged two areas of caution in its AI business. First, the timing of large hyperscale customer orders has shifted into late Q3, creating lumpiness in AI-related revenue recognition. Second, while AI infrastructure spending remains strong, some customers are reallocating budgets toward software optimization, which may temper demand for new optical hardware. As a result, management lowered its AI segment growth outlook from 50% to a range of 30%–35% for the full fiscal year.

Fabrinet’s automotive division saw a sequential revenue decline of 12%, reflecting industry-wide supply constraints and slower ramp of next-generation infotainment systems. Management attributed the softness to extended qualification cycles with Tier-1 customers and a cautious production restart among major automakers. However, the company expects a recovery in late fiscal 2026 as new electric-vehicle platforms begin high-volume production.

Following the lowered guidance on AI cadence and automotive drag, a leading sell-side analyst downgraded Fabrinet from Buy to Hold, citing a richer valuation multiple that now trades at 22× forward non-GAAP earnings. The analyst noted that while Fabrinet’s long-term growth drivers remain intact, current expectations have priced in an exceptional AI cycle, leaving limited upside without further execution beats.