Viavi, Solutions, Inc. VIAV shares have skyrocketed 430.7% in the past year compared with the industry’s growth of 350.7%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.
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The company has outperformed its peers like Keysight Technologies, Inc. KEYS but underperformed Ciena Corporation CIEN. Shares of Keysight have jumped 113.7%, and shares of Ciena have risen 609.8%.
AI Data Centers, Aerospace & Defense are Major Growth Drivers
Viavi is benefiting from rapid AI infrastructure expansion by hyperscalers, semiconductor companies, optical module vendors and networking equipment manufacturers. Demand for the company's lab, production and field-testing solutions remains robust. Growing investment in higher-speed optical transport, silicon photonics, PCIe interconnects and high-speed Ethernet technologies is driving demand for VIAV’s solutions. The company expects this momentum to continue in fiscal 2026.
It continues to see strong demand from aerospace and defense customers, primarily for its positioning, navigation and timing solutions. The company's acquisitions of Inertial Labs and Jackson Labs have expanded its capabilities in this market.
The acquisition of Spirent's high-speed Ethernet, network security and channel emulation product lines is performing better than expected. Management expects the acquired business to contribute approximately $200 million in annual revenue, above the initial estimate of $188 million. The acquisition also expands Viavi's presence among enterprise customers and strengthens its position in high-speed Ethernet testing. This is a critical component in AI data center expansion. Strong focus on innovation allows it to gain a competitive edge against other major players such as Keysight, Ciena and Teradyne.
Strong Backlog, Robust Liquidity and Cash Generation are Positives
The company continues to generate healthy cash flow. Viavi generated $31 million in operating cash flow and $22.5 million in free cash flow during Q1 FY26. This ensures strong financial flexibility for acquisitions, debt reduction and generates greater returns for shareholders.
Viavi ended the quarter with remaining performance obligations (RPO) of $352.6 million. This represents contracted business that has yet to be recognized as revenue. Importantly, management expects approximately 91% of this amount to convert into revenue within the next 12 months. Such a substantial backlog reflects healthy customer demand across the company's end markets.
Estimate Revision Trend
The company’s earnings estimates for 2026 and 2027 have improved over the past 60 days.
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Key Valuation Metric of VIAV
From a valuation standpoint, VIAV is currently trading at a discount compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 40.56 forward 12-month earnings, lower than 52.74 for the industry.
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End Note
Revenue growth in Network and Service Enablement is supported by increased demand from the data center ecosystem, including hyperscalers and semiconductor-driven infrastructure. Viavi highlighted continued momentum across scale-up and scale-out architectures, driven by AI workloads and high-speed interconnect technologies. This demand is expected to persist throughout 2026, supporting sustained growth in lab, production, and field-testing solutions. The integration of Spirent’s high-speed Ethernet and network security testing assets continues to contribute to revenue growth. Hence, with a Zacks rank #2 (Buy), Viavi appears to be a good investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Ciena Corporation (CIEN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).