Financial Data and Key Metrics Changes - Net revenue for Q1 fiscal 2026 was $299.1 million, exceeding guidance of $290 million to $298 million, representing a 3% sequential increase and a 25.6% year-over-year increase [4] - Operating margin for the quarter was 15.7%, above guidance of 14.6% to 15.4%, and increased by 130 basis points sequentially and 570 basis points year-over-year [4] - EPS was $0.15, above guidance of $0.13 to $0.14, and increased by $0.02 sequentially and $0.09 year-over-year [4] Business Segment Data and Key Metrics Changes - NSC revenue was $216 million, above guidance of $208 million to $214 million, with a year-over-year increase of 35.5% driven by strong demand in the data center ecosystem and the acquisition of Inertia Labs [5][6] - OSP revenue was $83.1 million, in line with guidance of $82 million to $84 million, with a year-over-year increase of 5.5% primarily due to strength in anti-counterfeiting products [7] - NSC gross margin was 63%, up 210 basis points year-over-year, while OSP gross margin was 52.3%, down 300 basis points year-over-year due to unfavorable product mix [6][7] Market Data and Key Metrics Changes - The data center ecosystem is driving strong demand for lab and production products, particularly in support of AI data center build-outs [13] - Aerospace and defense business saw strong growth, with continued high demand for positioning, navigation, and timing products [14] - The service providers' business remained stable, with a gradual recovery in fiber offset by soft demand for wireless products [14] Company Strategy and Development Direction - The company plans to leverage the complementary product portfolio from the Spirent acquisition and report NSC as one business segment going forward [11] - The focus is on increasing exposure to the data center ecosystem, which is expected to surpass traditional service provider revenue in the near future [19][20] - The company aims to enhance operational efficiency and expand margins through integration of the Spirent business [66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strong demand from the data center ecosystem and aerospace and defense sectors throughout fiscal 2026 [15] - The company anticipates a seasonal decline in OSP revenue in Q2 due to lower demand for anti-counterfeiting and 3D sensing products [10] - Management highlighted the potential for significant operating leverage as the business recovers, with EPS potentially reaching close to $1 if wireless demand rebounds [32] Other Important Information - Total cash and short-term investments at the end of Q1 were $549.1 million, up from $429 million in the previous quarter [8] - The company successfully refinanced $250 million in convertible notes and repurchased approximately 2.7 million shares for about $30 million [8] Q&A Session Summary Question: Update on revenue mix between core telecom service provider and new products - Management indicated a shift in revenue mix to approximately 45% service provider, 40% data center ecosystem, and 15% aerospace and defense post-Spirent acquisition [19] Question: Growth breakdown between data center and aerospace and defense - Management noted strong demand for field instruments from the data center ecosystem and gradual growth in aerospace and defense, with wireless remaining a weak segment [24][25] Question: Operating margin guidance for NSC - Management expects NSC operating margins to improve with Spirent's contribution, projecting around $165 million in quarterly run rate [27] Question: Impact of wireless recovery on earnings - Management acknowledged that a recovery in wireless could significantly enhance earnings, as it has been a lagging segment [32] Question: Margin profile of the Spirent business - Management confirmed that Spirent's business has a higher gross margin than the average NSC and is expected to be accretive post-integration [66][67] Question: Trends in large service providers' wireline networks - Management observed a gradual recovery in fiber spending among major service providers, with expectations for increased purchasing in the coming year [60]

Group 1: Market Performance and Key Players - The S&P 500 index has gained approximately 12% since the start of the year, despite concerns about economic stability due to tariff policies from the Trump administration [1] - The "Magnificent Seven" (Mag 7) tech companies, which include Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, have significantly outperformed the equities benchmark, especially over the last two to three years [2] - Earnings growth in the second quarter of this year was concentrated in the Mag 7, which expanded earnings three times faster than other corporate cohorts [3] Group 2: Nvidia's Performance - Nvidia has outperformed the Mag 7 group, with its stock surging over 475% since late 2022, driven by unprecedented demand for artificial intelligence and expansion in the data center ecosystem [4] Group 3: Concentration of Gains - The S&P 500's gains are heavily concentrated, with 58% of the index's two-year total return coming from the Mag 7 [5] Group 4: Direxion ETFs - Direxion offers two ETFs targeting the Mag 7: the Daily Magnificent 7 Bull 2X Shares (QQQU), which seeks 200% of the performance of the Indxx Magnificent 7 Index, and the Daily Magnificent 7 Bear 1X Shares (QQQD), which seeks the inverse performance [6][7] - The QQQU ETF has gained over 19% since the beginning of the year and nearly 63% in the trailing half-year period [10] - The QQQD ETF has lost more than 17% year-to-date, reflecting a downward trend [13] Group 5: Technical Analysis - The QQQU ETF shows strong technical strength, trading above its 50-day and 200-day moving averages, although volume levels have been fading since April [12] - The QQQD ETF is trading below its 50 and 200-day moving averages, with increased volume noted in August and September [16]

Financial Data and Key Metrics Changes - Net revenue for Q4 2025 was $290.5 million, up 2% sequentially and 15.3% year over year, at the high end of guidance [6][11] - Operating margin for Q4 was 14.4%, a decrease of 230 basis points from the prior quarter but an increase of 350 basis points year over year [6][7] - EPS for Q4 was $0.13, down $0.02 sequentially but up $0.05 year over year [7][11] - Full year revenue for 2025 was $1.084 billion, up 8.4% year over year [11] Business Segment Data and Key Metrics Changes - Network and Service Enablement (NSE) revenue for Q4 was $209.1 million, up 14.8% year over year, driven by strong demand in fiber lab and production products [8][11] - NSE gross margin for Q4 was 62.2%, up 10 basis points year over year, while operating margin was 4.7%, an increase of 290 basis points year over year [8][9] - OSP revenue for Q4 was $81.4 million, up 16.6% year over year, primarily due to strength in anti-counterfeiting products [9][10] - OSP gross margin was 54.7%, up 170 basis points year over year, and operating margin was 39.4%, an increase of 460 basis points year over year [10] Market Data and Key Metrics Changes - The revenue growth was mainly driven by strong demand from the data center ecosystem and aerospace and defense sectors [11][21] - The company noted a decline in spending for wireless and cable products by NEMS and service providers, but growth was observed in aerospace and defense products [11][21] Company Strategy and Development Direction - The company is focusing on diversifying its revenue streams, with approximately 30% of revenue now coming from the data center ecosystem, a significant increase from previous years [50] - The acquisition of Inertia Labs is expected to contribute to growth in aerospace and defense, with the company prioritizing capital allocation towards M&A [13][21] - The company anticipates continued strong demand from the data center ecosystem and aerospace and defense customers, which is expected to mitigate traditional revenue seasonality [19][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating tariff impacts, estimating a total impact of around $1.5 million, which has been largely addressed through pricing adjustments and supply chain realignment [26] - The company expects NSE revenue to be slightly up quarter on quarter, driven by strong demand from the data center ecosystem and aerospace and defense sectors [19][21] - Management indicated that the wireless business remains mixed, with healthy demand for wireless field instruments but sluggish recovery in infrastructure testing [19][41] Other Important Information - The company successfully priced and allocated a $600 million Term Loan B to fund acquisitions and general corporate purposes [16] - The company has approximately $200 million remaining under its current authorized share repurchase program [13] Q&A Session Summary Question: Impact of tariffs on revenue - Management indicated that the tariff impact is primarily on North American sales, with a total impact of around $1.5 million, which has been mitigated [26] Question: Competitive dynamics in the data center market - Management noted strong demand for their 1.6 terabit test solutions, with significant engagement from leading semiconductor vendors and optical module developers [30][34] Question: End markets performance in NSE - Management highlighted that fiber demand is driving growth, particularly from data center operators and specialty fiber companies [40] Question: Guidance for Q1 and seasonality - Management expects Q1 to be slightly up compared to Q4, driven by strong demand from the data center ecosystem, despite traditional seasonality [44][62] Question: Size of the data center business - Management indicated that approximately 30% of NSE revenue comes from the data center ecosystem, with expectations for continued growth in this segment [50] Question: Margin expectations for NSE - Management aims to move NSE operating margins into the mid to high teens as the business recovers, with long-term goals of reaching the twenties [58]