Viavi Solutions Inc. VIAV wrapped up fiscal 2026 on a strong note, backed by robust demand across the artificial intelligence (AI) data-center ecosystem, aerospace and defense markets and contributions from the acquired Spirent businesses. The company also witnessed substantial margin expansion, highlighting improving operating leverage.
Fiscal fourth-quarter revenues surged 52.5% year over year to $443.1 million and surpassed the Zacks Consensus Estimate of $433 million. Adjusted earnings jumped 161.5% year over year to 34 cents per share, beating the consensus estimate of 30 cents by 13.3%. VIAV surpassed the consensus mark for earnings and revenues in each of the past four quarters.
Management expects the momentum to extend into fiscal 2027. Let us delve a little deeper into the factors that make VIAV an attractive investment proposition following its solid fiscal fourth-quarter performance.
AI Data Center Momentum Remains a Key Catalyst
Viavi's expanding exposure to AI and hyperscale data centers is emerging as one of its most important growth drivers. Network and Service Enablement (NSE) revenues soared 69.2% year over year to $353.9 million in the fiscal fourth quarter, supported by demand for lab, production and field-testing products, aerospace and defense solutions and the acquired Spirent portfolio.
The data-center ecosystem now accounts for roughly half of NSE revenues, reflecting the rapid transformation of VIAV's revenue mix away from its historical dependence on telecom service-provider spending. Management expects robust data-center growth to continue over the next several quarters.
The company has also expanded its AI-networking portfolio through products such as the Ultra Ethernet Transport validation platform and the CyberFlood CF1000 400G security and application-performance testing platform. These solutions enable Viavi to benefit as hyperscalers, cloud operators and networking vendors deploy increasingly complex, high-bandwidth AI infrastructure.
Spirent Integration Strengthens VIAV's Growth Profile
The acquisition of selected Spirent Communications businesses has significantly expanded Viavi's addressable market and technological capabilities. It has strengthened the company's position in high-speed Ethernet testing, network security, channel emulation and enterprise network validation while creating cross-selling opportunities across its existing customer base.
Spirent's contribution should increase in the near term. Management expects the acquired business to grow roughly 10% sequentially in the September quarter, while December is typically its strongest quarter because of favorable seasonality.
The combination of Viavi's optical and network-testing capabilities with Spirent's Ethernet, cybersecurity and network-validation assets provides a broader platform for addressing the increasingly sophisticated testing requirements associated with AI clusters, cloud networks and next-generation communications infrastructure.
Aerospace & Defense Provides Another Growth Engine
Viavi's diversification beyond traditional telecom customers is another positive. The aerospace and defense business delivered another quarter of strong year-over-year growth, driven particularly by healthy demand for positioning, navigation and timing (PNT) products.
Management expects PNT to remain a multi-year growth driver for its aerospace and defense operations. This market provides VIAV with exposure to government and defense modernization spending and reduces dependence on more cyclical carrier capital expenditures. The combination of AI data centers and aerospace and defense has materially changed the company's growth profile, providing greater diversification and improving revenue visibility.
Price Performance
Viavi has surged 244.1% in the past year compared with the industry’s growth of 189.1%. It has outperformed peers like Knowles Corporation KN and Airgain, Inc. AIRG. While Airgain has gained 25.3%, Knowles soared 59% over this period.
One-Year VIAV Stock Price Performance
Image Source: Zacks Investment Research
Upbeat Q1 Outlook Signals Sustained Momentum
Management's first-quarter fiscal 2027 outlook reinforces the bullish growth narrative. VIAV expects revenues between $450 million and $460 million, above the $443.1 million recorded in the fiscal fourth quarter. Non-GAAP earnings are projected between 40 cents and 42 cents per share, representing another healthy sequential increase from 34 cents in the June quarter.
Management has also become more optimistic about Viavi's longer-term revenue trajectory. Given the current pace of growth, the company believes it could reach quarterly revenues of more than $500 million sometime during calendar 2027, earlier than its previous expectation of achieving that level near the end of fiscal 2028.
Moving Forward
Viavi entered fiscal 2027 with considerable momentum. Strong AI data-center spending and the expanding Spirent portfolio should support continued growth in the NSE segment. At the same time, healthy aerospace and defense demand provides another secular growth avenue.
The upbeat first-quarter outlook adds further visibility to the growth story. Investors seeking exposure to the rapidly expanding AI networking and high-speed optical testing ecosystem may consider betting on VIAV for further upside.
Viavi currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).