Viavi Solutions Inc (VIAV) Q3 2025 Earnings Report

Overview of QQ3 2025 results and mix highlights:
- Revenue: $284.8M; YoY +15.8%, QoQ +5.2% (per earnings call).
- Gross margin: 56.4% overall as reported (gross margin by segment: NSE 63.1%, NE 63.4%, SE 59.9%).
- Operating income: $8.5M; operating margin 2.98%. NSE segment operating margin 10.4% (vs prior year loss), OSP 33.9% (high end of guided range).
- Net income: $19.5M; net margin 6.85%.
- Earnings per share: GAAP diluted $0.088; Non-GAAP (call-reported) $0.15; weighted-average shares ~222.6–226.9M.
- Segment detail: NSE revenue $208.2M; NE revenue $188.0M; SE revenue $20.2M; OSP revenue $76.6M. NSE gross margin up 1.7pp YoY; NE gross margin up 190bp YoY; SE gross margin down ~90bp YoY.
- Cash and capital allocation: End-Q3 cash and short-term investments around $400M; total debt $640.9M; net debt $266.7M; operating cash flow $7.8M; free cash flow $1.0M; acquisitions paid (Inertial Labs) contributing to cash outflow; no share repurchases; capex $6.8M.
- Guidance for Q4 2025: revenue $278–$290M; opex margin ~13.5% ±1%; EPS $0.10–$0.13; NSE revenue about $208M ±$5M at ~5% ±1% operating margin; OSP revenue ~ $76M ±$1M at ~37% ±1% operating margin; tariff headwind ~ $3M embedded in guidance; share count ~227.4M; tax ~ $8M ±$0.5M; net expenses ~ $5M.

Key management takeaways from the QQ3 2025 earnings call:
- Demand and trajectory: Oleg Khaykin highlighted a sustained recovery, noting that “the March quarter was unseasonably strong, continuing a strong recovery and growth momentum” with Q3 revenue near the midpoint of guidance and EPS above the high end of guidance. He emphasized robust NSE demand, strength in fiber lab and production for data centers, and accelerating aerospace and defense programs driven by Inertial Labs.
- Data-center/fiber lab momentum: “Fiber lab and production saw another strong quarter driven by 800 gig and 1.6 terabit data center ecosystem, which includes semis, optical modules, systems and hyperscalers,” underscoring a secular data-center upgrade cycle.
- Tariffs and guidance: Oleg noted tariff-related uncertainty, guiding Q4 revenue to be “roughly flat relative to the strong third quarter revenue” and warning of a “low-single-digit impact on our operating margin” from tariffs, with supply-chain realignment expected within six months to mitigate impact. Ilan Daskal added that approximately $3M of tariff impact is embedded in current guidance, while management expects to offset future tariffs by passing costs through to customers when possible.
- OSP and anti-counterfeiting momentum: Management signaled ongoing strength in OSP’s anti-counterfeiting and 3D sensing, with anti-counterfeiting inventory burned off and higher utilization improving gross margins.
- M&A and capital allocation: Viavi reaffirmed commitment to strategic M&A, including financing Spirent’s high-speed Ethernet and network security business lines with debt, while aiming to maintain leverage below 3x net and below 4x gross in the long term; no stock buybacks were executed in the quarter.
- Market signals across segments: NSE recovery remains pivotal, supported by service providers and hyperscalers, with 5G field instruments showing renewed activity; SE continues to perform in line with expectations; OSP margin upside remains tied to anti-counterfeiting and 3D sensing demand.
- Competitive and strategic context: Oleg updated on the Keysight divestiture process (Keysight-led transaction) with timing targeted between now and July, highlighting ongoing portfolio optimization and strategic repositioning.

Viavi shows a positive earnings trajectory in QQ3 2025, driven by a durable data-center NSE demand and strong OSP margins. The company’s multi-pronged growth strategy—data-center expansion (800G/1.6Tb), aerospace/defense programs via Inertial Labs, and anti-counterfeiting/3D sensing in OSP—positions Viavi to benefit from secular capex in data centers and defense technologies. The Q4 guidance implies modest sequential revenue erosion due to tariff uncertainty, but management expects the tariff headwind to be a low-single-digit margin impact and anticipates supply-chain reallocation to mitigate these effects within 6 months. The Spirent high-speed Ethernet and network security businesses offer a credible long-term growth lever, financed with additional debt while targeting sub-3x net leverage. Euqi: Viavi’s valuation metrics (e.g., price-to-book ~3.44x, price-to-sales ~8.80x, and P/E ~32x) suggest a premium reflecting growth optionality in AI/data-center networks and defense, balanced by near-term tariff and integration risks. Investors should monitor: tariff development trajectories and timing of POs, the pace of NSE data-center deployments, defense program awards and ramp timing, and the progress of the Keysight divestiture. Overall stance: cautiously constructive. The stock is most compelling for investors who can tolerate near-term margin volatility tied to macro policy risk but want exposure to secular growth in data-center test infrastructure and aerospace/defense electronics.