Viavi Solutions Inc. (VIAV) | The Buildout — AI Infrastructure
The Verdict
Viavi Solutions sells the test, measurement and monitoring equipment that telecom and data-center networks are built, maintained and validated with, plus a separate business in optical coatings. It does not sell AI compute or data-center capacity. Its AI link is indirect: more optical modules, more high-speed Ethernet, more co-packaged optics and more fiber each require more test content at the design, production and field stages, and Viavi supplies instruments for that work. Management frames the company as a supplier to the build-out rather than a headline participant in it.
| Market Cap | — |
| Revenue (TTM) | $1.5B |
| Revenue Growth | +40.0% |
| EBITDA Margin (TTM) | 14.1% |
| Net Debt | $49M |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data center ecosystem revenue more than doubled year over year even excluding Spirent, management said in FQ4 FY2026.
- NSE revenue grew 69.2% yoy to $353.9M at a 64.1% gross margin; management puts NSE incremental fall-through at 40-45%.
- The $500M quarterly revenue milestone was pulled forward to "sometime in calendar 2027" from exiting fiscal 2028.
- Q1 FY2027 operating margin guided to 27.1%, up from 24% in FQ4, against a raised "mid- to high 20%" framework.
- After the follow-on offering retired the remaining Term Loan B, the balance sheet holds $647.8M in cash and $2.0M in short-term investments against $698.8M of total debt.
What We’re Watching
- Whether the 27.1% FQ1 FY2027 operating margin holds after the ~100 bps tariff-refund benefit and the 14-week quarter's costs wash out.
- Whether CPO revenue actually accelerates in December and OCS broadens beyond the single unnamed hyperscaler, both dated directional commitments.
- Share count has overshot guidance twice in a row (249.5M vs 245M; 261M vs 256.1M) and is guided to ~268M.
- Wireless stays down ~45% with no recovery date; a return could add $20-30M of quarterly revenue, per management.
The thesis is strengthening on the numbers: two consecutive beat-and-raise quarters, a mix shift toward higher-margin lab and production test, and a margin framework raised on the FQ4 call. Management also pulled a scale milestone in by roughly a year. The question is durability — whether the data center demand is a multi-year production-test ramp or a hyperscaler capex cycle, given that management's own visibility runs only about three quarters and the company's forward book is modest.
Earnings Beat
FQ4 FY2026 revenue was $443.1M, above the guided $427-437M and up 52.5% year over year. Adjusted operating margin was 24%, above the 22.2-23.2% guide, and adjusted EPS was $0.34 against the guided $0.29-0.31. NSE revenue rose 69.2% yoy to $353.9M, including $47.7M from Spirent product lines, at a 64.1% gross margin. OSP revenue was $89.2M, up 9.6% yoy.
| Metric | Q4 FY2026 | Q3 FY2026 | Q4 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $443M | $407M | $290M | +52.5% |
| Gross margin | 62.5% | 55.7% | 55.8% | +670bps |
| EBITDA | $42M | $73M | $35M | +18.2% |
| EPS | $0.14 | $0.03 | $0.04 | +304.3% |
| NSE revenue | $353.9M | $321.5M | n/a | +69.2% YoY |
| Spirent product lines revenue | $47.7M | $54.2M | n/a | — |
our data center is now running at about 50% of the NSE revenue. A&D is, I would say, probably about 17%, and the rest is service provider business.— Oleg Khaykin, CEO, August 5, 2026
Management tone: Management's tone on the FQ4 FY2026 call was more confident and more specific than the prior quarter. Where FQ3 answered with "next 2-3 quarters," FQ4 gave sizes and targets: "about 50%" of NSE, "December" for CPO acceleration, and "mid- to high 20%" for operating margins. Management reaffirmed that wireless demand remains "anemic, although stable" with no near-term recovery expected.
Management Guidance
For Q1 FY2027, management guided revenue of $450-460M, NSE revenue of $360-368M, OSP revenue of $90-92M, an operating margin of 27.1% ±40 bps, EPS of $0.40-0.42, tax of ~$12M ±$500K, other income/expense of ~$2.5M net expense, and a share count of ~268M. The guide includes a net ~100 bps / ~$0.02 benefit from ~$11M of tariff refunds received in July 2026, offset by elevated variable costs from a 14-week quarter; management said the refund will primarily benefit NSE operating margins.
Trajectory
Revenue stepped from $299M in FQ1 FY2026 to $369M, $407M and $443M over the next three quarters, with Spirent product lines and data center demand doing the lifting. The code-computed signal reads the sequential trajectory as decelerating — the quarter-over-quarter steps are getting smaller off a larger base — even as year-over-year growth accelerated. Gross margin held near 55-56% for three quarters, then moved to 62.5% in FQ4 on mix and volume. Operating margin reached 24%, up 960 bps year over year.
The Model
The model projects FY+1 revenue of $1,950M with EBITDA of $505M (25.9%), and FY+2 revenue of $2,250M with EBITDA of $621M (27.6%). The near term is anchored on the data center ecosystem, the Spirent integration and the guided margin step-up. FY+2 assumes the newer test vectors — CPO, OCS and advanced-packaging test — convert to revenue alongside the 1.6T optical cycle.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.5B | $1.9B | $2.2B |
| YoY Growth | — | +28.4% | +15.4% |
| EBITDA | $213M | $505M | $621M |
| EBITDA Margin | 14.1% | 25.9% | 27.6% |
Projections are the median of 5 independent model runs. The model’s revenue sits 6.0% above analyst consensus.
For Q1 FY2027, management guided revenue of $450-460M, NSE revenue of $360-368M, OSP revenue of $90-92M, an operating margin of 27.1% ±40 bps, EPS of $0.40-0.42, tax of ~$12M ±$500K, other income/expense of ~$2.5M net expense, and a share count of ~268M. The guide includes a net ~100 bps / ~$0.02 benefit from ~$11M of tariff refunds received in July 2026, offset by elevated variable costs from a 14-week quarter; management said the refund will primarily benefit NSE operating margins.
What Could Go Right — and Wrong
- Data center ecosystem growth holds at the pace management described for "the next several quarters," extending the mix shift toward higher-margin lab and production test.
- CPO revenue accelerates in December as management committed, and OCS broadens beyond the single existing hyperscaler, expanding the served market.
- The 1.6T optical cycle proves net-additive rather than substitutional against 800G, as management argues.
- Aerospace & Defense and PNT continue as a stated multiyear growth pillar, with Inertial Labs already exceeding management's forecasts.
- Wireless recovers toward the $20-30M of additional quarterly revenue management quantifies, adding a second growth engine.
- Hyperscaler and module-maker capex decelerates; data center is ~50% of NSE with no customer-concentration disclosure and management's visibility capped at about three quarters.
- CPO and OCS revenue slips past the December and "next several quarters" dates, leaving growth leaning on 1.6T, which is partly substitutional.
- Supply becomes the governor: Viavi says it lacks the volumes for long-term supply agreements while customers and competitors lock multiyear supply.
- Semiconductor component cost inflation outruns pass-through, pressuring gross margin.
- Share count keeps climbing past ~268M, diluting earnings growth even as operating margin improves.
Looking Ahead
Over the next 12 months the story turns on whether management's dated commitments land. The Q1 FY2027 guide of $450-460M revenue and a 27.1% operating margin is the first checkpoint, with the tariff refund and the 14-week quarter both inside it. Beyond that, CPO acceleration in December, OCS broadening over the next several quarters, and 1.6T ramping toward parity with 800G in 2027 are the markers management has set. Management also expects NSE revenue to be up quarter-on-quarter in Q1 FY2027 despite typical Q1 seasonality.
- Sept 9, 2026ECOC 2026 showcase — Demos CPO, silicon photonics and 1.6T data-center test portfolio.
- Q1 FY2027FQ1 FY2027 earnings — First test of the 27.1% margin guide with one-time items included.
- DecemberCPO revenue acceleration — Management expects co-packaged optics test revenue to accelerate.
- Next several quartersOCS revenue broadening — OCS majority revenue expected as adoption widens beyond one customer.
- 20271.6T parity with 800G — Management expects 1.6T test volume to match 800G.
- Calendar 2027$500M quarterly revenue — Pulled-forward scale milestone; a marker of management confidence.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.1B | $1.5B | $1.5B | +40.0% |
| Gross Margin | 56.9% | 57.4% | 57.6% | +50bps |
| EBITDA | $134M | $213M | $213M | +59.7% |
| EBITDA Margin | 12.3% | 14.1% | 14.1% | +173bps |
| Net Income | $35M | −$30M | −$30M | -187.4% |
| Free Cash Flow | $62M | $83M | $83M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)57.6%
- EBITDA Margin (TTM)14.1%
- Net Margin (TTM)-2.0%
- ROIC5.5%
- FCF Conversion38.8%
- SBC / Revenue3.6%
The Company
Viavi Solutions makes network test, monitoring and assurance products, plus optical coatings. Its larger segment, Network and Service Enablement, sells fiber, wireless, AIOps and network-performance test gear used to build, maintain and optimize telecom and datacom networks, along with aerospace and defense test equipment. The smaller segment, Optical Security and Performance Products, applies optical-coating technology to anti-counterfeiting pigments, 3D sensing filters and related products. In the AI story, Viavi is a supplier to the build-out rather than a participant in it: its instruments sit at the design, production and field test stages that optical modules, high-speed Ethernet and fiber require.
The business is asset-light. Full-year CapEx was $31.1M on $1.518B of revenue, roughly 2% of revenue. Viavi runs significant manufacturing for both segments in China, France, Germany, the United Kingdom and the United States — disclosed at the country level only, with no sites or capacity figures — and also relies on contract manufacturers worldwide. It sells to telecom carriers, network-equipment makers, hyperscalers, module makers and defense primes.
Business Segments
Competitive Landscape
Viavi competes in both segments. Its FY2025 10-K names Anritsu, EXFO, Keysight Technologies, NetScout Systems, Riverbed Technology, Rohde & Schwarz, VeEX and Spirent Communications as NSE competitors, and lists Giesecke & Devrient, Crane NXT, Merck KGA, FYOTEC, Materion, Zhejiang Crystal-Optech, Platinum Optics, Coherent and ams OSRAM in OSP. The neighbor read-through treats Keysight as the clearest benchmark in AI and wireline test — larger, at a 33.2% operating margin, and describing supply as its near-term governor. No market-share data is disclosed anywhere in the source material.
- Keysight TechnologiesVerified competitor and the clearest benchmark in AI/wireline test: record FQ3 2026 orders of $2.091B, +56% yoy, and a 33.2% operating margin; says supply chain will remain the governor of near-term revenue.
- Anritsu CorporationNamed in the FY2025 10-K as an NSE competitor; not discussed.
- EXFO Inc.Named in the FY2025 10-K as an NSE competitor; not discussed.
- NetScout SystemsNamed in the 10-K as an NSE competitor and a verified competitor in service assurance and network performance monitoring; carrier spending described as "disciplined."
- CoherentNamed in the 10-K as an OSP optical-coatings competitor; the neighbor read-through adds that Coherent is scaling optical-component capacity and moving CPO to production, with backlog through calendar 2027.
Supply Chain
Viavi sits upstream of the networks it tests, buying specialized components and relying on contract manufacturers, then selling instruments to carriers, equipment makers, hyperscalers and module makers. No neighbor transcript names Viavi directly, so the read-through is entirely indirect.
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