Viavi Solutions - Earnings Call - Q3 2025

Executive Summary

• VIAVI’s Q3 FY25 exceeded expectations: revenue $284.8M (+15.8% y/y, +5.2% q/q) and non-GAAP EPS $0.15 were both above guidance; non-GAAP operating margin was 16.7% (vs 13–15% guided). Strength was broad-based across NSE and OSP; GAAP EPS was $0.09 aided by a tax benefit. Q3 revenue and EPS beat S&P Global consensus of $281.8M and $0.118, respectively, with the beat driven by higher volumes and richer mix in NSE and OSP*.
• Q4 FY25 outlook: revenue $278–$290M and non-GAAP EPS $0.10–$0.13; VIAVI is prudently modeling a tariff-related order timing impact and absorbing ~$3M of tariffs on previously committed orders (≈$0.01 EPS drag), with plans to pass-through and mitigate within 3–6 months.
• Demand drivers: data center “fiber lab & production” tied to 800G/1.6T ecosystems and aerospace & defense (PNT) remained robust; hyperscaler adoption of fiber monitoring continues to rise. Wireless field instruments improved, while wireless infrastructure test remained soft but is seen as a later-cycle beneficiary.
• Strategic catalysts: announced acquisition of Spirent’s High-Speed Ethernet & Network Security business (~$180M incremental NSE revenue in first 12 months post-close); launched 1.6T lab platform enhancements and an 800G field test module, reinforcing AI infrastructure testing leadership.

What Went Well and What Went Wrong

• What Went Well

  • Broad-based operating outperformance: non-GAAP operating margin 16.7% exceeded the high end of guidance driven by volume and favorable mix; NSE operating margin swung to +10.4% from a loss y/y, aided in part by a $4M government R&D grant in Europe.
  • AI/data center momentum: management cited strong “fiber lab & production” demand tied to 800G and emerging 1.6T nodes across semis, modules, systems, and hyperscalers. Quote: “We expect 800 gig and 1.6 terabit… to continue driving strong demand for the rest of calendar ’25.”.
  • A&D growth/positioning: PNT strengthened with Inertial Labs; “we continue to win big programs… [PNT] is going to be a very strong grower,” positioning multi‑year growth in aerospace and defense.

• What Went Wrong

  • Gross margin mixed sequentially: GAAP gross margin fell to 56.4% (vs 59.4% in Q2) due to product mix, despite a modest y/y uptick; management flagged tariff cost absorption and mix as near-term headwinds.
  • Tariff overhang on order timing and margins: Q4 guide embeds ~$3M tariff costs on committed orders (≈$0.01 EPS drag), and a prudent stance on PO re-approvals, particularly at service providers.
  • Cash flow softer: operating cash flow was $7.8M (vs $19.5M y/y), and total cash & ST investments decreased (to $400.2M) largely due to Inertial Labs acquisition payments.

Transcript

Operator (participant)

Good afternoon. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions Fiscal Q3 2025 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Vibhuti Nayar, Head of Investor Relations. Please go ahead.

Vibhuti Nayar (Head of Investor Relations)

Thank you, Audra. Good afternoon, everyone, and welcome to Viavi Solutions fiscal Q3 2025 earnings call. My name is Vibhuti Nayar, Head of Investor Relations for Viavi Solutions, and with me on the call today is Oleg Khaykin, our President and CEO, and Ilan Daskal, our CFO. Please note this call will include forward-looking statements about the company's financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings. The forward-looking statements, including tariff impact and guidance that we provide during this call, are valid only as of today. Viavi undertakes no obligation to update these statements. Please also note that unless we state otherwise, all results discussed on this call, except revenue, are non-GAAP.

We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release. The release, as well as our supplemental earnings slides, which include historical financial tables, are available on Viavi's website at www.investor.viavisolutions.com. Finally, we are recording today's call, and we'll make the recording available on our website by 4:30 P.M. Pacific Time this evening. Now, I would like to turn the call over to Ilan. Ilan.

Ilan Daskal (CFO)

Thank you, Vibhuti. Good afternoon, everyone. Now, I would like to review the results of the Q3 of fiscal year 2025. Net revenue for the quarter was $284.8 million, which is above the midpoint of our guidance range of $276 to 288 million. Revenue was up 5.2% sequentially and, on a year-over-year basis, was up 15.8%. Operating margin for the third fiscal quarter was 16.7%, above the high end of our guidance range of 13% to 15%. Operating margin increased 1.8% from the prior quarter and, on a year-over-year basis, was up 7.4%. EPS at $0.15 was also above the high end of our guidance range of $0.10 to 0.13 and was up $0.02 sequentially. On a year-over-year basis, EPS was up $0.09. Moving on to our Q3 results by business segment.

NSC revenue for the third fiscal quarter came in at $208.2 million, which is slightly above the midpoint of our guidance range of $202 to 212 million. On a year-over-year basis, NSC revenue was up 22.6%. NE revenue for the quarter was $188 million, which is an increase of 23.9% year-over-year as a result of strong demand by NEMs for our fiber lab and production products. The year-over-year NE revenue increase included the Inertia Labs revenue, which was in line with our expectations. SE revenue was $20.2 million, which is an increase of 11.6% from the same period last year and is in line with our expectations. NSC gross margin for the quarter was 63.1%, which is 1.7 percentage points higher on a year-over-year basis.

NE gross margin was 63.4%, which is an increase of 190 basis points from the same period last year, mainly driven by higher volume and favorable product mix. SE gross margin was 59.9%, which is a decrease of 90 basis points from the same period last year as a result of product mix. NSC's operating margin for the quarter was 10.4% versus a 1.8% loss in the same quarter last year. NSC operating margin is significantly above our guidance range of 6% to 8%, driven by higher gross margin fall-through as well as $4 million government R&D grant in Europe. OSP revenue for the third fiscal quarter came in at $76.6 million, which is just above the high end of our guidance range of $74 to 76 million. On a year-over-year basis, OSP revenue was up 0.5%.

OSP gross margin was 51.6%, up 150 basis points from the same period last year, and was primarily driven by higher volume and favorable product mix. OSP's operating margin was 33.9%, which is at the high end of our guidance range of 32% to 34% and is 40 basis points lower on a year-over-year basis. Moving on to the balance sheet and cash flow. Total cash and short-term investments at the end of Q3 were $400.2 million compared to $512.8 million in the Q2 of fiscal 2025. The lower cash and investments balance at the end of this quarter is mainly attributed to the payment of the Inertia Labs acquisition. Cash flow from operating activities for the quarter was $7.8 million versus $19.5 million in the same period last year. The lower operating cash flow this quarter was mainly related to the acquisition of Inertia Labs.

During the quarter, we did not purchase any shares of our stock as we prioritized our capital allocation towards M&A with the agreement to acquire Spirent's high-speed Ethernet and network security business lines. Although we plan to finance this transaction with additional debt, we will continue our financial discipline and intend to target less than four times gross leverage and well below three times net leverage over the long term. The fully diluted share count for the quarter was 226.9 million shares, up from 224.6 million shares in the prior year versus 226.1 million shares in our guidance for the third fiscal quarter. CapEx for the quarter was $6.8 million versus $3.2 million in the same period last year. Moving on to our Q4 guidance. We continue to assess the potential impact of global tariffs on the overall demand and timing of orders.

Overall, we expect fiscal Q4 revenue to remain about flat relative to the strong Q3 revenue. For NSC, we are taking a more prudent outlook in view of tariff-related timing of customer orders. For OSP, we expect strength in anti-counterfeiting business, offsetting some seasonal weakness in 3D sensing demand. For the fourth fiscal quarter of 2025, we expect revenue in the range of $278 to 290 million. Operating margin is expected to be 13.5% plus or minus 1%, and EPS to be between $0.10 and $0.13. We expect NSC revenue to be approximately $208 million plus or minus $5 million, with an operating margin of 5% plus or minus 1%. OSP revenue is expected to be approximately $76 million plus or minus $1 million, with an operating margin of 37% plus or minus 1%.

Our tax expenses for the Q4 are expected to be about $8 million plus or minus $500,000 as a result of jurisdictional mix. We expect other income and expenses to reflect a net expense of approximately $5 million, and the share count is expected to be around 227.4 million shares. Our guidance includes a tariff impact of about $3 million on orders that are already booked. This is expected to be diluted to our gross margin and negatively impact our EPS by approximately $0.01. With that, I will turn the call over to Oleg. Oleg.

Oleg Khaykin (President and CEO)

Thank you, Ilan. The March quarter was unseasonably strong, continuing a strong recovery and growth momentum that we saw in fiscal Q2. The quarter revenue came in above the midpoint of the guidance, with EPS above the high end of the guidance. Higher volume and richer revenue mix were the primary drivers for stronger EPS. Looking in more detail at each of our businesses, starting with NSC. NSC revenue in fiscal Q3 grew 23% year-over-year, driven by recovery and growth across many of our product segments. Field instruments business segment continued to see a gradual recovery driven by the demand for fiber field instruments and fiber monitoring systems. Service providers and hyperscale data center operators drove the demand as they built out and upgraded their network. We are particularly encouraged to see the embrace and adoption of fiber monitoring by hyperscalers. We expect this trend to continue through calendar 2025.

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. We expect 800 gig and 1.6 terabit optical infrastructure and emerging technologies such as co-packaged optics to continue driving strong demand through the rest of calendar 2025. Our aerospace and defense business segment continued its strong growth momentum. We expect the position, navigation, and timing business, strengthened by the acquisition of Inertia Labs, to be a strong multi-year growth driver for our aerospace and defense business segment. The wireless business segment saw the same dynamics as in fiscal Q2. A stronger demand for 5G field instruments offset by continued weakness in the infrastructure test products. We believe that the demand for wireless field instruments is a leading indicator for the resumption of 5G network build-out, leading to gradual recovery for the overall wireless segment.

Lastly, the SE business segment results were in line with our expectations. Looking ahead, we expect Q4 to be roughly flat to fiscal Q3. Normally, we would expect a seasonally stronger Q4, but feel it's prudent to take a more conservative outlook due to recently imposed US tariffs. Specifically, on the revenue side, there's a risk that some of the previously approved POs and upcoming orders may get delayed or reduced in volume as customers reapprove POs to include tariffs or decide to take a wait-and-see approach. On the gross margin side, we expect to absorb approximately $3 million in tariffs from the previously committed orders and reciprocal tariffs on imported US materials. Overall, we currently expect the tariffs to have a low single-digit impact on our operating margins.

Given our global footprint, we are in the position to realign our supply chain to further reduce the tariffs impact as they stand today within six months. Now turning to OSP. During the fiscal Q3, OSP increased marginally on a year-over-year basis as a result of strength in anti-counterfeiting and other products. We expect fiscal Q4 to be a roughly flat quarter on quarter and up year-on-year, characterized by seasonally weaker 3D sensing offset by strength in anti-counterfeiting and other businesses. As communicated previously, we are starting to see a demand-supply equilibrium emerge in anti-counterfeiting business. In conclusion, I would like to thank the Viavi team for their continued dedication and strong performance and our customers and shareholders for their continued support. With that, I will now turn it back to the operator for Q&A.

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to, excuse me, ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We'll take your first question from Ruben Roy at Stifel.

Ryan Koontz (Senior Analyst)

Thank you. Hey, Oleg. Maybe we'll start with the tariffs discussion. If you could maybe drill down a little bit into the revenue side of the equation. You mentioned that you have some concerns that some approved POs may get delayed. Are you actually seeing delays today, any push-outs, et cetera, or is this just more of a conservative take near-term?

Oleg Khaykin (President and CEO)

You know, I tell you, on the first draft of our notes, I had canceled. I have removed canceled because actually nobody has canceled the order. That is one thing. Furthermore, we are seeing actually people accepting the increases and just adding it to their order. That is a positive. I feel, you know, clearly we are now what, four weeks into the quarter since the big changes. You know, I am starting to feel a bit better, but, you know, clearly there is a number of POs that had to go back to be reapproved with the adders to compensate for the tariffs. At this time, we are seeing some of them coming back. So far, nobody has canceled. Nobody has reduced the size of the order and they are accepting the tariff increases.

You know, I think it's probably prudent to be conservative because, you know, the people who are responding the earliest are usually the ones who really need the product. There's always a group of customers who said, you know what, if I can always wait another month, maybe things will change again. As we've seen in the first week, the tariffs fluctuated all over the place. I mean, we basically stopped all shipments into the US and we kind of took the POs and we held on to them to see until things stabilized. I think, you know, there's still, it's no longer as volatile as it was in the first two weeks, but I think it's probably prudent to be a bit more conservative.

You know, I do think there's going to be some set of customers who will delay placing orders, and that may just result in the revenue slipping into the fiscal Q1 of next year. That is why we are being a bit cautious on the revenue guidance for this quarter.

Ryan Koontz (Senior Analyst)

Okay. Thank you. As a follow-up, in terms of some of the, you know, some of your equipment that's shipped into the US, is there a way to think about how much of that revenue is sourced from China or other areas that we might have to worry about high tariffs? You mentioned you could potentially move in six months. You know, I'm just trying to figure out, you know, what the impact is. You know, how much are we talking about here?

Oleg Khaykin (President and CEO)

I think I said, you know, if I look at it, you know, clearly just looking trailing 12 months, it's roughly 15% of our revenue is subject to tariffs overall, right? Coming into the US. Clearly, China, given the magnitude of the tariffs, is the most pronounced thing. And we said that today, roughly 3% of the revenue is the tariff impact. And we can reduce it significantly within the next, I'll say, six months or more like three to six months because we can just reroute and move our production to even within the same contract manufacturers by different country of origin. You know, it takes some, we're already working on it. We're already moving things around. I think within six months, the tariff impact will be fairly de minimis.

Ryan Koontz (Senior Analyst)

Okay. Just one final one then.

Oleg Khaykin (President and CEO)

[crosstalk] These schedule don't change. Pardon me?

Ryan Koontz (Senior Analyst)

Right. That's a big if. Yeah. I had a quick follow-up for Ilan, I guess, on the cost side of the equation. So the $3 million on the higher costs, you know, a lot of folks have been talking about cutting through costs. You know, I would just like to understand, you know, how you're thinking about that. Is this, should we think about the increased costs, I guess, as a longer-term headwind on margins the way you're doing?

Oleg Khaykin (President and CEO)

Let me [crosstalk] take it. I'll turn. Yeah, I'll take it. We made a conscious effort, all the POs that we accepted and committed to, we're going to eat the tariff. That's about $3 million, as we mentioned. Everything else that POs came in but have not been confirmed and everything that's incoming is getting a universal tariff adder. It's non-negotiable. So far, we have not seen any issue with people not accepting it. I think, you know, there were some people who tried to play the game and said, hey, you know, I'm not going to pay tariff. I said, well, it's kind of like if you buy a product on Amazon and you refuse to pay the tax, you don't get the product. I think what we see in the industry is universally all our peers and everybody's passing it on.

I think, you know, I would call even the biggest customers are saying it is what it is. It is the new normal. I think today we are identifying tariffs. Obviously, as things stabilize and go on, it'll just become part of the price.

Ilan Daskal (CFO)

Yes. Ruben.

Ryan Koontz (Senior Analyst)

Okay. Got it.

Ilan Daskal (CFO)

The $3 million are embedded in our guidance, right?

Oleg Khaykin (President and CEO)

Yeah.

Ilan Daskal (CFO)

That is the one side kind of headwind. As Oleg mentioned, you know, prospectively, the goal is to pass it through to the customers and to offset the cost.

Oleg Khaykin (President and CEO)

Here we just basically did not want to argue. On committed POs, we did not want to go back and uncommit. That is just a, we decided to take a high road on that one.

Ryan Koontz (Senior Analyst)

Yep. Makes sense. Thank you, guys.

Ilan Daskal (CFO)

Thank you.

Operator (participant)

We'll move next to Ryan Koontz at Needham & Company.

Ryan Koontz (Senior Analyst)

Great. Thanks for the question. Oleg, any particular technology domains you'd call out as you look forward? Obviously, you talked about the Q3 strength across fiber and wireless and optical. As you look forward over the next couple of quarters, any changes in behavior you're hearing from the different customer segments? The follow-up, how's your exposure looking across data center and AI? Can you comment on that opportunity? Thanks.

Oleg Khaykin (President and CEO)

I would say it's a great question. Increasingly, when I say fiber lab and production, that's pretty much think of it today as a code word for data center. Because the days when fiber core and telecom drove the business are over today, disproportional. I mean, today, I'd say majority of it goes to fund the data center and the new nodes are being pushed by the data center. And it's your leading Semis. It's your leading fiber optic module manufacturers, leading NEMS, and the top data centers. I mean, that's pretty much the whole ecosystem that's driving it. The March quarter was a very strong growth quarter on quarter for that business. We've shipped into a number of projects. This quarter, you know, we expect a bit of a pullback, but it's still going to be stronger than December quarter.

We expect another very strong quarter in September. There we have some visibility and the customers are coming in and placing longer-term orders. We expect the, I would say, the data center ecosystem, which basically means for us fiber lab and production, is going to be very strong throughout the rest of this year. The other segment is the aerospace and defense with the acquisition of Inertia Labs and some of our earlier acquisition of Jackson Labs and our whole play in PNT. We continue to win big programs. As those things start going into production, it is a very different business from the rest of Viavi where we do a bookship. This one is all about design wins. I tell you, I am just blown away.

You're looking at some of the programs we are winning where, you know, the size of the program is bigger than the temp for our test and measurement business. That's why I think as these things start materializing and going into production, it's going to be a very strong grower. Even this year, it's already quarter on quarter. Through the rest of the year, we expect it to be posting pretty strong growth. I would say two businesses that are going to be really stand out and kind of driving the growth of weighted average growth is the data center business, which is fiber lab and production and aerospace and defense. We expect the fiber field, which is the instruments and fiber monitoring, to be the kind of steady recovery and, you know, gradual recovery trajectory.

The wireless, I think we expect, you know, clearly we're already seeing activity in the field for field instrumentation. We've seen, you know, obviously that confirmed with some of the leading wireless NEMS confirming that, you know, 5G construction is resuming. We expect that to lead in the H2 to recovery in our fiber, in our wireless infrastructure. The ONSC business, I think it continues to perform well. You know, I think there's a lot of great opportunities for us later in the year.

Ryan Koontz (Senior Analyst)

Great. Really helpful. Are there any commentary you can make about the process and where you are with regards to the divestiture from the Keysight acquisition?

Oleg Khaykin (President and CEO)

I would always kind of just, given that Keysight is the driving seat on this one, it all depends on there. They provided an update that they believe it's going to be during their July quarter. Basically, anytime between now and the end of July is what the stated dates are. You know, we just leave it at that.

Ryan Koontz (Senior Analyst)

Great. Appreciate the thoughts. Thanks so much.

Oleg Khaykin (President and CEO)

Yeah.

Operator (participant)

We'll move next to Meta Marshall at Morgan Stanley.

Mary Lenox (Equity Research Associate)

Hi, this is Mary on for Meta. I just wanted to go back to your comments on the OSP business. Is there anything else that you would add in terms of some of the headwinds or tailwinds on the OSP business as we think about the H2 of the calendar year? Thank you.

Oleg Khaykin (President and CEO)

I think it's kind of premature to talk about the H2 of the calendar year. Generally, it's a stronger half for the 3D sensing. It's kind of, you know, fairly steady for anti-counterfeiting. What we've seen now, the anti-counterfeiting has stabilized. We actually seen upsides in H1 of the calendar year. It just leads us to believe that a lot of the inventory has been burned off in the channel. We were expecting actually during the March quarter to burn off some inventory and run lower production. It didn't happen because the demand came in stronger. We actually did both manage to get the best of both worlds. We burned down the inventory and we ran higher utilization that's giving us better gross margin for that segment.

We expect the anti-counterfeiting to be in a much healthier shape for going forward than it was in the last 12 months. The 3D sensing, I mean, you guys all see the news and actually it's been pretty strong. I mean, I would even say the Q3 was stronger than we thought. Generally, our June quarter is a seasonally weaker quarter. The stronger demand comes in in the H2 of the calendar year.

Mary Lenox (Equity Research Associate)

Great. Thank you.

Operator (participant)

We'll go next to Andrew Spinola at UBS.

Andrew Spinola (Director)

Hi. Thank you. I wanted to ask sort of follow-up. You know, last quarter, we saw some strength return to the NSC business as the service providers started to spend again. This quarter looked pretty strong. The guide is for a little bit of a slowdown next quarter. I think we were hoping that there was a real return to spending by the service providers that maybe it wasn't indicative of a head fake. It was a return to growth that would hopefully be followed in Europe and beyond, you know, in six months, et cetera. I'm wondering first, do you think there was any sort of pull forward of demand by the service providers in either Q2, either both Q2 and Q3? Or do you think that this trend of a return to spend is intact and we should hope to see it continue going forward?

Oleg Khaykin (President and CEO)

I mean, first of all, I do not think there was any pull-in because that is not how they operate. You know, if you think about it seasonally with service providers, March quarter is one of the weakest quarters. It was almost on par with the December quarter. The demand was actually quite healthy, right? There is another one with service providers, which is the wireless field instruments. That continued to be pretty strong from December quarter as well. It leads us to believe that, you know, we are starting to see a resumption of a 5G buildout. In that respect, I would say the service provider field instrumentation and kind of demand is very much in line. I would say it is getting back to normal. I mean, it is not something that you are seeing big growth.

I think it's low single digits kind of quarter on quarter. That's generally, I think, the pattern. Maybe one quarter it'll be stronger. Next quarter, maybe a little bit weaker. Its trajectory is in the right direction. I would say generally, we would see a significant drop from December quarter to the March quarter. If you kind of think about it, the March quarter was roughly flat to December quarter. In that business, that is actually significant growth.

Andrew Spinola (Director)

We also assume for next quarter kind of a more prudent approach in terms of tariffs, et cetera.

Oleg Khaykin (President and CEO)

We expect that probably some of that will probably push out into the September quarter because if you do not place your orders early on and you place it later and, you know, it takes a long time for if you revise your PO, it has to recirculate and collect all the signatures. By the time it gets in, you may not have enough weeks in the quarter to build the product. It probably will push out into the next quarter.

Andrew Spinola (Director)

Yeah. It's overall last quarter, this quarter, next quarter, it's about timing, the dynamic of timing of orders. We don't see any change in our thinking in terms of the end markets that we operate. The demand there.

Oleg Khaykin (President and CEO)

Yeah.

Andrew Spinola (Director)

Got it. The best way to think about the Q4 guide is sort of you're just assuming across the board, everyone is just going to be a little slower, pull back a little bit. It's not that you're seeing weakness in one specific part of the business because of the tariffs and others are stronger. It's just a general expectation of some pause and some slowdown in the next quarter related to just waiting to see what's happening.

Oleg Khaykin (President and CEO)

I mean, it varies. In the OSP business, there is no impact because you have a long-term forecast and you execute. There is very de minimis tariff impact in that business because we have factories in different geographies that produce for those geographies. We do not have an impact there. It is really on the NSC side. Within that, it is the service providers who take the longest to reapprove POs with adders. When you look at the lab and production data centers, the turnaround has been pretty quick. They say, yep, it is what it is. That is the tariff.

Here's the PO back. I would say if any segment that's going to push out and you may see some slippage of revenue, that would be more for the service provider segment rather than the lab and production, which is semi companies, the equipment vendors, data centers, and the module integrators.

Andrew Spinola (Director)

Got it. Thank you.

Oleg Khaykin (President and CEO)

Thanks.

Operator (participant)

Our next question comes from Michael Genovese at Rosenblatt Securities.

Michael Genovese (Senior Research Analyst)

Great. Just back on the tariffs for a minute here. Do you have, you know, manufacturing exposure to places where tariffs, there's a risk? I mean, I know people don't think tariffs are going to go up, you know, and those full rates in Southeast Asia and Taiwan would be implemented. That is still on the table and a possibility. You know, I know you said they do not behave to pull things forward. Do you have any customers that are exposed more to those regions than China and would want to pull things forward for that reason?

Oleg Khaykin (President and CEO)

You know, I have not seen any customers that are pulling products forward because in the end, they all have their quarterly budgets. You got to, I have not seen they spend what they get in any given quarter. The only thing we've seen is like, okay, they have to put an adder. They just have to reapprove it. That's about it. I have not seen anybody who's saying, hey, I'll take everything now because I don't want to wait. It's just which, you know, you'd think you would see it because, you know, but it's not the case.

Michael Genovese (Senior Research Analyst)

Okay. And then just on the total inventory for the company, I mean, I think it went up about 25% quarter over quarter. Was that you buying in front of the tariffs or something else going on? No, that is the incremental inventory from the Inertia Labs acquisition that closed end of January. If you back out their inventory, actually our inventory was slightly down quarter over quarter. Okay. Perfect. And then last question for me is just an update and color on the aviation/milair business.

Oleg Khaykin (President and CEO)

Which business, sorry?

Michael Genovese (Senior Research Analyst)

Military aviation. Space and defense.

Oleg Khaykin (President and CEO)

Yeah. What about it?

Michael Genovese (Senior Research Analyst)

Just a color update on how that market is.

Oleg Khaykin (President and CEO)

Oh, yeah. No, I mean, listen, that business is doing very well. It's got very healthy quarter on quarter growth. I mean, there's parts of that business that are more like mature with a slow growth like the, I would say, the mission critical communication like two-way radios and avionics that go slower. The area that's really driving significantly higher growth is the whole PNT, positioning, navigation, and timing. That is all about drones. It's all about anti-spoofing, anti-jamming of GPS and things like that. That's the business that has very strong quarter on quarter growth.

Michael Genovese (Senior Research Analyst)

Okay. Thanks very much.

Operator (participant)

Next, we'll go to Tim Savageaux at Northland Capital Markets.

Tim Savageaux (Managing Director and Senior Research Analyst)

Hey, good afternoon. Two questions and really both trying to quantify a couple of things that we've been talking about here. First, in terms of the overall size of the fiber lab and production business, which is a real growth area for you guys. I think you're talking about growing into the June quarter. You know, if I were to put that around 20% to 25% of any revenue, would I be too far off there? Any color on that would be interesting. I want to take a shot at quantifying the degree of your prudence. Why don't we follow up with that and start with lab and production?

Oleg Khaykin (President and CEO)

I think this one is, so the June quarter, we expect some pullback from the March quarter because we ship into a lot of big projects. There was a big significant increase December and March quarter. The June quarter, there is some pullback. We expect September quarter to be another increase in the shipment. I'd say today, 25% maybe on NSC is probably a little too much. 20% is probably more like it.

Tim Savageaux (Managing Director and Senior Research Analyst)

On any?

Oleg Khaykin (President and CEO)

On any. No, NSC.

Tim Savageaux (Managing Director and Senior Research Analyst)

NSC.

Oleg Khaykin (President and CEO)

NSC. Yeah. Okay. That's on that. What was your second part? You were talking about the push, how much. I think probably anywhere from $5 million to maybe $10 million is a reasonable number to take a hedge, slip out.

Tim Savageaux (Managing Director and Senior Research Analyst)

Right. Yeah. That was going to be my follow-up, which is, you know, normally you might even see high single digit sequential growth in any on a seasonal basis.

Oleg Khaykin (President and CEO)

Yeah.

Tim Savageaux (Managing Director and Senior Research Analyst)

That gets me a little bit higher, closer to maybe $15 million.

Oleg Khaykin (President and CEO)

You got to also remember what is seasonal. I mean, seasonally, March quarter is down. Here, we actually had a March quarter up, right? I mean, it's a different kind of compare, you know. If you had a typically seasonally March quarter, the June quarter would be exactly what you would expect it to be up. I mean, you know, it wasn't a seasonal. I do not know if that pattern will maintain. Clearly, if it is, we may have to redefine what's seasonal.

Tim Savageaux (Managing Director and Senior Research Analyst)

Right. Understood. You know, we'll settle on 5%.

Oleg Khaykin (President and CEO)

I think it is really the data center that probably broke the traditional seasonality. Even then, you look at the field instruments, they were roughly flat quarter on quarter, which is, like, in that particular space, you could consider growth.

Tim Savageaux (Managing Director and Senior Research Analyst)

Great. Appreciate it. Thanks very much.

Oleg Khaykin (President and CEO)

All right.

Tim Savageaux (Managing Director and Senior Research Analyst)

Thank you.

Operator (participant)

There are no further questions at this time. I will turn the conference back over to Vibhuti for closing remarks.

Vibhuti Nayar (Head of Investor Relations)

Thank you, Audra. And thank you, everyone. This concludes our earnings call for today. Have a good evening. Bye-bye.

Operator (participant)

This does conclude today's conference call. Thank you for your participation. You may now disconnect.