FN vs. AAOI: Which Stock Is Worth Buying Post Latest Earnings Results?
Two companies currently drawing significant investor interest in the Zacks Computer and Technology sector are Fabrinet FN and Applied Optoelectronics AAOI. Fabrinet is a provider of advanced optical packaging and precision optical, electromechanical and electronic manufacturing services to original equipment manufacturers of complex products.
Applied Optoelectronics designs and manufactures fiber-optic networking products for internet data centers, cable television, telecommunications and fiber-to-the-home end markets. Both FN and AAOI reported contrasting quarterly results earlier in the month.
Fabrinet reported impressive results for the third quarter of fiscal 2026 (ended March 27, 2026), driven by strong momentum across multiple programs. Adjusted earnings came in at $3.72 per share, reflecting a 47.6% increase year over year and surpassing the Zacks Consensus Estimate by 3.9%. Revenues for the quarter climbed 39.3% year over year to $1.214 billion, exceeding the consensus estimate by 1.56%.
Growth in the Optical Communications segment remained robust, with revenues rising 35% year over year to $888.7 million. This performance was largely fueled by a 55% increase in Telecom revenues, supported by strong demand across a broad range of products. Within the Telecom segment, data center interconnect revenues jumped 90% year over year and increased 38% sequentially. Further strengthening investor sentiment, Fabrinet issued an upbeat outlook for the fourth quarter of fiscal 2026, projecting revenues between $1.25 billion and $1.29 billion and adjusted earnings in the range of $3.72-$3.87 per share.
In contrast, Applied Optoelectronics reported a wider-than-expected loss for the first quarter of 2026 due to elevated costs. The company posted an adjusted loss of 7 cents per share, compared with the Zacks Consensus Estimate of a loss of 5 cents. This compares with a loss of 2 cents per share in the year-ago quarter and a loss of 1 cent in the prior quarter.
Quarterly revenues increased 51.4% year over year to $151.1 million, although they fell short of the consensus estimate by 3.4%. On a sequential basis, revenues grew 12.5%, supported by solid demand in both the data center and CATV businesses. However, margins came under pressure due to product mix changes and higher operating costs.
Looking ahead to the second quarter of 2026, Applied Optoelectronics expects revenues between $180 million and $198 million. The company forecasts adjusted gross margins in the range of 29-30% as it manages higher production volumes alongside ongoing manufacturing and ramp-up expenses. Adjusted earnings per share are expected to range from a loss of 3 cents to earnings of 3 cents.
After their most recent releases, let's take a look at the two companies’ earnings surprise history
FN
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AAOI
Image Source: Zacks Investment Research
Against this backdrop, it is worth taking a closer look at the competitive positioning of these companies to determine which one appears better equipped within the sector and more deserving of a spot in your investment portfolio.
The Case for AAOI
Applied Optoelectronics is gaining from the rising demand for its 400G and 800G solutions as enterprises worldwide transition from traditional data centers to AI-focused infrastructure. AI-driven data centers require advanced networking capabilities and high-speed optical interconnect solutions to handle significantly larger workloads essential for next-generation computing architectures.
Historically, AAOI relied heavily on China for its operations. However, during 2025, the company prioritized vertical integration and expanded its manufacturing footprint in the United States to reduce risks related to supply chains, costs and policy exposure. At the same time, increased spending associated with vertical integration and the launch of new manufacturing facilities weighed on profitability, as reflected in its first-quarter 2026 results.
To address growing demand, the company has boosted manufacturing capacity, expanded automation efforts and built additional inventory to support higher production levels. Continued improvements in production efficiency are also expected to support growth.
The Case for FN
Fabrinet’s business remains centered on optical communications while also expanding its presence across automotive, industrial laser, medical and sensor markets. In fiscal 2025, revenues increased 18.6% year over year to $3.42 billion. Optical communications contributed 76.6% of total revenues, while non-optical segments accounted for the remaining 23.4%.
The company appears well-positioned for continued expansion as AI infrastructure investments accelerate across telecom and data center interconnect (“DCI”), datacom and high-performance computing markets. Growth is further supported by debt-free capacity expansion initiatives and operating leverage, which help offset foreign exchange pressures.
The increasing need for faster, more efficient and energy-saving electronic systems is also driving automation adoption. Technologies such as computerized control systems, robotics and advanced information systems used in industrial processes continue to support demand for companies like Fabrinet. In particular, the growing deployment of collaborative robots designed to work alongside human workers is improving manufacturing efficiency and creating additional growth opportunities for FN.
Performance Comparison
On a year-to-date basis, Applied Optoelectronics stock has performed better than that of Fabrinet.
YTD Price Comparison
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In terms of valuation, AAOI’s shares appear more expensive on the basis of the forward 12-month price-to-sales (P/S) ratio.
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See how the Zacks Consensus Estimate for FN and AAOI’s earnings has been revised over the past 60 days.
Earnings Estimate Revisions for FN
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Earnings Estimate Revisions for AAOI
Image Source: Zacks Investment Research
Final Verdict
Both Fabrinet and Applied Optoelectronics are well-positioned to capitalize on the continuing AI-led expansion of digital infrastructure. However, Fabrinet currently appears to offer a stronger growth outlook. The company benefits from deep supply-chain integration, strong visibility driven by long-term programs and consistent earnings growth.
While Applied Optoelectronics is gaining from rising demand for high-speed optical connectivity solutions, near-term margin pressures and intense competition continue to weigh on its performance. In addition, AAOI’s valuation profile appears less attractive compared with Fabrinet.
Based on this analysis, Fabrinet emerges as the more attractive investment at present. It currently holds a Zacks Rank #2 (Buy), while Applied Optoelectronics carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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