Fabrinet (FN) Barclays 23rd Annual Global Technology Conference summary

DCI and telecom growth

• DCI (data center interconnect) was broken out from telecom due to strong growth, mainly driven by 400ZR and 800ZR products, with five main customers and robust demand outlook.

• Most DCI volume comes from two of the five customers, with efforts ongoing to add a sixth major customer.

• DCI is seen as a sustainable opportunity for multiple years, supported by customer CapEx and power commitments.

• Traditional telecom business is also growing, primarily through share gains, but is expected to have more stable, less exponential growth.

HPC business and diversification

• HPC business, primarily with AWS, is a new and promising category, with $15 million in initial qualification revenue and expectations for significant growth.

• The company is a pure contract manufacturer, targeting customers who own their own designs, and is optimistic about expanding to other HPC customers and products.

• Automated production lines are being qualified, with the ramp to a revenue plateau expected by the June quarter.

• Success in the AWS HPC program is seen as a proof point to expand into other AWS business areas, including optical interconnect.

Capacity expansion and operational flexibility

• Building 10, a 2 million sq ft facility, is under construction, adding $2.5 billion in revenue capacity, with 250,000 sq ft being pulled forward for early use.

• The company has flexibility to repurpose space quickly and plans for two additional 1 million sq ft buildings, each adding $1.25 billion in capacity.

• CapEx for expansion is success-based and fully funded from internal cash, with minimal downside risk if capacity is underutilized.

• Additional manufacturing space is being created by repurposing existing facilities and seeking new land.