VIAVI's profit jump goes beyond its tariff refund
Sales and adjusted earnings beat the company’s forecast. Acquired businesses, stronger testing demand and an extra week help explain the much larger quarter.
VIAVI beat its own sales and earnings forecasts as demand for testing equipment strengthened. A tariff refund helped the quarter, but the increase in reported operating profit was much larger than that benefit alone.
The company reported $469.3 million of revenue and adjusted earnings of $0.47 a share for its first fiscal quarter, ended October 3. In August, it had forecast $450 million to $460 million and $0.40 to $0.42 a share.
Our VIAVI company profile follows the results, acquisitions, cash and new share repurchase authorization.
Testing demand brings more revenue
VIAVI makes equipment that helps customers test communications networks, optical connections and other systems. Its largest business benefited from data-center investment and demand from aerospace and defense customers.
Total revenue rose 56.9% from a year earlier. That comparison includes $52.7 million from the Spirent testing businesses acquired in October 2025. The latest quarter also had 14 weeks, compared with 13 a year earlier, so the reported increase combines demand, acquisitions and a longer period.
Network and Service Enablement revenue reached $376.1 million, compared with $216.0 million a year earlier. The smaller Optical Security and Performance Products business also grew, helped by anti-counterfeiting products and 3D sensing.
The infrastructure buildout reaches beyond testing equipment. Our Coherent analysis examines the expansion from the optical-component supplier's side.
The refund helps explain the margin, not the whole increase
Reported operating profit rose to $81.7 million from $7.6 million. VIAVI recognized a $10.2 million tariff-refund benefit in the cost of sales. Higher sales volume and a more favorable mix of products also lifted gross margin, while the business spread its expenses over a larger revenue base.
The refund remains in adjusted earnings. Those figures remove items such as share-based compensation, acquired intangible-asset amortization and changes in estimated acquisition payments.
Management estimates the combined effect of tariff refunds and extra-week variable costs added about $0.02 to adjusted earnings per share and 1.1 percentage points to adjusted operating margin. That estimate covers both effects together.
Adjusted operating profit reached $136.1 million, compared with $48.7 million a year earlier. The margin rose to 29.0% from 16.3%. The prior figures have been recast to match VIAVI's current treatment of payroll taxes on share-based compensation.
The next forecast calls for another step up
For the fiscal second quarter ending January 2, 2027, VIAVI expects revenue of $505 million to $515 million and adjusted earnings of $0.50 to $0.52 a share. That is an initial forecast for the next quarter, above the results just reported.
Management expects continued strength in the network-testing business. The optical-security business has a lower sequential revenue outlook, so the next stage of growth rests more heavily on network testing.
Stronger cash generation meets larger buybacks
Operating cash flow was $104.7 million, compared with $31 million a year earlier. After $12 million of capital spending, VIAVI reported $92.7 million of free cash flow.
The company repurchased $150 million of shares during the quarter and approved a further $500 million authorization in November, in addition to the $18.4 million left under its earlier plan. Cash and cash equivalents ended the quarter at $526.7 million.
The next results will test whether demand sustains the higher sales and earnings targets.