Investing.com -- Shares in Fabrinet (NYSE:FN) sank nearly 10% in premarket trading Tuesday despite the company’s beat-and-raise performance in the second quarter of fiscal 2025.
The company delivered adjusted earnings per share (EPS) of $2.61 in Q2, exceeding the consensus estimate of $2.50. Revenue rose 17% year-over-year to $833.6 million, beating forecasts of $813.86 million.
Fabrinet CEO Seamus Grady highlighted "continued business momentum" in Q2, citing strong demand in telecom, particularly for datacenter interconnect products, and progress on recent systems wins.
While noting that datacom demand has "slightly moderated near-term," he said Fabrinet still expects "more rapid growth as next-generation products ramp production."
The telecom segment, up 24% year-over-year, drove nearly all of the company’s 17% total revenue growth. However, datacom declined 9% as the ramp-up of new 1.6T transceivers for Nvidia (NASDAQ:NVDA)'s Blackwell remained delayed.
For the third quarter, Fabrinet expects adjusted EPS between $2.55 and $2.63, ahead of the $2.55 analyst estimate. It also projects revenue in the range of $850 million to $870 million, surpassing the $825 million forecast.
“Even with Datacom not expected to rebound in F3Q, guidance impressed on expected continued strength in Telecom (BCBA:TECO2m), benefiting from both share gains and strong momentum in 400ZR products,” Needham analysts led by Ryan Koontz commented in a post earnings note.
“Management confidence in sustained growth was evident with its recent groundbreaking for its massive building 10 capacity expansion,” they added.
Needham hiked its Fabrinet estimates for the fiscal 2025 and 2026 years, while maintaining a Buy rating and a price target of $280.
Alongside the results, Fabrinet said its board approved an expansion of its share repurchase program, authorizing up to an additional $100 million in buybacks.
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