Fabrinet vs. TE Connectivity: Which Electronics Stock is the Better Buy?

Both Fabrinet FN and TE Connectivity TEL play vital roles as contract manufacturers in the electronics and industrial markets. Fabrinet is best known for high-precision optical components and photonics systems used in telecommunications and data centers, while TE Connectivity leads in connectivity and sensor solutions spanning automotive, aerospace, energy and communications.The two companies share overlapping exposure to secular growth drivers, including artificial intelligence infrastructure, electric vehicles and industrial automation. Their focus on advanced manufacturing, supply chain scale and materials expertise makes them direct competitors in high-growth connectivity markets. Let us delve deep to determine which one is a better investment now.The Case for FNFabrinet has built its reputation as a premier contract manufacturer for high-end optical communications equipment, working with leading customers such as NVIDIA and Cisco. Its strength lies in precision packaging for complex photonics and microelectronics, capabilities that position it at the center of fast-growing markets like data center connectivity and high-performance computing. In the fourth quarter of fiscal 2025, revenues reached $910 million, up 21% year over year, with optical communications contributing $689 million, a 15% increase from the prior year.Fabrinet’s optical packaging capabilities are directly enabling the build-out of artificial intelligence infrastructure, where faster data transfer is critical. Its expertise also extends to automotive and industrial applications, tying it to long-cycle growth areas such as electric vehicles and automation. Data center interconnect revenue grew 45% year over year to $107 million, underscoring its role in AI-driven infrastructure. Early volume shipments of 1.6 terabit transceivers further signal alignment with the industry’s shift to higher bandwidth. The Zacks Consensus Estimate for optical communications revenues for the first quarter of fiscal 2026 is pegged at $699.92 million, up 11.8% year over year. The consensus mark for earnings is pegged at $2.83 per share, up by 2.2% over the past 30 days, indicating a year-over-year improvement of 18.41%. These projections highlight that demand for advanced optical products should remain a core driver.Fabrinet Price and Consensus Fabrinet price-consensus-chart | Fabrinet QuoteHowever, Fabrinet faces near-term headwinds, including component supply constraints affecting datacom revenue and margin pressure from new product ramps. The company’s concentration risk remains elevated, with NVIDIA representing 28% of fiscal 2025 revenues and the top 10 customers accounting for 86%. Manufacturing operations are primarily located in Thailand, creating geographic concentration risk. Fabrinet’s reliance on a narrow customer set and exposure to cyclical spending patterns is something investors will want to watch closely, particularly as hyperscale investment cycles continue to dictate demand trends.The Case for TELTE Connectivity has established itself as a diversified technology leader, supplying connectivity and sensor solutions across transportation, industrial, energy and communications markets. Its breadth across end markets provides resilience and positions it to benefit from vehicle electrification, grid modernization and the build-out of artificial intelligence infrastructure. The company’s third quarter fiscal 2025 results reflected this strength, with revenues of $4.53 billion, up 14% year over year. Both the Transportation and Industrial segments maintained margins near 20%, highlighting TEL’s ability to scale efficiently across a broad portfolio.Secular demand is driving growth across core businesses. Transportation is benefiting from rising electronic content per vehicle and greater demand for data connectivity, particularly in Asia. Industrial Solutions expanded 30% year over year on strong demand from AI data networks, renewable energy and aerospace. Artificial intelligence-related revenue is projected to exceed $800 million in fiscal 2025, more than double the prior year. The Zacks Consensus Estimate for Industrial Solutions revenues for the fourth quarter of fiscal 2025 is pegged at $2.17 billion, up 84% year over year. The consensus mark for earnings is pegged at $2.28 per share, up 1.33% over the past 30 days, indicating a 16.92% improvement from the prior year. These projections highlight expectations that AI and energy markets will remain key growth catalysts.TE Connectivity Ltd. Price and Consensus TE Connectivity Ltd. price-consensus-chart | TE Connectivity Ltd. Quote TEL’s localized manufacturing footprint, with more than 70% of production near customers, reduces supply chain risks, while a diversified customer base balances cyclical swings. Strong free cash flow supports shareholder returns and strategic acquisitions such as Richards, which expanded its Energy portfolio. With leadership across multiple verticals, TEL is well-positioned to sustain growth and extend its competitive advantage.Price Performance and Valuation of FN and TELIn the year-to-date period, Fabrinet shares have returned 69.5%, reflecting investor enthusiasm for its leadership in high-speed optical communications and data center interconnect. TE Connectivity shares have appreciated 47.1% over the same period, supported by broad-based growth across transportation, industrial and energy markets.FN & TEL Share PerformanceImage Source: Zacks Investment ResearchOn valuation, Fabrinet trades at 3.93X trailing 12-month sales, above TE Connectivity’s 3.78X. Despite the premium, FN carries heavier risks from customer concentration and cyclical optical demand, which makes its multiple appear stretched. TEL’s lower multiple looks more balanced given its diversified end markets, strong cash flow and visibility from long-cycle secular drivers.FN vs TEL: P/S F12M RatioImage Source: Zacks Investment ResearchConclusionFabrinet and TE Connectivity both operate in critical segments of the electronics ecosystem. Fabrinet is capturing demand in high-speed optical communications, but its reliance on a concentrated customer base and cyclical spending patterns limits visibility. TEL, in contrast, offers diversified exposure across transportation, industrial and energy markets, supported by strong free cash flow and alignment with long-cycle drivers such as electrification and artificial intelligence infrastructure. With TEL carrying a Zacks Rank #2 (Buy) compared with FN’s Zacks Rank #3 (Hold), investors are better served buying TE Connectivity stock at current levels.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report TE Connectivity Ltd. (TEL): Free Stock Analysis Report Fabrinet (FN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks