Viavi Solutions (NASDAQ:VIAV) reported fiscal second-quarter 2026 results at the high end of its guidance range, with management pointing to strong demand across the data center ecosystem and continued momentum in aerospace and defense as key drivers.
Quarterly results topped guidance
Chief Financial Officer Ilan Daskal said net revenue for the quarter was $369.3 million, landing at the high end of the company’s $360 million to $370 million outlook. Revenue rose 23.5% sequentially and increased 36.4% year over year.
Segment performance: NSE growth led by data center and acquisitions
Within Network Service Enablement (NSE), revenue was $291.5 million, also at the high end of guidance. Daskal said NSE revenue rose 45.8% year over year, driven by the acquisitions of Inertial Labs and Spirent product lines, as well as “strong demand for lab and production and field products” tied to the data center ecosystem.
Revenue from Spirent was $43 million, which Daskal said was slightly below expectations of $45 million to $55 million due to the timing of certain opportunities.
NSE gross margin was 64.7%, down 10 basis points year over year. NSE operating margin was 15.6%, up from 8.7% in the same quarter last year and above the company’s guidance range, which management attributed primarily to higher flow-through.
OSP benefits from anti-counterfeiting strength
Optical Security and Performance (OSP) revenue was $77.8 million, slightly above the company’s guidance of about $77 million and up 9.7% year over year. Daskal cited strength in anti-counterfeiting and other products as the primary driver.
OSP gross margin was 50.8%, up 20 basis points year over year. OSP operating margin was 33.4%, up 100 basis points year over year, but slightly below guidance due to higher variable costs.
Balance sheet actions and restructuring plan
Viavi ended the quarter with $772.1 million in total cash and short-term investments, up from $549.1 million in the prior quarter. Operating cash flow was $42.5 million, versus $44.7 million in the year-ago period, which Daskal attributed mainly to the timing of working capital. Capex was $5.6 million, compared with $8.2 million a year earlier.
The company also highlighted debt-related actions during the quarter. Daskal said Viavi exchanged about $100 million principal amount of 1.625% convertible notes due March 2026 for 7.9 million shares at $17.88 per share. About $50 million principal remains on these notes, which the company expects to pay in cash, while the associated premium will be settled in shares. Viavi also prepaid $100 million of its $600 million Term Loan B in January 2026 and did not repurchase shares during the quarter, prioritizing debt management.
Management also disclosed a new restructuring initiative. Daskal said Viavi approved a restructuring and workforce reduction plan expected to impact approximately 5% of its global workforce, with an estimated $32 million in restructuring charges. Upon completion, the company expects annual savings of about $30 million, primarily benefiting operating expenses, and said it intends to reinvest a portion into higher-growth areas. The company expects to recognize the majority of charges by the end of June 2026, with the plan substantially completed by the end of December 2026. Daskal noted that the savings figure includes previously communicated $16 million of synergy savings from the Spirent product line acquisition.
Management highlights: data center visibility improves; PNT demand in defense
Chief Executive Officer Oleg Khaykin said demand from the data center ecosystem—including high-performance semiconductors, optical modules, and network equipment manufacturers—continued to drive lab and production test needs tied to AI data center build-outs. He also pointed to “emerging strong demand” for fiber field instruments from hyperscalers and service providers as they build and optimize fiber networks to interconnect data centers.
On the call, Khaykin updated the company’s NSE mix. He said that while the company had previously discussed a mix of roughly 45% service provider, 40% data center, and 15% aerospace and defense, the latest view is closer to around 40% service provider, 45% data center, and about 15% aerospace and defense, with service provider expected to trend “a little bit below 40%,” aerospace and defense “up above 15%,” and data center “up above 45%.”
He also said Viavi is seeing longer visibility in data center-related demand, describing “multi-quarter commitments and multi-year engagements” and saying the company’s view into base demand has expanded from roughly one to one-and-a-half quarters historically to “at least…up to three quarters ahead.”
In aerospace and defense, Khaykin pointed to continued strength in positioning, navigation, and timing (PNT) products, especially “resilient PNT” as an alternative to GPS/GNSS in contested environments. He cited applications across autonomous systems, including drones, and also discussed emerging timing opportunities in data centers as speeds increase and synchronization requirements become more demanding.
Looking ahead, Daskal guided fiscal third-quarter 2026 revenue to $386 million to $400 million, with NSE revenue of $304 million to $316 million and OSP revenue of $82 million to $84 million. The company expects operating margin of 19.7% ±50 basis points and EPS of $0.22 to $0.24. Daskal said the outlook includes a full 13 weeks of Spirent product line results versus 10 weeks in the prior quarter and that the company now expects its tax rate to be in the mid-teens on a go-forward basis, citing greater U.S. profitability and the benefit of net operating losses.
Daskal added that the company expects to pay an Inertial Labs earnout liability of about $75 million during the third quarter due to strong performance in calendar 2025.
About Viavi Solutions (NASDAQ:VIAV)
Viavi Solutions Inc is a provider of network test, monitoring and assurance solutions for communications service providers, cable operators, enterprises and government agencies. The company offers an extensive portfolio of fiber optic and copper cable test and measurement instruments, wireless network testing equipment and network performance monitoring software. Its products are designed to support the deployment, maintenance and optimization of high-speed broadband, 5G wireless, data center and enterprise networks.
Viavi’s product offerings are organized into two primary segments: Network & Service Enablement and Optical Security & Performance.
