Fabrinet sold a lot more this year and kept less cash from it.
Revenue rose 35.7% to $4.6 billion in the twelve months ended June 26, while net income climbed 42.3% to $473.0 million. Operating cash flow went the other way, falling 21.8% to $256.7 million. Cash conversion dropped from 0.99x to 0.54x.
The numbers point to a business growing faster than its cash engine. Inventory rose 75.8% to $1.0 billion, more than twice the pace of revenue, and accounts receivable increased 34.1% to $1.0 billion. Fabrinet also spent $252.5 million on capital projects, up 108.5% from the comparable year.
Management gives a direct explanation for the cash squeeze:
"The decrease in cash provided by operating activities for fiscal year 2026 as compared to fiscal year 2025 was primarily due to (1) an increase in inventories to support higher demand in the next quarter, and (2) an increase in trade receivables due to timing of collection, partially offset by (1) an increase in trade payables aligned with the increasing volume of inventories, and (2) an increase in net income."
10-K 2026-08-18
The filing attributes the cash-flow decline to higher inventories and trade receivables, while saying the inventory build supported higher demand in the next quarter. Some receivables had not yet been collected.
The income statement itself is cleaner. Gross profit rose 34.6% to $556.5 million, and operating income grew 42.7% to $462.9 million. Gross margin slipped only slightly, from 12.1% to 12.0%, while operating margin widened from 9.5% to 10.0%.
The cost explanation is unusually plain:
"The increase in cost of revenues was primarily due to a proportional increase in sales volume."
10-K 2026-08-18
The filing attributes the increase in cost of revenues to proportional sales-volume growth. The tension is that the accounting profit arrived immediately, while inventory, receivables, and buildings absorbed cash along the way.
That investment footprint is set to expand. Fabrinet said:
"We expect our capital expenditures for fiscal year 2027 to increase compared to fiscal year 2026, mainly due to the purchase of a new manufacturing building in California, continued investment in our manufacturing facilities at our Pathum Thani campus, and ongoing investments in equipment to support the expansion of our manufacturing capacity."
10-K 2026-08-18
The company links the demand to data-center, communications-infrastructure, automotive, industrial, and other products. Its own annual history also shows the latest sales increase was larger than the prior year's 18.6% gain, extending a multiyear expansion rather than marking a single jump.
That matters because Fabrinet's shares closed at $599.20 on August 17, and the stock carries a 65.4x trailing P/E. At that price, the filing puts the focus on a specific accounting-to-cash question, not simply whether revenue is growing: how much investment and working capital must accompany each new dollar of sales?
Fabrinet's next quarterly report can put the current balance-sheet build into a new snapshot. How much of that $1.0 billion inventory will turn into sales and cash in the next reported period?
Source: Fabrinet’s fiscal 2026 and fiscal 2025 Form 10-K filings.