Viavi Solutions Inc. reported fiscal third‑quarter 2026 revenue of $406.8 million, up 42.8% from $284.8 million a year earlier. Non‑GAAP diluted earnings per share rose to $0.27, beating the consensus estimate of $0.23 by $0.04, or 17.4%. The earnings beat was driven by a 54.4% year‑over‑year increase in the Network and Service Enablement (NSE) segment, which includes the Spirent‑acquired product lines, and strong demand in data‑center and aerospace/defense markets.
The NSE segment generated $260 million in revenue, a 54.4% jump, while the Optical Security and Performance Products (OSP) segment saw a modest decline in gross margin due to an unfavorable product mix. Data‑center and aerospace/defense customers accounted for 70% of NSE revenue growth, reflecting continued investment in high‑performance networking and secure communications.
Non‑GAAP operating margin expanded to 21.0%, up 170 basis points from the prior quarter, as the higher‑margin mix in NSE and aerospace/defense offset lower margins in OSP. The company also benefited from operational leverage as revenue grew while fixed costs remained largely flat, allowing margin improvement without significant cost increases.
For fiscal fourth quarter 2026, Viavi is guiding net revenue of $427 million to $437 million and non‑GAAP diluted EPS of $0.29 to $0.31, both above analyst consensus of $402.3 million and $0.24, respectively. The upward guidance signals management confidence in sustained demand in data‑center and aerospace/defense markets and the continued integration of Spirent product lines.
Despite the strong top‑line performance, the company reported negative operating cash flow of $26.3 million, driven by contingent consideration payments and working‑capital timing. GAAP net income fell 67.2% to $6.4 million, and GAAP diluted EPS dropped to $0.03, reflecting restructuring, amortization, and financing charges that weighed on earnings.
CEO Oleg Khaykin said, "Our financial performance for the third quarter has exceeded our expectations, driven by strong growth in the data center and aerospace and defense end markets. We expect these end markets to continue to be strong drivers for the foreseeable future." He added, "The results of the third quarter of fiscal 2026 exceeded our expectations and came in above the high end of our guidance. The strong year‑on‑year and quarter‑on‑quarter performance was driven by strong growth in many of our end markets."
Investors reacted positively to the earnings beat and robust guidance, citing the company’s ability to capture high‑margin growth in data‑center and aerospace/defense segments and the successful integration of Spirent product lines. Analysts noted the margin expansion and the company’s confidence in future demand as key factors behind the favorable market response.
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