Viavi Solutions Inc. (VIAV) | The Buildout — AI Infrastructure
The Verdict
Viavi Solutions supplies the test, measurement, monitoring, and assurance layer for networks and optical systems. Its Network and Service Enablement unit equips chipmakers, optical module makers, network equipment makers, and hyperscalers with tools to validate high-speed Ethernet, PCIe interconnects, fiber, and co-packaged optics. That makes the company a supplier into the AI data-center build-out rather than a builder of the infrastructure itself.
| Market Cap | — |
| Revenue (TTM) | $1.4B |
| Revenue Growth | +30.6% |
| EBITDA Margin (TTM) | 15.2% |
| Net Debt | $636M |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data-center share of NSE moved to the high 40s, up from roughly 45% a quarter earlier, and could reach about 50% in the near future.
- Fiscal Q3 2026 non-GAAP EPS was $0.27, above the $0.22–$0.24 guidance and up $0.12 year over year.
- NSE operating margin rose 680 basis points year over year to 17.2%, with management citing roughly 40% incremental fall-through.
- Remaining performance obligations stood at $533.8M, with about 92% expected to be recognized as revenue within 12 months.
- Aerospace and defense strength included a $73.5M Inertial Labs contingent consideration payment after the business exceeded forecasts.
What We’re Watching
- Whether co-packaged optics revenue ramps within the 2–3 quarter timeframe management described.
- Wireless demand is down roughly 45% from peak, with no near-term recovery expected.
- Diluted share count was 249.5M in Q3 versus 245M guided; Q4 guidance is around 256M, and a May 2026 offering adds 11.1M shares.
- Data-center concentration is rising; approaching ~50% of NSE exposes Viavi to any AI or hyperscaler capex slowdown.
The thesis is strengthening on execution: the beat-and-raise, the mix shift toward data center, and the Spirent pushouts landing all support management's narrative. The key open question is whether the co-packaged optics and advanced packaging ramp materializes in the next two to three quarters without the AI capex cycle pausing.
Earnings Beat
Fiscal Q3 2026 revenue was $406.8M, up 42.8% year over year and above the $386M–$400M guidance. NSE revenue rose 54.4% to $321.5M with non-GAAP gross margin of 65.3%, while OSP revenue rose 11.4% to $85.3M with non-GAAP gross margin of 50.3%. Non-GAAP operating margin came in at 21.0%, above the 19.2%–20.2% guidance range.
| Metric | Q3 FY2026 | Q2 FY2026 | Q3 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $407M | $369M | $285M | +42.8% |
| Gross margin | 55.7% | 55.3% | 56.0% | -30bps |
| EBITDA | $73M | $59M | $41M | +79.3% |
| EPS | $0.03 | $-0.21 | $0.09 | −70.2% |
| NSE revenue | $321.5M | $291.5M | $208.2M | +54.4% YoY |
| Spirent product-line revenue | $54.2M | $43M | n/a | — |
I've never seen so much demand for our fiber monitoring solutions. I mean, I'd say these data centers buying more equipment than regular service providers for the whole big network.— Oleg Khaykin, CEO, 2026-04-29
Management tone: Management's tone turned more bullish on data center and aerospace and defense while becoming more cautious on wireless. The data-center ecosystem definition expanded to include hyperscalers, and field-instrument data-center mix language moved from about one-third to 'approaching 40%, 45% — pretty soon probably maybe 50%.' Wireless language shifted from 'weak but stable' to no near-term recovery expected.
Management Guidance
For fiscal Q4 2026, management guided total revenue of $427M–$437M, NSE revenue of $340M–$348M, OSP revenue of $87M–$89M, total operating margin of 22.7% ± 50 bps, and non-GAAP EPS of $0.29–$0.31. Tax expense is expected around $10M ± $0.5M, other income and expense is expected to be a net expense of about $12M, and diluted share count is expected around 256M.
Trajectory
Revenue grew 10.2% sequentially in fiscal Q3 2026 to $406.8M, following a 23.5% sequential jump in fiscal Q2. The mix is shifting toward NSE, which grew 54.4% year over year, while OSP grew 11.4%. The driver is data-center ecosystem demand across 800G and 1.6T speeds and hyperscaler fiber monitoring, offset by a still-weak wireless business. Operating margin expanded 430 basis points year over year to 21.0%.
The Model
The model projects fiscal-year revenue of $1,900M with EBITDA of $466M (24.5% margin) in FY+1, and revenue of $2,200M with EBITDA of $590M (26.8% margin) in FY+2. The near-term projection is anchored by the Spirent acquisition, the data-center mix shift, and NSE operating leverage; FY+2 assumes co-packaged optics and advanced packaging begin contributing meaningful revenue alongside continued high-speed Ethernet ramp.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.1B | $1.9B | $2.2B |
| YoY Growth | — | +75.2% | +15.8% |
| EBITDA | $134M | $466M | $590M |
| EBITDA Margin | 12.3% | 24.5% | 26.8% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.2% above analyst consensus.
For fiscal Q4 2026, management guided total revenue of $427M–$437M, NSE revenue of $340M–$348M, OSP revenue of $87M–$89M, total operating margin of 22.7% ± 50 bps, and non-GAAP EPS of $0.29–$0.31. Tax expense is expected around $10M ± $0.5M, other income and expense is expected to be a net expense of about $12M, and diluted share count is expected around 256M.
What Could Go Right — and Wrong
- Co-packaged optics and advanced packaging ramp within 2–3 quarters and become a separate revenue stream.
- Data-center share of NSE reaches about 50% and holds there as service-provider weakness fades.
- U.S. Tier-1 aerospace and defense wins convert into quantified PNT revenue growth.
- Wireless recovery adds the $20M–$30M of quarterly revenue management described.
- NSE incremental fall-through holds near 40% or improves once restructuring is complete.
- AI data-center capex pauses or consolidates, slowing NSE revenue and the mix shift.
- Co-packaged optics timing slips beyond 2–3 quarters or the ramp is captured by Keysight and others.
- Supply constraints on memory, wafers, or photonics convert from a demand signal into delivery delays.
- Wireless continues to decline without recovery, leaving service-provider seasonality as a drag.
- Dilution from convertibles and the May 2026 offering accelerates beyond the guided share count of roughly 256M.
Looking Ahead
The next twelve months hinge on whether data-center ecosystem momentum continues through calendar 2026 and whether management's 2–3 quarter co-packaged optics and advanced packaging ramp becomes visible revenue. The restructuring plan is scheduled for substantial completion by December 2026, with margin fall-through benefit more visible in H2 FY27. The first integrated Viavi-Spirent product is targeted at 3.2T, though timing is not specified.
- Through calendar 2026Data-center momentum — Tests continued NSE data-center growth and mix toward ~50%.
- Through calendar 2026A&D PNT growth — Tests whether U.S. Tier 1 defense wins keep ramping revenue.
- December 2026Restructuring substantially complete — Tests whether $30M in annual savings and margin fall-through hold.
- Late CY2026 / early CY2027Co-packaged optics ramp — Tests whether early CPO and advanced packaging sales become visible revenue.
- H2 FY27Restructuring margin benefit — Tests whether NSE fall-through improves after savings materialize.
- Timing unspecifiedIntegrated 3.2T Spirent product — Tests launch of first fully integrated Viavi-Spirent product.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.0B | $1.1B | $1.4B | +8.4% |
| Gross Margin | 57.0% | 56.9% | 55.7% | 8bps |
| EBITDA | $84M | $134M | $1.5B | +59.0% |
| EBITDA Margin | 8.4% | 12.3% | 15.2% | +392bps |
| Net Income | −$26M | $35M | −$55M | +234.9% |
| Free Cash Flow | $97M | $62M | $817M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)55.7%
- EBITDA Margin (TTM)15.2%
- Net Margin (TTM)-4.0%
- ROIC5.9%
- FCF Conversion22.0%
- SBC / Revenue3.9%
The Company
Viavi Solutions provides network test, monitoring, and assurance products across two segments: Network and Service Enablement (NSE) and Optical Security and Performance Products (OSP). NSE covers fiber, wireless, AIOps, network performance and threat solutions, and aerospace and defense test equipment. OSP uses optical coating technologies for anti-counterfeiting, 3D sensing, government, aerospace, automotive, and industrial applications. Its test and measurement tools support high-speed Ethernet, PCIe interconnects, and fiber monitoring in AI data-center build-outs.
Viavi operates significant manufacturing facilities in China, France, Germany, the United Kingdom, and the United States, and uses contract manufacturers around the world. It depends on a limited number of often small and specialized vendors and has sole or limited source supply arrangements for certain components. The company is not an infrastructure owner or network equipment maker; it supplies the test, measurement, monitoring, and assurance layer that chipmakers, optical module makers, network equipment makers, and hyperscalers use to design, validate, ramp, and operate their products.
Business Segments
Competitive Landscape
The 10-K lists NSE competitors including Anritsu, EXFO, Keysight, NetScout, Riverbed, Rohde & Schwarz, VeEX, and Spirent, and OSP competitors including Giesecke & Devrient, Crane NXT, Merck KGA, FYOTEC, Materion, Zhejiang Crystal-Optech, Platinum Optics, Coherent, and ams OSRAM. The high-speed Ethernet competitive picture changed when Viavi acquired the Spirent HSE and CE business, so Spirent is now part of Viavi's portfolio rather than an external competitor. Keysight remains a named NSE competitor.
- KeysightNamed in 10-K as an NSE competitor.
- AnritsuNamed in 10-K as an NSE competitor; not discussed.
- EXFONamed in 10-K as an NSE competitor; not discussed.
- CoherentNamed in 10-K as an OSP competitor.
- MaterionNamed in 10-K as an OSP competitor.
Supply Chain
Viavi sits between component suppliers and network or optical equipment makers, supplying the test and assurance layer used to design, validate, and operate AI data-center infrastructure. No neighbor transcript mentioned Viavi by name, so ecosystem reads are inferential.