Viavi Solutions NASDAQ: VIAV reported fiscal fourth-quarter revenue and earnings above its guidance, supported by demand from data-center customers, aerospace and defense markets, and contributions from acquired Spirent product lines.
Fiscal fourth-quarter revenue totaled $443.1 million, exceeding the company’s guidance range of $427 million to $437 million. Revenue increased 8.9% sequentially and 52.5% from a year earlier. Non-GAAP operating margin was 24%, also above guidance, while non-GAAP earnings per share reached $0.34, compared with the company’s outlook of $0.29 to $0.31.
CFO Ilan Daskal said a $1.5 million tariff refund modestly benefited fourth-quarter operating margin. Lower interest expense and the tariff refund together contributed approximately $0.02 to quarterly EPS, he said.
Full-Year Growth and Balance-Sheet Actions
For fiscal 2026, Viavi reported revenue of $1.518 billion, up 40% year over year. The Spirent product lines acquired during the second fiscal quarter contributed $145 million of full-year revenue. Full-year non-GAAP operating margin rose 630 basis points to 20.6%, while EPS increased to $1.00 from $0.47 in fiscal 2025.
During the fourth quarter, Viavi completed a follow-on offering of about 12.78 million shares at $45 per share, generating $575 million in gross proceeds. Daskal said the company used the proceeds to repay the remaining balance of its Term Loan B, with excess proceeds included in quarter-end cash.
Cash and short-term investments were $656.7 million at quarter-end, compared with $508 million at the end of the prior quarter. Operating cash flow was $66.7 million, up from $23.8 million in the year-earlier period. Viavi did not repurchase stock during the quarter as it prioritized debt management, though it repurchased about 2.7 million shares for approximately $30 million during fiscal 2026 in connection with an earlier convertible-note exchange. The company said it has nearly $170 million remaining under its authorized repurchase program.
NSE Leads Quarterly Performance
Network Service Enablement, or NSE, revenue was $353.9 million in the fourth quarter, above the company’s $340 million to $348 million outlook. The segment’s revenue increased 69.2% year over year, including $47.7 million from Spirent product lines. NSE gross margin was 64.1%, and operating margin was 20%, compared with 4.6% a year earlier.
President and CEO Oleg Khaykin attributed the segment’s growth primarily to demand from the data-center ecosystem and aerospace and defense customers. He said the data-center opportunity encompasses optical products used in research and development labs, production testing, fiber monitoring and data-center build-outs.
“Our data center is now running at about 50% of the NSE revenue,” Khaykin said during the question-and-answer session. He estimated aerospace and defense at about 17% of NSE revenue, with the remaining business coming from service providers.
Khaykin said the company’s data-center business more than doubled year over year excluding Spirent. He identified production-related applications as a particularly fast-growing part of the opportunity, including testing for fiber-optic modules, fiber-optic cables and co-packaged optics, or CPO.
The company also launched what Khaykin described as the industry’s first validation solution for Ultra Ethernet transport, designed to support large-scale artificial intelligence and high-performance computing workloads.
While 800 gigabits-per-second technology remains the largest driver by volume, Khaykin said 1.6-terabit-per-second technology is ramping quickly. He expects 1.6 Tbps to potentially reach parity with 800 Gbps in 2027, while noting that multiple technology generations, including 400 Gbps, are likely to remain in use.
OSP Growth and Outlook
Optical Security and Performance, or OSP, generated fourth-quarter revenue of $89.2 million, at the high end of guidance and up 9.6% year over year. Growth was driven by 3D sensing, anti-counterfeiting and other products. OSP gross margin increased 50 basis points to 55.2%, and operating margin was 40%.
For the first quarter of fiscal 2027, Viavi forecast consolidated revenue of $450 million to $460 million. NSE revenue is expected to be between $360 million and $368 million, while OSP revenue is projected at $90 million to $92 million. The company expects operating margin of 27.1%, plus or minus 40 basis points, and EPS of $0.40 to $0.42.
The first fiscal quarter will include an additional week, which the company said will create elevated variable costs but have minimal revenue impact because customer shipments are concentrated near calendar quarter-end. Guidance also includes an approximately $11 million tariff refund received in July, primarily benefiting first-quarter cost of goods sold. Viavi said the net impact of the tariff refund and the additional week is expected to add about 100 basis points to operating margin and about $0.02 to EPS.
Spirent Integration and Longer-Term Expectations
Management said Spirent integration activities, including go-to-market and research-and-development rationalization, were completed by the end of the June quarter. Daskal said restructuring savings are being realized and that Spirent revenue is expected to rise about 10% sequentially in the September quarter, with December typically its strongest quarter.
Khaykin said the company expects continued growth from data centers and aerospace and defense over the next several quarters. He also said demand for wireless products remains “anemic,” though stable, while service-provider demand improved seasonally through fiber-monitoring and cable-architecture migration projects.
On profitability, Khaykin said NSE gross margins generally range from the low 60% range for certain field instruments to the high 70% range for some lab products. As NSE grows faster than OSP, he said the company expects its overall gross margin to trend higher. Management expects operating leverage from research and development and other operating expenses to support mid- to high-20% operating margins in the not-too-distant future.
Khaykin also said Viavi could reach a quarterly revenue run rate above $500 million sooner than previously anticipated, potentially sometime during calendar 2027 rather than by the exit of fiscal 2028.
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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