Core Insights - Fabrinet (FN) and TE Connectivity (TEL) are key players in the electronics and industrial markets, with FN specializing in high-precision optical components and TEL in connectivity and sensor solutions [1][2] - Both companies are positioned to benefit from growth drivers such as artificial intelligence infrastructure, electric vehicles, and industrial automation, making them direct competitors in high-growth connectivity markets [2] Fabrinet (FN) Overview - Fabrinet is recognized for its contract manufacturing of high-end optical communications equipment, serving major clients like NVIDIA and Cisco [3] - In Q4 fiscal 2025, Fabrinet reported revenues of $910 million, a 21% increase year over year, with optical communications contributing $689 million, reflecting a 15% rise [3][4] - The company’s optical packaging capabilities are crucial for AI infrastructure, with data center interconnect revenue growing 45% year over year to $107 million [4] - The Zacks Consensus Estimate for optical communications revenues in Q1 fiscal 2026 is $699.92 million, an 11.8% increase year over year, with earnings projected at $2.83 per share, up 2.2% [4] Risks for Fabrinet (FN) - Fabrinet faces near-term challenges, including component supply constraints and margin pressure from new product launches [5] - The company has a high concentration risk, with NVIDIA accounting for 28% of fiscal 2025 revenues and the top 10 customers making up 86% [5] TE Connectivity (TEL) Overview - TE Connectivity is a diversified technology leader providing connectivity and sensor solutions across various markets, including transportation and industrial sectors [6] - In Q3 fiscal 2025, TEL reported revenues of $4.53 billion, a 14% increase year over year, with margins near 20% in both Transportation and Industrial segments [6][7] - TEL anticipates over $800 million in AI-related revenue for fiscal 2025, more than double the previous year [8] Strengths of TE Connectivity (TEL) - TEL's localized manufacturing, with over 70% of production near customers, mitigates supply chain risks [9] - The company’s strong free cash flow supports shareholder returns and strategic acquisitions, enhancing its competitive position [9] Share Performance and Valuation - Year-to-date, Fabrinet shares have increased by 69.5%, while TE Connectivity shares have appreciated by 47.1% [10] - Fabrinet trades at a higher price-to-sales (P/S) ratio of 3.93 compared to TEL's 3.78, reflecting greater risks associated with customer concentration and cyclical demand [13] Conclusion - Both companies are integral to the electronics ecosystem, with Fabrinet focusing on high-speed optical communications and TEL offering diversified exposure across multiple markets [16] - TEL is recommended as a better investment option due to its diversified market presence and strong cash flow, compared to Fabrinet's concentrated customer base and cyclical risks [16]

Group 1 - Fabrinet (NYSE: FN) has demonstrated strong and steady growth in both top and bottom lines, indicating solid momentum in its performance [1] - The company's current valuation is higher than its five-year average, but this increase is considered justified due to its growth prospects [1] - The focus of the analysis includes foreign stocks, particularly in the Nordic market, as well as growth stocks in the U.S. market, highlighting a diverse investment approach [1]

Core Viewpoint - Fabrinet reported better-than-expected fourth-quarter financial results for fiscal 2025, showcasing strong revenue and earnings performance [1][2]. Financial Performance - Fourth-quarter revenue reached $909.69 million, surpassing analyst estimates of $884.87 million [1]. - Adjusted earnings for the fourth quarter were $2.65 per share, exceeding estimates of $2.64 per share [1]. - The CEO highlighted that the fourth quarter capped off a remarkable year with record quarterly revenue and non-GAAP EPS at an all-time high [2]. Future Guidance - For the fiscal first quarter, Fabrinet expects revenue to be between $910 million and $950 million, compared to estimates of $916.72 million [3]. - The company anticipates first-quarter adjusted earnings to range from $2.75 to $2.90 per share, against estimates of $2.74 per share [3]. Market Reaction - Following the earnings announcement, Fabrinet shares fell by 10.3%, trading at $293.32 [3]. Analyst Ratings and Price Targets - B. Riley Securities maintained a Neutral rating and raised the price target from $184 to $220 [5]. - Barclays maintained an Equal-Weight rating and increased the price target from $234 to $329 [5]. - Rosenblatt maintained a Buy rating with a price target of $360 [5]. - Needham reiterated a Buy rating and maintained a price target of $350 [5].

Core Viewpoint - Despite exceeding earnings expectations, Fabrinet's stock fell by 9.82% in early trading on Tuesday [1] Financial Performance - Fabrinet reported adjusted earnings per share of $2.65, slightly above the FactSet analyst expectation of $2.64 [1] - The company's revenue for the fourth fiscal quarter was $909.7 million, surpassing the consensus estimate of $883.1 million [1]

Group 1 - Home Depot shares rose by 1.9%, with a same-store sales growth of 1% in Q2 [1] - Intel shares increased by 5.3% following a $2 billion investment from SoftBank [1] - Home Depot shares also saw a rise of 1.4%, maintaining the same-store sales growth of 1% in Q2 [1] Group 2 - PatSnap shares surged by 6.7%, with Q4 performance exceeding Wall Street expectations [1] - Fabrinet shares fell by 11.9%, despite its Q4 results surpassing expectations [1] - New Oriental shares declined by 1.8% after rumors regarding the CEO's involvement in related-party transactions were denied [1]

Part I [Business](index=8&type=section&id=Item%201.%20Business) Fabrinet provides advanced optical packaging and precision manufacturing services to OEMs, achieving **18.6% revenue growth to $3.42 billion** in fiscal year 2025 driven by diverse market demand - Fiscal Year 2025 vs 2024 Financial Highlights | Metric | Fiscal Year 2025 | Fiscal Year 2024 | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $3.42 billion | $2.88 billion | +18.6% | | **Optical Communications Revenue %** | 76.6% | 79.4% | -2.8 p.p. | | **Automotive, Industrial Lasers, Other Revenue %** | 23.4% | 20.6% | +2.8 p.p. | - The company provides advanced optical packaging and precision manufacturing services to OEMs of complex products including optical communication components, industrial lasers, automotive components, medical devices, and sensors[21](index=21&type=chunk) - Key growth strategies include strengthening its presence in the optical communications market, leveraging technology to diversify into industrial lasers and medical markets, extending vertical integration in customized optics, and expanding its client base geographically[37](index=37&type=chunk) - As of June 27, 2025, the company's facilities comprised approximately **3.7 million total square feet**, with the majority (**3.3 million sq. ft.**) located in Thailand[28](index=28&type=chunk) - The company has a high customer concentration, with **NVIDIA Corporation** and **Cisco Systems, Inc.** contributing **27.6%** and **18.2%** of revenues, respectively, in fiscal year 2025[50](index=50&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including high customer concentration, foreign currency fluctuations, intense competition, and geopolitical instability in key operating regions - The company is highly dependent on a small number of customers, with two customers accounting for **45.8%** and **48.5%** of revenues in fiscal years 2025 and 2024, respectively[79](index=79&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk) - A majority of operating expenses are paid in Thai baht while revenues are primarily in U.S. dollars, creating significant exposure to currency exchange rate fluctuations, with the U.S. dollar depreciating approximately **8.5%** against the Thai baht since June 30, 2023[111](index=111&type=chunk) - The company's primary competition comes from the internal manufacturing capabilities of its current and prospective customers, especially when they have excess capacity[90](index=90&type=chunk) - Operations are subject to governmental export and import controls, with the addition of Huawei to the U.S. BIS Entity List in May 2019 immediately impacting customer orders and expected to continue to adversely affect orders[117](index=117&type=chunk)[118](index=118&type=chunk) - The majority of assets and manufacturing operations are located in Thailand, making the business susceptible to political, social, and economic instability in the country[122](index=122&type=chunk)[123](index=123&type=chunk) [Unresolved Staff Comments](index=37&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - Not applicable[177](index=177&type=chunk) [Cybersecurity](index=37&type=section&id=Item%201C.%20Cybersecurity) Fabrinet's cybersecurity program, based on ISO and NIST frameworks, is overseen by the Audit Committee and has not experienced a material breach in the past three years - The company's cybersecurity program is based on the International Organization for Standardization (ISO) and the National Institute of Standards and Technology (NIST) Cybersecurity Framework[179](index=179&type=chunk) - The Audit Committee of the Board of Directors oversees cybersecurity risk, receiving quarterly briefings from the VP of Information Technology and Information Security[183](index=183&type=chunk) - The company has not experienced a material security breach in its systems, or to its knowledge, in its third-parties' systems, in the past three years[181](index=181&type=chunk) [Properties](index=39&type=section&id=Item%202.%20Properties) The company's principal facilities are located in Thailand, China, the United States, and Israel, with the largest owned campuses in Thailand totaling over **3.2 million square feet** - Principal Facilities as of June 27, 2025 | Location | Owned/Leased | Approximate Square Footage | | :--- | :--- | :--- | | Pinehurst Campus, Bangkok, Thailand | Owned | 1,731,000 | | Hemaraj Campus, Chonburi, Thailand | Owned | 1,522,000 | | Fuzhou, Fujian, PRC | Leased | 348,000 | | Santa Clara, California, United States | Owned | 72,000 | | Mountain Lakes, New Jersey, United States | Leased | 28,000 | | Yokneam Illit, Israel | Leased | 27,000 | [Legal Proceedings](index=39&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in a legal proceeding in China regarding a purported 1997 investment in a subsidiary, with potential liability currently unquantifiable - A complaint was filed against the company's PRC subsidiary, Casix, alleging unjust enrichment related to a 1997 investment, predating Fabrinet's acquisition, with plaintiffs seeking **RMB 400 million** plus interest[188](index=188&type=chunk) - The initial lawsuit was dismissed on jurisdictional grounds in September 2024, but the plaintiffs have appealed the ruling, and the company cannot quantify potential liability at this early stage[189](index=189&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[192](index=192&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Fabrinet's ordinary shares are listed on the NYSE under "FN", with no current dividend plans, and a share repurchase program with **$174.3 million** remaining authorization as of June 27, 2025 - The company currently intends to retain any earnings for use in its business and does not intend to pay dividends on its ordinary shares[196](index=196&type=chunk) - Share Repurchase Activity (FY 2025) | Metric | Value | | :--- | :--- | | **Aggregate Authorization** | $534.3 million | | **Shares Repurchased in FY2025** | 561,858 | | **Aggregate Purchase Price in FY22025** | $125.7 million | | **Average Price Per Share** | $223.76 | | **Remaining Authorization (as of June 27, 2025)** | $174.3 million | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting an **18.6% revenue increase** to **$3.42 billion** in fiscal 2025, strong liquidity, and key financial risks including foreign exchange exposure - Revenues by Geographic Region (% of Total Revenues) | Region | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | North America | 43.4% | 36.5% | 48.0% | | Asia-Pacific | 48.4% | 57.1% | 43.2% | | Europe | 8.2% | 6.4% | 8.8% | - Revenues by End Market (in thousands) | End Market | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | **Optical Communications** | $2,619,355 | $2,289,015 | $2,008,347 | | *Datacom* | *$1,155,944* | *$1,150,307* | *$520,796* | | *Telecom* | *$1,463,411* | *$1,138,708* | *$1,487,551* | | **Non-Optical Communications** | $799,972 | $593,952 | $636,890 | | *Automotive* | *$464,369* | *$327,188* | *$368,581* | | *Industrial Laser* | *$153,068* | *$122,722* | *$125,415* | | *Others* | *$182,535* | *$144,042* | *$142,894* | | **Total Revenue** | **$3,419,327** | **$2,882,967** | **$2,645,237** | - FY2025 revenue increased by **18.6%** to **$3.42 billion**, primarily due to increased demand for both optical communications products (up **14.4%**) and non-optical communications products (up **34.7%**)[259](index=259&type=chunk) - The company's effective tax rate increased to **6.4%** in FY2025 from **4.9%** in FY2024, primarily due to higher income subject to tax and an IRS audit assessment[267](index=267&type=chunk) - As of June 27, 2025, the company had **$934.2 million** in cash, cash equivalents, and short-term investments with no outstanding debt[282](index=282&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to interest rate, foreign currency, and credit risks, with significant foreign currency exposure to the Thai baht and RMB, which it hedges using derivatives - The company has significant foreign currency risk as a substantial portion of payroll and operating expenses are in Thai baht and RMB, while the majority of revenues are in U.S. dollars[299](index=299&type=chunk) - A hypothetical **10% weakening** in the U.S. dollar against the Thai baht and RMB would have resulted in a decrease in the company's net dollar position of approximately **$9.4 million** as of June 27, 2025[302](index=302&type=chunk) - Interest rate risk exists for the company's cash, cash equivalents, and short-term investments totaling **$934.2 million**, where a **10 basis point decline** in interest rates during fiscal year 2025 would have decreased interest income by approximately **$0.9 million**[296](index=296&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2023-2025, along with the independent auditor's report and detailed notes on accounting policies - The independent auditor, PricewaterhouseCoopers ABAS Ltd., issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of June 27, 2025[309](index=309&type=chunk) - Consolidated Balance Sheet Highlights (in thousands) | Account | June 27, 2025 | June 28, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$2,831,432** | **$2,338,519** | | Cash and cash equivalents | $306,425 | $409,973 | | Short-term investments | $627,819 | $448,630 | | Trade accounts receivable, net | $758,894 | $592,452 | | Inventories | $581,015 | $463,206 | | **Total Liabilities** | **$849,620** | **$592,774** | | Trade accounts payable | $637,417 | $441,835 | | **Total Shareholders' Equity** | **$1,981,812** | **$1,745,745** | - Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | **Revenues** | **$3,419,327** | **$2,882,967** | **$2,645,237** | | **Gross Profit** | $413,349 | $356,118 | $336,273 | | **Operating Income** | $324,447 | $277,605 | $251,704 | | **Net Income** | **$332,527** | **$296,181** | **$247,913** | | **Diluted EPS** | $9.17 | $8.10 | $6.73 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=107&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - Not applicable[518](index=518&type=chunk) [Controls and Procedures](index=107&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of June 27, 2025, with no material changes during the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[519](index=519&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company maintained effective internal control over financial reporting as of June 27, 2025[524](index=524&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of fiscal 2025 that materially affected, or are reasonably likely to materially affect, internal controls[520](index=520&type=chunk) [Other Information](index=107&type=section&id=Item%209B.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 27, 2025[525](index=525&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=107&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[526](index=526&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=108&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's definitive proxy statement for its 2025 annual general meeting of shareholders - Information for this item is incorporated by reference from the 2025 Proxy Statement[528](index=528&type=chunk) [Executive Compensation](index=108&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the company's definitive proxy statement for its 2025 annual general meeting of shareholders - Information for this item is incorporated by reference from the 2025 Proxy Statement[529](index=529&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=108&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the company's definitive proxy statement for its 2025 annual general meeting of shareholders - Information for this item is incorporated by reference from the 2025 Proxy Statement[530](index=530&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=108&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the company's definitive proxy statement for its 2025 annual general meeting of shareholders - Information for this item is incorporated by reference from the 2025 Proxy Statement[531](index=531&type=chunk) [Principal Accountant Fees and Services](index=108&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item is incorporated by reference from the company's definitive proxy statement for its 2025 annual general meeting of shareholders - Information for this item is incorporated by reference from the 2025 Proxy Statement[532](index=532&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=109&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report on Form 10-K, including financial statements, an index of exhibits, and certifications - This section contains the index of all exhibits filed with or incorporated by reference into the Form 10-K[535](index=535&type=chunk)[536](index=536&type=chunk)[538](index=538&type=chunk) [Form 10-K Summary](index=113&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[541](index=541&type=chunk)

Group 1 - U.S. stock futures showed mixed results, with S&P 500 futures declining approximately 0.1% [1] - Fabrinet reported better-than-expected fourth-quarter financial results for fiscal 2025, with expected first-quarter revenue between $910 million and $950 million, slightly below estimates of $916.72 million [2] - Fabrinet's expected first-quarter adjusted earnings are projected to be between $2.75 and $2.90 per share, slightly above the estimate of $2.74 per share [2] Group 2 - Fabrinet shares fell 9.7% to $295.54 in pre-market trading following the earnings report [2] - Xunlei Limited experienced a decline of 8.4% to $8.05 in pre-market trading after a significant increase of around 38% on the previous day [4] - Precigen, Inc. shares dipped 5.8% to $2.78 in pre-market trading after the FDA approved PAPZIMEOS [4] - Adecoagro S.A. shares fell 4.5% to $8.79 in pre-market trading after reporting disappointing quarterly results [4] - Immatics NV shares decreased by 3.9% to $5.97 in pre-market trading [4] - Tonix Pharmaceuticals Holding Corp shares fell 3.9% to $38.51 in pre-market trading following FDA approval of Tonmya for fibromyalgia in adults [4]

Market Overview - Market participants began the trading week without a clear catalyst, resulting in flat trading with the Dow down 14 points (-0.03%) and the S&P 500 down 1 point (-0.02%) [1] - The Nasdaq saw a slight gain of +0.03%, while the small-cap Russell 2000 outperformed with a +0.35% increase [1] Homebuilders Confidence - Homebuilders Confidence for August decreased to 32, lower than the expected 34 and matching June's level, which is the lowest since December 2021 [2] - Homebuilders are increasing incentives for new home sales to a five-year high due to weak demand and elevated mortgage rates [2] Interest Rate Outlook - No interest rate cuts are expected from the Federal Reserve until at least September 17, with a projected cut of 25 basis points [3] - This potential cut would bring the Fed funds rate below 4% for the first time in 2.5 years [3] Upcoming Housing Data - Upcoming housing data includes Housing Starts and Building Permits for July, expected to be slightly lower at 1.30 million and 1.39 million, respectively [4] - Existing Home Sales are anticipated to improve to 4.0 million from 3.93 million reported last month [4] Earnings Results - Palo Alto Networks reported fiscal Q4 earnings of 95 cents per share, exceeding the consensus of 88 cents, with revenues of $2.54 billion surpassing expectations of $2.50 billion [5] - Following the positive earnings report, Palo Alto Networks shares jumped +7% [5] - Fabrinet also reported Q4 earnings of $2.65, beating consensus by a penny, with revenues of $909.7 million exceeding the expected $883.1 million [6] - Despite positive guidance, Fabrinet shares fell -1.5% after a year-to-date gain of +48% [6]

Core Viewpoint - Fabrinet reported quarterly earnings of $2.65 per share, exceeding the Zacks Consensus Estimate of $2.64 per share, and showing an increase from $2.41 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +0.38%, and the company had a previous quarter surprise of +2.02% with earnings of $2.52 per share against an expectation of $2.47 per share [2] - Fabrinet's revenues for the quarter ended June 2025 were $909.69 million, surpassing the Zacks Consensus Estimate by 3.01%, compared to $753.26 million in the same quarter last year [3] Stock Performance - Fabrinet shares have increased approximately 50% since the beginning of the year, significantly outperforming the S&P 500's gain of 9.7% [4] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.77 on revenues of $919.75 million, and for the current fiscal year, it is $11.94 on revenues of $3.95 billion [8] - The Zacks Rank for Fabrinet is 2 (Buy), indicating expectations for the stock to outperform the market in the near future [7] Industry Context - Fabrinet operates within the Zacks Electronics - Miscellaneous Components industry, which is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable industry outlook [9]

Financial Data and Key Metrics Changes - Fourth quarter revenue reached $910 million, exceeding guidance and up more than 20% year-over-year and 4% sequentially [5][12] - Full fiscal year 2025 revenue was a record $3.4 billion, representing a 19% increase from the prior year [6][18] - Non-GAAP EPS for Q4 was $2.65, a new quarterly record, while full year non-GAAP EPS hit $10.17 [6][12] Business Line Data and Key Metrics Changes - Optical Communications revenue was $689 million in Q4, up 15% year-over-year and 5% sequentially [13] - Telecom revenue reached $412 million, a 46% increase from a year ago and 1% from Q3, driven by data center interconnect (DCI) products [9][13] - DCI revenue was reported for the first time at $107 million, representing 12% of overall revenue [13] - Datacom revenue was $277 million, down 12% year-over-year but up 10% sequentially [14] - Non-optical communications revenue was $221 million, a 41% increase year-over-year [16] Market Data and Key Metrics Changes - Telecom business momentum is expected to continue into Q1, particularly with the ramp-up of a next-generation system program [9][21] - Datacom demand is anticipated to surge, although temporary component supply challenges are being faced [10][21] - Automotive revenue was $128 million, showing a slight decline but better than expected [16] Company Strategy and Development Direction - The company is evaluating options to accelerate the completion of Building 10 to meet increasing customer demand [8][19] - A significant partnership with Amazon Web Services is expected to be a meaningful revenue driver in fiscal year 2026 [6][8] - The introduction of a new revenue category for high-performance computing (HPC) is planned for Q1 [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for fiscal year 2026, citing strong demand across multiple growth drivers [11][38] - Temporary supply constraints are expected to impact Datacom revenue in Q1, but these issues are anticipated to be short-lived [21][56] - The company remains confident in maintaining excellent execution while continuing to grow revenue and earnings [11][21] Other Important Information - The company returned $126 million to shareholders through a buyback program, with continued repurchases expected [8][20] - The effective GAAP tax rate was 6.5% for the quarter [18] Q&A Session Summary Question: Clarification on Datacom revenue dip - Management clarified that the expected dip in Datacom revenue for Q1 does not include contributions from the new HPC segment, which will be reported separately [26][27] Question: Future hyperscaler transceiver opportunities - Management indicated that future opportunities will predominantly focus on 1.6 terabit speeds, while 800 gig opportunities will still be pursued [28][30] Question: Growth prospects for fiscal year 2026 - Management remains optimistic about growth prospects, citing strong demand trends and new customer wins [36][39] Question: Impact of component shortages on Datacom - Management acknowledged that component shortages are significant enough to impact Datacom revenue but are expected to be temporary [56][105] Question: Amazon business potential - Management believes the Amazon PCB business could represent a significant opportunity, with revenue expected to ramp in fiscal Q1 [83][84]