Compare moats
Up to three covered companies, band by band. Every call is a curated editorial judgment, never a disclosed figure — and every band carries its cited basis.
| Fabrinet | ServiceNow | TE Connectivity | |
|---|---|---|---|
| Moat rating | narrow The FY2026 10-K grounds a real but bounded defence. On the defence side: Item 1 states that in the manufacturing services market "there are significant barriers to entry in our existing and target markets, including lengthy sales cycles, the need to demonstrate complex precision optical and electro-mechanical engineering and manufacturing capabilities to a prospective customer and the ability to protect a customer's intellectual property," and that qualification of a program "may take three to six months or longer to complete." On the limiting side, the same filing shows the protection does not reach price: gross profit was 12.0% of revenues in FY2026 against 12.1% in FY2025 and 12.4% in FY2024 even as revenue rose 35.7% to $4.64 billion, four customers each exceeded 10% of revenue (Cisco 19.9%, NVIDIA 16.3%, Nokia 10.7%, Amazon 10.5%), and "reliance on a small number of customers gives those customers substantial purchasing power and leverage in negotiating contracts with us." Sales are made on "individual purchase orders that have short lead times and are subject to revision or cancellation," so the qualified program is sticky while the contract is not. | narrow The FY2025 10-K shows RPO of $28.2 billion, up 27%; customers above $5 million of ACV at 603, 502 and 420 as of December 31 2025, 2024 and 2023; revenue of $13,278 million, up 21%; and a 98% renewal rate for three years. That rate cannot prove durability: the filing computes it excluding "changes in price or users," says it "does not reflect increased or decreased purchases," and warns "period-to-period comparison of renewal rates may not be meaningful." The company also calls its market "characterized by fragmentation, low barriers to entry." Real switching costs plus compounding large accounts support narrow; wide would need durability proof this filing lacks. | narrow The FY2025 10-K's own Competition section undercuts any claim of insulation: 'The industries in which we operate are highly competitive, and we compete with thousands of companies that range from large multinational corporations to local manufacturers', competition is 'generally based on breadth of product offering, product innovation, price, quality, delivery, and service', and TE has 'experienced, and expect[s] to continue to experience, downward pressure on prices'. The same filing explicitly disclaims IP as the basis of its position: 'we do not believe that our competitive position or our operations are dependent upon or would be materially impacted by any single patent or group of related patents.' What TE does hold is durable rather than absolute — it calls itself 'one of the leading providers of advanced automobile connectivity solutions', its Industrial segment 'a leading supplier', and it converted that position into rising profitability across the same filing's three income statements (gross margin 31.5% of net sales in FY2023, 34.4% in FY2024, 35.2% in FY2025). A position that earns expanding margins into admitted price pressure is an advantage; one held against thousands of competitors and no decisive patent is not a wide one. |
| Moat type | switching costs The 10-K locates the stickiness in qualification rather than in patents or scale. Customers "do not purchase our services until they qualify the services and satisfactorily complete factory audits and vendor evaluations"; qualification "may take three to six months or longer"; production is transferred "copy-exact: the setup of a production process identical to the one used by our customer"; and the filing's own experience of changing a component source is that it "resulted in our customers or their end customers requiring requalification and validation of components, a process that can often be lengthy and has negatively impacted the timing of our revenue" — the same friction a customer would face moving the program elsewhere. The filing rules out an IP-based moat itself: "Historically, patents have not played a significant role in the protection of our proprietary rights," and any process improvement developed for a customer's product is "immediately assigned to that customer." The Thailand cost base is a genuine advantage but the filing warns it is not durable on its own — "Wage increases may impact our ability to sustain our competitive advantage and may reduce our profit margin." | switching costs The binding force is architecture and configuration. The filing describes "a multi-instance architecture that provides each customer with a dedicated application layer and database," an ITOM product that "maintains a single record of all IT configurable items," and products built to "integrate with existing workflows rather than replace them." Once that record and its integrations are configured, replacement becomes a re-platforming program — our inference, as the filing quantifies no switching cost. Not IP: it holds "over 2,000 issued U.S. and foreign patents" but is not "materially dependent on any single patent." Not network effects. | switching costs The FY2025 10-K locates the advantage at the customer, not in patents. It describes 'close working relationships with many of our customers' whose 'relationships with them typically date back many years', and co-development as the mechanism: 'By working with our customers in developing new products and technologies, we believe we can identify and act on trends and leverage knowledge about next-generation technology across our products.' Roughly 75% of fiscal 2025 net sales were direct to manufacturers rather than through distribution, and the Transportation segment's products 'must withstand harsh conditions' — parts engineered in with the customer and built to survive the application, so the position sits inside the customer's design rather than in a purchase order. The filing rules the alternative out in its own words on intellectual property, so intangibles_ip is not the source; the 'thousands of companies' in Competition rules out efficient_scale. |
| Leadership | co leader The leadership claim in the filing is the company's own qualitative assessment: "We believe we are a leader in manufacturing products for the optical communications market," and, on breadth of process technology, "Based on our experience with customers and our qualitative assessment of our capabilities, we believe we provide a broader array of process technologies to the optics industry than any other manufacturing services provider." The same Item 1 names a crowded field against it — "Benchmark Electronics, Inc., Celestica Inc., InnoLight Technology (Suzhou) Ltd., Jabil Inc., Sanmina Corporation, Venture Corporation Limited and Eoptolink Technology Inc., Ltd., as well as the internal manufacturing capabilities of our customers" — and no independent share ranking is given, so the record supports front-of-field standing but not sole primacy. | clear leader The call is scoped to IT service management. Apps Run The World's 2024 ITSM ranking (page dated 23 July 2025) places ServiceNow first at 44.4% share, ahead of Atlassian, BMC, GoTo and Ivanti, in an $11.4 billion market where the top ten hold 83.3%. Scale corroborates: about 8,700 customers, 29,187 employees, $13,278 million of revenue, $28.2 billion of RPO. References to "two decades partnering with enterprise customers" and process knowledge "that cannot be readily replicated" are the filing's own characterisation. Outside ITSM it is weaker: one of six Leaders in the 2025 Gartner LCAP quadrant, and tenth of ten in CRM behind Salesforce at 26.1%. | co leader The FY2025 10-K claims leadership in qualified form and then names the peers who contest it. Transportation Solutions 'is a leader in connectivity and sensor technologies' and TE is 'one of the leading providers of advanced automobile connectivity solutions' — one of, not the — while the segment's 'major competitors include Yazaki, Aptiv, Sumitomo, Sensata, Honeywell, Molex, and Amphenol'. Industrial Solutions 'is a leading supplier of products that connect and distribute power, data, and signals' and 'competes primarily against Amphenol, Hubbell, Carlisle Companies, Integer Holdings, Molex, Omron, JST, and Korea Electric Terminal (KET)'. Amphenol and Molex appear on both lists, so TE shares the top of the interconnect market rather than owning it. |
| Pricing power | weak Gross profit was 12.0% of revenues in FY2026, 12.1% in FY2025 and 12.4% in FY2024 — flat to down across three years in which revenue grew from $2.88 billion to $4.64 billion — and the FY2026 increase in gross profit is attributed to "sales volume and product mix," not price. Item 1 says so directly: "we expect the prices we charge for our manufactured products to decrease over time (partly as a result of competitive market forces)," with the offset coming from cycle-time, mix, yield and material-cost work rather than from rate. The risk factors add that customer consolidation gives buyers "increased leverage that may result in, among other things, decreases in our average selling prices," and that new competition "could result in price reductions for our services, reduced gross profit margins or loss of market share." | moderate The filing discloses no average selling price, no net revenue retention and no pricing data, and the renewal rate is no proxy — it "does not reflect increased or decreased purchases" and excludes "changes in price or users." Revenue up 21%, the $5 million-plus cohort up about 20% annually and RPO up 27% are all consistent with expansion at flat pricing. Margins cut the other way: subscription gross profit fell to 80% from 82% with no stated cause, and professional services gross loss widened to 5% from 2%. One real lever is that "certain AI and data solutions include a consumption-based pricing component." | moderate The FY2025 10-K states both halves plainly: TE has 'experienced, and expect[s] to continue to experience, downward pressure on prices. However, as a result of increased costs and tariffs, certain of our businesses implemented price increases in recent years.' Pass-through, not price-setting. The realised result is margin expansion rather than erosion — gross margin of 31.5% of net sales in FY2023, 34.4% in FY2024 and 35.2% in FY2025 per the same filing's income statements, and 36.5% ($5,319M on $14,573M) for the nine months to 26 June 2026 versus 35.3% a year earlier, with Q3 FY2026 GAAP operating margin of 19%, per the 22 July 2026 results release (https://www.sec.gov/Archives/edgar/data/1385157/000110465926085589/tel-20260722xex99d1.htm). Strong would require pricing that leads rather than follows cost; weak is contradicted by three years of expanding gross margin. |
| Summary | Fabrinet is the neutral outsourced factory for complex photonics. The FY2026 10-K describes a business that wins on qualification and IP hygiene rather than on product ownership: a "factory-within-a-factory" that physically segregates each customer's engineers and floor space, copy-exact line transfers, Telcordia-grade environmental qualification, and a claim that "there is no other manufacturing services provider with a similar breadth and depth of optical and electro-mechanical engineering and process technology capabilities that does not directly compete with its customers in their end-markets." That neutrality is claimed as a belief, not demonstrated — the filing's own framing is "we believe" — and Item 1 names the field it is measured against without characterising any of them: "Benchmark Electronics, Inc., Celestica Inc., InnoLight Technology (Suzhou) Ltd., Jabil Inc., Sanmina Corporation, Venture Corporation Limited and Eoptolink Technology Inc., Ltd., as well as the internal manufacturing capabilities of our customers." Once a program is qualified it tends to stay, and "in many cases, we are the sole outsourced manufacturing partner used by our customers for the products that we manufacture for them." What the moat does not buy is margin. Revenue grew 35.7% in FY2026 to $4.64 billion on the AI-datacenter build-out — data center products are now 47.9% of revenue — yet gross margin slipped to 12.0%, and Item 1 concedes the company expects "the prices we charge for our manufactured products to decrease over time." The two live erosion paths are named in the risk factors: customer consolidation that "may result in, among other things, decreases in our average selling prices," and customers who "acquired the capacity to manufacture products in-house." Concentration cuts both ways this year — FY2025 had two customers above 10% of revenue, FY2026 had four, so the book broadened even as its scale grew. | ServiceNow sells a workflow platform that sits on top of, rather than replaces, an enterprise's existing systems. Each customer gets a dedicated application layer and database, ITOM maintains a single record of all IT configurable items, and products integrate with existing workflows rather than replace them; once that record and its integrations span IT, HR and customer service, displacement becomes a re-platforming exercise. The evidence is in large commitments: $5 million-plus ACV customers rose from 420 to 502 to 603, and RPO reached $28.2 billion, up 27%, against $13,278 million of FY2025 revenue. The moat is bounded by a market the company itself calls fragmented with low barriers to entry, by larger rivals that can bundle or cut price, and by falling subscription gross margin, 82% to 80%. | TE Connectivity sells the connectors, terminals, sensors and cable-protection parts that, in its own framing, 'enable the distribution of power, signal, and data' — a component vendor, never a system or compute vendor. The FY2025 10-K puts the two reportable segments, Transportation Solutions (54% of net sales) and Industrial Solutions (46%), against a combined served market it estimates at roughly $200 billion, which tells you immediately that no single share number governs this business: the filing discloses no market share, says 'no single customer accounted for a significant amount of our net sales in fiscal 2025, 2024, or 2023', and states that because TE is 'not organized by product or service, it is not practicable to disclose net sales by product or service'. The defensible part is entrenchment. Parts get designed in with the customer and then qualified to survive automotive, aerospace, subsea and grid conditions; TE sells about 75% of net sales direct into ~130 countries; relationships 'typically date back many years'. That is a switching-cost moat, and the filing is unusually candid that it is not a patent moat — no single patent or group of patents is material to its competitive position. The limit is equally plain in the filing: highly competitive industries, thousands of competitors, and persistent downward price pressure, with Amphenol and Molex named as competitors in BOTH segments and Yazaki, Aptiv and Sumitomo heading the Transportation segment's competitor list. The evidence that the moat is nonetheless working is margin plus mix. Gross margin ran 31.5% / 34.4% / 35.2% of net sales across FY2023-FY2025, and in the nine months to 26 June 2026 gross margin was $5,319M on $14,573M of net sales (36.5%) against $4,419M on $12,513M (35.3%) a year earlier, while Q3 FY2026 GAAP operating margin was 19% and orders hit a record $5.7 billion, up 27% year over year. Growth has also rotated: digital data networks grew 34.2% in Q3 FY2026 (34.0% organic) and 48.8% over nine months, with the CEO naming 'increased momentum in AI in both the data center and across the broader energy infrastructure' — while sensors, an end market for which the 10-K makes no leadership claim at all, shrank 2.8% organically in the quarter. Narrow, not wide: a real toll on other people's platforms, collected under admitted price pressure. |
| Chain position | A contract manufacturer sitting between optical components and the network and AI-datacenter OEMs whose brands ship the finished box. FY2026 revenue is 47.9% data center, 33.3% communications infrastructure and 18.8% automotive, industrial and other markets (FY2025: 46.2% / 30.7% / 23.1%), with Cisco, NVIDIA, Nokia and Amazon each above 10% of revenue. Fabrinet also integrates one layer down, designing and fabricating its own customized optics and glass — crystals, ferrules, precision glass tubing — at Fuzhou, China and Mountain Lakes, New Jersey, both for its own assemblies and for the merchant market, while volume manufacturing runs from the Pinehurst and Chonburi campuses in Thailand. | Enterprise workflow platform layered on top of customers' existing systems of record. It consumes public cloud capacity (named relationships with AWS, Google, Microsoft and NVIDIA) plus its own data centers, and reaches customers through a direct sales force, global system integrators (Accenture, Deloitte, EY, Infosys, KPMG) and resale partners. Microsoft is named as both partner and competitor. | TE is an upstream component supplier to the AI build-out, not a participant in compute. It sells 'connectivity and sensor solutions [that] enable the distribution of power, signal, and data to advance next-generation transportation, energy networks, automated factories, data centers enabling artificial intelligence', about 75% of it direct to manufacturers across roughly 130 countries. AI exposure runs through one end market: digital data networks was 28% of Industrial Solutions, and Industrial Solutions was 46% of fiscal 2025 net sales — so the datacenter line is a minority of a company still 54% transportation. That minority is where the growth now is: digital data networks net sales rose 34.2% in Q3 FY2026 and 48.8% over the nine months, and energy rose 34.4% in the quarter, the CEO tying both to AI momentum 'in both the data center and across the broader energy infrastructure' (https://www.sec.gov/Archives/edgar/data/1385157/000110465926085589/tel-20260722xex99d1.htm). |
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| Long-horizon vote | +0.05 at weight 0.20 · swarm neutral Editorial prior, not backtested. | +0.20 at weight 0.20 · swarm neutral Editorial prior, not backtested. | +0.13 at weight 0.20 · swarm neutral Editorial prior, not backtested. |