Viav Solutions (VIAV) Up 5% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Viavi Solutions reported strong first-quarter fiscal 2026 results, with both revenue and earnings exceeding expectations, driven by growth in key segments despite macroeconomic challenges [3][6][12]. Financial Performance - Viavi recorded a net loss of $21.4 million or 10 cents per share on a GAAP basis, compared to a net loss of $1.8 million or 1 cent per share in the same quarter last year, indicating a significant deterioration in net income [4]. - Non-GAAP net income rose to $33.1 million or 15 cents per share, up from $12.4 million or 6 cents per share year-over-year, surpassing the Zacks Consensus Estimate by 2 cents [5]. - Quarterly revenues reached $299.1 million, reflecting a 25.6% year-over-year increase, and exceeded the consensus estimate of $294 million [6]. Segment Performance - The Network and Service Enablement (NSE) segment generated net sales of $216 million, a 35.5% increase from $159.4 million in the prior year, driven by strong demand for fiber lab and production products [7]. - Optical Security and Performance Products (OSP) revenues increased to $83.1 million from $78.8 million, primarily due to demand for anti-counterfeiting products [7]. - Revenue contributions from different regions included $128.8 million from the Americas, $92.1 million from Asia-Pacific, and $78.2 million from EMEA, showing growth across all regions [8]. Margins and Cash Flow - Non-GAAP gross margin improved to 60%, up 90 basis points year-over-year, with the NSE segment achieving a gross margin of 63% [9]. - Total non-GAAP operating margin increased by 570 basis points to 15.7%, while the NSE segment's operating margin rose significantly [10]. - Viavi generated $31 million in cash from operating activities, with a free cash flow of $22.5 million, and held $543.8 million in cash and cash equivalents as of September 27, 2025 [11]. Future Outlook - For the second quarter of fiscal 2026, management anticipates revenues between $360 million and $370 million, with non-GAAP earnings per share expected to be between 18 cents and 20 cents [12]. - The NSE segment is projected to generate revenues between $283 million and $293 million, while the OSP segment is expected to contribute approximately $77 million [12]. - Estimates for the stock have been trending upward, with a consensus estimate shift of 51.85%, indicating positive investor sentiment [13][15].