Viavi Solutions Recovery Well Underway, Analyst Upgrades Stock, Forecasts Stronger 2025

Needham analyst Ryan Koontz upgraded Viavi Solutions VIAV from Hold to Buy and a $15 price forecast after the company reported its quarterly print Thursday.

In line with Koontz’s preview, Viavi Solutions delivered fiscal second-quarter 2025 revenue of $271 million (+6.4% Y/Y, +13.7% Q/Q), well above the $260 million consensus, while adjusted EPS of $0.13 beat the $0.10 consensus.

The adjusted gross margin of 61.1% (+110bps Y/Y, +200bps Q/Q) was above the 59.2% consensus, while the adjusted operating margin of 14.9% was above the 12.7% consensus.

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Network and Service Enablement (NSE) sales (74% of revenue) came in above guidance as Network Enablement sales were up +15.1% Y/Y and higher margin Service Enablement sales were down -13.3% Y/Y.

Management highlighted firm orders from NA Service Providers for 5G field testing and NEMs for optical lab gear in the massive NE segment.

Management also noted strong demand for fiber sensing across broad global segments, including cloud data centers.

For SE (8% of revenue), results were lower than expected due to delays in SP adoption and soft by enterprise spending.

Optical Security and Performance Products sales (26% of revenue) were just below the low end of guidance and decreased -5.3% Y/Y.

Weakness was due to softer demand for 3D Sensing products. Fiscal third-quarter 2025 revenue of $276 million-$288 million was above consensus of $256 million (+10% at MP), while adjusted EPS of $0.10-$0.13 was ahead of consensus of $0.09.

The company expects an adjusted operating margin of 13%-15% versus 12.1% consensus.

Viavi Solutions expects fiscal third-quarter NSE revenue of $202 million-$212 million and adjusted operating margin of 6%-8%.

The guidance includes Inertial Labs’ contribution of $50 million in annual RR, implying organic revenue +16% Y/Y and flattish Q/Q in a seasonally soft quarter.

In OSP, the company targets revenue of $74 million-$76 million (flat Y/Y) and an adjusted operating margin of 32%-34%.

Management highlighted the strong recovery for NSE across all products, for which visibility has markedly improved through the second half of fiscal 2025 but withheld commentary on fiscal 2026.

Key drivers included the resumption of 5G upgrades in NA to re-band spectrum from 4G to 5G, which is expected to continue through calendar 2025; new fiber broadband deployments gaining momentum through calendar 2025; and optical transport upgrades to 800G/1.6T, which are largely intended to support data center interconnect.

Koontz updated fiscal 2025 estimates and 2026 estimates. The analyst’s fiscal 2025 revenue and EPS estimates changed to $1.08 billion and $0.43 from $1.04 billion and $0.38. The fiscal 2026 estimates changed to $1.14 billion and $0.49 from $1.08 billion and $0.47

With evidence, the North American Service Provider recovery is well underway, and with the balance of its smaller verticals appearing past the bottom, Koontz upgraded Viavi Solutions’ stock rating.

The analyst noted improving predictability and profitability in Viavi Solutions’ results over the second half of calendar 2024, a far cry from its challenges, which began around two years ago.

In the fiscal second quarter of 2025, Viavi Solutions delivered revenue and EPS +4% and +$.03 above consensus. Its key NSE segment sales were well above guidance, benefitting from a meaningful recovery in SP and OEM spending on 5G and optical and the broad adoption of fiber sensing.

Koontz modestly raised his fiscal 2025 and 2026 estimates, reflecting steady organic growth and ample room for upside.

Price Action: VIAV stock is up 23.2% at $12.31 at last check Friday.

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