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VIAV Q1 Earnings Beat Estimates on Data Center, A&D Strength
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Key Takeaways
Viavi's Q1 2027 earnings jumped 213.3% year over year, while revenues rose 56.9%, beating consensus estimates.
VIAV's NSE revenues surged 74.1%, driven by data center and defense demand and acquired Spirent product lines.
VIAV expects fiscal Q2 2027 revenues of $505M-$515M and EPS of 50-52 cents, fueled by strong demand.
Viavi Solutions Inc. (VIAV - Free Report) reported strong first-quarter fiscal 2027 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Non-GAAP earnings of 47 cents per share beat the consensus estimate of 40 cents by 17.5% and surged 213.3% year over year. Revenues of $469.3 million topped the consensus mark of $455.23 million by 3.09% and increased 56.9% year over year.
The robust performance was driven by sustained demand from the data center ecosystem and aerospace and defense markets, alongside contributions from acquired Spirent product lines. Network and Service Enablement (NSE) revenues surged 74.1% year over year.
VIAV Delivers Strong Growth Across Both Segments
Network and Service Enablement generated revenues of $376.1 million, up from $216 million a year ago and above management's guidance range of $360-$368 million. Growth reflected strong demand for lab, production and field instruments supporting data center infrastructure, along with healthy aerospace and defense spending. Acquired Spirent product lines contributed $52.7 million to segment revenues.
Optical Security and Performance Products (OSP) revenues increased 12.2% year over year to $93.2 million, exceeding management's guidance range of $90-$92 million. Growth was driven by stronger demand for 3D sensing, anti-counterfeiting and other optical products. Both segments also delivered sequential revenue growth, with NSE rising 6.3% and OSP advancing 4.5%.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Viavi Expands Margins on Higher Operating Leverage
Profitability improved significantly as higher sales volumes and a favorable product mix supported margin expansion. Non-GAAP gross margin increased 430 basis points year over year to 64.4%, while non-GAAP operating margin expanded 1,270 basis points to 29%. Non-GAAP operating income surged 179.5% to $136.1 million.
NSE operating margin improved to 25.5% from 8.2% a year earlier, while OSP operating margin increased 600 basis points to 43.2%. Non-GAAP operating expenses totaled $165.9 million, up 26.4% year over year but down 2.3% sequentially. Results included a net operating margin benefit of approximately 110 basis points from tariff refunds, partly offset by an additional week of variable costs.
VIAV Benefits From Expanding Data Center Opportunities
Management highlighted strong demand for optical testing equipment supporting high-performance semiconductors, optical modules and hyperscale infrastructure. Investments in scale-up, scale-out and scale-across networking continued to drive instrument demand. The company also began shipping products into semiconductor packaging and testing applications during the quarter.
The emergence of co-packaged optics and near-packaged optics is creating additional opportunities beyond traditional optical module testing. Management expects semiconductor assembly and testing to become a business exceeding $100 million over the next couple of years. Demand for 1.6-terabit optical technology and optical circuit switching equipment also presents opportunities as next-generation data center architectures expand.
Viavi Sees Momentum in Defense and Service Providers
Aerospace and defense demand remained robust, particularly for positioning, navigation and timing products used in autonomous systems and resilient communications. The U.S. Army recently selected Viavi's T/Rx system to create realistic electromagnetic environments for testing drones, counter-drone systems and interceptors, representing a potential multiyear growth opportunity.
Service provider demand benefited from fiber network build-outs, cable infrastructure upgrades and stronger seasonal spending. Management also identified early signs of a multiyear replacement cycle for equipment purchased between 2020 and 2022. However, wireless spending remained subdued, with a longer-term recovery expected from investments in 6G and artificial intelligence-enabled radio access networks.
Viavi generated $104.7 million in operating cash flow compared with $31 million in the year-ago period, supported by higher net income and working capital timing. Free cash flow reached $92.7 million, while capital expenditures totaled $12 million.
The company ended the quarter with $535.3 million in total cash, short-term investments and restricted cash, alongside debt carrying values totaling $642.5 million. During the quarter, Viavi repurchased approximately 3.9 million shares for $150 million. Its board subsequently authorized a new $500 million share repurchase program, supplementing the approximately $18.4 million remaining under the previous authorization.
Viavi Projects Continued Growth in Q2
For the second quarter of fiscal 2027, management expects revenues between $505 million and $515 million, with non-GAAP earnings of 50-52 cents per share. NSE revenues are projected between $426 million and $434 million, supported by continued data center and aerospace and defense demand.
OSP revenues are expected between $79 million and $81 million, reflecting seasonal weakness in 3D sensing and anti-counterfeiting products. Management forecasts a non-GAAP operating margin of 29.3%, plus or minus 30 basis points. Viavi expects sequential revenue growth to continue throughout fiscal 2027, supported by its expanding end-market opportunities.
Sanmina Corporation (SANM - Free Report) is set to release fourth-quarter fiscal 2026 earnings Nov. 9. The Zacks Consensus Estimate for earnings is pegged at $3.27 per share, implying growth of 95.8% from the year-ago reported figure.
Sanmina has a long-term earnings growth expectation of 27.4%. The company delivered an average earnings surprise of 16.68% in the last four reported quarters.
Cisco Systems, Inc. (CSCO - Free Report) is scheduled to release first-quarter fiscal 2027 earnings on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $1.33 per share, suggesting growth of 33% from the year-ago reported figure.
Analog Devices has a long-term earnings growth expectation of 10.88%. The company delivered an average earnings surprise of 2.55% in the last four reported quarters.
NVIDIA Corporation (NVDA - Free Report) is set to release third-quarter fiscal 2027 earnings on Nov. 17. The Zacks Consensus Estimate for earnings is pegged at $2.49 per share, implying growth of 100.8% from the year-ago reported figure.
NVIDIA has a long-term earnings growth expectation of 14%. The company delivered an average earnings surprise of 5.82% in the last four reported quarters.
View the Zacks #1 Rank List
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VIAV Q1 Earnings Beat Estimates on Data Center, A&D Strength
Key Takeaways
Viavi Solutions Inc. (VIAV - Free Report) reported strong first-quarter fiscal 2027 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Non-GAAP earnings of 47 cents per share beat the consensus estimate of 40 cents by 17.5% and surged 213.3% year over year.
Revenues of $469.3 million topped the consensus mark of $455.23 million by 3.09% and increased 56.9% year over year.
The robust performance was driven by sustained demand from the data center ecosystem and aerospace and defense markets, alongside contributions from acquired Spirent product lines. Network and Service Enablement (NSE) revenues surged 74.1% year over year.
VIAV Delivers Strong Growth Across Both Segments
Network and Service Enablement generated revenues of $376.1 million, up from $216 million a year ago and above management's guidance range of $360-$368 million. Growth reflected strong demand for lab, production and field instruments supporting data center infrastructure, along with healthy aerospace and defense spending. Acquired Spirent product lines contributed $52.7 million to segment revenues.
Optical Security and Performance Products (OSP) revenues increased 12.2% year over year to $93.2 million, exceeding management's guidance range of $90-$92 million. Growth was driven by stronger demand for 3D sensing, anti-counterfeiting and other optical products. Both segments also delivered sequential revenue growth, with NSE rising 6.3% and OSP advancing 4.5%.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Viavi Solutions Inc. price-consensus-eps-surprise-chart | Viavi Solutions Inc. Quote
Viavi Expands Margins on Higher Operating Leverage
Profitability improved significantly as higher sales volumes and a favorable product mix supported margin expansion. Non-GAAP gross margin increased 430 basis points year over year to 64.4%, while non-GAAP operating margin expanded 1,270 basis points to 29%. Non-GAAP operating income surged 179.5% to $136.1 million.
NSE operating margin improved to 25.5% from 8.2% a year earlier, while OSP operating margin increased 600 basis points to 43.2%. Non-GAAP operating expenses totaled $165.9 million, up 26.4% year over year but down 2.3% sequentially. Results included a net operating margin benefit of approximately 110 basis points from tariff refunds, partly offset by an additional week of variable costs.
VIAV Benefits From Expanding Data Center Opportunities
Management highlighted strong demand for optical testing equipment supporting high-performance semiconductors, optical modules and hyperscale infrastructure. Investments in scale-up, scale-out and scale-across networking continued to drive instrument demand. The company also began shipping products into semiconductor packaging and testing applications during the quarter.
The emergence of co-packaged optics and near-packaged optics is creating additional opportunities beyond traditional optical module testing. Management expects semiconductor assembly and testing to become a business exceeding $100 million over the next couple of years. Demand for 1.6-terabit optical technology and optical circuit switching equipment also presents opportunities as next-generation data center architectures expand.
Viavi Sees Momentum in Defense and Service Providers
Aerospace and defense demand remained robust, particularly for positioning, navigation and timing products used in autonomous systems and resilient communications. The U.S. Army recently selected Viavi's T/Rx system to create realistic electromagnetic environments for testing drones, counter-drone systems and interceptors, representing a potential multiyear growth opportunity.
Service provider demand benefited from fiber network build-outs, cable infrastructure upgrades and stronger seasonal spending. Management also identified early signs of a multiyear replacement cycle for equipment purchased between 2020 and 2022. However, wireless spending remained subdued, with a longer-term recovery expected from investments in 6G and artificial intelligence-enabled radio access networks.
VIAV Generates Strong Cash Flow, Announces Buyback
Viavi generated $104.7 million in operating cash flow compared with $31 million in the year-ago period, supported by higher net income and working capital timing. Free cash flow reached $92.7 million, while capital expenditures totaled $12 million.
The company ended the quarter with $535.3 million in total cash, short-term investments and restricted cash, alongside debt carrying values totaling $642.5 million. During the quarter, Viavi repurchased approximately 3.9 million shares for $150 million. Its board subsequently authorized a new $500 million share repurchase program, supplementing the approximately $18.4 million remaining under the previous authorization.
Viavi Projects Continued Growth in Q2
For the second quarter of fiscal 2027, management expects revenues between $505 million and $515 million, with non-GAAP earnings of 50-52 cents per share. NSE revenues are projected between $426 million and $434 million, supported by continued data center and aerospace and defense demand.
OSP revenues are expected between $79 million and $81 million, reflecting seasonal weakness in 3D sensing and anti-counterfeiting products. Management forecasts a non-GAAP operating margin of 29.3%, plus or minus 30 basis points. Viavi expects sequential revenue growth to continue throughout fiscal 2027, supported by its expanding end-market opportunities.
Zacks Rank
Viavi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Sanmina Corporation (SANM - Free Report) is set to release fourth-quarter fiscal 2026 earnings Nov. 9. The Zacks Consensus Estimate for earnings is pegged at $3.27 per share, implying growth of 95.8% from the year-ago reported figure.
Sanmina has a long-term earnings growth expectation of 27.4%. The company delivered an average earnings surprise of 16.68% in the last four reported quarters.
Cisco Systems, Inc. (CSCO - Free Report) is scheduled to release first-quarter fiscal 2027 earnings on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $1.33 per share, suggesting growth of 33% from the year-ago reported figure.
Analog Devices has a long-term earnings growth expectation of 10.88%. The company delivered an average earnings surprise of 2.55% in the last four reported quarters.
NVIDIA Corporation (NVDA - Free Report) is set to release third-quarter fiscal 2027 earnings on Nov. 17. The Zacks Consensus Estimate for earnings is pegged at $2.49 per share, implying growth of 100.8% from the year-ago reported figure.
NVIDIA has a long-term earnings growth expectation of 14%. The company delivered an average earnings surprise of 5.82% in the last four reported quarters.