Revenue Beat and Strong Growth
Q3 net revenue $406.8M, above the high end of guidance ($386M-$400M). Revenue +10.2% sequentially and +42.8% year-over-year.
Viavi Solutions
· VIAV
April 29th, 2026
Summary
- Earnings Call Date:
- 2026-04-29
- Change Since:
- +8.52%
- Next Earnings Date:
- 2026-08-06
Earnings Call Sentiment
PositiveThe call conveyed a strong operational beat and clear momentum: revenue and EPS exceeded guidance, margins expanded materially, NSE delivered very high year-over-year growth (driven by Spirent and data center demand), and management provided upbeat sequential guidance. Offsetting items include a substantial cash balance decline driven by strategic earn-outs and debt prepayments, negative operating cash flow for the quarter, near-term dilution from convertible conversions, and some product-mix pressure on OSP gross margins plus a weak wireless/service-provider market. On balance, the company demonstrated robust demand, margin leverage and a constructive outlook while taking deliberate debt-reduction and investment actions; these positives outweigh the near-term cash and dilution headwinds.
Company Guidance
For Q4 FY2026 Viavi guided revenue of $427–$437 million (sequentially higher), with NSE revenue of $340–$348 million and OSP revenue of $87–$89 million; consolidated operating margin of 22.7% ±50 bps (22.2%–23.2%), NSE operating margin 18.7% ±50 bps (18.2%–19.2%), and OSP operating margin 38.4% ±40 bps (38.0%–38.8%); EPS of $0.29–$0.31; tax expense of roughly $10.0 million ±$0.5 million ($9.5–$10.5M); other income/expense net expense ≈ $12M; and an expected fully diluted share count of ~256 million — revenue is expected to rise quarter-over-quarter driven by continued strength across NSE (data center, aerospace & defense and seasonally stronger service provider spend) and across OSP product lines.
Profitability and Margin Expansion
GAAP (non-GAAP) operating margin 21.0%, above guidance (19.2%-20.2%). Operating margin improved +170 bps sequentially and +430 bps year-over-year.
EPS Above Guidance
Q3 EPS $0.27, above guidance ($0.22-$0.24). EPS increased $0.05 sequentially and $0.12 year-over-year.
NSE Segment Outperformance
NSE revenue $321.5M, above guidance ($304M-$316M). NSE revenue +54.4% year-over-year, driven primarily by the Spirent product-line acquisition and strong demand from the data center ecosystem and aerospace & defense customers. NSE gross margin 65.3% (+220 bps YoY); NSE operating margin 17.2% (+680 bps YoY) and above guidance (15%-16%).
OSP Growth and Strong Operating Margin
OSP revenue $85.3M, above guidance ($82M-$84M) and +11.4% year-over-year. OSP operating margin 35.3% (+140 bps YoY) and in line with guidance (34.8%-35.8%).
Spirent Contribution and Cross-Sell Momentum
Spirent product-line revenue $54.2M in Q3. Management expects a calendar annual run-rate ~ $200M for Spirent lines and ongoing cross-selling (normalized Spirent June-quarter contribution ~ $48M).
Improving Fall-Through / Incremental Margins
Management cites roughly 40%-45% fall-through on incremental NSE revenue today with potential upside as volumes grow and restructuring actions complete, indicating significant operating leverage.
Debt Reduction and Capital Allocation
Paid $49M principal on convertible notes and prepaid $150M of Term Loan B (remaining Term Loan B balance $450M). Management prioritized debt prepayment over share repurchases this quarter.
Positive Guidance for Q4
Q4 revenue guidance $427M-$437M (sequentially higher). Segment guidance: NSE $340M-$348M, OSP $87M-$89M. Company operating margin guide 22.7% ±50 bps; EPS guide $0.29-$0.31. Management expects continued data center and aerospace & defense strength through calendar 2026.
Favorable Tax Position This Quarter
Effective tax rate reported ~12% in the quarter; management noted U.S. jurisdictional profit and NOL consideration contributes to a lower tax burden.
Operator
Good afternoon. My name is Hillary, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions Fiscal Third Quarter 2026 Earnings Call. Today's conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Vibhuti Nayar, Head of Investor Relations. Please go ahead.
Vibhuti Nayar
Thank you, Hillary. Good afternoon, everyone, and welcome to Viavi Solutions Fiscal Third Quarter 2026 Earnings Call. My name is Vibhuti Nayar, Head of Investor Relations for Viavi Solutions. And with me on today's call is Oleg Khaykin, our President and CEO; and Ilan Daskal, our CFO. Please note, this call will include forward-looking statements about the company's financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings. The forward-looking statements, including the guidance that we provide during this call, and our expectations regarding the end market and acquired business are valid only as of today.
Viavi undertakes no obligation to update these statements. Please also note that unless we state otherwise, all results discussed on today's call, except revenue, are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release. The release as well as our supplemental e...
Subscribe to unlock transcripts
Get The Fly Pro 7 days for free