Viavi Solutions (NasdaqGS:VIAV) Q1 2026 Earnings Call October 29, 2025 04:30 PM ET Company ParticipantsVibhuti Nayar - Head of Investor RelationsOleg Khaykin - President and CEOIlan Daskal - CFOConference Call ParticipantsAndrew Spinola - AnalystRuben Roy - AnalystMehdi Hosseini - AnalystMichael Genovese - AnalystRyan Koontz - AnalystTim Savageaux - AnalystOperatorGood afternoon. My name is Jael and I will be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutio ...

Financial Data and Key Metrics Changes - Net revenue for Q1 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 Q1 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 for the quarter 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 from the data center ecosystem and the acquisition of Inertia Labs [5] - OSB revenue was $83.1 million, in line with guidance of $82 million to $84 million, and up 5.5% year-over-year, primarily due to strength in anti-counterfeiting products [6] Market Data and Key Metrics Changes - Total cash and short-term investments at the end of Q1 were $549.1 million, compared to $429 million in the previous quarter [7] - Cash flow from operating activities for the quarter was $31 million, up from $13.5 million in the same period last year [7] Company Strategy and Development Direction - The company expects continued strong demand in NSC driven by the data center ecosystem and aerospace and defense customers, with a focus on integrating the recently acquired Spirent Communications product lines [9][10] - The company plans to report NSC as one business segment going forward, leveraging complementary product portfolios [10] Management's Comments on Operating Environment and Future Outlook - Management noted strong momentum from Q4 2025, with expectations for continued growth in NSC driven by data center demand and aerospace and defense [11][12] - The service providers' business was stable, with gradual recovery in fiber offset by soft demand for wireless products [13] Other Important Information - The company successfully refinanced $250 million in convertible notes and repurchased approximately 2.7 million shares for about $30 million [7] - The acquisition of Spirent Communications is expected to add about $200 million in annual revenue run rate, higher than the previous estimate of $188 million [8][44] 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, with data center revenue approaching service provider levels [18][19] Question: Growth breakdown in core NSC business - Management noted strong demand from data center and aerospace and defense sectors, with traditional field instruments seeing increased demand from hyperscalers [20][22] Question: Operating margin guidance for NSC - Management expects operating margins to improve with Spirent's contribution, projecting around $165 million in quarterly revenue from Spirent [24][25] Question: Impact of wireless business recovery on earnings - Management acknowledged that recovery in the wireless segment could significantly enhance earnings, with potential for EPS to approach $1 if trends continue positively [27][28] Question: Margin profile of Spirent Communications business - Management stated that Spirent has a higher gross margin than the average NSC and is expected to be accretive post-integration [51][52]