VIAV

Q2 2026

Date: 2026-01-28Rank: #91Forward Promise: very_bullish

Viavi Solutions reported strong fiscal Q2 2026 results, with revenue of $369.3 million, up 23.5% sequentially and 36.4% year-over-year, driven primarily by the data center ecosystem and aerospace & defense sectors. Operating margin expanded significantly to 19.3% (up 360 bps QoQ), and EPS of $0.22 beat the high end of guidance. The company announced a restructuring plan impacting 5% of the workforce to save $30 million annually, while guiding for Q3 revenue of $386M-$400M, representing sequential growth despite typical seasonality, due to continued strength in AI-related demand.

Bullishness Score

86.18

μ Mean

91.69

σ Uncertainty

1.84

Forward Promise

8.5

Management Tone

Management displayed high confidence and enthusiasm throughout the call, particularly regarding the secular growth in AI data centers and aerospace/defense. The tone shifted from purely factual in prepared remarks to highly animated and forward-looking during the Q&A, where Oleg Khaykin elaborated extensively on new market opportunities.

Confidence: HIGH — Management consistently beat guidance, raised the outlook for the next quarter (which is seasonally flat/down), and provided specific, granular details on demand drivers and customer behaviors without hesitation.

Strategic Signals

Management emphasized a fundamental shift in the company's revenue mix, moving away from a heavy reliance on traditional service providers (now ~40%) toward high-growth areas like data centers (~45%) and aerospace & defense (~15%). This diversification reduces cyclicality and aligns the company with secular AI infrastructure spending.

A significant strategic highlight is the penetration of hyperscalers and data center operators using Viavi's field instruments. Historically used by telcos, these tools are now being deployed by data center operators to monitor fiber performance for latency-sensitive AI workloads, representing a new and expanding vertical.

The company is actively reallocating resources via a restructuring plan (impacting 5% of workforce) to save $30 million annually. Management explicitly stated these savings would be reinvested into higher-growth areas like the data center ecosystem and aerospace & defense, signaling a disciplined capital allocation strategy focused on ROI.

Viavi is benefiting from the accelerating technology cycle in data centers. Management noted that technology nodes are now turning over every two years (down from six), driving more frequent replacement of test equipment. Additionally, the acquisition of Spirent’s product lines is gaining traction, with expectations for a full quarter of contribution in Q3.

In the Aerospace & Defense sector, Viavi is positioning itself as a leader in 'Resilient PNT' (Positioning, Navigation, and Timing). This technology is critical for autonomous systems (drones, robotics) operating in GPS-denied environments, a high-priority area for defense spending globally.

Key Metrics

Revenue$369.3M+23.5% QoQ / +36.4% YoY

Operating Margin19.3%+360 bps QoQ / +440 bps YoY

EPS$0.22+$0.07 QoQ / +$0.09 YoY

NSE Revenue$291.5M+45.8% YoY

NSE Operating Margin15.6%+690 bps YoY

Cash & Short-term Investments$772.1MN/A

Restructuring Charge~$32MOne-time

Annual Savings from Restructuring~$30MRecurring

Guidance

Q3 Revenue: $386M - $400M (Up sequentially)

Q3 Operating Margin: 19.7% +/- 50 bps

NSE Q3 Revenue: $304M - $316M

NSE Q3 Op Margin: 15.5% +/- 50 bps

OSP Q3 Revenue: $82M - $84M

Share Count: ~245M shares

Bottom Line

Price Target: N/A

Viavi Solutions is successfully transforming into a pure-play AI infrastructure enabler. The Q2 results and Q3 guidance demonstrate that the company is benefiting from massive secular trends in data center build-outs and aerospace/defense modernization. The shift in revenue mix—where data centers now contribute ~45% of NSE revenue—reduces reliance on cyclical telco spending. Management's confidence is palpable and backed by specific operational details, such as hyperscalers directly purchasing fiber test tools to ensure low-latency performance. The restructuring, while a near-term cost, will further align resources with these high-growth verticals. With operating margins expanding rapidly and a clear path for continued growth, VIAV presents a compelling opportunity.

Forward Promise

Overall: 8.5 · very_bullish

Management exudes high confidence as AI demand drives 'amazing' turnaround.

The Q&A confirms that Viavi is a key enabler of the AI build-out, with management providing specific evidence of new customer behaviors (hyperscalers) and structural growth that supports the raised guidance.

Red Flags

While the overall outlook is strong, the Spirent acquisition integration showed some minor hiccups, with revenue of $43 million coming in below the guided range of $45-$55 million due to timing issues. Management attributed this to government shutdowns and holidays, but investors will watch for further integration complexity.

The company announced a restructuring plan impacting 5% of the global workforce. While positioned as a reallocation to growth areas, such actions often carry execution risks and can temporarily impact morale or operational efficiency during the transition period.

The traditional service provider business remains 'weak but stable.' While this is less of a concern given the growth in other sectors, any further deterioration in telco capital expenditures could act as a headwind to the overall growth narrative if the data center boom slows.

Management noted that visibility in the data center business is typically only 1 to 1.5 quarters out. While the current trend is robust, the short visibility window means that rapid changes in customer capital allocation could impact results with little warning.

Macro Insights

AI Infrastructure: The build-out of AI data centers is driving a massive upgrade cycle for fiber optics. As speeds increase to 1.6T and beyond, the tolerance for latency and signal loss drops to zero, necessitating new testing and monitoring equipment.

Aerospace & Defense: Defense spending is increasingly focused on autonomous systems and 'Resilient PNT' (Positioning, Navigation, and Timing) to operate in GPS-denied environments, driving sustained demand for Viavi's specialized timing products.

Telecom Service Providers: Traditional telecom capex remains 'weak but stable.' While not a growth driver, it is no longer a significant drag due to the company's successful pivot to data centers and aerospace.