10-K: Viavi Solutions Reports Strong Revenue Growth

Viavi Solutions Inc. announced its fiscal year 2026 results, showcasing a substantial 40% increase in net revenue to $1.5 billion, primarily driven by strategic acquisitions and robust demand in its Network and Service Enablement segment.

Summary

• Viavi Solutions Inc. reported a 40% year-over-year increase in net revenue for fiscal year 2026, reaching $1.5 billion.
• The growth was largely attributed to the acquisition of Spirent Communications plc's HSE and CE business and Inertial Labs, alongside strong demand in data center, aerospace, and defense markets.
• The Network and Service Enablement (NSE) segment saw a 52.3% revenue increase, while the Optical Security and Performance Products (OSP) segment grew by 9.0%.
• Despite revenue growth, the company reported a GAAP diluted loss per share of $(0.13), impacted by debt extinguishment losses.
• Non-GAAP diluted EPS showed significant improvement, increasing by 112.8% to $1.00.
• The company generated $113.9 million in operating cash flow and deployed $31.1 million for capital expenditures.
• A restructuring plan affecting approximately 5% of the global workforce was announced in fiscal 2026, aiming for $30.0 million in annualized cost savings.
• The company's stock price performance showed a significant increase from July 2025 to June 2026, outperforming major indices.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as generally positive, reflecting significant revenue growth driven by acquisitions and strong performance in key segments, though offset by a net loss and ongoing restructuring costs.

Positives

• Net revenue increased by 40.0% to $1.5 billion in fiscal 2026.
• Acquisitions of Spirent's HSE and CE business ($145.0 million revenue) and Inertial Labs ($86.1 million revenue) significantly contributed to growth.
• NSE segment operating margin improved substantially to 16.1% from 5.5% in the prior year.
• Non-GAAP operating margin increased by 630 basis points to 20.6%.
• Non-GAAP diluted EPS grew by 112.8% to $1.00.
• Operating cash flow was $113.9 million.
• The company's stock performance graph shows a substantial increase in value from July 2025 to June 2026.

Negatives

• Reported a GAAP diluted loss per share of $(0.13) for fiscal 2026, a decrease from $0.15 in fiscal 2025.
• Experienced a loss on debt extinguishment of $56.7 million in fiscal 2026.
• Restructuring and related charges increased significantly to $15.9 million in fiscal 2026 from $0.7 million in fiscal 2025.
• OSP segment gross margin decreased by 1.0 percentage point due to unfavorable product mix.
• Amortization of acquired technologies and other intangibles increased significantly due to acquisitions.

Risks

• Geopolitical conditions, regional conflicts, and trade tensions could negatively impact business results and operations.
• Rapid technological change requires continuous innovation and timely product introductions to remain competitive.
• Dependence on a limited number of customers for a significant portion of revenue poses a risk.
• Supply chain constraints, component shortages, and increased costs can impact manufacturing and profitability.
• Cybersecurity threats pose risks to operations, intellectual property, and data security.
• Changes in global economic conditions, including inflation and fiscal tightening, could reduce demand.
• The company faces risks related to its international operations, including currency fluctuations and compliance with foreign laws.
• Restructuring activities could adversely affect business and results of operations if not implemented effectively.

Future Outlook

Looking ahead to fiscal 2027, the company expects continued growth in many traditional businesses and remains focused on executing its strategic priorities to drive revenue and earnings growth, capture market share, and optimize its capital structure.

Management Comments

• Our objective is to accelerate profitable growth by leveraging VIAVI technologies and capabilities into attractive high-growth markets and applications.
• We remain positive on our long-term growth drivers and will continue to focus on executing our strategic priorities over the long-term.
• We believe that continuing our investments in R&D is critical to attaining our strategic objectives.
• We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue.

Industry Context

StockSavvy.ai notes that Viavi's performance aligns with broader industry trends favoring increased demand for high-speed networking, data center infrastructure, and advanced communication technologies, particularly with the ongoing evolution towards 5G/6G and AI-driven applications.

Comparison to Industry Standards

• Viavi's revenue growth of 40% in FY2026 significantly outpaces the typical growth rates seen in the broader test and measurement sector, which often experiences single-digit to low-double-digit growth.
• The company's non-GAAP operating margin of 20.6% is strong compared to industry peers like Keysight Technologies (which reported ~20% non-GAAP operating margin in its recent fiscal year) and EXFO Inc. (which has historically operated at lower margins).
• The significant increase in R&D as a percentage of revenue (17.3%) reflects a commitment to innovation, which is crucial in the rapidly evolving telecom and networking equipment sectors, where companies like Anritsu and Rohde & Schwarz also invest heavily.

Legal Proceedings

• Aeroflex Wichita (a VIAVI subsidiary) received a $7.3 million judgment against Tel-Instrument Electronics Corp. (TIC) for tortious interference and improper use of confidential information.

Stakeholder Impact

• Shareholders: Potential for increased value due to strong revenue growth and improved non-GAAP EPS, offset by GAAP net loss and restructuring costs. Stock repurchase program and convertible note issuance also impact equity.
• Employees: Approximately 5% of the global workforce affected by the fiscal 2026 restructuring plan.
• Creditors: Debt extinguishment and new convertible note issuance alter the company's debt profile.
• Customers: Continued investment in R&D and new product development aims to meet evolving customer needs in data center, wireless, and aerospace/defense sectors.

Next Steps

• Continue to defend and consolidate leadership in core business segments (NSE and OSP).
• Invest in secular trends like data center ecosystems and next-gen wireless networks.
• Extend VIAVI technologies into lucrative adjacent markets.
• Execute on debt management strategy.
• Return capital to shareholders through share buybacks.
• Leverage net operating loss carryforwards.
• Pursue inorganic investments synergistic to business segments.
• Complete the Fiscal 2026 restructuring plan by the end of calendar year 2026.

Key Dates

Recommendation

The company demonstrates strong revenue growth and operational improvements on a non-GAAP basis, driven by strategic acquisitions and market demand. However, the GAAP net loss, significant restructuring charges, and the inherent risks in the technology sector warrant a cautious 'hold' stance until the benefits of restructuring are fully realized and the GAAP profitability improves.

Keywords

test and measurement, optical technologies, network security, 5G, Open RAN, data center, aerospace and defense, anti-counterfeiting