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VIAVI SOLUTIONS INC. (VIAV)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered broad-based strength with net revenue $299.1M (+25.6% y/y, +3.0% q/q) and non-GAAP EPS $0.15, both above company guidance; GAAP EPS was $(0.10) due to non-GAAP exclusions including contingent liability fair value change and higher tax expense .
  • NSE/NSC revenue rose to $216.0M (+35.5% y/y) on strong demand from the AI data center ecosystem and aerospace & defense; OSB grew to $83.1M (+5.5% y/y) with mix-driven margin headwinds .
  • Q2 FY26 guidance: revenue $360–$370M and non-GAAP EPS $0.18–$0.20; segment guidance embeds ~10 weeks of Spirent HSE/Network Security/Channel Emulation contribution and stronger seasonality in acquired lines .
  • Key stock-reaction catalysts: continued AI data center demand, acquisition closing and accretion pathway (Spirent ~$200M annual run-rate; mid- to high-60s GM), and raised top-line run-rate into Q2; watch wireless RAN recovery timing and OSB mix .

What Went Well and What Went Wrong

What Went Well

  • Data center ecosystem momentum: “Strong demand from the data center ecosystem and aerospace & defense customers was the primary driver” of outperformance; AI build-out drove lab, production and now field instruments demand .
  • Segment performance: NSE/NSC revenue $216.0M (+35.5% y/y) and operating margin improved to 7.5% vs (4.6)% last year; non-GAAP operating margin reached 15.7% (+570 bps y/y) .
  • Strategic M&A: Closed acquisition of Spirent HSE/Network Security/Channel Emulation lines; higher run-rate (~$200M vs prior ~$188M) with accretive margin profile (mid-to-high 60% GM) and AI HSE workload opportunity .

Selected management quotes:

  • “We expect the strong momentum in these end markets to continue through the fiscal year.”
  • “Hyperscalers are now also buying our traditional field instruments... as they build out and operate their new AI data centers.”
  • “The acquisition... is expected to further strengthen our position in the data center ecosystem.”

What Went Wrong

  • GAAP loss despite strong non-GAAP results: GAAP net loss $(21.4)M and EPS $(0.10) from higher tax expense and non-GAAP exclusions (e.g., contingent liability fair value change $10.9M) .
  • OSB margin compression: OSB GM 52.3% (−300 bps y/y) and operating margin 37.1% (−250 bps y/y) on unfavorable mix; Q2 OSB revenue expected seasonally lower (~$77M) .
  • Wireless remains a laggard: “Wireless business... last cylinder... to turn on,” with recovery expected into next calendar year; infrastructure test demand sluggish .

Financial Results

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$284.8 $290.5 $299.1
GAAP Diluted EPS ($)$0.09 $0.04 $(0.10)
Non-GAAP EPS ($)$0.15 $0.13 $0.15
Gross Margin % (GAAP)56.4% 56.3% 56.5%
Operating Margin % (GAAP)3.0% 5.3% 2.5%
Operating Margin % (Non-GAAP)16.7% 14.4% 15.7%
Adjusted EBITDA ($USD Millions)$57.0 $51.3 $56.8
Cash from Operations ($USD Millions)$7.8 $23.8 $31.0
Total Cash & ST Investments ($USD Millions)$400.2 $429.0 $549.1
Diluted Shares (Millions)226.9 227.0 227.9

Segment performance and margins:

Segment MetricQ3 FY25Q4 FY25Q1 FY26
NSE/NSC Revenue ($USD Millions)$208.2 $209.1 $216.0
OSB Revenue ($USD Millions)$76.6 $81.4 $83.1
NSE/NSC Gross Margin %63.1% 62.2% 63.0%
OSB Gross Margin %51.6% 54.7% 52.3%
NSE/NSC Operating Margin %10.4% 4.7% 7.5%
OSB Operating Margin %33.9% 39.4% 37.1%

KPIs and balance sheet highlights:

KPIQ3 FY25Q4 FY25Q1 FY26
Total Debt – Net Carrying Value ($USD Millions)$640.9 $642.5 $791.6
CapEx ($USD Millions)$6.8 $5.5 $8.5
Regional Mix (% of Revenue)Americas 38.0%; APAC 35.4%; EMEA 26.6% Americas 39.2%; APAC 35.0%; EMEA 25.8% Americas 43.1%; APAC 30.8%; EMEA 26.1%

Consensus vs actual/guidance:

MetricQ1 FY26 ConsensusQ1 FY26 ActualQ2 FY26 ConsensusQ2 FY26 Company Guidance
Revenue ($USD Millions)294.35*299.10 365.25*360–370
Primary EPS ($)0.131*0.15 0.1885*0.18–0.20

Values marked with * were retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company Revenue ($USD Millions)Q1 FY26 → Q2 FY26$290–$298 $360–$370 Raised
Non-GAAP EPS ($)Q1 FY26 → Q2 FY26$0.13–$0.14 $0.18–$0.20 Raised
NSE/NSC Revenue ($USD Millions)Q1 FY26 → Q2 FY26~$211 ±$3 $283–$293 (incl. Spirent $45–$55) Raised (incl. M&A)
OSB Revenue ($USD Millions)Q1 FY26 → Q2 FY26~$83 ±$1 ~ $77 Lowered (seasonal)
Viavi Operating Margin (Non-GAAP)Q1 FY26 → Q2 FY26~15% ±40 bps 17.9% ±60 bps Raised
NSE/NSC Operating Margin (Non-GAAP)Q1 FY26 → Q2 FY265.8% ±40 bps 13.6% ±70 bps Raised
OSB Operating Margin (Non-GAAP)Q1 FY26 → Q2 FY2638.3% ±20 bps 34% ±50 bps Lowered (mix/seasonal)
Tax Expense ($USD Millions)Q1 FY26 → Q2 FY26~$8.5 ±$0.5 ~$10.0 ±$0.5 Raised
Other Income/Expense (Net) ($USD Millions)Q1 FY26 → Q2 FY26~$(5.0) ~$(12.2) (TLB interest) Lowered (more expense)
Diluted Shares (Millions)Q1 FY26 → Q2 FY26~228.6 ~228.7 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 FY26)Trend
AI/data center demandStrong 800G/1.6T lab & production; field instruments adoption by hyperscalers; 1.6T Gen2 launched Broad demand across 800G/1.6T; hyperscalers buying field tools; Spirent AI HSE workloads; competitive position vs Keysight strengthened Strengthening
Supply chain/tariffs~$3M tariff cost absorbed in Q4; pass-through and mitigation within ~6 months; no cancellations Tariff impact de-emphasized; guidance headwinds move to OI&E from TLB interest Mitigated
Wireless RANField instruments healthy; infra test sluggish; recovery expected to resume “Last cylinder” to turn on; expect improvement next calendar year Gradual improvement later
Aerospace & defensePNT strength, design-win driven growth (Inertial Labs) Another strong quarter; broad PNT portfolio across modules to full systems Strengthening
OSB/3D sensing & anti-counterfeitingStabilization and inventory normalization; stronger 2H seasonal for 3D sensing Revenue up; margin down on mix; Q2 seasonal down expected Stable; mix-sensitive margins
Product cadence & R&DFaster 2–3 year cycles driven by data center; co-packaged optics, PCIe 6.0 optical link demo “Churns and earns”: faster turnover, higher margins for first-to-market products Accelerating cycles

Management Commentary

  • CEO on data center ecosystem: “We saw strong demand across all optical networking product lines... 800 gig and 1.6 terabit Ethernet test, chip-to-chip interconnect and protocol test... production test equipment.”
  • CEO on field instruments: “We are now also seeing a growing demand for our traditional field instruments by hyperscalers as they build out and operate their new AI data centers.”
  • CFO on Spirent contribution and guidance: “We expect Viavi revenue in the range of $360M–$370M... NSC revenue between $283M and $293M, including Spirent $45M–$55M... EPS $0.18–$0.20; Spirent EPS contribution $0–$0.02.”
  • CEO on competitive landscape: “At layer two to seven... it’s Keysight and Viavi that are big players.”

Q&A Highlights

  • Mix shift and portfolio balance: Exit mix moving to ~45% service provider, ~40% data center, ~15% aerospace & defense post-Spirent; data center likely to surpass service provider over time .
  • EPS power: Management acknowledged path “entirely possible” to approach ~$1 annualized EPS next year if momentum continues; wireless recovery could be incremental upside .
  • Spirent run-rate and margins: Annual run-rate ~ $200M (higher than prior ~$188M); GM mid-to-high 60% and accretive operating margin; AI HSE workload growing faster .
  • Capital structure: Refinanced 2026 converts with 2031 0.625% notes; closed $600M Term Loan B for acquisition; repurchased 2.7M shares ($30M); remaining buyback authorization ~$170M .
  • OSB pricing/mix: ASPs stabilized; volumes and mix drive margin; automotive LiDAR and Android facial recognition are emerging incremental demand drivers .

Estimates Context

  • Q1 FY26 beat: Revenue $299.1M vs consensus $294.35M*; non-GAAP EPS $0.15 vs consensus $0.131* .
  • Q2 FY26 guide in-line: Revenue guide $360–$370M vs consensus $365.25M*; EPS guide $0.18–$0.20 vs consensus $0.1885* .
    Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Data center tailwinds and Spirent integration drive higher revenue run-rate and margins; watch continued AI-driven lab/production and field instruments demand as the key narrative for multiple expansion .
  • Non-GAAP strength underpins earnings quality; GAAP volatility primarily from non-cash and acquisition-related items (contingent liability, amortization, tax) .
  • Segment guidance implies a step-up in NSC/NSE margins with Spirent accretion path; OSB seasonal and mix sensitivities remain a swing factor .
  • Near-term trading: Potential positive reaction to raised Q2 guidance and accretive M&A; monitor updates on wireless infrastructure recovery timing and OI&E headwind from TLB .
  • Medium-term thesis: Faster product cycles (“churns and earns”) in data center testing, AI HSE workloads, and broadening PNT portfolio in aerospace & defense support sustained double-digit NSC growth and margin expansion .
  • Capital allocation: Balanced approach—debt-funded M&A with remaining buyback capacity; diluted share count roughly stable; leverage to be managed below long-term targets .
  • Risk checks: Tariff impacts appear mitigated, but keep an eye on mix-driven OSB margins and macro-driven service provider spend variability .