Fabrinet Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Karl Ackerman - BNP - Analyst : Yes, thank you gentlemen. For my first question, I was hoping to discuss telecom for a second. When should we expect to see record revenue in telecom? I guess, is that implied in your March quarter outlook? I asked because Telecom fell from about $400 million a quarter two years ago to a trough of $280 million in June of last year, but now you're seeing fraction coherent ZR modules and two large system business wins that appear to be just flowing into your results that do support this end market recovery. So you've got several things acting as tailwinds. So if you can talk about the visibility you see within telecom and when we should see revenue in that segment?

Question: Karl Ackerman - BNP - Analyst : Yeah. No, thank you for that. If I may have a follow-up, the growth in your silicon photonics business is now approaching record levels as well. I guess within silicon photonics, is the incremental growth coming from high-speed transceivers inside the data center? Or is it mainly coherent ZR for DCI and other telecom applications? Thank you.

Question: Karl Ackerman - BNP - Analyst : Got it. Thank you. Thank you, sir.

Question: Samik Chatterjee - JPMorgan - Analyst : Hi. Thanks for taking my questions. Seamus, you talked about the next generation product on, in, on in Datacom for the primary customer that you have here. And I think you've referenced sort of the strong visibility you have in ramping the next generation product. I mean, how, what's driving that confidence in terms of timing? You, you're guiding here to a moderation in three Q as well. So should we just conclude that the new product sort of ramps starting in four Q towards the end of the year and has the timing from the customer in terms of when that next product ramps, has that also changed or is it still pretty intact in terms of the timing that you were expecting to ramp the next generation product and have a follow up? Thank you.

Question: Samik Chatterjee - JPMorgan - Analyst : Okay. Got it. And related to the volumes that you're expected to ramp initially or even sort of volumes through the cycle as well as pricing on these sort of products, what is the capability that you have currently from the customer, and particularly if you compare it to 800,000 when you were initially ramping in terms of price and volume, how does the next-generation product compare?

Question: Samik Chatterjee - JPMorgan - Analyst : Alright, great. Thank you. Thank you for taking my questions. You're welcome.

Question: George Notter - Jefferies - Analyst : Hi there. Thanks very much guys. I guess I was going to ask the question of the day, I think, which is tariffs. Obviously, it's been something the industry has been concerned about for some time. I'm wondering if you guys are seeing incremental opportunity associated with tariffs coming in place now, was this an opportunity for Fabrinet to take share? Can you kind of give us a sense for what you're seeing from the customers in your conversations? Thanks.

Question: George Notter - Jefferies - Analyst : Got it. And then, I think part of the trick in this is that there is some lead time, moving manufacturing from one country or one geography to another is that, if there is a benefit is that, is that months away, quarters away, years away, like how do you think about what's, what's reasonable in terms of when it could help you?

Question: George Notter - Jefferies - Analyst : Super, thank. You.

Question: Ryan Koontz - Needham - Analyst : Great. Thanks for the question. Seamus, with your momentum in ZR and DCI, I wonder if you're contemplating or your customers are contemplating yet much of a transition over 800 ZR yet? Or are you really seeing 400 as the dominant force here in '25?

Question: Ryan Koontz - Needham - Analyst : Got it great. And it relates to your expectations. You talked about some lumpiness here on the Datacom side. Do you are, are you, is that primarily the your lower speed Datacom? Do you think that will suffer more or more the high end at 800? Do you think we will see a little of a slow down anything you can share there?

Question: Ryan Koontz - Needham - Analyst : It makes sense. And just last, if I could around, what's the rough time frame between your CapEx and when you can bring capacity online, we're talking months quarters.

Question: Ryan Koontz - Needham - Analyst : That's great, really impressive. Thank you, gentlemen.

Question: George Wang - Barclays - Analyst : Hey guys, thanks for taking my question. Just two quick one. Firstly, Just two quick ones. The first one, just I kind of want to hold me on 1.6T ramp. Just maybe kind of versus the last quarter. Are you guys seeing further delay or kind of status quo kind of still waiting for B-300 transition kind of as you guys called out later this year? And also kind of are there other impediments for wider adoption of the full 1.6T such as maybe the supply chain is waiting for the 800G network interface cards, which probably doesn't arrive until later this year. Can you kind of unpack some of the potential other underlying constraints aside from just your largest datacom customer kind of solving on the transition on the ballpark?

Question: George Wang - Barclays - Analyst : Okay, thanks. And just a quick one if I can, I just, in terms of Sienna business, obviously, it's anticipated is going to be a much bigger customer. You know, in the next few quarters, kind of FY26 as you guys called out, is there any sort of a refresh view in terms of, the peak revenue run rate? I mean, do you think it can, you know, surpass the Cisco kind of, 10% customer and any of the latest thoughts in terms of the prospect, for Sienna, recognizing it's early days, just curious if you have additional thoughts on that.

Question: George Wang - Barclays - Analyst : Okay. Thank you. I'll go back.

Question: Tim Savageaux - Northland Capital Markets - Analyst : Thanks, good afternoon. And Congrats on the results and outlook here. Maybe I can try and come at that from another direction. So first question, if you look at the sequential growth in telecom this quarter, you've been pretty clear about the ZR data center interconnect impact. fair to conclude that the other piece of that $50 million is the new program ramp with the major customer that you're talking about or anything to discuss within with regard to the broader telecom landscape recovering?

Question: Tim Savageaux - Northland Capital Markets - Analyst : Okay. Well, that makes this question a little easier. And Chabas referred to a couple of times, strengthen the business in Q3 and beyond. So I think, I think that fairly opens up a discussion about fiscal Q4. And, and Seamus, you just said that the CN ramp you do expect to begin fiscal '25. So I guess looking at the sum total of that, you're typically seasonally pretty strong in the June quarter anyway. But it looks like you got a fair bit of momentum heading into that June quarter regardless of whether you see 1.6 T start to ramp them, which, I imagine you might but feel free to comment on that as well. And just your assessment on that overall set up there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 03, 2025 / 10:00PM, FN.N - Q2 2025 Fabrinet Earnings Call

Question: Tim Savageaux - Northland Capital Markets - Analyst : Absolutely and well, quick one for me, I missed the non optical guide if you wouldn't mind repeating that briefly. And, and the last real question is, my assumption would be, I guess I'm trying to get you to rank order of magnitude, the size of the relative new systems opportunities. I would assume the NNA would be larger to much larger, but, but maybe not if you're willing to comment on that. Thanks.

Question: Mike Genovese - Rosenblatt Securities - Analyst : Great, thanks. I mean, just to clarify something that's been asked a couple of times already, I probably won't get a new answer but so on June versus September for when we might see, you know, Datacom grow again, sequentially. Is it just too early to tell or, I mean, do you have a, do you have a sense one way or the other, whether that would happen in June or September?

Question: Mike Genovese - Rosenblatt Securities - Analyst : And then I guess you probably, again, like, don't have a view on the overall market, but do you think that your results are representative of the overall 800 G market or, just, you just, I mean, obviously you have one customer there. Do you think the market is maybe doing better than, than what you guys are showing or, or do you have any idea about that?

Question: Mike Genovese - Rosenblatt Securities - Analyst : Okay. And this is just finally for me, if I could sneak one more in. Is there, are you seeing anything with E MLS, you know, particularly 200 G per lane or even 100 G per lane E MLS being hard to get, is that having any impact on, you know, either the size or the timing of the, of the 800 G market going to 1.6. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 03, 2025 / 10:00PM, FN.N - Q2 2025 Fabrinet Earnings Call

Question: Mike Genovese - Rosenblatt Securities - Analyst : Okay. I would ask one more if I could. As long as I have you know, look in the beginning of the 800 G, there weren't a lot of merchant guys ready yet. So the start of 800 G was a lot of share game for, for fina. Almost because you guys were the only player in town, the only game in town, I guess 1.6 everyone is had more of a time to sort of develop on the same timeline. But, but do you see 1.6 as an opportunity to gain, to gain some share or how do you think that that could play out?

Question: Mike Genovese - Rosenblatt Securities - Analyst : I appreciate that the, straightforward answers and the interesting discussion. Thanks so much.