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 .

Financial Results

Overall P&L vs prior periods (GAAP unless noted)

Metric	Q1 FY25 (Sep 28, 2024)	Q2 FY25 (Dec 28, 2024)	Q3 FY25 (Mar 29, 2025)
Revenue ($M)	$238.2	$270.8	$284.8
Gross Margin % (GAAP)	57.1%	59.4%	56.4%
Operating Margin % (GAAP)	4.8%	8.2%	3.0%
Diluted EPS (GAAP)	$(0.01)	$0.04	$0.09
Operating Margin % (Non-GAAP)	10.0%	14.9%	16.7%
Diluted EPS (Non-GAAP)	$0.06	$0.13	$0.15

Q3 FY25 vs S&P Global consensus

Metric	Q3 FY25 Consensus	Q3 FY25 Actual
Revenue ($M)	281.8*	284.8
EPS (Non-GAAP)	0.118*	0.15

Values retrieved from S&P Global.*

Segment revenue breakdown

Segment ($M)	Q3 FY24	Q2 FY25	Q3 FY25
Network Enablement (NE)	$151.7	$179.0	$188.0
Service Enablement (SE)	$18.1	$20.9	$20.2
Optical Security & Performance (OSP)	$76.2	$70.9	$76.6
Total	$246.0	$270.8	$284.8

Key KPIs and balance sheet/cash flow

KPI	Q2 FY25	Q3 FY25
Geographic mix: Americas	42.9%	38.0%
Geographic mix: APAC	34.6%	35.4%
Geographic mix: EMEA	22.5%	26.6%
Total cash, ST inv., ST restricted cash ($M)	$512.8	$400.2
Total debt carrying value ($M)	$639.3	$640.9
Cash from operations ($M)	$44.7	$7.8
Adjusted EBITDA ($M)	$50.1	$57.0

Non‑GAAP adjustments and impact (Q3): add-backs included stock-based comp, acquisition/integration charges, amortization of intangibles, contingent liability fair-value changes, and tax normalization; GAAP tax line reflected a $(16.3)M benefit, which is removed in non‑GAAP EPS .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q4 FY25	—	$278M–$290M	New
Non-GAAP EPS	Q4 FY25	—	$0.10–$0.13	New
NSE Revenue	Q4 FY25	—	≈$208M ± $5M	New
NSE Operating Margin	Q4 FY25	—	5% ± 1%	New
OSP Revenue	Q4 FY25	—	≈$76M ± $1M	New
OSP Operating Margin	Q4 FY25	—	37% ± 1%	New
Tax Expense	Q4 FY25	—	≈$8M ± $0.5M	New
Other Income/Expense (net)	Q4 FY25	—	≈$(5)M	New
Diluted Shares	Q4 FY25	—	≈227.4M	New
Tariff Impact	Q4 FY25	—	≈$3M cost; ≈$(0.01) EPS	New
Revenue	Q3 FY25	$276M–$288M (Q2 guide)	$284.8M actual	Beat high end
Non-GAAP EPS	Q3 FY25	$0.10–$0.13 (Q2 guide)	$0.15 actual	Beat high end

Earnings Call Themes & Trends

Topic	Q1 FY25 (prior two)	Q2 FY25 (prior)	Q3 FY25 (current)	Trend
AI/data center (800G/1.6T, lab & production)	Initial 1.6T shipments; expect significant growth remainder FY25	Strong lab & production; 1.6T R&D demand rising	Momentum sustained; 800G and 1.6T to drive demand through CY25	Accelerating
Service providers & 5G	Stabilizing; green shoots in wireless	SP spend recovery; wireless field instruments up; 5G densification signals	Continued recovery; Q4 prudence on tariffs/PO timing	Improving but cautious near term
Tariffs/macro	—	No explicit tariffs; prudent macro stance	Tariff absorption ($3M), pass-through thereafter, 3–6 mo supply chain realignment	New headwind, manageable
OSP (anti‑counterfeiting, 3D sensing)	OSP up y/y; seasonally weaker Q2; inventory burn expected	OSP down y/y on 3D sensing; anti‑counterfeiting inventory normalization underway	OSP flat y/y; anti‑counterfeiting stabilized; seasonal 3D sensing dip	Stabilizing
Aerospace & Defense (PNT)	Robust y/y growth; Inertial Labs closed Jan 28	Strong, multi‑year design-win pipeline; diversification thesis	Strong growth; multiyear driver	Positive
Open RAN/VALOR	VALOR lab launch cited	—	VALOR expansion incl. Massive MIMO OTA test	Building capability
M&A	—	Inertial Labs closed; appetite for EPS‑accretive deals	Spirent HSE & Security assets announced; ~$180M yr‑1 NSE rev, accretive after 12 mo	Expanding scope

Management Commentary

“The March quarter was unseasonably strong… revenue came in above the midpoint… EPS above the high end. Higher volume and richer revenue mix were the primary drivers for stronger EPS.” — Oleg Khaykin, CEO .
“NSE revenue… grew 23% year-over-year… Field instruments… recovery… Fiber lab and production saw another strong quarter driven by 800 gig and 1.6 terabit data center ecosystem… We expect this trend to continue through calendar ’25.” — CEO .
“Our guidance includes a tariff impact of about $3 million… expected to be dilutive to our gross margin and negatively impact our EPS by approximately $0.01.” — Ilan Daskal, CFO .
“So far, we have not seen any issue with people not accepting [tariff pass-through]… it will just become part of the price.” — CEO .
“Total cash and short-term investments… $400.2 million… lower… mainly attributed to the payment of the Inertial Labs acquisition.” — CFO .

Q&A Highlights

Tariffs: No order cancellations; customers reapproving POs; VIAVI absorbing ~$3M on committed orders in Q4 then universally passing through tariffs; expects supply chain realignment to reduce impact within 3–6 months .
Data center/AI exposure: Fiber lab & production now primarily datacom; 20% of NSE and growing; visibility into strong shipments with 800G volume and 1.6T R&D ramp; September quarter expected strong again .
Service provider spend: Q3 strength not a pull-forward; recovery seen as sustainable; Q4 prudence reflects PO re-approval timing; SP segment most affected by tariff timing .
OSP dynamics: Anti‑counterfeiting stabilized with inventory burn and higher utilization; 3D sensing seasonally weaker in June, stronger in 2H CY .
A&D/PNT: Healthy q/q growth; drones, anti‑spoofing/jamming demand; Inertial Labs integration augments PNT platform .

Estimates Context

Q3 FY25: VIAVI beat S&P Global consensus on both revenue ($284.8M vs $281.8M) and EPS ($0.15 vs $0.118), driven by stronger NSE margins (including a $4M grant) and OSP mix benefits* . Values retrieved from S&P Global.*
Q4 FY25: S&P Global consensus (pre-result) indicated ~$285.2M revenue and ~~$0.115 EPS, broadly aligned with guidance midpoint ($278–$290M and $0.10–$0.13). Management’s tariff absorption (~~$0.01 EPS) and segment mix (NSE margin at ~5%) suggest near-term estimate fine-tuning toward the midpoints* . Values retrieved from S&P Global.*

Key Takeaways for Investors

Positive inflection sustained: two consecutive quarters of accelerating revenue and margin expansion in NSE, with Q3 beats on revenue and EPS relative to consensus and guidance .
AI infrastructure tailwind: portfolio is leveraged to 800G/1.6T across lab and field; recent product launches (1.6T LabPro enhancements, 800G OneAdvisor module) support a multi‑year growth path .
Tariff risk manageable: near-term EPS drag (~$0.01) and order timing prudence, but pass-through and supply chain shifts expected to neutralize impact in 3–6 months .
Diversification working: A&D/PNT adds secular growth and margin mix; Spirent assets (expected ~$180M yr‑1 revenue) broaden layers 2–7 exposure in Ethernet and security testing post close .
OSP stable: anti-counterfeiting inventory normalization largely complete; expect seasonal 3D sensing patterns with healthier mix through 2H CY .
Watch Q4 execution: Focus on NSE margin at ~5% (vs 10.4% in Q3) given tariff/mix, OSP margin at ~37%, tax ~$8M, and OI&E ≈$(5)M; Q4 revenue guide implies flat q/q on prudence .
Medium-term setup: If SP/wireless recovery spreads to Europe and data center momentum persists, the earnings power post-Spirent integration and tariff normalization supports estimate revisions upward through FY26 .

Citations:

Q3 FY25 8-K press release and financials
Q3 FY25 earnings call
Q2 FY25 8-K and call
Q1 FY25 8-K and call
Spirent acquisition PR
Product/AI infrastructure PRs
S&P Global consensus (via tool): Q3 FY25, Q4 FY25 estimates*

VIAVI SOLUTIONS INC. (VIAV)·Q3 2025 Earnings Summary