Key Takeaways:
Fabrinet (NYSE: FN) posted third-quarter results that beat analyst estimates on strong demand for its optical communication products, while competitor Applied Optoelectronics (NASDAQ: AAOI) reported a wider-than-expected loss despite revenue growth.
"Growth in the Optical Communications segment remained robust, with revenues rising 35 percent year over year to $888.7 million," Zacks Investment Research noted in a May 13 report, highlighting the divergence between the two companies.
Fabrinet reported adjusted earnings of $3.72 per share for the quarter ending March 27, a 47.6 percent year-over-year increase that surpassed the Zacks Consensus Estimate by 3.9 percent. Revenue climbed 39.3 percent to $1.214 billion, exceeding consensus by 1.56 percent. In contrast, Applied Optoelectronics posted an adjusted loss of 7 cents per share on revenue of $151.1 million. While revenue grew 51.4 percent year over year, the loss was wider than the consensus estimate of 5 cents.
The results underscore the intense demand for optical components driven by artificial intelligence data center buildouts, a theme that has lifted related stocks like Lumentum (NASDAQ: LITE) and Coherent (NYSE: COHR). However, Fabrinet's performance shows a stronger ability to convert that demand into profitability. The company's data center interconnect revenues jumped 90 percent year over year.
Applied Optoelectronics has seen its stock gain a dramatic 441 percent year-to-date on investor enthusiasm for its 800G product cycle. The company confirmed its first volume shipments to a hyperscale customer in the first quarter. However, Fabrinet's consistent execution and debt-free capacity expansion have earned it a Zacks Rank #2 (Buy), compared to a #3 (Hold) for AAOI.
Looking ahead, Fabrinet guided for fourth-quarter revenue between $1.25 billion and $1.29 billion, with adjusted earnings of $3.72 to $3.87 per share. Applied Optoelectronics projects second-quarter revenue of $180 million to $198 million, with adjusted results ranging from a loss of 3 cents to a profit of 3 cents per share.
The divergent results suggest Fabrinet's deep supply-chain integration and broad market exposure provide a more stable growth profile. Investors will watch Applied Optoelectronics' second-quarter results, expected in early August, to see if the company can control costs as it ramps production to meet demand.
This article is for informational purposes only and does not constitute investment advice.
