A month has gone by since the last earnings report for Viav Solutions (VIAV). Shares have added about 5% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Viav Solutions due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Viavi Solutions Inc. before we dive into how investors and analysts have reacted as of late.
Viavi Beats Q1 Earnings Estimates on Solid Top-Line Improvement
Viavi reported solid first-quarter fiscal 2026 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The company reported an increase in revenues backed by healthy growth in the Network and Service Enablement (NSE) and Optical Security and Performance Products (OSP) segments. Management’s strong emphasis on various markets such as wireless & fiber, optical transport, Ethernet, broadband access, video test and storage network testing is a key growth driver. However, a constrained spending environment owing to macroeconomic challenges is worrisome.
Net Income
On a GAAP basis, Viavi recorded a net loss of $21.4 million or a loss of 10 cents per share compared with a net loss of $1.8 million or a loss of 1 cent per share in the year-ago quarter. The significant improvement in the bottom line on a GAAP basis, despite higher operating expenses and cost of revenues, was primarily due to top-line growth.
Non-GAAP net income increased to $33.1 million or 15 cents per share from $12.4 million or 6 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 2 cents.
Revenues
Quarterly revenues were $299.1 million, up 25.6% year over year. The healthy demand in the NSE and OSP segments cushioned the top line. Revenues beat the consensus estimate of $294 million.
Net quarterly sales in the NSE segment were $216 million, up from $159.4 million in the year-ago quarter. The 35.5% growth was primarily driven by the strong demand for fiber lab and production products, along with aerospace and defense products. OSP revenues increased to $83.1 million from $78.8 million, primarily due to strength in anti-counterfeiting products.
Net sales from America contributed $128.8 million to revenues, up from $88.7 million reported a year ago. Revenues from Asia-Pacific were $92.1 million, up 7.2% from the year-earlier quarter’s tally of $85.9 million. Revenues from EMEA increased to $78.2 million from $63.6 million a year ago.
Other Details
In the first quarter of fiscal 2026, the non-GAAP gross margin was 60%, up 90 basis points (bps) from the prior-year quarter. Non-GAAP gross margin in the NSE segment was 63%, up 210 bps, led by higher volume and product mix. OSP segment’s non-GAAP gross margin was 52.3%, down 300 bps due to unfavorable product mix.
Total non-GAAP operating margin increased 570 bps year over year to 15.7%. Non-GAAP operating margin in NSE increased 1,210 bps to 7.5%, while the OSP segment’s operating margin decreased 250 bps to 37.1% on higher manufacturing costs.
Cash Flow & Liquidity
In the first quarter of fiscal 2026, Viavi generated $31 million of cash from operating activities, with a free cash flow of $22.5 million. As of Sept. 27, 2025, the company had $543.8 million in cash and cash equivalents with $640.5 million of long-term debt.
Outlook
For the second quarter of fiscal 2026, management expects revenues in the range of $360-$370 million. Non-GAAP earnings per share are expected to be between 18 cents and 20 cents.
For the NSE segment, revenues are projected to be between $283 and $293 million, with a non-GAAP operating margin of 13.6% owing to incremental contribution from Spirent. Revenues for the OSP segment are anticipated to be approximately $77 million, with a non-GAAP operating margin of 34%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted 51.85% due to these changes.
VGM Scores
At this time, Viav Solutions has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a score of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Viav Solutions has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Viavi Solutions Inc. (VIAV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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