Earnings Call Transcript - FN Q2 2025

Operator, Operator

Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the Second 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, Garo Toomajanian, Vice President of Investor Relations.

Garo Toomajanian, Vice President 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 second quarter of fiscal year 2025 which ended December 27, 2024. 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.com. 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 10-Q filed on November 5, 2024. We will begin the call with remarks from Seamus and Csaba followed by time for questions. I would now like to turn the call over to Fabrinet's CEO, Seamus Grady. Seamus?

Seamus Grady, CEO

Thank you, Garo. Good afternoon, and thanks to those of you joining our call today. Our strong business momentum continued in the second quarter and represented a record quarter for both revenue and profitability with growth that exceeded our expectations. Revenue of $834 million was an increase of 17% from a year ago and 4% from Q1. Our team executed well to produce record non-GAAP earnings per share of $2.61. While this is a remarkable performance, we are also very excited to see the positive trends in key areas of our business extending into the third quarter. This reflects both increasing demand in the high-growth markets we serve as well as our ability to further deepen relationships with existing customers and gain additional market share. As a result, we are confident that our strong revenue growth will extend into the third quarter along with the corresponding increase in profitability. We are excited about these growth trends and have ample capacity to meet our near- to medium-term requirements and commitments to our customers. That said, with our continued growth, we will need additional capacity in the future, which is why we are pleased to announce that last month we broke ground on Building 10, a new 2 million square foot facility at our Chonburi campus, adding more than 50% to our total footprint. This new building will provide us with plenty of capacity to support our anticipated growth over the longer term. Also reflecting our confidence, during the second quarter, we repurchased more than one-third of our $200 million authorized for share repurchases, and our Board just authorized an additional $100 million for share buybacks. Looking at the dynamics of the quarter in more detail, within Optical Communications, datacom experienced some bumpiness ahead of the ramp in next generation products at a major customer and grew 4% from a year ago but declined 9% from the first quarter. While we believe datacom demand could see a slight decrease in the third quarter, we remain confident that datacom revenue trends will improve as next-generation technologies at the 1.6 terabyte data rate begin to ramp later this calendar year. Meanwhile, we were pleased to see telecom revenue perform even better than anticipated in the quarter, increasing 24% from a year ago and 17% sequentially. Our telecom revenue strength was driven primarily by increasing demand for data center interconnect products and by early success with recent telecom system wins. We're optimistic that this positive trend will extend into the third quarter. Turning to Non-Optical Communications, we experienced another healthy performance in automotive, with the revenue up 32% from a year ago and roughly flat from Q1. Also contributing to our growth in the quarter, industrial laser revenue was up 24% from a year ago and 6% from last quarter. In summary, with the confluence of several positive growth drivers ahead of us, we are more confident than ever in our business. In the coming quarters, we expect our datacom business to return to faster growth. In telecom, we anticipate further growth driven by increasing momentum from recent system wins coupled with rising demand for data center interconnect products. Collectively, we are very optimistic as we look to the third quarter and beyond. Now, I'll turn the call over to Csaba for more financial details on our second quarter and our guidance for the third quarter of fiscal 2025. Csaba?

Csaba Sverha, CFO

Thank you, Seamus, and good afternoon, everyone. We had a strong second quarter with revenue and net income per share that were above our guidance ranges. Revenue in the second quarter was $834 million, an increase of 17% from a year ago and 4% from Q1. Non-GAAP EPS was $2.61, with revenue upside and foreign exchange evaluation gain contributing to our results. Details of our revenue breakdown are included in the investor presentation on our website. So, I will focus my comments on some of the more noteworthy highlights. In the second quarter, Optical Communications revenue was $647 million, up 14% from a year ago and 3% from Q1. Within Optical Communications, datacom revenue was $299 million, or 46% of optical communications revenue, an increase of 4% from a year ago, but a decline of 9% as a major customer transitioned to next-generation products. Telecom revenue was $348 million, or 54% of Optical Communications revenue, a remarkable increase of 24% from a year ago and 17% from Q1, driven primarily by growth in DCI products and early contributions from recent system business wins. By data rate, revenue from 800-gig and faster products was $257 million, up 12% from a year ago and flat sequentially. Revenue from products below 800-gig was $277 million, an increase of 25% from a year ago and 5% from Q1. 400ZR products for data center interconnect applications were very strong contributors to growth, reaching 10% of total revenue in the quarter. Revenue from Optical Communications products that are non-speed rated was $114 million, up 6% from Q1. Non-Optical Communications revenue was $186 million, up 29% from a year ago and 5% sequentially. Each of automotive, industrial laser and other revenue categories was up sequentially and grew over 20% year-over-year. As I discuss the details of our P&L, expense and profitability metrics will be on a non-GAAP basis, unless otherwise noted. Gross margin in the second quarter was 12.4% compared to 12.7% in the first quarter, primarily due to Q1 foreign exchange tailwinds turning into slight headwinds as anticipated. Operating expenses were flat sequentially at $16 million, offsetting most of the impact of slightly lower gross margins. Operating income was a record $88 million, representing an operating margin of 10.6% compared to 10.7% both a year ago and last quarter. Interest income of $11 million in the quarter was in-line with Q1, and a foreign exchange evaluation gain contributed $4 million. Effective GAAP tax rate was elevated in the quarter at 8.7% due to discrete items. We continue to expect an effective tax rate in the mid-single-digit for the fiscal year. Non-GAAP net income was $95 million or $2.61 per diluted share, which was above our guidance range and a quarterly record. Turning to the balance sheet, we ended the second quarter with cash and short-term investments of $935 million, up $26 million from the end of the first quarter. Operating cash flow in the quarter was strong at $116 million. Capital Expenditures were $22 million, resulting in free cash flow of $94 million in the second quarter. As Seamus mentioned, we recently broke ground on our new Building 10 in Chonburi, which will considerably increase our manufacturing capacity. As a result, we expect to incur a higher CapEx outlay over the next several quarters. Turning to share buybacks, recall that we increased the size of our share repurchase program in August to $200 million. During the second quarter, we were very active in the program and acquired 292,000 shares at an average price of $235 per share for a total cash outlay of $69 million. As a result, at the end of the second quarter, we had $131 million remaining under our repurchase authorization. As a sign of continued confidence in our business, last week our Board authorized an additional $100 million for share repurchases. Now, I will turn to our guidance for the third quarter of fiscal year 2025. As Seamus highlighted, we have several reasons to be optimistic about our business in Q3 and beyond, and this is reflected in our outlook. For the third quarter, we expect total revenue to be between $850 million and $870 million. By major product area, we anticipate datacom revenue to be down slightly sequentially in anticipation of the ramp in coming quarters from next-generation products. We expect telecom revenue to see strong sequential growth again in Q3, as increasing DCI momentum and new system wins make larger contributions. We also expect automotive revenue to continue to grow sequentially. We expect foreign exchange pressure on gross margin to persist in the third quarter, but believe we can again offset much of that impact with continued operating leverage. Therefore, we anticipate EPS in the third quarter to be between $2.55 to $2.63 per diluted share. In summary, after a very strong second quarter, we continue to be very optimistic about our business as we benefit from several positive trends. We believe Q3 will represent another quarter of record revenue for the company as our strong business momentum continues in the third quarter and beyond.

Operator, Operator

Yes, sir. Our first question or comment comes from Karl Ackerman from BNP Paribas. Your line is open.

Karl Ackerman, Analyst

Yes, thank you, gentlemen. For my first question, I was hoping to discuss telecom for a second. When should we expect to see record revenue in telecom? I guess, is that implied in your March quarter outlook? I asked because telecom fell from about $400 million a quarter two years ago to a trough of $280 million in June of last year, but now you're seeing traction in coherent ZR modules and two large system business wins that appear to be just flowing into your results that do support this end market recovery. So, you've got several things acting as tailwind. So, if you could talk about the visibility you see within telecom and when we should see record revenue in that segment?

Seamus Grady, CEO

Yeah, thanks, Karl. So, yeah, as you rightly say, our telecom revenue was down for the last several quarters as the whole industry digested inventory. The nice thing is the counter-cyclicality we have in the business, when our telecom revenue was flat, our datacom revenue was growing nicely. And at the moment, our datacom revenue is a little bit flat as we wait for new product launch, and our telecom revenue is back to strength. And the drivers of that are a mixture of new program wins and strength in primarily DCI products and ZR products. So, we expect that trend to continue. Some of the system wins are beginning to show in the numbers, but the majority of the new system wins are actually not in our results yet. The Ciena win we talked about previously is more of an FY '26 story from a revenue perspective, and the other system win, where we took business away from one of our competitors, is really just beginning to ramp. So, yeah, good strength in telecom, really offsetting that softness in datacom, but we expect that strength in telecom to continue for the next several quarters. Exactly when it gets back to where we were before the inventory digestion, it's really hard to say and I wouldn't like to speculate, but we're just focused on getting the customers what they need and we're very happy to see, as I say, the telecom business being very strong for us just when we need it to be when the datacom business is a little bit soft.

Karl Ackerman, Analyst

Yeah, thank you for that. If I may have a follow-up?

Seamus Grady, CEO

Sure.

Karl Ackerman, Analyst

The growth in your silicon photonics business is now approaching record levels as well. I guess, within silicon photonics, is the incremental growth coming from high-speed transceivers inside the data center or is it mainly coherent ZR for DCI and other telecom applications? Thank you.

Seamus Grady, CEO

That's mainly the latter, coherent transceivers for ZR, transceivers for DCI applications between the data centers. That's the main driver of our silicon photonics growth. And we're a very early adopter of silicon photonics. We've been building silicon photonics products for over a decade at this stage. So, we really feel we're in a strong position as the industry moves more towards silicon photonics and also co-packaged optics that for us it's a fairly natural transition to go from one to the other, but yeah that growth in silicon photonics is primarily driven by coherent ZR DCI products.

Karl Ackerman, Analyst

Got it. Thank you.

Seamus Grady, CEO

Thank you, Karl.

Operator, Operator

Thank you. Our next question or comment comes through the line of Samik Chatterjee from JPMorgan. Your line is open.

Samik Chatterjee, Analyst

Hi. Thanks for taking my questions. Seamus, you talked about the next-generation product in datacom for the primary customer that you have here, and I think you've referenced sort of the strong visibility you have in ramping the next-generation product. I mean, what's driving that confidence in terms of timing? You're guiding here to a moderation in 3Q as well. So, should we just conclude that the new product sort of ramps starting in 4Q towards the end of the year? And has the timing from the customer in terms of when that next product ramps has that also changed, or is it still pretty intact in terms of the timing that you were expecting to ramp the next-generation product? Then, I have a follow-up. Thank you.

Seamus Grady, CEO

Yeah, I think the timing of the next-generation product really depends on our customers' launch timing. We would expect to see a ramp about one quarter before our customer wants to ship product to their customers. We're ready, we're prepared, and we're ready to go from a capacity perspective and we're really just working to the customer schedule. So, no big change other than we're working to the customer schedule in terms of the launch. We have good visibility. We still have the same visibility we've had. We have visibility well beyond the component lead times and we're quite optimistic. We're not concerned. It's really just a question of making sure we're ready to go when the customer is ready to go. So, we're ready to ramp and ready to go whenever the product launches.

Samik Chatterjee, Analyst

Okay. Got it. And relative to the volumes that you're expected to ramp on initially or even sort of volumes through the cycle as well as pricing on these sort of products, what is the visibility that you have currently from the customer? Particularly if you compare it to 800-gig and when you're initially ramping in terms of price and volume, how does the next-generation product compare?

Seamus Grady, CEO

I believe that once we start seeing volume, it will increase rapidly, which is typical for that segment of our business, and we're prepared for it. Regarding average selling prices, we are continuously lowering our costs and, consequently, our prices for customers. This is not a new strategy. The delay in launching the final product has allowed both us and our customers to focus on costs and ensure competitiveness. We anticipate that when we launch the 1.6 product, we will be very competitive in pricing compared to the 800-gig. However, the increase in pricing may not be as significant as traditionally expected when doubling the speed. We are ready and are working diligently to keep our costs competitive. Regarding volumes, we're prepared to ramp up whenever the customer is ready, and we remain optimistic. There’s no reason for pessimism; it's simply a matter of timing.

Samik Chatterjee, Analyst

Got it. Great. Thank you for taking my questions.

Seamus Grady, CEO

You're welcome.

Operator, Operator

Thank you. Our next question or comment comes from the line of George Notter from Jefferies. Mr. Notter, your line is open.

George Notter, Analyst

Hi, there. Thanks very much, guys. I guess, I was going to ask the question of the day, I think which is tariffs. Obviously, it's been something the industry has been concerned about for some time. I'm wondering if you guys are seeing incremental opportunity associated with tariffs going in place now. Was this an opportunity for Fabrinet to take share? Can you kind of give us a sense for what you're seeing from the customers in your conversations? Thanks.

Seamus Grady, CEO

We're closely monitoring the situation. So far, we haven't encountered any tariffs on China due to the locations of our factories, and we don't anticipate any negative effects. In fact, if customers consider shifting their production because of the recent tariffs, it could potentially benefit us. A significant portion of the supply chain in our industry remains in Mexico, along with some still in China. We're eager to collaborate with customers who wish to move production our way. Overall, aside from the broader economic factors, which I'm not equipped to discuss in detail, we don’t view tariffs as a challenge. On the contrary, it might even provide us with a slight advantage, although it's still too early to predict the outcomes.

George Notter, Analyst

Got it. I think part of the challenge here is that there is some lead time required to move manufacturing from one country or region to another. If there is a benefit, how far away do you think that is—months, quarters, or even years? How do you perceive what is reasonable in terms of when it could be advantageous for you?

Seamus Grady, CEO

It's difficult to provide a clear answer, George. I don’t want to avoid the question, but it's challenging. If the benefit hasn't become evident over a few months or quarters, it likely won't at that stage. Companies often choose to remain where they are and find other cost-cutting methods. However, I see it as an opportunity. I wouldn’t get overly enthusiastic, though. It's more likely to be a matter of months and quarters rather than years. The products are complex, but we have a history of moving intricate products swiftly. If customers decide to make a change, we are prepared to assist them and can act quickly.

George Notter, Analyst

Great. Super. Thank you.

Seamus Grady, CEO

You're welcome.

Operator, Operator

Thank you. Our next question or comment comes from the line of Ryan Koontz from Needham. Mr. Koontz, your line is open.

Ryan Koontz, Analyst

Great. Thanks for the question. Seamus, with your momentum in ZR and DCI, I wonder if you're contemplating or your customers are contemplating yet much of a transition over to 800ZR yet or you really seeing 400 as the dominant force here in '25?

Seamus Grady, CEO

In the fourth quarter and first quarter, 400ZR constituted 10% or more of our optical revenue. In the second quarter, 400ZR represented 10% of our total revenue, making it a crucial category for us. This translates to approximately a 43% sequential increase to $83 million, highlighting the significance of ZR for our business. We anticipate that 400ZR will continue to perform strongly in the upcoming quarters. We have also qualified and shipped 800ZR, although it's still in the early stages.

Ryan Koontz, Analyst

Got it. Great. Regarding your expectations, you mentioned some fluctuations on the datacom side. Do you think it's primarily the lower speed datacom that will be more affected, or do you believe the higher end at 800 will experience a slowdown as well? Is there anything you can share about this?

Seamus Grady, CEO

Yeah. So, we don't have much low-speed datacom business, right? It's mostly predominantly 800-gig and above. And what I would say is, we're very optimistic about our datacom business overall. When we provided guidance, we indicated that datacom would be roughly flat and things turned out a little bit softer than anticipated, and then near-term, the product transition we talked about means our overall datacom revenue will see additional softness in Q3. Again, nothing that we're overly concerned about, but it is at those higher-speed products. We continue to anticipate increasing demand and revenue as our customer ramps the next-generation 1.6 terabit products, which makes us optimistic over the longer term, albeit we have some near-term softness. In the meantime, we have several other drivers that contributed to strong growth in Q2 and we'll continue to benefit from those in Q3. Interestingly, if you look at, we often talk about the counter-cyclicality in our business, that it seems when one part of our business is down, and other part is up. That's really what we've been seeing here with our telecom and datacom business. Historically, when we were going through that inventory digestion for several quarters, our datacom business was strong. And at the moment, our datacom business is a little bit flat, but our telecom business is very strong. But the mix of our business is more on the leading-edge, higher-speed products, not the older products.

Ryan Koontz, Analyst

Got it. Makes sense. And just last, if I could, around, what's the rough timeframe between your CapEx and when you can bring capacity online? Are we talking months, quarters?

Seamus Grady, CEO

Yeah, go ahead, Csaba.

Csaba Sverha, CFO

Ryan, if you're talking about our Building 10, so the lead time of that is about 18 months. So, we will see linear cash outlay in terms of CapEx. So, you would see probably about $20 million uplift in CapEx spends and cash outlay in the next, let's say, six to eight quarters.

Seamus Grady, CEO

And just maybe, Ryan, just to put some context around Building 10, in terms of the revenue capacity that we're adding, general rule of thumb, we generate about $1,200 per square foot in annual revenue. So, Building 10 will be a 2 million square foot facility. So, it's about $2.4 billion capacity addition that we're investing in. So, obviously, the actual revenue will depend on the mix of products, but that's the ballpark capacity that we're adding is about $2.4 billion.

Ryan Koontz, Analyst

That's great. Really impressive. Thank you, gentlemen.

Seamus Grady, CEO

Thank you, Ryan.

Csaba Sverha, CFO

Thanks, Ryan.

Operator, Operator

Thank you. Our next question or comment comes from a line of George Wang from Barclays. Mr. Wang, your line is open.

George Wang, Analyst

Thank you for taking my question. I have two quick inquiries. First, I want to focus on the 1.6T ramp. Compared to last quarter, are there further delays or is it still in a holding pattern regarding the transition you mentioned earlier this year? Additionally, are there other obstacles to broader adoption of 1.6T, such as the supply chain's wait for the 800G network interface cards, which likely won't be available until later this year? Can you elaborate on some of the other potential constraints beyond just your largest datacom customer dealing with the transition related to Blackwell?

Seamus Grady, CEO

Yeah, I think on the wider questions around the supply chain and waiting for network interface cards and things like that, that's probably a question more better directed to our customer. It's not something we'd really comment on or have any particular knowledge of. We've been producing sample qualification builds of 1.6T and to the point where we're ready to go whenever the customer is. As I talked about earlier, it's really just a question of the timing of that product launch. Again, wider questions about other parts of the network, we're not really in a position to talk about, mostly because we don't know, but it's also just a question that will be better directed to our customer.

George Wang, Analyst

Okay, thanks. And just a quick one, if I can. Just in terms of the Ciena business, obviously, it's anticipated it's going to be a much bigger customer in the next few quarters, FY '26, as you guys call it out. Is there any sort of a refreshed view in terms of the peak revenue run rate? Do you think it can surpass Cisco, kind of 10% customer? Any sort of latest thoughts in terms of the prospect for Ciena, recognizing its early days? Just curious if you have additional thoughts on that.

Seamus Grady, CEO

We have recently achieved a couple of significant wins, including the new Ciena products we've mentioned in previous quarters. We anticipate that most of Ciena's growth will occur toward the end of fiscal 2025 and into early fiscal 2026. Therefore, we view it more as a revenue story for fiscal 2026. Our revenue ramp will align with our customers' plans. However, we do not provide specific revenue estimates for Ciena or any individual customer. We only disclose if a customer reaches 10% of our revenue at the end of the fiscal year. I cannot provide more details regarding revenue at this time.

George Wang, Analyst

Okay, thank you. I'll go back to the queue.

Seamus Grady, CEO

Thank you.

Operator, Operator

Thank you. Our next question or comment comes from the line of Tim Savageaux from Northland Capital Markets. Mr. Savageaux, your line is open.

Tim Savageaux, Analyst

Thanks. Good afternoon, and congrats on the results and outlook here.

Seamus Grady, CEO

Thank you, Tim.

Tim Savageaux, Analyst

Maybe I can try and come at that from another direction. So, first question, if you look at the sequential growth in telecom this quarter, you've been pretty clear about the ZR, data center interconnect impact. Fair to conclude that the other piece of that $50 million is the new program ramp with the major customer that you're talking about, or anything to discuss with regard to the broader telecom landscape recovery?

Seamus Grady, CEO

It's mainly due to ZR and the initial ramp-up of another competitive program win where we captured some market share from a competitor. The customer we previously mentioned related to the Ciena business isn't reflected in the numbers yet. So, it's a mix of that competitive system win along with the growth of ZR and DCI. We took advantage of the flat telecom business, which was impacted by inventory digestion, to secure new business, and we are starting to see the results of that now.

Tim Savageaux, Analyst

Okay. Well, that makes this question a little easier. And Csaba has referred to a couple of times strength in the business in Q3 and beyond. So, I think that fairly opens up a discussion about fiscal Q4. And Seamus, you just said that the Ciena ramp, you do expect to begin in fiscal '25.

Seamus Grady, CEO

Yes.

Tim Savageaux, Analyst

So, I guess, looking at the sum total of that, you're typically seasonally pretty strong in the June quarter anyway, but it looks like you got a fair bit of momentum heading into that June quarter, regardless of whether you see 1.6T start to ramp then, which I imagine you might, but feel free to comment on that as well, and just about your assessment on that overall set up there.

Seamus Grady, CEO

You're absolutely right, Tim. I couldn't have expressed it better. Our telecom business, which has been a challenge for quite some time, has now shifted to being a source of growth, thanks to several growth opportunities. ZR continues to show strong growth. We've gained market share through new network system wins from one of our competitors, and the Ciena win hasn't yet impacted our numbers. We're also pursuing other system victories. As we mentioned earlier, we've been actively working to secure telecom business during a period of flat industry growth and have been dedicated to that effort. We typically wait to announce developments until they’re certain, but there are more initiatives we are diligently working on. So yes, the telecom segment is transforming from a challenge to a growth opportunity. Around the same time, we anticipate the ramp-up of our next-generation datacom products. We feel optimistic about the second half of the year, especially with the announcement of the new factory and the increased share buyback, which should reflect our confidence.

Tim Savageaux, Analyst

Absolutely. And well, a quick one for me. I missed the Non-Optical guide. If you wouldn't mind repeating that briefly? And the last real question is, my assumption would be, I guess, I'm trying to get you to rank order of magnitude, the size of the relative new systems opportunities. I would assume, Ciena would be larger to much larger, but maybe not. If you're willing to comment on that? Thanks.

Csaba Sverha, CFO

With regards to the guidance, Tim, we are anticipating automotive to be sequentially up and laser to be flat to slightly up as well. So, across the board, we are seeing upside going into Q3 other than the temporary softness in datacom.

Tim Savageaux, Analyst

Great. Thanks a lot.

Csaba Sverha, CFO

You're welcome.

Seamus Grady, CEO

You're welcome.

Operator, Operator

Thank you. Our next question or comment comes from the line of Mike Genovese from Rosenblatt Securities. Mr. Genovese, your line is open.

Mike Genovese, Analyst

Great, thanks. I just want to clarify something that has been asked a few times already. I probably won't get a new answer, but regarding the timeline for when we might see datacom grow again sequentially, is it too early to tell? Do you have any indication whether that growth might occur in June or September?

Seamus Grady, CEO

Well, I mean, we only guide one quarter at the time, Mike. So, right now, we're guiding one quarter at the time, so we're not going to really go beyond that. Yeah, we have a sense of when the new products will begin to ramp. But as we've learned the hard way over the years, sometimes new products, they don't launch exactly in line with your expectations. And sometimes, they launch much quicker than we think they will. So, it's really early days. But from our point of view, we're just ready to support the customer whenever they're ready to start ramping the product. But I wouldn't want to get into whether it's June or September at this point.

Mike Genovese, Analyst

Do you think your results reflect the overall 800G market, considering you have one customer? Is it possible the market is performing better than what your results indicate, or do you have any insights on that?

Seamus Grady, CEO

I don't really know. We just respond to what our customers require. If you look at the 800-gig data center segment, there are several companies involved. We are the only supplier that operates as a contract manufacturer for our customers' designs, but there are other merchant suppliers as well. Therefore, we don't have overall visibility. Our overall numbers for 800-gig and above also include telecom products, making it a mixed situation. I don't believe we are fully representative of the entire industry since we lack a complete customer and product portfolio.

Mike Genovese, Analyst

Okay. Lastly, is there anything you are experiencing with EMLs, specifically regarding the availability of 200G per lane or even 100G per lane EMLs? Is that affecting either the size or the timing of the transition from the 800G market to 1.6?

Seamus Grady, CEO

Yeah, I think it's not a secret. They're very hard to get. The world needs more EMLs, so yeah, they're one of the components that's in fairly short supply.

Mike Genovese, Analyst

Okay, I would ask one more if I could...

Seamus Grady, CEO

Sure.

Mike Genovese, Analyst

...as long as I have you. Look, in the beginning of the 800G, there weren't a lot of merchant guys ready yet. So, the start of the 800G was a lot of share gain for Finisar, almost because you guys were the only player in town, the only game in town. I guess, 1.6, everyone has had more of a time to sort of develop on the same timeline, but do you see 1.6 as an opportunity to gain some share, or how do you think that that could play out?

Seamus Grady, CEO

It's difficult to say. I believe this situation is somewhat different this time. With 800-gig, the products and applications were new, and we were likely the only source for a while until some of the merchant suppliers could meet the demand. This time, the demand is well recognized. Additionally, I expect that all the merchant suppliers are actively working to prepare their 1.6 offerings for rollout. One reason we were the only source in the early stages of 800-gig was likely to simplify the overall network by reducing complexity and variables. While that may still be true, I anticipate that as soon as the merchant suppliers are ready, they will quickly enter the supply chain. Depending on your viewpoint, one positive aspect of the delay in launching 1.6 is that everyone is now better prepared. Our customers are ready, and the supply base is more equipped. This should lead to a quicker ramp-up in overall supply.

Mike Genovese, Analyst

I appreciate the straightforward answers and the interesting discussion. Thanks so much.

Seamus Grady, CEO

No problem. Thank you, Mike.

Operator, Operator

Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Grady for any closing remarks.

Seamus Grady, CEO

Thank you for joining our call today. We're excited that our second quarter results again exceeded our guidance to produce record revenue and EPS for the company. We continue to be very optimistic about our future with several tailwinds driving our growth in the third quarter and beyond. We look forward to speaking with you again and to seeing those of you who will be attending the Susquehanna Virtual Conference later this month. Goodbye.

Operator, Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.