Viavi Sees AI Optics, CPO Testing Driving Path Toward $500M Quarterly Revenue

Key Points

• AI-driven optical networking is expanding Viavi’s testing opportunity as 800G and 1.6T technologies, optical circuit switches and co-packaged optics require more complex testing across development and production.
• Viavi’s data center business is a major growth driver, while aerospace and defense revenue has more than doubled in two years. The company also sees longer-term potential in AI-related wireless infrastructure and edge connectivity.
• Management said Viavi could reach $500 million in quarterly revenue earlier than previously expected, potentially as soon as the December quarter, with operating margins in the high-30% range possible at that scale.

Viavi Solutions NASDAQ: VIAV expects rising complexity in optical networking, co-packaged optics and aerospace applications to expand the company’s testing and measurement opportunities, executives said during the Rosenblatt Age of AI Technology conference.

President and CEO Oleg Khaykin said data center-related revenue accounted for about half of revenue in the company’s Network Service Enablement, or NSE, segment in the recently reported fiscal fourth quarter. Aerospace and defense represented roughly 17%, while telecommunications made up the remainder, according to the discussion.

Higher-Speed Optics Raise Test Content

Khaykin said Viavi works with all five of the world’s largest transceiver manufacturers and has particularly deep engagement with four of them. He said the company is used in development labs and in manufacturing environments by several leading suppliers.

As optical speeds advance from 400G to 800G and 1.6T, the amount and precision of testing required increases, Khaykin said. At 800G, manufacturers require more detailed laser, insertion-loss and transceiver testing than at prior generations. At 1.6T, testing becomes more optical and includes more functional testing on production lines.

“The content for test is actually increasing,” Khaykin said, adding that manufacturers also need additional equipment to test advanced fiber types and multi-fiber connectors. He said defects in a single fiber can render an entire connector unusable, increasing the importance of surface inspection and interferometry.

Viavi has been selling 1.6T equipment to developers for more than a year, according to Khaykin. He characterized production deployments as having begun in early stages at the beginning of the year and described the market as being in the “second” or “third inning.” He said a 1.6T tester can also test 800G and 400G modules, improving economics on a cost-per-bit basis, even as the cost of a full testing system rises.

Khaykin said the price of a 1.6T test box is generally about 50% higher than an 800G equivalent because of higher component costs.

CPO and Optical Circuit Switches

The company sees a growing role in testing optical circuit switches, or OCS, and co-packaged optics, or CPO. Khaykin said Viavi is the dominant merchant-equipment supplier for OCS testing, though some companies may build internal equipment.

For highly complex products such as OCS, he estimated that the test-and-measurement market could represent roughly 10% of annual market size, while noting that the figure could change as yields improve and manufacturers modify testing practices.

CPO creates more testing opportunities per port than pluggable transceivers, Khaykin said. The technology requires testing of electronic integrated circuits and photonic integrated circuits before assembly, retesting after they are combined into optical engines, testing of interconnect platforms, and final system testing after the addition of ASICs and memory.

“If you do not do all these other things ahead of it and make sure that all the pieces that you are putting together and the final product is good,” Khaykin said, manufacturers could face costly losses from scrapped modules.

He said Viavi has worked on CPO test systems for nearly two years and has begun early shipments. The company expects its integrated and automatable optical test platforms to be used alongside semiconductor testers and probers supplied by companies such as Advantest, Teradyne and FormFactor.

Separately, Khaykin said more than 40% of Viavi’s traditional field-instrument business is now driven by data centers. Hyperscale operators are using fiber monitoring tools to qualify newly built networks, monitor dark fiber and identify potential network issues before activating capacity, he said.

Aerospace, Defense and Wireless Opportunities

Viavi’s aerospace and defense business has more than doubled over the past two years, Khaykin said. He described its growth as higher than telecom but somewhat lower and more sustainable than data center growth over the long term.

The business focuses on resilient positioning, navigation and timing technologies that can operate without relying solely on GPS. Khaykin said the emergence of drones, intelligent munitions and autonomous equipment has expanded demand for these capabilities. Viavi uses cesium and rubidium clocks and has developed MEMS clock technology that it believes can match cesium-clock performance.

While wireless remains weak, Khaykin said the company sees a future opportunity in AI-related radio access networks and edge inference. He said improving bandwidth, latency and edge connectivity will be necessary for broader AI adoption, describing wireless infrastructure as a potential growth area within two to three years.

Revenue and Margin Outlook

Khaykin said Viavi could approach $500 million in quarterly revenue sooner than its prior expectation of the end of calendar 2027 if demand remains strong. He said the company could be “not far” from that level in the December quarter, although he cautioned that it was too early to make a definitive call.

Chief Financial Officer Ilan Daskal said the company had previously viewed the $500 million quarterly revenue milestone as a fiscal 2028 objective but now expects to reach it earlier. Daskal said operating leverage could also alter the company’s profit outlook, adding that operating margins in the high-30% range were “not an unrealistic” possibility when Viavi reaches $500 million in quarterly revenue.

Khaykin also described Viavi’s Optical Security and Performance Products segment as a steady business expected to grow at a mid- to high-single-digit annual rate, with opportunities in consumer electronics, autonomous driving, aerospace and defense. He said the business has returned to normalized inventory levels following a COVID-era buildup tied to government demand for currency-printing materials.

About Viavi Solutions (NASDAQ:VIAV)

Viavi Solutions Inc is a provider of network test, monitoring and assurance solutions for communications service providers, cable operators, enterprises and government agencies. The company offers an extensive portfolio of fiber optic and copper cable test and measurement instruments, wireless network testing equipment and network performance monitoring software. Its products are designed to support the deployment, maintenance and optimization of high-speed broadband, 5G wireless, data center and enterprise networks.

Viavi's product offerings are organized into two primary segments: Network & Service Enablement and Optical Security & Performance.

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