Viavi Solutions Recovery Well Underway, Analyst Upgrades Stock, Forecasts Stronger 2025

Core Viewpoint - Viavi Solutions has been upgraded from Hold to Buy with a price target of $15 following strong quarterly results, indicating a positive outlook for the company [1]. Financial Performance - Fiscal Q2 2025 revenue reached $271 million, reflecting a year-over-year increase of 6.4% and a quarter-over-quarter increase of 13.7%, surpassing the consensus estimate of $260 million [1]. - Adjusted EPS for the quarter was $0.13, exceeding the consensus of $0.10 [1]. - The adjusted gross margin was 61.1%, up 110 basis points year-over-year and 200 basis points quarter-over-quarter, above the consensus of 59.2% [2]. - Adjusted operating margin stood at 14.9%, also above the consensus of 12.7% [2]. Segment Performance - Network and Service Enablement (NSE) sales, which account for 74% of total revenue, exceeded guidance, with Network Enablement sales increasing by 15.1% year-over-year, while Service Enablement sales decreased by 13.3% year-over-year [2][3]. - Optical Security and Performance Products (OSP) sales, making up 26% of revenue, were slightly below guidance, declining by 5.3% year-over-year [3]. Future Guidance - For fiscal Q3 2025, revenue is projected to be between $276 million and $288 million, above the consensus of $256 million, with adjusted EPS expected between $0.10 and $0.13 [4]. - The company anticipates an adjusted operating margin of 13% to 15%, compared to the consensus of 12.1% [4]. - NSE revenue for Q3 is expected to be between $202 million and $212 million, with an adjusted operating margin of 6% to 8% [4]. Market Drivers - Key growth drivers include the resumption of 5G upgrades in North America, new fiber broadband deployments, and optical transport upgrades to support data center interconnectivity [6]. - Management noted strong demand for fiber sensing technology across various global segments, including cloud data centers [3]. Analyst Updates - Analyst Ryan Koontz revised fiscal 2025 revenue and EPS estimates to $1.08 billion and $0.43, respectively, up from $1.04 billion and $0.38 [7]. - Fiscal 2026 estimates were also increased to $1.14 billion and $0.49 from $1.08 billion and $0.47 [7]. - The analyst highlighted improving predictability and profitability in Viavi Solutions' results, indicating a recovery in North American service providers [8][9].