Fabrinet (NYSE:FN) reported its fourth-quarter financial results after Monday’s closing bell.

Below are the transcripts from the fourth quarter earnings call.

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OPERATOR:

Good afternoon. Welcome to Fabrinet’s financial results conference call for the fourth quarter of fiscal year 2025. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions on how to participate will be provided at that time. As a reminder, today’s call is being recorded. I would now like to turn the call over to your host, Kiro Tumajanian, VP of Investor Relations.

Garo Toomajanian (VP of Investor Relations)

Thank you Operator and good afternoon everyone. Thank you for joining us on today’s conference call to discuss Fabrinet’s financial and operating results for the fourth quarter of fiscal year 2025 which ended June 27, 2025. With me on the call today are Seamus Grady, Chief Executive Officer and Csaba Sverha, Chief Financial Officer. This call is being webcast and a replay will be available on the Investors section of our website located at Investor Fabrinet. During this call we will present both GAAP and non GAAP financial measures. Please refer to the Investors section of our website for important information including our earnings press release and investor presentation which include our GAAP to non GAAP reconciliation as well as additional details of our revenue breakdown. In addition, today’s discussion will contain forward looking statements about the future financial performance of the company. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management’s current expectations. These statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise them in light of new information or future events, except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings, in particular the section captioned Risk Factors in our Form 10Q filed on May 6, 2025. We will begin the call with remarks from Seamus and Chaba, followed by time for questions. I would now like to turn the call over to Fabrinet’s CEO Seamus Grady.

Seamus Grady (Chief Executive Officer)

Thank you, Garo. Good afternoon and thanks to those joining our call today we had an excellent fourth quarter ending an outstanding year with tremendous momentum. Fourth quarter revenue was $910 million, which was above our guidance range and up more than 20% from a year ago and 4% from Q3 with margins that were a little better than expected. We also achieved record non GAAP earnings of $2.65 per share for the full year fiscal 2025. Revenue reached a record $3.4 billion, representing a robust 19% increase over the prior year. Non GAAP EPS also hit an all time high at $10.17 Looking back, fiscal year 2025 was an exceptional year of execution and growth for Fabrinet. We navigated a significant product transition at a major Datacom customer, while our telecom business and overall revenue reached record highs. We established a significant partnership with Amazon Web Services, which we anticipate will be a meaningful revenue driver in fiscal year 2026. Construction began on Building 10, which will add 2 million square feet of capacity to our overall footprint. We also marked the 15th anniversary of our IPO by ringing the opening bell at the New York Stock Exchange. Additionally, we returned $126 million to shareholders through our buyback program, with continued repurchases expected in fiscal 2026. We begin fiscal 2026 with strong broad based momentum. Robust customer demand across our business leaves us better positioned than ever to capitalize on the many significant opportunities ahead of us. In fact, with multiple growth drivers providing clear visibility toward reaching $1 billion in quarterly revenue, we are now evaluating options to accelerate the completion of a portion of Building 10 to meet increasing customer demand. Looking more closely at our fourth quarter results, optical communications revenue delivered strong growth. Telecom revenue increased 46% from a year ago and 1% from Q3, with system programs and demand for data center interconnect products driving the bulk of our growth. In fact, DCI revenue represented one quarter of our total telecom revenue and grew 45% from a year ago. We expect our telecom momentum to continue into Q1, especially as we begin to ramp volume production of a next generation system program for a major customer. As anticipated, Datacom revenue was down from a year ago but increased double digits sequentially as we enter a meaningful growth phase for 1.6t products. With demand still increasing, we are very optimistic about Datacom growth trends for fiscal 2026. In the near term, this surge in demand has created some temporary component supply challenges which we are working closely with a major customer to overcome. Within non optical communications, Automotive performed better than expected for the quarter with only a slight sequential decline, while industrial laser revenue remained stable. Looking ahead, multiple simultaneous growth drivers give us strong optimism for fiscal 2026. These include the launch of a new telecom system, continued growth in DCI, increasing demand for 1.6T transceivers, and the ramp of a prominent high performance compute program. We remain confident in our ability to maintain excellent execution while continuing to grow both revenue and earnings. In summary, we are pleased with our outstanding performance in Q4 and throughout fiscal 2025. More importantly, we enter fiscal 2026 in a very strong position, reinforcing our optimism for the future as we further solidify our leadership position in the marketplace. We look forward to carrying this momentum into a strong Q1. I’ll now turn the call over to CSABA for more financial details on our fourth quarter results and our outlook for the first quarter of fiscal 2026.

Csaba Sverha 
Thank you Seamus and good afternoon everyone. We had a very strong fourth quarter, achieving new quarterly records for both revenue and non GAAP Net income revenue in the fourth quarter was $910 million above our guidance range and an increase of 21% from a year ago and 4% from Q3. Non GAAP EPS was $2.65, a new quarterly record. This result includes the impact of a $4 million or $0.10 per share FX evaluation loss. Looking at revenue performance by category in the fourth quarter, optical communications revenue was $689 million, up 15% from a year ago and 5% from Q3. Within optical communications, telecom revenue reached a robust $412 million, up 46% from a year ago and 1% from Q3. This performance reflects growing demand driven primarily by continuous strength in data center interconnect products. For the first time, we are reporting DCI revenue which reached $107 million in the fourth quarter, representing 12% of overall revenue. To provide investors better insight into this important growth area, we have included historical DCI revenue data in the investor presentation available on our website. Datacom revenue of $277 million was down 12% from a year ago, but swung to a strong growth of 10% sequentially driven by very strong demand for new, higher data rate products. In optical communications, revenue from 800G and faster products was $313 million, up 21% year over year and 32% sequentially, driven primarily by the ramp of new 1.60 Datacom products. Importantly, we have now begun volume shipments of 1.60 transceivers, a major milestone, and expect demand trends to continue ramping in fiscal 2026. In contrast, revenue from products below 800G was $233 million, up 4% from a year ago but down 18% from Q3, reflecting the industry’s transition to next generation products. Revenue from optical communications products that are non Speed rated was $143 million, up 4% from Q3. We expect strong revenue momentum from 800 gig and faster products to continue, while revenue from lower speed products is expected to decline gradually as the industry transitions towards higher data rates. As a result, beginning next quarter we will no longer report revenue by data rate. Similarly, starting in Q1 we will discontinue the breakout of silicon photonics revenue as the vast majority of it is now captured under DCI. Non optical communications revenue was $221 million, representing a healthy 41% increase year over year and 3% sequential gain. Automotive revenue came in better than expected at $128 million, experiencing a modest quarterly decline following several quarters of rapid growth. Industrial laser revenue was stable at $40 million. Other revenue was $53 million, up 38% year over year and 20% from Q3, with the sequential increase primarily reflecting the absence of a non cash contra revenue Item recorded in Q3. As I discussed, the details of our P and L expense and profitability metrics will be on a non GAAP basis unless otherwise noted. Gross margin in the fourth quarter was better than anticipated at 12.5%, with operational efficiencies offsetting a smaller than expected impact from large project ramps. Operating expenses remained below 2% of revenue, resulting in record operating income of $97 million or an operating margin of 10.7%, a 50 basis point improvement from Q3. Interest income was $8 billion in Q4. As I mentioned, we also incurred a foreign exchange evaluation loss of $4 billion. Effective GAAP tax rate was 6.5%. Non GAAP net income was $96 million or $2.65 per diluted share for the full fiscal year. Revenue was a record $3.4 billion, up 19% from fiscal 2024. Non GAAP EPS was $10.17 for the year, which includes the impact of an $0.11 headwind from non cash contra revenue and a $0.26 impact from FX evaluation losses. Looking at customer concentration in fiscal 2025, we had two customers who represented more than 10% of our total revenue, with Nvidia at 28% and Cisco at 18% of revenue. Our top 10 customers made up 86% of total revenue for the year, consistent with last year. Turning to our balance sheet highlights, we ended the year with cash and short term investments of $934 million, down $16 million from the end of Q3. Operating cash flow in the quarter was $55 million. Capital expenditures rose to $50 million, primarily driven by building tent construction costs and investments to support new program ramps resulting in fourth quarter free cash flow of $5 million. As Seamus mentioned, we are actively evaluating options to accelerate the construction of Building 10 in response to growing customer demand. If we move forward, quarterly capital expenditures could temporarily increase from current levels. With our very strong balance sheet, we believe we have ample cash to support our top capital allocation priorities, which are first, investing in our future growth and second, returning value to shareholders through our buyback programs. In the fourth quarter, we remained active in our share repurchase program. We repurchased 108,000 shares at an average price of $206 per share for a total cash outlay of $22 billion. For fiscal year 2025, we repurchased $126 million worth of FiberNet shares, which is the most we have ever spent on repurchases in a single fiscal year. We entered fiscal 2026 with $174 million available for repurchases. Now, turning to our guidance for the first quarter of fiscal year 2026, we remain very well positioned to extend our track record of excellent growth and execution. In telecom, we expect our very strong revenue growth trends to extend into the first fiscal quarter, driven particularly by ramping system program. In Datacom, we are excited to see growing demand, especially for next generation products. However, the surging demand has resulted in near term supply constraints for some critical components and as a result we expect to see a sequential dip in Datacom revenue. In Q1, we are working with our customer and suppliers to resolve these supply issues which we expect to be temporary. In non optical communications, we anticipate strong growth driven primarily by a new high performance computing program. Since this new revenue stream does not align with our current disclosure categories, beginning in Q1 we will be introducing a new revenue category called HPC. In automotive, we expect the near term softness experienced in Q4 to continue into Q1, but we remain optimistic about a return to more normalized growth trends. Industrial laser revenue should be relatively flat. Taking all of this together, we anticipate healthy year over year and sequential growth in the first quarter with total revenue in the range of 910 to $950 million. From profitability perspective, please keep in mind that our annual merit increases take effect in Q1, creating seasonal margin pressure of about 10 to 20 basis points that we typically recover through efficiency gains over the course of the year. In addition, Q1 margins will be impacted by temporary inefficiencies from new product ramps which are expected to subside as these programs advance through their early production stages. With that in mind, we remain optimistic that we can achieve gross margins within our mid 12% target range while continuing to generate operating leverage that supports steady improvement in operating margins over time. We expect earnings per diluted share to be between $2.75 and $2.90. In summary, this is an exciting time at Fibernet. It delivered a very strong fourth quarter and an outstanding fiscal year with multiple new programs fueling our long term growth trajectory and our strong competitive position. We are highly optimistic about Q1 and the new fiscal year ahead. Operator we are now ready to open the call for questions.

OPERATOR

As a reminder to ask a question, you will need to press Star 11 on your telephone to remove yourself from the queue. You may press star 11 again. Please limit yourself to one question and one follow up to allow everyone the opportunity to participate. Please stand by while we compile the Q and A roster. Our first question comes from the line of Karl Ackerman of BNP Paribas. Please go ahead Karl.

Equity Analyst at BNP Paribas

Yes, thank you. Gentlemen, congrats on the quarter. I have a clarification question or a follow up if I may. The clarification question is the dip in Datacom revenue that you expect in September, does that exclude or include contributions from? The new HPC segment?

Seamus Grady (Chief Executive Officer)

Hi Karl, thanks for the question. So the new HPC program is not in our Datacom number in Q1. It will be in a new category that we’ll report in the quarter called HPC or High Performance computer. So HPC will not be in Datacom, it will be in its own category. In Q4 it was in other as it just got off the ground. But in Q1 it will be in its own category.

Equity Analyst at BNP Paribas

Got it. Thank you for that. So Seamus, you suggested in the past are interested and certainly have the opportunity to perhaps have an EMS partner manufacturers. I know you’ve been shipping manufacturing capacity away from 800 gig toward 1.6t. So should we assume that any future hyperscaler transceiver opportunities would be on 1.6 terabit port speeds or do you still see a very long Runway of growth on 800 gig? Thank you.

Seamus Grady (Chief Executive Officer)

No, I think. Well it depends on really whether we’re talking about our main customer or the market. Generally for our main customer it would be predominantly 1.6T but for, you know, for the Datacom customers generally it will be both 800 and 1.6. We don’t see much going on below 800 gig for the Datacom opportunities if you like. In total that we’re pursuing, we usually work with our customers on the current plus the next two generations of products. And so in addition to our leading Datacom customer, we have other long standing Datacom customers that we’re working with who are designing their own products for 800 gig 1.6 and also CPO products. We’re also pursuing engagements with a number of merchant transceiver suppliers as well as, as you mentioned, Hyperscale Direct. So we have four, if you like, four distinct growth vectors in the Datacom space. Our largest Datacom customer, other Datacom customers who are designing their own products, merchant transceiver manufacturers and Hyperscalers Direct. And we’re actively pursuing all four of those growth vectors. Very good. Thank you. You’re welcome.

OPERATOR

Thank you. Our next question comes from the line of Tim Savageaux of Northland Capital Markets. Please go ahead. Tim.

Equity Analyst at Northland Capital Markets

Hi, good afternoon and congrats on the results.

It’s a higher level question perhaps, I think maybe it was the close of last quarter’s call, Jamie, you talked about, I guess, the potential for accelerating growth in fiscal 26 off of, you know, obviously what was a pretty strong 25, growing 19%. I guess the question is, you know, any more precision on that now that we’re three months later? Do you feel like, still feel like that’s the case? Does perhaps the component issues change that or just love to get your view on that previous statement.

Seamus Grady (Chief Executive Officer)

Yeah, I think we, you know, we enter fiscal year 26 very optimistic about the year ahead. As you say, we had it. We had an excellent FY25. You know, we grew 19% and we grew 19% in a year where our largest customer, our business with our largest customer was down on a dollar for dollar basis. So we feel, I would say, very optimistic, Tim,, about the year ahead. We guide one quarter at a time, so we’re not going to give full year guidance. But I think our cause for optimism remains. You know, the Datacom business is coming back and the demand is outstripping supply right now that’s a temporary issue, but we have very strong demand for 1.6-terabit products right now. We have a number of other Datacom products in the works. As I just mentioned, the strong telecom trends continue, driven primarily by dci. And you know, we have a number of new customer wins, of course, that we’ve talked about previously. But overall I think we enter the year with a very positive outlook for the year ahead.

Equity Analyst at Northland Capital Markets

Got it. And I guess that’s evident to some degree in your comments about maybe accelerating the building 10 capacity expansion. Trying to figure out what you’re exactly trying to communicate here. Have you pulled the trigger on something? Are you very close to or how, as you said, evaluating options, how might we see that move forward and over what time frame?

Seamus Grady (Chief Executive Officer)

Yeah, so the decision to pull Building 10 in to get a portion of the building completed maybe one or two quarters ahead of the original Schedule we really communicated that because it will impact our capex. Obviously we’ll have to spend a little bit more to pull in completion of a portion of the building and it’s a combination of a few things. It’s a combination of the business opportunities that we just talked about that we’re addressing right now. Telecom, datacom and high performance compute as well as some other potential new opportunities. We really want to be able to occupy some of the space in building 10 before the total building is completed. So, you know, meanwhile we have flexibility. We can accommodate all the demand that we’re seeing. But we do want to be able to occupy, you know, a few hundred thousand square feet of building 10 probably three to six months ahead of originally contemplated.

Equity Analyst at Northland Capital Markets

Great. And last one for me, wonder if you can talk about whether your new telecom systems win contributed in a material way in Q4.

Seamus Grady (Chief Executive Officer)

It contributed. I mean we’re really just getting going. You know we’ve always said this will ramp in FY26, so we just really getting started with that and it will ramp as we go throughout the year. So it did contribute. But you know, it’s really as we go through the year that we’ll start to see that program ramp. But it’s going very well. We’re very happy with the relationship. I think the customer is happy and we’re very happy with how it’s going and how the ramp schedule is going. But the big I would say that the bulk of that ramp is still in front of us.

Equity Analyst at Northland Capital Markets

Great, thanks very much.

Seamus Grady (Chief Executive Officer)

Thank you, Tim. Thank you.

OPERATOR

Our next question comes from the line of Samik Chatterjee of JPMorgan. Please go ahead.

Equity Analyst at JPMorgan

Hey guys, thanks for the questions. This is Joe Cardoso on for Samik, maybe for my first one, in a similar vein to the prior question on the growth prospects for the company kind of heading into next year. Just given these multiple customer ramps across various and different products, some of them being kind of newer to the portfolio. Anything we should keep in mind relative to kind of the gross margin and OPEX trends going forward? Anything one off or different from kind of what we’re used to in terms of the historical profile for Fabrinet. Just trying to be mindful that there’s a lot of irons in the fire here and so if there’s anything that we should be kind of considering. And then I have a follow up.

Csaba Sverha 

Hi Joe, this is Csaba. Let me take that question with regards. To profitability, obviously our aim is to maintain our gross margin target range in the mid 12%. So obviously as you would anticipate some of these large new programs would put some temporary pressure on the gross margins. However, we do anticipate that this headwinds to be temporary and subside over time. We did call out small headwind in our Q1 guide because that’s a good pretty seasonal quarter for us with merit increases as well as this program. Ramps are coming through. However, we don’t anticipate any structural changes in our portfolio or margin profile. So our aim is to maintain our existing gross margin range.

Equity Analyst at JP Morgan
And then just on the OPEX side. And then I have a follow-up OPEX?

Csaba Sverha

We have been very careful about spending on operating expenses and we have been very cautious about adding costs and we will maintain that discipline. As you see our track record, we have been able to deliver operating leverage year over year. So we continue that path. We don’t anticipate to add any significant OPEX other than the usual merit increases throughout the year. So that should continue to drive operating leverage as the top line grows.

Equity Analyst at JPMorgan

Very clear. And then maybe just as my follow up 800 gig trends, you mentioned 1.6 being kind of the primary driver of growth sequentially. But curious how much of a gating factor was the supply constraints that you, you highlighted. And as you think about the ramp going forward, any color on how you’re thinking about the magnitude of the impact from these bottlenecks and when we potentially could see them easing and then maybe just quickly like any color and whether that’s what components Those are, lasers, DSPs, anything else that you guys are seeing that’s kind of the concentration of the supply constraints.

Seamus Grady (Chief Executive Officer)

Yeah. So it’s, you know really it’s an, it’s a, a handful of components that are causing us to have some component constraints. You know with the, as we saw this past quarter and into this quarter and beyond, we think now a surge in demand for 1.6t transceivers and in particular you know, 200 gig per lane EML based products. We are seeing some supply constraints mainly for specific components. That’s small number of components, it’s not broad based. It’s unique to really one component for one or two components for one product for our customer or for one customer. And because of these constraints we’re anticipating that the Datacom revenue will be down. We’ve called that out in our prepared remarks. But we think it’s short lived. We’re pretty confident we’re pursuing multiple paths with our customer and with the supply base to help remedy the constraints in order to meet the strong demand. And we believe the supply issues will be temporary, but they will take a little bit of time to fully resolve. Maybe one or two quarters. But we do think it’s a short lived problem, but it’s one we have to deal with right now. The good news is the demand is very strong and the current demand is strong and well above the supply availability. But like I say, it’s not unusual when you get a new product like this, a kind of a leading edge product with leading edge technology and a big spike coupled with a big spike in demand. It’s not unusual to have these temporary supply constraints. But we’ll work through that.

Equity Analyst at JPMorgan

Thank you gentlemen.

Seamus Grady (Chief Executive Officer)

Thank you Joe. Thanks Jim.

OPERATOR

Thank you. Our next question comes from the line of Steven Fox of Fox Advisors. Please go ahead.

Fox Equity Analyst

Hi, good afternoon. I think I’m still a little confused. On the gross margins. Can we back up and just talk. About the fiscal fourth quarter margins for a second? You did better than you thought you. Would on efficiencies, but I would assume you had some of the product ramps going on. I guess you avoided the component shortages. In the quarter and weren’t expanding on. Building 10 yet faster than previously thought. Like if you could just break that down. What like why didn’t you see some of these headwinds and how else you. Got efficiencies in Q4 besides, you know, better sales. Thanks. And then I had a follow up.

Csaba Sverha

So let me clarify. So first of all Steve, building 10. Expenses are not in the numbers. So building 10 is a future event. So we don’t see any gross margin headwinds from Building 10 context. So that’s number one. Secondly, obviously as these programs are ramping, obviously we do have certain inefficiencies that are baked in in our outlook. However, the existing program, existing business continues to execute very well and we have a very strong execut on the flip side that resulted better than expected gross margin in our Q4. And we do anticipate that this product ramps will put some pressure on the near term gross margin. So going into Q1 we expect a mild headwind. But Q4 was strong and it’s not particularly because of building 10. It’s just very strong execution on the legacy business and obviously starting off with the new programs.

Seamus Grady (Chief Executive Officer)

If I can just add maybe to Chavez comments there, Stephen. You know the ramp cost that we had assumed going into the quarter we came in a little bit better than we had planned. But you know, we have a few quarters I think now of fairly strong ramps going on simultaneously. So we are going to have to carry these ramp costs. You know, when we start a new program, some of these big programs takes a little bit of time to get ramped up to full efficiency. So we do carry some startup costs or NPI costs when we start these programs. And then, you know, in Q4 we just did a little bit better on efficiencies. Our operations team did an excellent job. Outstanding. Sorry, an excellent job to execute, to make sure that we came in a little bit better than anticipated in Q4.

Fox Equity Analyst

And just one other minor detail and all that, and that’s very helpful, is that you didn’t experience any component constraints to speak of in Q4, is that correct?

Csaba Sverha

Not, not any huge constraints. I mean, we have again, as we called out there, a couple of constraints going into, into Q1. There was, there was some in Q4, but the big hit really is in Q1. You know, we, we were able to get what we needed in Q in Q4, but we are constrained in Q1. Yes. Stephen, typically we don’t have margin. Impacts from component shortages. So we are always able to juggle the capacity to make sure that component constraints don’t create near term. And the good thing about component constraints, we have a fairly good visibility on supply, so we are able to adjust capacity so there is no concern of headwinds from component constraints when it comes to gross margins.

Fox Equity Analyst

Great, thanks for explaining all that. And then just as a follow up, can you a little bit more on. The data center interconnect business? I thought you also had talked about. Some new customers for the new fiscal year. I know you don’t. You only got a quarter at a time. But can you give us a sense for the momentum? You were up 45% year over year in the quarter. Any way to think about how the momentum directionally continues for the rest for the new fiscal year? Anything, any other clues you can provide there?

Seamus Grady (Chief Executive Officer)

Thanks. Yeah, maybe I’ll let Chavez put a bit more detail around it. But in general, Steven, our DCI business has been very strong. We’ve captured a number of customers there. They’re all ramping and we’re able to keep up with the demand. And the demand seems to be, it’s strong, it’s robust and it looks to be durable and it is increasing over time. So I think as these big data center, you know, clusters get rolled out, these big AI workloads get shared around between data centers, the need for DCI is increasing, if anything. So we see DCI demand being continue to be very strong for some time.

Csaba Sverha

To come and some clarification there, Steve, as well. So DCI is a distinct category, as you called out. We wanted to give that additional color to the investors. So it’s part of our telecom business, but we wanted to call out as it’s a significant growth driver as we look ahead. So there is one more thing that’s going on in dci. Obviously bulk of that growth came in the fiscal year from 400 ZRMs. We started to see transition to 800 ZR as well, but it’s not at the expense of 400 at this stage. So there is that growth driver going on there. And to clarify your question about the new programs, we did not talk about particular DCI programs as a new category going forward. So dci, we have already captured the customers who we have been shipping and we anticipate the growth to come from those customers. So the new system WINS will be in the telecom space, not the dci. And the HPC is going to be distinct, its own segment and another DCI category.

OPERATOR

Thank you. Our next question comes from the line of George Notter of Wolfe Research. Your question please, George.

Wolfe Research Analyst

Hi guys. Thanks very much. Can you just remind us the triggers on vesting of the Amazon warrants and recognition of contra revenue? I know that it was 4 million last quarter. I think none here in the June quarter. Can I assume that you did not generate revenue with Amazon this quarter? Is that the right read through.

Csaba Sverha

Hi, George. So basically the first vesting was prior. To signing the contract. So upon signing the contract we invested 10% in Q3. So that was one condition of the vesting. The rest of the shares will last over revenue and over time. So the fact that you haven’t seen anything in Q4 has to do with the fact that there is a threshold that to be met in terms of revenue shipments. So it doesn’t mean that we haven’t shipped anything, but future vesting will be subject to revenue and volume shipments throughout the year.

Wolfe Research Analyst

Got it. And then any. I guess we’re all curious about how big that Amazon PCB business can be over time. I mean, obviously you’re breaking it out into its own category. I get that, certainly. But. Is this hundreds of millions of opportunities? Is this in the billions? How do you kind of think about the scale of, of what you can do here? Yes.

Seamus Grady (Chief Executive Officer)

So, you know, as we look at the opportunity, it’s certainly a significant opportunity for us. You know, it could be significant. We believe it could be significant this fiscal year. We’re not sizing the overall revenue with the customer there or the high performance computer deal we have with them. But the business will start to ramp in Q1. We, you know, we did ship a little bit in Q4, but it will start to ramp in Q1. And that is contributing to our strong, you know, anticipated sequential growth. But keep in mind that our shipping. I’m sorry. Yeah, so, yeah, I’m sorry. Calendar. Yeah, calendar Q1 is just the beginning for us though with AWS and we think there could be more to come. We have, you know, one opportunity. There’s a high performance compute opportunity, but we’re working hard to see if we can, you know, gain some momentum in other categories there longer term. High performance compute, we think represents a significant new TAM expansion opportunity for us. And that’s why we’ve, we’ve decided to classify it as its own category. So again, we’ll be disclosing in our Q1, we’ll be disclosing HPC as its own category. We’ll also be disclosing if Chava mentioned or be starting to disclose DCI as its own category.

Wolfe Research Analyst

Got it. And I’m sorry, just to be clear. The ramp is in your fiscal Q1 or in calendar Q1 of 26?

Seamus Grady (Chief Executive Officer)

Fiscal. Fiscal Q1. We’ve already started. We’ve already started. We’ve shipped some revenue in Q4 and really that’s just the, you know, getting off the ground. And that’s why we have the, if you like, we’ve called that the startup cost because, you know, as you can imagine, when you start up, you don’t start at cruising speed. We start up, we get the lines debugged, we get the efficiencies up, we make sure the yields are good. You know, the customer comes and qualifies the production line and then we start ramping. So that work has been largely completed now and we’re just beginning to ramp properly then this quarter. So fiscal Q1.

OPERATOR

Our next question comes from the line of Ryan Koontz of Needham and Company. Please go ahead, Ryan.

Equity Analyst at Needham and Company

Super, thanks. Also about Datacom, maybe a different angle here. If we could certainly understand the ramp going on for your large customer at 1 6T. That’s self evident. You’ve talked about, I think 800 remaining strong and obviously there are other customers involved in the mix there. But Seamus, how would you characterize your visibility for 800 demand right now as you look at this next fiscal year? I think there’s been some investor concern that that might dry up with your large customer shifting over.

Seamus Grady (Chief Executive Officer)

Thanks. Our visibility is quite good. I mean our main focus is on the next generation products, the 1.6T. But we have visibility on 800Gig as well. Our visibility is quite good and like I say in both areas it’s supply constrained as opposed to demand constrained right now. Got it. Helpful.

Equity Analyst at Needham and Company

And then you guys had some pretty decent auto numbers. Auto segment. Any view of how you think that unravels in 26?

Seamus Grady (Chief Executive Officer)

I think, you know, steady. We think steady. I don’t think it’s going to have the same kind of growth trajectory as let’s say high performance compute or Datacom or even telecom. It’s probably telecom. It’s probably more steady. Steady growth as we, as we gain market share. Again, bear in mind our automotive business is more on the infrastructure side, the EV charging side of the business. So we’re not as exposed to consumer sentiment as maybe other, you know, companies who are producing for automotive companies. So we think automotive will be steady but maybe not grow quite as fast as Datacom or Telecom or the others.

Equity Analyst at Needham and Company

That’s great. One last one if I could sneak it in, it was around tariffs. Any dialogue with tariffs that you’d be willing to share in terms of how your discussions are going with customers?

Seamus Grady (Chief Executive Officer)

Yeah, it’s an interesting one. You know, for us we haven’t seen any meaningful impact to date from the tariffs. You know, first bear in mind our shipping terms with our customers dictate that the receiver or the customer is responsible for the tariffs. So we don’t bear the cost of the tariffs and the products we make both in the optical communication space and the non optical communication space. Those categories are not necessarily shipped directly to the US as they may be shipped to Asia or Europe or elsewhere to another contract manufacturer for higher level assembly. So in many cases the products we make, they don’t ship directly into the us so thus far we have not seen any significant impact from tariffs, thankfully. Super helpful.

OPERATOR

Our next question comes from the line of Mike Genovese of Rosenblatt Securities. Please go ahead Mike.

Equity Analyst at Rosenblatt Securities

Thank you. Seamus. I’m wondering, do you have any of your 800g customers moving to 200g per lane lasers or is 800g still a 100g per lane market?

Seamus Grady (Chief Executive Officer)

The focus for us is on 200 gig per lane, 800 gig products. That’s the bulk of the growth of new planes is on 200 gig per lane, 800 gig products.

Equity Analyst at Rosenblatt Securities

So when you talk about supply constraints then is it in both for the current quarter. Is it in both 800G and 1.6 or is it more in 1.6 than in 800?

Seamus Grady (Chief Executive Officer)

It’s affecting both. It’s both 600. Sorry, 800Gig and 1.6G. Yes.

Equity Analyst at Rosenblatt Securities

So then when we talk about being sequentially down in the quarter, then that sounds like it could happen at more than one customer. That would be something that would happen at least multiple customers, because potentially 200g per lane EMLs are in short supply. Is that, is that a right read?

Seamus Grady (Chief Executive Officer)

Yes and no. I think there’s a number of opportunities we’re working on with customers, but they’re not, you know, producing meaningful revenue in the current quarter. Even though we’re working on several opportunities, the big impact is with our main customer on the 200 gig per lane, again, which impacts both 800 gig and 1.6. But there are, again, there are other customers we’re working with on both 800 gig and 1.6 actually, but they’re not meaningful in terms of revenue in the current quarter.

OPERATOR

Thank you, Mike. Thank you once again. To ask a question, please press Star 11 on your telephone again, that’s Star 11 to ask a question from Tim Savageaux of Northland Capital Markets. Please go ahead, Tim.

Equity Analyst at Northland Capital Markets

Yeah, thanks for the follow up. And just a couple quick ones. One, could you take a shot at quantifying the impact of the component shortages on Datacom? I assume without that they’d be up. Would that be up significantly? Throw us a number on that one. And also, obviously 800 gig and above grew quite sharply in the quarter, but much more sharply. Not as sharply as Datacom. Sorry, Datacom didn’t grow that sharply. So it looks like you had a big tick up at 800 gigs and above Telecom. And that was kind of what I was asking with Sienna before. But if I’m reading the numbers right, I wonder what might be driving that. That’s it for me, thanks.

Seamus Grady (Chief Executive Officer)

Yeah, I think on the, you know, the impact of the component shortage in Datacom. We’re not going to quantify that, Tim, but it’s, you know, I put it this way, it’s meaningful enough for us to call it out. You know, we would be up fairly significantly were it not for that issue. You know, we’re not going to quantify it, but it’s a substantial enough headwind for us this quarter on the 800 gig and above. Yeah, that’s a mix of, as you rightly point out, both Datacom and Telecom. So, you know, good growth in the Datacom business, the 800 gig and above, but also, you know, primarily DCI and other products in the, in the 800 gig telecom category. Donna Chava, if you want to add anything to that.

Csaba Sverha

No, I think that’s the color we can provide there. So you’ll see we are seeing some in DCI. We have it’s below 800 gig timm. So 400 ZR was very strong in DCI segment. So that potentially that’s a reason for not going as fast as Datacore.

OPERATOR

Thank you. I would now like to turn the conference back to Seamus Grady for closing remarks.

Seamus Grady (Chief Executive Officer)

Sir, thank you for joining our call today. We are very pleased with our strong fourth quarter results culminating in another record year for the company. As we look to the first quarter and fiscal 2026, we are very excited about the opportunities that lie ahead and believe we are better positioned than ever to extend our strong track record of growth and execution. We look forward to speaking with you in the future and to seeing those of you who will be attending the Wolfe Research Conference in September. Goodbye.

OPERATOR

This concludes today’s conference call. Thank you for participating. You may now disconnect.

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