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VIAV Q1 Earnings Call Maps New Data Center Test Markets
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Key Takeaways
Viavi expects fiscal Q2 revenues of $505M-$515M and EPS of $0.50-$0.52, with sequential growth through FY27.
Co-packaged optics test shipments mark Viavi's semiconductor push, with a $100M-plus annual opportunity.
Data centers drive about 40% of expected NSE growth, and aerospace and defense contribute roughly one-third.
Viavi Solutions Inc. (VIAV - Free Report) expects sequential revenue growth through fiscal 2027 as data center testing and aerospace and defense demand counter seasonal weakness elsewhere.
Management outlined new semiconductor testing opportunities, defended infrastructure demand and detailed operating leverage as sales rise.
VIAV Projects Continued Sequential Growth
Chief financial officer Ilan Daskal guided second-quarter fiscal 2027 revenues to $505-$515 million and non-GAAP earnings of $0.50-$0.52 per share. Management expects sequential revenue gains through fiscal year-end.
Network and Service Enablement (NSE) revenues are projected at $426-$434 million, while Optical Security and Performance Products (OSP) revenue is expected at $79 million-$81 million. Daskal attributed the divergence to data center and defense demand versus seasonal weakness in 3D sensing and anti-counterfeiting.
First-quarter revenues rose 56.9% year over year to $469.3 million, exceeding the Zacks Consensus Estimate of $455.2 million. Non-GAAP earnings of $0.47 per share surpassed the $0.40 estimate.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
A Stifel analyst asked what drives the expected NSE increase. President and CEO Oleg Khaykin attributed about 40% of that growth to data centers and roughly one-third to aerospace and defense.
Viavi Expands Into Semiconductor Production Testing
Khaykin said that Viavi began shipping optical test products into semiconductor assembly and testing during the September quarter, moving beyond traditional optical module manufacturing.
In response to a Rosenblatt Securities analyst, Khaykin clarified that initial shipments primarily supported co-packaged optics (CPO), and said that volumes should grow each quarter. He described a potential annual opportunity exceeding $100 million within a couple of years.
Khaykin also identified emerging demand from fiber and connector manufacturers as data centers adopt denser connections and multicore fibers. These applications broaden Viavi's reach beyond pluggable transceiver testing.
VIAV Sees More Optical Testing Ahead
A Needham analyst asked whether production capacity for 1.6-terabit optical modules was already substantially installed. CEO Khaykin said the transition remained early, with 800-gigabit modules still leading shipment volumes.
Khaykin expects 800-gigabit and 1.6-terabit products to coexist, with 1.6-terabit shipments not surpassing 800-gigabit volumes before late calendar 2027 at the earliest.
He also highlighted optical circuit switching as an attractive testing category because of its high test content per port. In the Northland Capital Markets discussion, Khaykin distinguished its lower-volume, higher-value profile from the larger-volume semiconductor CPO opportunity.
Viavi Draws on Defense and Network Refresh Cycles
Khaykin said that aerospace and defense demand is benefiting from positioning, navigation and timing equipment used in autonomous systems and protection against GPS interference.
Khaykin pointed to a U.S. Army selection of Viavi's T/Rx system for electromagnetic testing environments. Defense demand also contributes to expected December-quarter NSE growth.
Service provider spending improved with fiber deployments, cable upgrades and early equipment replacements. Khaykin sees a multiyear refresh cycle for devices purchased from 2020 to 2022, while wireless spending remains subdued pending greater activity around AI radio access networks and 6G.
VIAV Addresses Margins and Spending Scrutiny
A Rosenblatt Securities analyst questioned whether unusually strong incremental margins were sustainable. Khaykin favored low-to-mid-50% incremental operating profit conversion as a conservative assumption, citing future spending.
Daskal said that first-quarter non-GAAP operating margin reached 29%, including an approximately 110-basis-point net benefit related to tariff refunds and an additional week of variable costs. He expects second-quarter margin around 29.3%, plus or minus 30 basis points.
Asked by a UBS analyst about Spirent synergies, Daskal said that integration was complete and current margin gains reflect scale, not remaining integration savings. CEO Khaykin separately told UBS he had observed no slowdown in customer data center spending.
Viavi Keeps Its Growth Priorities Broad
Khaykin stressed that data centers are one element of Viavi's strategy, alongside defense investment, service provider replacements and an eventual wireless recovery.
Daskal also detailed a newly authorized $500 million stock repurchase program, following approximately $150 million of buybacks during the quarter. Management also prioritizes organic growth and potential acquisitions.
VIAV's Zacks Rank and Style Scores
VIAV carries a Zacks Rank #3 (Hold), indicating a neutral near-term ranking. Its Growth Score of A and Momentum Score of B signal comparatively favorable growth and price-trend characteristics, while the Value Score of D reflects a weaker valuation profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock's VGM Score of B combines its value, growth and momentum characteristics. Favorable style grades can complement stronger Zacks Ranks, but VIAV's ranking can change as analysts revise earnings estimates following the quarter.
View the Zacks #1 Rank List
Image: Bigstock
VIAV Q1 Earnings Call Maps New Data Center Test Markets
Key Takeaways
Viavi Solutions Inc. (VIAV - Free Report) expects sequential revenue growth through fiscal 2027 as data center testing and aerospace and defense demand counter seasonal weakness elsewhere.
Management outlined new semiconductor testing opportunities, defended infrastructure demand and detailed operating leverage as sales rise.
VIAV Projects Continued Sequential Growth
Chief financial officer Ilan Daskal guided second-quarter fiscal 2027 revenues to $505-$515 million and non-GAAP earnings of $0.50-$0.52 per share. Management expects sequential revenue gains through fiscal year-end.
Network and Service Enablement (NSE) revenues are projected at $426-$434 million, while Optical Security and Performance Products (OSP) revenue is expected at $79 million-$81 million. Daskal attributed the divergence to data center and defense demand versus seasonal weakness in 3D sensing and anti-counterfeiting.
First-quarter revenues rose 56.9% year over year to $469.3 million, exceeding the Zacks Consensus Estimate of $455.2 million. Non-GAAP earnings of $0.47 per share surpassed the $0.40 estimate.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Viavi Solutions Inc. price-consensus-eps-surprise-chart | Viavi Solutions Inc. Quote
A Stifel analyst asked what drives the expected NSE increase. President and CEO Oleg Khaykin attributed about 40% of that growth to data centers and roughly one-third to aerospace and defense.
Viavi Expands Into Semiconductor Production Testing
Khaykin said that Viavi began shipping optical test products into semiconductor assembly and testing during the September quarter, moving beyond traditional optical module manufacturing.
In response to a Rosenblatt Securities analyst, Khaykin clarified that initial shipments primarily supported co-packaged optics (CPO), and said that volumes should grow each quarter. He described a potential annual opportunity exceeding $100 million within a couple of years.
Khaykin also identified emerging demand from fiber and connector manufacturers as data centers adopt denser connections and multicore fibers. These applications broaden Viavi's reach beyond pluggable transceiver testing.
VIAV Sees More Optical Testing Ahead
A Needham analyst asked whether production capacity for 1.6-terabit optical modules was already substantially installed. CEO Khaykin said the transition remained early, with 800-gigabit modules still leading shipment volumes.
Khaykin expects 800-gigabit and 1.6-terabit products to coexist, with 1.6-terabit shipments not surpassing 800-gigabit volumes before late calendar 2027 at the earliest.
He also highlighted optical circuit switching as an attractive testing category because of its high test content per port. In the Northland Capital Markets discussion, Khaykin distinguished its lower-volume, higher-value profile from the larger-volume semiconductor CPO opportunity.
Viavi Draws on Defense and Network Refresh Cycles
Khaykin said that aerospace and defense demand is benefiting from positioning, navigation and timing equipment used in autonomous systems and protection against GPS interference.
Khaykin pointed to a U.S. Army selection of Viavi's T/Rx system for electromagnetic testing environments. Defense demand also contributes to expected December-quarter NSE growth.
Service provider spending improved with fiber deployments, cable upgrades and early equipment replacements. Khaykin sees a multiyear refresh cycle for devices purchased from 2020 to 2022, while wireless spending remains subdued pending greater activity around AI radio access networks and 6G.
VIAV Addresses Margins and Spending Scrutiny
A Rosenblatt Securities analyst questioned whether unusually strong incremental margins were sustainable. Khaykin favored low-to-mid-50% incremental operating profit conversion as a conservative assumption, citing future spending.
Daskal said that first-quarter non-GAAP operating margin reached 29%, including an approximately 110-basis-point net benefit related to tariff refunds and an additional week of variable costs. He expects second-quarter margin around 29.3%, plus or minus 30 basis points.
Asked by a UBS analyst about Spirent synergies, Daskal said that integration was complete and current margin gains reflect scale, not remaining integration savings. CEO Khaykin separately told UBS he had observed no slowdown in customer data center spending.
Viavi Keeps Its Growth Priorities Broad
Khaykin stressed that data centers are one element of Viavi's strategy, alongside defense investment, service provider replacements and an eventual wireless recovery.
Daskal also detailed a newly authorized $500 million stock repurchase program, following approximately $150 million of buybacks during the quarter. Management also prioritizes organic growth and potential acquisitions.
VIAV's Zacks Rank and Style Scores
VIAV carries a Zacks Rank #3 (Hold), indicating a neutral near-term ranking. Its Growth Score of A and Momentum Score of B signal comparatively favorable growth and price-trend characteristics, while the Value Score of D reflects a weaker valuation profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock's VGM Score of B combines its value, growth and momentum characteristics. Favorable style grades can complement stronger Zacks Ranks, but VIAV's ranking can change as analysts revise earnings estimates following the quarter.