Shares of Fabrinet (FN) plummeted 8.90% in after-hours trading on Monday, despite the company reporting better-than-expected fourth-quarter results for fiscal year 2025. The sharp decline suggests investors are looking beyond the headline numbers and focusing on concerns about future growth and cash flow.

For Q4, Fabrinet posted adjusted earnings per share of $2.65, slightly above the $2.64 analyst estimate. Revenue came in at $909.69 million, surpassing expectations of $884.87 million and marking a 20.8% year-over-year increase. However, the company's non-GAAP free cash flow saw a dramatic drop to $4.7 million, primarily due to increased capital spending and inventory growth.

Looking ahead, Fabrinet provided guidance for Q1 fiscal 2026, projecting revenue between $910 million and $950 million, and non-GAAP earnings per share in the range of $2.75 to $2.90. While this outlook suggests continued growth, investors appear concerned about potential margin pressures and the sustainability of the company's rapid expansion. The significant decline in free cash flow, despite strong revenue growth, is raising questions about Fabrinet's capital efficiency and future investment needs as it ramps up new programs and expands capacity.