Exchange: NASDAQ | Sector: Technology | Industry: Communication Equipment
Q1 2026
Published: Oct 29, 2025
Earnings Highlights
Revenue of $299.10M up 18.7% year-over-year
EPS of $-0.10 decreased by 2.7% from previous year
Gross margin of 56.5%
Net income of -21.40M
""I would say if we look at our exit of the fiscal year, we did about 50-30-20, so 50% service provider, 30% data center ecosystem and 20% aerospace and defense. And as we close the Spirent business, it's about, what, 45%, about 40% and then the remainder."" - Oleg Khaykin
Viavi Solutions Inc (VIAV) QQ1 2026 Results — Data Center Momentum Drives Growth; Spirent Acquisition Expands NSE Run-Rate with Positive Margin Profile
Executive Summary
Viavi Solutions delivered a robust start to fiscal year 2026 (QQ1) with revenue of $299.1 million, up 25.6% year over year and 3% sequentially, aided by strong demand in the Network Enablement (NSE) segment and the strategic Spirent High-Speed Ethernet product-line acquisition. EPS of $0.15 (non-GAAP basis referenced in the call) exceeded the guided range, and operating margin rose to 15.7%, above the high end of the guidance. NSE led topline growth (+35.5% YoY), driven by data center ecosystem activity, lab/production and field instruments, as well as the Inertial Labs acquisition, while OSP revenue stayed flat to up modestly in line with expectations.
The Spirent acquisition closed in mid-October 2025 and is expected to add roughly $200 million of annual revenue run rate, expanding Viavi’s data center footprint and accelerating NSE margin progression. Management guided for Q2 FY2026 revenue of $360–$370 million, with total NSE revenue of $283–$293 million (including Spirent), and OSP around $77 million. Operating margin guidance for the quarter implies continued margin leverage despite a higher base from Spirent, with expected EPS of $0.18–$0.20 (split: stand-alone ~ $0.18; Spirent contribution $0.00–$0.02).
Viavi also highlighted balance-sheet strengthening: cash and short-term investments of $549.1 million at quarter-end, $31.0 million of operating cash flow, and a $30 million share-repurchase activity during the quarter. The company refinanced $250 million of 1.625% convertible notes due 2026 into $250 million of 0.625% convertible notes due 2031, and arrangements included roughly 2.7 million shares repurchased. Management emphasized a diversified, more balanced revenue mix (roughly 45% service provider, 40% data center, 15% aerospace/defense post-Spirent) and a favorable longer-term outlook for data-center-driven growth, while noting ongoing softness in wireless end-markets.
Overall, Viavi’s QQ1 performance signals meaningful operating leverage with elevated data-center exposure, improving gross margins, and a clearer path to earnings accretion as Spirent integrates and scales. Investors should monitor data-center demand trajectory, Spirent integration progress, potential wireless/OSP mix shifts, and the pace of enterprise/test-market adoption in the AI/data center segment.
Key Performance Indicators
Revenue
299.10M
QoQ: 5.02% | YoY:18.69%
Gross Profit
169.00M
56.50% margin
QoQ: 5.16% | YoY:17.12%
Operating Income
7.60M
QoQ: -10.59% | YoY:-12.64%
Net Income
-21.40M
QoQ: -209.74% | YoY:1.38%
EPS
-0.10
QoQ: -213.51% | YoY:-2.67%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $299.1 million, up 25.6% YoY and 3.0% QoQ. Non-GAAP EPS: $0.15, above guidance of $0.13–$0.14.
- Revenue: $299.1 million, up 25.6% YoY and 3.0% QoQ. Non-GAAP EPS: $0.15, above guidance of $0.13–$0.14.
- Gross profit: $169.0 million; gross margin: 56.5% (0.5650).
- Operating income: $7.6 million; operating margin: 2.54% (0.0254).
- NSE revenue: $216.0 million, up 35.5% YoY; NSE gross margin: 63.0%; NSE operating margin: 7.5%.
- OSP revenue: $83.1 million; OSP gross margin: 52.3%; OSP operating margin: 37.1%.
- Net income (GAAP): -$21.4 million; net income margin: -7.15%. Non-GAAP (EPS) basis discussed on call was $0.15.
- Cash/liqidity: Cash and ST investments $549.1 million; operating cash flow $31.0 million; CapEx $8.5 million; stock repurchase ~$30 million.
- Share count: Fully diluted shares 227.9 million; weighted average shares outstanding 222.9 million.
- Debt/financing: Refinanced $250M convertible debt into 0.625% 5.5-year notes; Spirent-related debt and terms disclosed; $170–$170+ million remaining under share repurchase authorization.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
299.10M
18.69%
5.02%
Gross Profit
169.00M
17.12%
5.16%
Operating Income
7.60M
-12.64%
-10.59%
Net Income
-21.40M
1.38%
-209.74%
EPS
-0.10
-2.67%
-213.51%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and mix evolution: Oleg Khaykin highlighted a transition to a more balanced portfolio, noting exit-year mix around 45% service provider, 40% data center, 15% aerospace/defense, and Spirent contribution shifting the mix further toward data center (“This mix… 45% service provider, 40% data center and 15% aerospace/defense.”). (Quote from Oleg Khaykin)
- Data center momentum and AI focus: “The data center ecosystem… drove strong demand for lab and production products in support of the AI data center build-out” illustrating the key growth driver in NSE. (Quote from Oleg Khaykin)
- Margin discipline and integration: Ilan Daskal signaled that with Spirent, total quarterly run rate around $165 million in early 2026 (post-integration), implying potential margin expansion through scale efficiencies. (Quote from Ilan Daskal)
- Wireless and fiber dynamics: Oleg noted wireless headwinds and the gradual fiber recovery, with professional-grade fiber operators emerging to interconnect data centers, suggesting a gradually improving service-provider/enterprise mix. (Quotes from Oleg Khaykin)
- Outlook and accretion potential: Oleg and Mehdhi/Hosseini discussions around potential EPS uplift to around $1 in calendar year 2026 if wireless improves, highlighting the optionality from a re-accelerating wireless cycle. (Quotes from Oleg Khaykin)
"I would say if we look at our exit of the fiscal year, we did about 50-30-20, so 50% service provider, 30% data center ecosystem and 20% aerospace and defense. And as we close the Spirent business, it's about, what, 45%, about 40% and then the remainder."
— Oleg Khaykin
"The data center ecosystem, which includes high-performance semis, optical modules and NAMs drove strong demand for lab and production products in support of the AI data center build-out."
— Oleg Khaykin
Forward Guidance
- Revenue: Q2 FY2026 guidance at $360–$370 million, including Spirent contribution of $45–$55 million within NSE. OSP anticipated at about $77 million.
- Margins: Viavi guiding to an overall operating margin of approximately 17.9% (±60 bps); NSE margin about 13.6% (±70 bps) including Spirent; OSP margin around 34% (±50 bps).
- EPS: Q2 non-GAAP EPS guidance of $0.18–$0.20; stand-alone Viavi EPS around $0.18, with Spirent contributing roughly $0.00–$0.02 after pro rata interest on debt.
- Tax/one-offs: Tax expense guidance around $10 million (±$0.5M); other income/expense around $12.2 million (driven by interest on the Term Loan B). Shares outstanding ~228.7 million.
- Commentary: Management expects continued strength in NSE driven by data-center ecosystem and aerospace/defense, while OSP is seasonally softer in Q2. The acquisition of Spirent’s lines is expected to be slightly accretive to current NSE margins in the quarter. Key factors for investors: acceleration of data-center adoption, integration progress of Spirent, and stabilization/expansion of fiber interconnect spend as hyperscalers and enterprise customers increase capex.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
VIAV Focus
56.50%
N/A
N/A
N/A
LITE
23.10%
-24.50%
-9.20%
-13.37%
NTGR
34.80%
-7.90%
-1.13%
-29.10%
KVHI
29.30%
-8.83%
-1.24%
-15.08%
TSAT
94.20%
26.40%
-2.19%
-6.27%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Viavi’s QQ1 2026 results reinforce the strategic merit of diversifying beyond traditional telecom service-provider exposure into a data-center–driven NSE franchise. The Spirent acquisition provides a meaningful annual revenue run-rate uplift (~$200M) and is expected to be modestly accretive to NSE margins as integration benefits materialize. The data-center momentum is underpinned by AI-related build-out, high-speed Ethernet testing (800G, 1.6T), and chip-to-chip interconnect, with hyperscalers and data-center network equipment manufacturers forming Viavi’s core addressable market. Aerospace/defense also remains a growth vector, with continued demand for positioning, navigation and timing products, and LiDAR/3D sensing opportunities in automotive and industrial sectors.
Key risks include near-term wireless headwinds and potential volatility in service-provider fiber spend, integration execution risk for Spirent, and OLED-style pricing pressures in mature OSP segments. Nevertheless, Viavi’s improved balance sheet, enabling cash deployment for buybacks and debt reduction, supports an increasingly favorable earnings trajectory as Spirent scales. The company’s guidance for Q2 FY2026 implies continued revenue growth and margin leverage, with non-GAAP EPS of $0.18–$0.20 and a path toward higher earnings power should wireless demand normalize. Investors should monitor Spirent-related synergies, data-center capex cycles in hyperscalers, and the pace of fiber interconnect deployments as the primary near-term catalysts.
Key Investment Factors
Growth Potential
Growth driven by data-center ecosystem, AI compute build-out, and chip-to-chip interconnect demand. Spirent’s $200M annual run-rate adds scale and expands NSE’s addressable market across lab/production and AI workloads, potentially lifting full-year margins as integration proceeds. Automotive and aerospace/defense incremental opportunities also support multi-end-market diversification.
Profitability Risk
Execution risk from Spirent integration and realization of synergies; ongoing wireless/5G RAN cycle uncertainty; cyclical nature of service-provider spend; potential mix shift toward OSP softness; macroeconomic volatility affecting capex cycles in data centers and telecoms.
Financial Position
Solid liquidity with $549.1M in cash and ST investments; debt refinanced into 0.625% 5.5-year convert; ongoing share repurchase authorization (~$170M remaining); modest 1Q24 GAAP net loss mitigated by non-GAAP profitability expectations and leverage from Spirent.
SWOT Analysis
Strengths
Strong DPS growth in NSE driven by data center ecosystem and AI demand; Spirent acquisition expands market reach and run-rate revenue (≈$200M)
High gross margins (Q1 gross margin 56.5%; NSE gross margin 63%), favorable product mix and scale efficiencies from Spirent integration
Solid liquidity position: cash and short-term investments of ~$549M and ongoing share repurchase program
Diversified end-market exposure including data centers, aerospace/defense, and security/anti-counterfeiting—reduces cyclicality compared with pure telecom exposure
Proven ability to refinance debt with favorable terms and extend maturities (convertible notes due 2031)
Weaknesses
GAAP net income negative in QQ1 due to non-operational items and mix; OSP margins buoyed by mix but profitability sensitive to product mix
Near-term reliance on NSE (data-center-driven) growth which is highly cyclical and sensitive to capex cycles in hyperscalers and telecom operators
Integration risk and execution risk associated with Spirent acquisition (10-week to 12-month accretion window)
Wireless/RAN segment remains a headwind in the near term, contributing to earnings volatility and potential underutilization of some capital in that segment
Opportunities
Data-center AI/data-center interconnect opportunities (800G, 1.6Tb Ethernet, PCIe interconnect) and rising demand for lab/production test equipment
Expansion through Spirent lines in NSE and increased TAM across chips, modules, and hyperscaler deployments
Aerospace/defense inertial/navigation systems opportunities and LiDAR/3D sensing in automotive/industrial applications
Potential uplift in OSP due to broader world-facing 3D sensing and facial recognition deployments; automotive LiDAR adoption
Threats
Macro weakness or delays in hyperscaler capex and enterprise budgets; continued wireless RAN spend softness
Competition with Keysight and Spirent in NSE space; potential pricing pressure in OSP and test equipment markets
Geopolitical/ supply-chain risks and component shortages; foreign exchange volatility affecting procurement and pricing
Regulatory/compliance and cyber-risk in defense-related applications