We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
VIAV Gains From Strong Operating Margin Growth: Will the Trend Last?
Read MoreHide Full Article
Key Takeaways
VIAV lifted non-GAAP operating margin to 21% as NSE and OSP revenue posted strong year-over-year growth.
VIAV expects operating margin to reach 22.7% in the fourth quarter, up from 21% in the third quarter.
VIAV's earnings estimates for 2026 were unchanged, while 2027 estimates improved over the past 60 days.
Viavi Solutions, Inc. (VIAV - Free Report) reported a non-GAAP operating income of $85.5 million, up from $47.7 million a year ago quarter. Non-GAAP operating margin was 21%, up from 16.7% a year ago.
The improvement in operating margin is driven by multiple factors, including strong growth in the Network and Service Enablement segment (NSE) and Optical Security and Performance Products (OSP). In the third quarter of fiscal 2026, the NSE segment generated $321.5 million in revenues, up 54.4% year over year. The segment accounted for 79% of total revenues. Acquisition of Spirent product lines and strong demand across lab, production and field products, mainly from the data center ecosystem and aerospace & defense sectors, drove solid sales growth in this segment. The OSP segment revenues were $85.3 million, up 11.4% year over year, driven by strong demand for 3D Sensing and anti-counterfeiting.
Higher revenue is allowing fixed costs to be spread across a larger sales base. This is resulting in a significant operating leverage. Every incremental dollar of NSE revenue contributes roughly 40-45 cents to operating income, reflecting a highly scalable cost structure. Increasing mix, AI infrastructure and data center business, backed by hyperscalers’ demand, investment by optical module vendors and semiconductor companies will likely drive operating margin in the coming quarters. In the fourth quarter, Viavi expects its operating margin to reach 22.7%, up from 21% in the third quarter.
Other Tech Firms With Strong Margin Expansion
Sanmina Corporation (SANM - Free Report) reported a non-GAAP operating profit of $257 million in the second quarter of 2026, up from $111 million a year ago. Non-GAAP operating margin improved to 6.4% from 5.6%. The 131.5% increase year over year and an 80-basis point operating margin expansion are driven by a multitude of factors. The ZT system, which performed significantly better than expected, was one of the biggest contributors. Strong customer demand for accelerated compute systems and earlier-than-expected shipments supported Sanmina’s profitability. Sanmina’s revenues surged 102.3% year over year to $4.01 billion. Revenue growth significantly outpaced the increase in operating expenses. Disciplined cost management was also a key contributor in this regard.
HubSpot. Inc. (HUBS - Free Report) generated a non-GAAP operating income of $156.8 million, up from $100.3 million in the prior-year quarter, with margin expanding 380 basis points year over year to 17.8%. Higher revenues and operating discipline helped offset increased investments in research, AI innovation and sales initiatives. HubSpot continues to witness rising adoption among larger customers as businesses consolidate marketing, sales and service workflows on a unified AI-enabled platform. During the first quarter of 2026, deals above $60,000 in annual recurring revenues increased 37% year over year, while deals above $120,000 ARR rose 64%. HubSpot’s AI strategy is increasingly contributing to customer engagement and monetization.
Going by the price/earnings ratio, the company’s shares currently trade at 32.8 forward earnings, lower than 41.94 for the industry and its mean of 37.66.
Image Source: Zacks Investment Research
The company’s earnings estimates for 2026 have remained unchanged and 2027 have improved over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
VIAV Gains From Strong Operating Margin Growth: Will the Trend Last?
Key Takeaways
Viavi Solutions, Inc. (VIAV - Free Report) reported a non-GAAP operating income of $85.5 million, up from $47.7 million a year ago quarter. Non-GAAP operating margin was 21%, up from 16.7% a year ago.
The improvement in operating margin is driven by multiple factors, including strong growth in the Network and Service Enablement segment (NSE) and Optical Security and Performance Products (OSP). In the third quarter of fiscal 2026, the NSE segment generated $321.5 million in revenues, up 54.4% year over year. The segment accounted for 79% of total revenues. Acquisition of Spirent product lines and strong demand across lab, production and field products, mainly from the data center ecosystem and aerospace & defense sectors, drove solid sales growth in this segment. The OSP segment revenues were $85.3 million, up 11.4% year over year, driven by strong demand for 3D Sensing and anti-counterfeiting.
Higher revenue is allowing fixed costs to be spread across a larger sales base. This is resulting in a significant operating leverage. Every incremental dollar of NSE revenue contributes roughly 40-45 cents to operating income, reflecting a highly scalable cost structure. Increasing mix, AI infrastructure and data center business, backed by hyperscalers’ demand, investment by optical module vendors and semiconductor companies will likely drive operating margin in the coming quarters. In the fourth quarter, Viavi expects its operating margin to reach 22.7%, up from 21% in the third quarter.
Other Tech Firms With Strong Margin Expansion
Sanmina Corporation (SANM - Free Report) reported a non-GAAP operating profit of $257 million in the second quarter of 2026, up from $111 million a year ago. Non-GAAP operating margin improved to 6.4% from 5.6%. The 131.5% increase year over year and an 80-basis point operating margin expansion are driven by a multitude of factors. The ZT system, which performed significantly better than expected, was one of the biggest contributors. Strong customer demand for accelerated compute systems and earlier-than-expected shipments supported Sanmina’s profitability. Sanmina’s revenues surged 102.3% year over year to $4.01 billion. Revenue growth significantly outpaced the increase in operating expenses. Disciplined cost management was also a key contributor in this regard.
HubSpot. Inc. (HUBS - Free Report) generated a non-GAAP operating income of $156.8 million, up from $100.3 million in the prior-year quarter, with margin expanding 380 basis points year over year to 17.8%. Higher revenues and operating discipline helped offset increased investments in research, AI innovation and sales initiatives. HubSpot continues to witness rising adoption among larger customers as businesses consolidate marketing, sales and service workflows on a unified AI-enabled platform. During the first quarter of 2026, deals above $60,000 in annual recurring revenues increased 37% year over year, while deals above $120,000 ARR rose 64%. HubSpot’s AI strategy is increasingly contributing to customer engagement and monetization.
VIAV’s Price Performance, Valuation and Estimates
Viavi has gained 290.8% in the past year compared with the Electronics - Measuring Instruments industry’s growth of 287%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company’s shares currently trade at 32.8 forward earnings, lower than 41.94 for the industry and its mean of 37.66.
Image Source: Zacks Investment Research
The company’s earnings estimates for 2026 have remained unchanged and 2027 have improved over the past 60 days.
Image Source: Zacks Investment Research
VIAV carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.