This Nvidia Supplier Is Seeing Endless Data-Center Demand. Why the Stock Is Sinking.

Fabrinet CEO Seamus Grady told analysts on the company’s earnings call that “there looks to be no end in sight to the demand from the customers.” (Dreamstime)

Shares of Fabrinet tumbled Tuesday as artificial-intelligence companies were under pressure and investors were concerned about some of the data-center component supplier’s business segments that outweighed a strong quarterly earnings report and guidance that was above estimates.

Fabrinet stock fell 11% to $531.48 in premarket trading on Tuesday after announcing better-than-expected fiscal fourth-quarter earnings and first-quarter guidance.

The company late Monday posted adjusted earnings of $4.10 a share, up from $2.65 a year ago and above Wall Street’s call for $3.81. Revenue grew 45% to $1.32 billion, beating the analysts’ estimates of $1.28 billion, according to FactSet.

The solid quarterly revenue was primarily due to robust demand from data centers. CEO Seamus Grady said on the company’s earnings call with analysts that “there looks to be no end in sight to the demand from the customers.”

Fabrinet expects fiscal first-quarter earnings of $4.10 to $4.25 a share, coming in well above Wall Street’s $3.98 forecast. The company sees first-quarter revenue totaling between $1.375 billion and $1.425 billion, exceeding analysts’ expectations of $1.324 billion.

Wall Street, however, saw a few blemishes in the report.

Revenue at Fabrinet’s data-communications segment declined 1% sequentially to $258 million, extending recent softness. The company’s high-performance computing business also was a concern for investors even as revenue increased 11% sequentially to $118 million.

B. Riley analyst Dave Kang on Tuesday lowered his Fabrinet stock price target to $598 from $635 and maintained a Neutral rating on the “languishing datacom” segment.

Fabrinet also is a major supplier for Nvidia , but fiscal 2026 revenue from the chips giant declined 21% to $742 million, according to B. Riley.

Barclays and J.P. Morgan, meanwhile, increased Fabrinet stock price targets, but both firms noted that the company’s data-communications and high performance compute businesses were reasons for concern.

Barclays raised its price target to $739 from $702 and J.P. Morgan hiked its Fabrinet price target to $695 from $680.

Shares have been on a hot streak. Entering the trading session on Tuesday, the stock has gained 31% this year and more than 80% over the past 12 months.

The strong stock performance could also be contributing to the decline Tuesday, along with general weakness in many AI-infrastructure names.

Write to Kit Norton at kit.norton@barrons.com

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