Network testing solutions company Viavi Solutions (NASDAQ: VIAV) beat Wall Street’s revenue expectations in calendar Q3 2026 (fiscal Q1 2027), with sales up 56.9% year on year to $469.3 million. On top of that, next quarter’s revenue guidance ($510 million at the midpoint) was surprisingly good and 8.9% above what analysts were expecting. Its non-GAAP profit of $0.47 per share was 15.5% above analysts’ consensus estimates.

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StockStory’s take

Viavi Solutions delivered a positive quarter, with the market responding favorably to strong sales growth and margin expansion. Management credited robust demand from data center and aerospace customers as the primary drivers of the company’s performance. CEO Oleg Khaykin highlighted initial shipments into the semiconductor test market and continued uptake in aerospace and defense, noting, “The data center segment drove strong demand for lab and production and field instruments in support of the scale-up, scale-out, and scale-across applications.”

Looking ahead, Viavi’s outlook is shaped by anticipated continued strength in its core end markets, particularly data center, aerospace and defense, and service providers. Khaykin emphasized the company’s entry into new semiconductor testing and fiber manufacturing segments, which he described as "major new growth areas." Management expects sequential revenue growth to persist, underpinned by new technology cycles and product launches, as well as a multi-year refresh cycle among service providers.

Key insights from management’s remarks

Management attributed the quarter’s results to robust data center demand, growth in aerospace and defense, and new market entries enabled by technology adoption and recent acquisitions.

• Data center segment expansion: Viavi’s core network testing business saw substantial growth from ongoing investment by data center operators, including hyperscalers and semiconductor manufacturers. The adoption of co-packaged optics (CPO) and near-packaged optics (NPO) technologies enabled the company to enter semiconductor assembly and test markets, with Khaykin noting initial shipments and expectations for this to become a significant revenue contributor over time.
• Aerospace and defense momentum: Demand for Positioning, Navigation, and Timing (PNT) products remained high, with Viavi’s solutions selected for complex electromagnetic testing environments, including U.S. Army drone and counter-drone initiatives. Management expects this market to provide a sizable growth opportunity for several years, driven by increased focus on autonomous systems and advanced navigation technologies.
• Service provider refresh cycle: Field instruments and service enablement products benefited from stronger-than-expected demand, as service providers began a multi-year equipment replacement cycle. Upgrades in fiber infrastructure and adoption of new cable architectures supported this trend, with increased demand for fiber monitoring systems and DOCSIS 4.0 equipment.
• Organic and acquired growth: The integration of Spirent product lines contributed to network and service enablement (NSE) revenue, but Viavi’s organic growth—particularly in data center and aerospace—was the primary driver. Management noted that the Spirent integration was completed quickly, and full portfolio integration is expected to accelerate next year, supporting additional product launches.
• Operating leverage and capital allocation: Higher volumes and favorable product mix resulted in significant operating margin expansion, helped by a tariff refund and disciplined expense management. Management highlighted operating leverage from scale, as well as the launch of a new $500 million share buyback plan and focus on organic growth and strategic M&A.

Drivers of future performance

Viavi’s guidance is anchored in ongoing demand from data centers, aerospace and defense, and a multi-year replacement cycle among service providers, while margin expansion is expected to remain a focus.

• Data center technology cycles: Management expects continued investment in data center infrastructure—including scale-up, scale-out, and scale-across applications—to drive robust demand for Viavi’s testing solutions. The expansion into semiconductor packaging and fiber manufacturing, supported by adoption of CPO and NPO, is anticipated to become a substantial growth engine over the coming years.
• Aerospace, defense, and service provider strength: The aerospace and defense segment is projected to maintain momentum, bolstered by autonomous systems and advanced navigation requirements. Meanwhile, a multi-year refresh cycle among service providers is expected to create steady demand for Viavi’s field and wireless products, with the wireless segment viewed as a longer-term recovery opportunity as 6G and AI-enabled networks develop.
• Product integration and operating leverage: The continued rollout of products jointly developed with Spirent, alongside a disciplined approach to operating expenses, is expected to support margin stability. Management cautioned that seasonality could impact certain segments, particularly optical security and performance (OSP), but believes overall operating margins will benefit from scale and product mix.

Catalysts in upcoming quarters

In the quarters ahead, our team will be monitoring (1) the pace of adoption for Viavi’s new data center and semiconductor test products, (2) sustained margin expansion as integration with Spirent deepens and product mix evolves, and (3) progress in aerospace and defense contracts, particularly with U.S. military initiatives. Execution on the service provider refresh cycle and response to seasonal fluctuations in optical security will also be important to track.

Viavi Solutions currently trades at $30.39, up from $29.50 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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