Viavi Solutions (NasdaqGS:VIAV) Q2 2026 Earnings call January 28, 2026 04:30 PM ET Company ParticipantsIlan Daskal - CFOOleg Khaykin - CEORuben Roy - Managing DirectorVibhuti Nayar - Head of Investor RelationsConference Call ParticipantsAndrew Spinola - AnalystRyan Koontz - Senior AnalystTim Savageaux - AnalystOperatorLadies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions Fiscal Second Quarter ...

Viavi Solutions (NasdaqGS:VIAV) Q2 2026 Earnings call January 28, 2026 04:30 PM ET Company ParticipantsIlan Daskal - CFOOleg Khaykin - CEORuben Roy - Managing DirectorVibhuti Nayar - Head of Investor RelationsConference Call ParticipantsAndrew Spinola - AnalystRyan Koontz - Senior AnalystTim Savageaux - AnalystOperatorLadies and gentlemen, good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the VIAVI Solutions Fiscal Second Quarter ...

Financial Data and Key Metrics Changes - Net revenue for Q2 2026 was $369.3 million, up 23.5% sequentially and 36.4% year-over-year, exceeding guidance of $360-$370 million [4] - Operating margin for Q2 was 19.3%, above the guidance range of 17.3%-18.5%, and increased by 360 basis points quarter-over-quarter and 440 basis points year-over-year [4] - EPS was $0.22, above the guidance range of $0.18-$0.20, and increased by $0.07 sequentially and $0.09 year-over-year [5] Business Segment Data and Key Metrics Changes - NSE revenue for Q2 was $291.5 million, up 45.8% year-over-year, driven by acquisitions and strong demand in the data center ecosystem [5][6] - OSP revenue for Q2 was $77.8 million, up 9.7% year-over-year, primarily due to strength in anti-counterfeiting products [6][7] - NSE gross margin was 64.7%, slightly down year-over-year, while OSP gross margin was 50.8%, up 20 basis points year-over-year [6][7] Market Data and Key Metrics Changes - Strong demand was noted in the data center ecosystem, particularly for lab and production products, driven by AI data center build-outs [15] - Aerospace and defense business saw significant growth, with continued high demand for positioning, navigation, and timing products [15][16] - Service provider business remained stable, with some opportunistic demand from cable operators transitioning to new architectures [16] Company Strategy and Development Direction - The company approved a restructuring plan affecting approximately 5% of the global workforce, expecting to incur about $32 million in charges but aiming for annual savings of $30 million [10][11] - The focus will be on reinvesting savings into higher growth areas, particularly in data center and aerospace and defense sectors [11][30] - The company anticipates continued revenue momentum in the data center ecosystem through 2026, supported by robust bookings [15][17] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing strength of the data center ecosystem and aerospace and defense markets, expecting these trends to continue [15][17] - The company noted improved visibility on demand, with multi-quarter commitments from major customers [26] - Management highlighted the importance of operational efficiency and resource allocation to support growth in strategic areas [30] Other Important Information - Total cash and short-term investments at the end of Q2 were $772.1 million, up from $549.1 million in Q1 [8] - The company did not repurchase any shares during the quarter, prioritizing debt management [10] - The fully diluted share count increased to 233.4 million shares from 224.8 million shares year-over-year [10] Q&A Session Summary Question: Update on NSE business mix across data center, aerospace and defense, and telco - Management indicated a shift towards 45% data center, 40% service provider, and 15% aerospace and defense, reflecting strong growth in data center demand [21][22] Question: Visibility on demand and order backlog - Management confirmed improved visibility on demand, with commitments extending up to three quarters ahead [26] Question: Impact of restructuring on specific product areas - The restructuring is aimed at improving efficiency across multiple functions, not targeting specific areas [29] Question: Exciting defense and aerospace programs - Management highlighted resilient PNT (position, navigation, timing) as a key driver, particularly for drones and autonomous systems [36] Question: Growth in optical domain and data center demand - Management noted strong growth across all segments, particularly driven by advancements in optical technology and increased demand for fiber monitoring [41][45] Question: Breakdown of data center business across lab, production, and field - Management stated that while they do not break down these categories, production is expected to be a significant growth driver linked to volume demands [56][58]

Fiscal Q2 2026 Earnings Call Supplementary Slides January 28, 2026 Cautionary Language Concerning Forward-Looking Statements This presentation contains forward-looking statements under Section 27A of the Securities Act of 1934. Forward-looking statements are all statements we make other than those dealing specifically with historical matters. These forward-looking statements include, among other things, financial guidance and our expectations regarding the acquired business. Please refer to the Company's fi ...

Financial Performance - Net revenue for Q2 FY 2026 was $369.3 million, an increase of $98.5 million or 36.4% year-over-year[5] - GAAP operating margin was 3.1%, down 510 basis points year-over-year, while non-GAAP operating margin improved to 19.3%, up 440 basis points year-over-year[5] - GAAP net loss was $48.1 million, a decrease of $57.2 million or 628.6% year-over-year, whereas non-GAAP net income was $51.5 million, an increase of $22.1 million or 75.2% year-over-year[5] - The company expects Q3 FY 2026 net revenue to be between $386 million and $400 million, with non-GAAP EPS projected between $0.22 and $0.24[9] - Operating income for the three months ended December 27, 2025, was $11.4 million, down from $22.2 million in the same period in 2024[19] - Net loss for the three months ended December 27, 2025, was $(48.1) million, compared to net income of $9.1 million for the same period in 2024[19] - Adjusted EBITDA for the three months ended December 27, 2025, was $81.4 million, compared to $50.1 million for the same period in 2024[38] - Non-GAAP measures for net income for the three months ended December 27, 2025, were $51.5 million, resulting in a diluted EPS of $0.22[39] Cash Flow and Assets - Cash flows from operations for the quarter ended December 27, 2025, were $42.5 million[14] - As of December 27, 2025, total cash, short-term investments, and short-term restricted cash amounted to $772.1 million[14] - Total current assets increased to $1,278.6 million as of December 27, 2025, from $885.2 million as of June 28, 2025[22] - Cash and cash equivalents increased to $765.5 million as of December 27, 2025, from $423.6 million as of June 28, 2025[22] Liabilities and Expenses - Total liabilities rose to $1,943.5 million as of December 27, 2025, compared to $1,213.6 million as of June 28, 2025[22] - Research and development expenses for the three months ended December 27, 2025, were $65.9 million, up from $52.1 million in the same period in 2024[19] - Stock-based compensation for the three months ended December 27, 2025, was $13.9 million, contributing 3.7% to the operating income margin[34] - Total related to cost of revenues and operating expenses for the three months ended December 27, 2025, was $60.0 million, representing 16.2% of total revenue[34] Gross Margin and Profitability - The company reported a gross margin of 57.0% for Q2 FY 2026, a slight increase of 50 basis points from Q1 FY 2026 but a decrease of 240 basis points year-over-year[4] - Gross profit for the three months ended December 27, 2025, was $210.6 million, compared to $160.8 million for the same period in 2024, reflecting a gross margin of 57.0%[19] - GAAP gross profit for the three months ended December 27, 2025, was $210.6 million, with a gross margin of 57.0%, compared to $160.8 million and 59.4% for the same period in 2024[34] - Non-GAAP gross profit for the six months ended December 27, 2025, was $407.7 million, with a gross margin of 61.0%, up from $306.1 million and 60.1% in the prior year[34] Restructuring and Cost Savings - The restructuring plan approved on January 23, 2026, is expected to affect approximately 5% of the global workforce and incur total charges of about $32 million[6][7] - The company anticipates annualized cost savings of approximately $30 million upon completion of the restructuring plan[7] Segment Performance - Revenue from the Network and Service Enablement segment was $291.5 million, representing a 35.0% increase quarter-over-quarter and a 45.8% increase year-over-year[4] - The company reported a gross margin of 64.7% for the Network and Service Enablement segment for the three months ended December 27, 2025[25] Other Charges - The company experienced a charge of $2.1 million for restoration services for a facility impacted by a fire during the three and six months ended December 27, 2025[41] - The company incurred losses of $38.7 million and $42.5 million for the three and six months ended December 27, 2025, respectively, related to the extinguishment of certain 1.625% Senior Convertible Notes[40] - The company reported a total of $99.6 million in adjustments related to net income and EPS for the three months ended December 27, 2025[39]

Core Viewpoint - Viavi Solutions Inc. will announce its fiscal second quarter 2026 financial results on January 28, 2026, after market close [1]. Group 1: Financial Results Announcement - The financial results will cover the period ended December 27, 2025 [1]. - An earnings call will be hosted at 1:30 p.m. PT / 4:30 p.m. ET on the same day [2]. - A live webcast of the earnings call and its replay will be available on the VIAVI website [2]. Group 2: Participation Details - Telephone participation can be done via a toll-free dial-in number: 1 (800) 715-9871 or a toll dial-in number: 1 (646) 307-1963 [3]. - The conference ID for the call is 3072689 [3]. - A replay of the call will be available from January 28, 2026, 4:30 p.m. PT to February 11, 2026, 8:59 p.m. PT [3]. Group 3: Company Overview - VIAVI Solutions is a global provider of network test, monitoring, and assurance solutions for various sectors including telecommunications, cloud, and military [4]. - The company is also a leader in light management technologies for applications in 3D sensing, anti-counterfeiting, and consumer electronics [4]. - More information about VIAVI can be found on their official website [4].

Core Insights - VIAVI Solutions Inc. has announced enhancements to its XEdge cloud-based edge monitoring and assurance platform, focusing on improved data collection capabilities for private 4G, 5G, and Wi-Fi networks at the edge [1][2]. Group 1: Product Enhancements - The enhanced XEdge portfolio now supports multiple sensor types, allowing customers to scale deployments based on monitoring needs, site density, and operational constraints [2]. - XEdge v2 is a portable, multi-carrier unit designed for comprehensive monitoring, supporting up to four cellular modems for high-capacity data collection [5]. - XEdge Lite is a compact sensor for fixed installation, supporting a single cellular modem for targeted, always-on monitoring across private networks, available in standard and ruggedized forms [5]. Group 2: Operational Features - XEdge provides continuous visibility into device connectivity and network performance through unattended edge sensors, centralized cloud dashboards, and automated analytics [2]. - The platform is designed for minimal daily management and does not require specialized network expertise, supporting remote control and automated 24/7 monitoring [3]. - Customizable reporting and multi-site scalability make XEdge suitable for enterprises, system integrators, and private network operators [3]. Group 3: Market Positioning - The enhancements aim to ensure reliability and user experience across diverse environments, including campuses, factories, transport hubs, remote sites, and secure zones [3]. - VIAVI Solutions is positioned as a global provider of network test, monitoring, and assurance solutions across various sectors, including telecommunications and aerospace [4].

Core Viewpoint - Viavi Solutions Inc. has shown a significant annual stock price increase of 77.87%, despite a slight monthly decrease of 1.97%, leading to questions about potential overvaluation [1]. Group 1: Stock Performance - The current share price of Viavi Solutions is $17.64, reflecting a 3.13% increase in the current market session [1]. - Over the past month, the stock has decreased by 1.97%, but it has increased by 77.87% over the past year [1]. Group 2: P/E Ratio Analysis - Viavi Solutions has a P/E ratio of 285.17, which is significantly higher than the aggregate P/E ratio of 69.25 for the Communications Equipment industry [4]. - A higher P/E ratio may suggest that Viavi Solutions is expected to perform better in the future compared to its industry peers, although there are indications that the stock may be overvalued [4][5]. Group 3: Limitations of P/E Ratio - The P/E ratio is a useful metric for assessing market performance but has limitations; a lower P/E can indicate undervaluation or lack of expected future growth [7]. - It is advised that the P/E ratio should not be used in isolation, as other factors such as industry trends and business cycles also influence stock prices [7].

Core Insights - VIAVI Solutions Inc. has integrated a new Augmented Reality (AR) solution called RF Viewer into its OneAdvisor 800 Wireless test platform, aimed at enhancing user interaction with radio frequency (RF) signals in various applications such as telecommunications and smart building design [1][4] Group 1: Product Features and Benefits - RF Viewer, developed in collaboration with Verizon Wireless, provides real-time visibility of RF emissions by overlaying signal strength data onto a live video feed, making RF analysis more accessible [2][3] - Key features of RF Viewer include live AR overlays of RF signal strength, real-time diagnostics for troubleshooting, and a user-friendly interface suitable for both professionals and non-experts [3] - The integration of RF Viewer into the OneAdvisor 800 Wireless enhances its capabilities, which include spectrum analysis, interference detection, and support for the evolution towards 5G Advanced and 6G technologies [4] Group 2: Industry Impact - The collaboration between VIAVI and Verizon aims to improve network performance and technician safety by enabling efficient identification of Passive Intermodulation (PIM) sources [3] - The introduction of AR technology in RF analytics empowers technicians, engineers, and researchers to make faster and smarter decisions in the field [3]

Core Insights - VIAVI Solutions Inc. has launched the first all-in-one medium and long-range bidirectional testing and certification solution for hollow core fiber (HCF) [1] - The solution utilizes advanced 8100 Series OTDR modules, optical dispersion measurement (ODM) modules, and ReportPRO software with specific algorithms for bidirectional OTDR analysis [1][6] Technology and Performance - Hollow core fiber technology offers significant advantages over single mode fiber, including up to 30% lower latency, up to 70% reduced Chromatic Dispersion (CD), and up to 65% lower attenuation [3] - The technology is increasingly adopted for applications such as AI, high-frequency financial trading, and quantum communication, where operational performance improvements are critical [4] Market Demand and Testing Requirements - Projects involving hollow core fiber require larger investments and extensive testing due to higher manufacturing costs and unique optical properties [5] - VIAVI's solution is designed to meet the specific testing needs of hollow core fiber, including bidirectional OTDR, PMD, CD, and attenuation profile testing [6][7] Validation and Collaboration - The efficacy of VIAVI's solution has been validated through trials with leading fiber manufacturers and hyperscalers, demonstrating strong performance across various link distances [2][7]