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

Electronics manufacturers Fabrinet (FN) and TE Connectivity (TEL) present contrasting investment profiles. Fabrinet, a leader in high-precision optical components, reported strong Q4 FY25 revenue of $910 million, up 21% year-over-year, driven by AI infrastructure demand, but carries higher risk due to customer concentration and cyclicality, trading at a 3.93x TTM sales multiple. Conversely, TE Connectivity, with diversified connectivity and sensor solutions, posted Q3 FY25 revenue of $4.53 billion, up 14% year-over-year, projecting over $800 million in fiscal 2025 AI-related revenue, and is favored for its broader market exposure, lower valuation (3.78x TTM sales), and reduced supply chain risks, garnering a Zacks Rank #2 (Buy) versus Fabrinet's #3 (Hold).

Analysis

A comparative analysis of Fabrinet (FN) and TE Connectivity (TEL) reveals two distinct investment profiles within the electronics manufacturing sector, both benefiting from secular trends in artificial intelligence. Fabrinet demonstrates strong momentum as a specialized provider of high-precision optical components, evidenced by its 21% year-over-year revenue growth to $910 million in Q4 fiscal 2025 and a 45% surge in data center interconnect revenue. This growth is directly tied to the AI infrastructure build-out, with the company shipping 1.6 terabit transceivers. However, this focused growth comes with significant risks, including extreme customer concentration, with NVIDIA alone accounting for 28% of fiscal 2025 revenue and the top ten customers representing 86%. Furthermore, its manufacturing concentration in Thailand and exposure to cyclical hyperscaler spending patterns create limited visibility. In contrast, TE Connectivity offers a more diversified and resilient model, with its Q3 fiscal 2025 revenue rising 14% to $4.53 billion, driven by strength across transportation, industrial, and energy markets. TEL is also capitalizing on AI, projecting its related revenue will double to over $800 million in fiscal 2025. Its diversified end markets, localized manufacturing footprint, and strong free cash flow mitigate cyclical and supply chain risks. Despite FN's superior year-to-date stock performance of 69.5% versus TEL's 47.1%, its higher price-to-sales multiple of 3.93x appears stretched given its risk profile, whereas TEL's 3.78x multiple seems more balanced.

Key Decisions for Investors

• Given its diversified business model, resilient margins, and more attractive risk-adjusted valuation at 3.78x sales, TE Connectivity (Zacks Rank #2 Buy) presents a more balanced investment compared to Fabrinet, despite FN's stronger year-to-date stock performance.
• Investors holding or considering Fabrinet must closely monitor its high customer concentration, as its top 10 customers account for 86% of revenue, making the stock highly sensitive to any shifts in hyperscaler spending cycles or specific customer demand.
• For exposure to multiple long-term secular growth drivers, TE Connectivity is well-positioned, as its AI-related revenue is set to double to over $800 million while its core Transportation and Industrial segments are also capitalizing on vehicle electrification and grid modernization.