Network testing solutions company Viavi Solutions (NASDAQ: VIAV) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 36.4% year on year to $369.3 million. On top of that, next quarter’s revenue guidance ($393 million at the midpoint) was surprisingly good and 10% above what analysts were expecting. Its non-GAAP profit of $0.22 per share was 17.2% above analysts’ consensus estimates.

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StockStory’s Take

Viavi Solutions delivered a positive fourth quarter, with results above Wall Street’s revenue and profit expectations. Management attributed growth to robust demand from the data center ecosystem and increased momentum in aerospace and defense, which together now comprise a growing share of the business. CEO Oleg Khaykin highlighted, “The data center ecosystem, which includes high-performance semiconductors, optical modules, and network management systems, drove strong demand for lead and production products in support of AI data center build-out.” The company also benefited from contributions of recently acquired product lines and a recovery in anti-counterfeiting solutions.

Looking ahead, Viavi Solutions’ guidance is underpinned by continued strength in data center and aerospace and defense markets. Management expects these segments to sustain elevated demand, particularly as hyperscale customers require advanced fiber monitoring tools and defense applications turn to positioning and navigation products. Khaykin emphasized, “We are now seeing emerging strong demand for our fiber field instruments by hyperscalers and service providers to build, operate, and optimize the next generation of fiber networks.” The company also plans to reinvest savings from its recent restructuring into higher-growth areas, aiming to further capitalize on these trends.

Key Insights from Management’s Remarks

Viavi’s revenue growth was led by surging demand from customers building AI-focused data centers and further supported by aerospace, defense, and anti-counterfeiting product momentum.

• Data center ecosystem shift: Management noted a significant mix shift, with data center-related sales now comprising an estimated 45% of segment revenue, surpassing service provider sales for the first time. This shift was driven by increased investment in AI-related infrastructure and greater adoption of Viavi’s lab, production, and field instruments by both hyperscalers and traditional network operators seeking to monitor and optimize fiber performance.

• Aerospace and defense momentum: The aerospace and defense segment saw continued high demand, especially for positioning, navigation, and timing products, which are critical for autonomous systems such as drones and robotic vehicles. Management believes this segment’s growth is being fueled by increased adoption of resilient navigation solutions in both military and commercial applications.

• Acquisition integration: The addition of Spirent’s product lines and Inertia Labs contributed to year-on-year revenue growth, though Spirent’s performance was slightly below expectations this quarter due to timing of government orders. Management expects these acquisitions to generate additional synergies, with some savings already being reinvested in higher-growth markets.

• Anti-counterfeiting recovery: The OSP (Optical Security and Performance) segment benefited from a rebound in demand for anti-counterfeiting products, supporting improved segment margins.

• Restructuring for growth: Viavi approved a workforce reduction plan expected to deliver $30 million in annual savings, with a portion intended for reinvestment in data center and aerospace initiatives. Management emphasized this move is focused on aligning resources with strategic growth areas rather than targeting specific product groups.

Drivers of Future Performance

Viavi’s outlook is anchored in ongoing demand from data center and aerospace customers, as well as operational realignment to concentrate resources on these high-growth segments.

• AI-driven data center investment: Management expects the ongoing build-out of AI and high-speed data centers to drive sustained demand for Viavi’s test and monitoring solutions. Increasing requirements for fiber network performance and real-time monitoring by hyperscalers and service providers are anticipated to expand the addressable market for both lab and field instruments.

• Aerospace and defense expansion: Viavi’s positioning, navigation, and timing products are seeing increased adoption in defense and industrial robotics markets, particularly as demand rises for resilient navigation in environments where GPS is unavailable or unreliable. Management sees this trend providing steady growth opportunities through expanded use cases in autonomous systems.

• Operational efficiencies and reinvestment: The company’s restructuring is expected to improve operating margins and free up capital for reinvestment in its fastest-growing segments. Management cautioned that while cost reductions will provide leverage, reinvestment is necessary to capture emerging opportunities, and any slowdown in the targeted end markets could temper anticipated gains.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will monitor (1) sustained momentum in data center and aerospace demand, (2) the pace and effectiveness of Viavi’s workforce restructuring and reinvestment in growth segments, and (3) the integration of acquired product lines, particularly Spirent, and whether they deliver the anticipated synergies. Broader industry trends in AI and hyperscale infrastructure will also be critical to track.

Viavi Solutions currently trades at $21.80, up from $21.03 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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