Fabrinet's shares tumbled despite beating Q4 expectations and providing strong guidance, primarily due to a sequential decline in Datacom revenue attributed to reduced sales to Nvidia. This weakness overshadowed strong performance in Telecom and other segments, raising concerns about customer concentration and competitive pressures.
Fabrinet reported strong fiscal Q4 results, beating revenue and EPS estimates, and provided robust Q1 FY27 guidance. However, the stock tanked because investors focused on a 1% sequential decline in Datacom revenues, specifically due to reduced sales to Nvidia. This suggests potential market share loss to Chinese competitors, as highlighted by Needham. While new customers like Amazon are offsetting some of this, the market is reacting negatively to the perceived weakness with a key customer and potential opacity in management's product re-segmentation. This creates short-term volatility for FN, but long-term, the company's aggressive capacity expansion and broadening customer base suggest continued growth potential if demand trends hold.