Earnings Highlights: Viavi Solutions (VIAV) | Q4 FY2026 — Data Center Now Half of NSE Revenue, $500M Quarterly Target Pulled Forward a Full Year

2 days ago

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In the quarter ended June 27, 2026, Viavi delivered revenue of $443.1M, up 52.5% YoY, beating the top end of guidance on all three metrics (revenue, operating margin and EPS). The real signal isn't that "this quarter looked good" — it's that Viavi has officially shifted from a test-equipment vendor riding the telecom capex cycle into a "picks-and-shovels" winner of the AI data center optical build-out. The data center ecosystem now accounts for half of NSE revenue, and management pulled its "$500M per quarter" timeline forward from "exiting fiscal 2028" to "within calendar 2027." This is a structural pivot, not a one-off quarterly surprise.

This article is for technology and industry trend analysis only and does not constitute investment advice.

1. Executive Takeaway: The Three Most Important Signals

First, the growth engine has been completely replaced. NSE (Network and Service Enablement) grew about 69% YoY, with the data center ecosystem and aerospace & defense (A&D) driving the vast majority of the increase, while the traditional telecom service provider business played a supporting role with a "seasonal recovery." Management put it plainly: data center is now roughly 50% of NSE revenue and A&D about 17%, with service providers making up the rest. A revenue mix once held hostage by telecom capex is being rewritten by the AI build-out.

Second, operating leverage is starting to "fall straight through to operating income." Revenue grew 52.5% YoY, yet non-GAAP operating margin rose 960 basis points in a year to 24.0%, and R&D actually declined in absolute dollars — because lab and production test volumes far exceed the field instruments of the past, so the same R&D spend amortizes over much more gross profit. This is what makes this upcycle for Viavi most different from previous ones.

Third, management moved its long-term target forward. Last quarter it said "$500M per quarter won't be visible until exiting fiscal 2028"; this quarter it changed its tune to "looks like it will land within calendar 2027" — pulling the timeline forward by nearly a year. With CPO test revenue starting to be recognized this quarter and accelerating in December, visibility is stacking up.

2. Revenue and Financials

All of this quarter's hard numbers are based on Viavi's official non-GAAP basis (apart from revenue, Viavi's headline figures are all non-GAAP):

Quarterly revenue was $443.1M, up 52.5% YoY and 8.9% QoQ, blowing past the top of the $427M–$437M guidance range. Non-GAAP gross margin was 62.3% (up 2.2 percentage points YoY), and non-GAAP operating margin was 24.0% (up 960 bps YoY and 280 bps QoQ), both above guidance. Non-GAAP net income was $89.1M (up 200% YoY), and non-GAAP diluted EPS was $0.34 (up 161.5% YoY), also above the top of guidance at $0.31. A $1.5M tariff refund contributed modestly to operating income this quarter.

Broken out by segment, the signal is even clearer. NSE revenue was $353.9M, up 69.2% YoY, with gross margin of 64.1% (up 190 bps YoY) and operating margin jumping from 4.6% to 20% within a year; the newly acquired Spirent product lines contributed $47.7M this quarter. OSP revenue was $89.2M, up 9.6% YoY, with 55.2% gross margin and 40% operating margin, driven by 3D sensing and anti-counterfeiting products.

For the full year, FY2026 revenue was $1,518.3M, up 40% YoY, with non-GAAP operating margin of 20.6% (up 630 bps) and full-year non-GAAP EPS of $1.00 (vs. $0.47 the prior year). On the balance sheet, Viavi completed an equity offering this quarter of 12.78M shares at $45 per share, totaling $575M, used to repay the remaining Term Loan B; cash and short-term investments stood at $656.7M at quarter-end.

3. Technology and Business Highlights: From "Selling to Labs" to "Selling into Production Lines"

The core of Viavi's growth is that it is penetrating the "production line" alongside each technology generation of data center optical modules. Management was direct: talking about the data center is almost entirely talking about optics — whether R&D lab testing, volume production testing, or fiber monitoring during data center deployment, nearly everything used is an optical product, and the copper portion is "so small it's almost nothing."

On the optical module generation axis, 800G is still the main volume driver, but 1.6T is ramping fast — and mostly heading into volume production. Management expects 800G and 1.6T to roughly break even in 2027, after which 1.6T keeps strengthening and 800G declines, though 400G/800G will be around for a long time thanks to their huge installed base. For this rhythm of "multiple generations in parallel, with the center of gravity shifting gradually to 1.6T," our article 800G vs 1.6T optical modules: a BOM teardown of who really captures the margin offers a full materials and margin breakdown; read side by side, it explains why Viavi can "keep selling test as each generation steps up."

Even more important is CPO (co-packaged optics). The market had rumored that "CPO is being delayed because of yield," which management dismissed as nonsense, adding "I have POs in hand to prove it." The logic is very STT: to manage CPO yield you have to test more — known good die, known good optical engine, known good substrate — every gate must be tested, and rising test intensity is business for Viavi. CPO test revenue already started being recognized this quarter (fall) and will accelerate in December. To understand why CPO is only really moving "now," and which wall pluggable optics have hit, see our Have pluggable optics hit the wall? Before you understand CPO, understand this wall.

The Spirent post-acquisition integration also finished ahead of schedule. Viavi just launched the industry's first validation solution for Ultra Ethernet Transport, designed to emulate large-scale AI and high-performance computing network loads — plugging Spirent's high-speed Ethernet test capabilities straight into the hottest demand pool there is: the AI data center.

4. Management Outlook: Guidance Stays Strong, but Watch Two "One-Time" Variables

Viavi's guidance for Q1 FY2027 (the September quarter) is up across the board: total revenue of $450M–$460M (NSE $360M–$368M, OSP $90M–$92M), non-GAAP operating margin of 27.1% ±40bps (NSE 23.1%, OSP 43.2%), and non-GAAP diluted EPS of $0.40–$0.42. Notably, the September quarter is usually seasonally weak for NSE, yet this time it is guided up sequentially — meaning data center and A&D growth is now enough to outweigh softness in service providers and wireless.

There are two "one-time" variables in management's wording worth unpacking. First, this is a 14-week quarter (one extra week) that comes around only once every five to six years, which will push up some variable costs; management stressed that revenue is essentially unaffected, since shipments follow customers' quarter-ends, not the number of weeks. Second, a tariff refund of about $11M received in July 2026 will mainly benefit Q1 cost of goods sold, adding a net benefit of about 100 bps and about $0.02 of EPS, partially offset by the variable costs of the extra week. In other words, strip out these two pieces of noise and the core business's operating leverage is still genuinely rising.

What was explicitly moved forward is that $500M quarterly target — from "exiting fiscal 2028 (roughly the June 2028 quarter)" to "some quarter within calendar 2027." This kind of "target pulled forward" tone is more worth remembering than a single-quarter beat.

5. Supply Chain and Customer Clues

Reading between the lines this quarter, there are several clues that matter for the entire optical communications supply chain.

First, OCS (optical circuit switching) demand is spreading beyond "a single large customer." Viavi used to sell equipment mainly to one hyperscaler that builds its own OCS; now more companies want to deploy optical switching in their core networks. Management described demand as "very healthy," with most OCS-related revenue landing over the next few quarters. For the full context on OCS moving from Google's in-house technology into the industry toolbox, see Google wrote the answer into 134,000 TPUs: what Virgo Network reveals is a win for OCS.

Second, A&D's growth engine is PNT (positioning, navigation and timing), which management called a "multi-year growth driver" for A&D — meaning that beyond the data center, Viavi has added another growth curve that isn't fully tied to the AI cycle.

Third, CPO's entry into semiconductor test is itself a new market — Viavi says it is moving into "the optical plane of semiconductor test," territory where it was completely absent before but which will expand as 1.6T and CPO ramp. For a position map of the whole optical communications and CPO supply chain, see Must-read for 2026 AI infrastructure: the complete optical communications and CPO supply chain map.

6. Conclusion

The thing to remember about Viavi this quarter isn't "another beat," but that its revenue engine has been fully replaced: data center plus A&D drove nearly 70% NSE growth, and telecom capex is no longer its ceiling. When a test-equipment vendor's growth starts moving in step with the 1.6T generation step-up, CPO yield management, OCS diffusion and PNT defense demand, its revenue volatility falls and visibility rises — which is exactly what gave management the confidence to pull the $500M target forward a year.

Three things to track starting next quarter: first, whether the December acceleration in CPO test revenue materializes; second, how fast 1.6T penetrates volume production relative to 800G (management expects parity in 2027); and third, the actual revenue cadence as OCS spreads beyond a single customer. If two of these three lines go right, Viavi's "$500M pulled forward" will be more than just talk.