Viavi Solutions reported a solid QQ2 2025 showing a rebound in Network Enablement (NSE) activity and continued strength in growth drivers outside traditional telecom end markets. Net revenue of $270.8 million represented a 6.4% year-over-year increase and 13.7% sequential growth, with EBITDA margin around 14.8% and GAAP operating margin of approximately 8.2% (non-GAAP guidance framed around 14% operating margin). The quarter was highlighted by a strong NSE performance (recovery across multiple product lines, including lab/production and field instruments) and a modest, but improving, OSP backdrop led by 3D sensing softness. The company closed the Inertial Labs acquisition, expanding VIAVI’s PNT footprint and enabling entry into aerospace/defense end-markets, with management positioning M&A as a continued strategic tool and capital allocation priority. Management signaled continued momentum into Q3 2025, with revenue guidance of $276–$288 million and non-GAAP EPS of $0.10–$0.13, underpinned by NSE strength and steady OSP normalization. Cash generation remained robust, supported by a large cash balance (~$496M end of period) and moderate debt, though net debt remained ~$199.6M post-transaction, reflecting ongoing M&A activity and the Inertial Labs deal.
Key Performance Indicators
Revenue
270.80M
QoQ: 13.69% | YoY:6.40%
Gross Profit
160.80M
59.38% margin
QoQ: 18.15% | YoY:8.65%
Operating Income
22.20M
QoQ: 93.04% | YoY:-0.89%
Net Income
9.10M
QoQ: 605.56% | YoY:-14.95%
EPS
0.04
QoQ: 593.83% | YoY:-16.84%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $270.8M; YoY +6.40%; QoQ +13.69%
Gross Profit: $160.8M; Gross Margin 59.38%
EBITDA: $40.2M; EBITDA Margin 14.84%
Operating Income: $22.2M; Operating Margin 8.20% (GAAP); Non-GAAP guidance around 14% hides higher gross-through and D&A mix
Net Income: $9.1M; Net Margin 3.36%
Financial Highlights
Consolidated metrics (USD):
- Revenue: $270.8M; YoY +6.40%; QoQ +13.69%
- Gross Profit: $160.8M; Gross Margin 59.38%
- EBITDA: $40.2M; EBITDA Margin 14.84%
- Operating Income: $22.2M; Operating Margin 8.20% (GAAP); Non-GAAP guidance around 14% hides higher gross-through and D&A mix
- Net Income: $9.1M; Net Margin 3.36%
- EPS (GAAP): $0.04; (Non-GAAP): $0.13
- Diluted EPS: $0.04; Weighted Avg Diluted Shares 224.8M
- Operating Cash Flow: $44.7M; Free Cash Flow: $36.5M
- CapEx: $8.2M; Cash End of Period: $496.4M; Cash + ST Investments: $509.4M
- Total Debt: $687.6M; Net Debt: $199.6M; Debt/Capitalization ~0.50; Current Ratio 3.55; Quick Ratio 3.18
- Segments (Q2): NSE revenue $199.9M; NE $179.0M; SE $20.9M; OSP $70.9M
- Segment margins (Q2): NSE GM 64.8%; NE GM 64.5%; SE GM 67.5%; NSE Op Margin 8.7%; OSP Op Margin 32.4%
- Guidance (Q3 2025): Revenue $276–$288M; Operating Margin ~14% (±100 bps); NSE Revenue ≈ $207M (±$5M); OSP ≈ $75M (±$1M); Tax ~$9M (±$0.5M); Share count ≈ 226.1M; Inertial Labs contribution embedded in NSE guidance
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
270.80M
6.40%
13.69%
Gross Profit
160.80M
8.65%
18.15%
Operating Income
22.20M
-0.89%
93.04%
Net Income
9.10M
-14.95%
605.56%
EPS
0.04
-16.84%
593.83%
Key Financial Ratios
currentRatio
3.55
grossProfitMargin
59.4%
operatingProfitMargin
8.2%
netProfitMargin
3.36%
returnOnAssets
0.53%
returnOnEquity
1.33%
debtEquityRatio
1.01
operatingCashFlowPerShare
$0.2
freeCashFlowPerShare
$0.16
priceToBookRatio
3.31
priceEarningsRatio
62.09
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ2 2025 earnings call:
- Viavi delivered a better-than-guided quarter: 'Net revenue for the quarter was $270.8 million, which is above the high end of our guidance range' and 'Revenue was up 13.7% sequentially, and on a year-over-year basis was up 6.4%.' (Ilan Daskal)
- NSE recovery and end-market momentum: 'NSE revenue ... at the high end of our guidance range' driven by 'strong order pace from service providers and NEMs for field instruments' and management commentary that 'many of NSE traditional end markets have stabilized and are showing signs of gradual recovery as we enter calendar 2025' (Oleg Khaykin).
- 800G and 1.6T fiber optics as growth engines: '800 gig is the workhorse that everybody's buying today, and the volume is growing pretty rapidly. 1.6 terabit is entering the R&D labs ... production maybe towards the end of the calendar year' (Oleg Khaykin).
- Inertial Labs acquisition adds PNT capabilities: 'Earlier this week, we closed the acquisition of Inertial Labs, which strengthens VIAVI's position in the PNT space' (Oleg Khaykin) and guidance that includes Inertial Labs in NSE outlook: 'NSE revenue includes a high single digit million from Inertial Labs, in line with the $50M annual revenue run rate.'
- Capital allocation framework remains active: 'M&A continues to be part of our overall capital allocation model. We believe that we have more bandwidth to raise additional funding if we find the right opportunity' (Ilan Daskal); 'Deals under evaluation are highly profitable with margin accretive characteristics' (Oleg Khaykin).
- SE AI ops and private networks: 'AI ops is absolutely everybody and their brother wants it' but 'teething pains' slow revenue realization; 'private mission-critical networks' are growing meaningfully, with enterprise spending slower excluding security; outlook remains constructive for calendar 2025.
"800 gig is the workhorse that everybody's buying today, and the volume is growing pretty rapidly."
— Oleg Khaykin
"M&A continues to be part of our overall capital allocation model. We believe that we have more bandwidth to raise additional funding if we find the right opportunity for us."
— Ilan Daskal
Forward Guidance
Q3 2025 outlook: Revenue $276M–$288M; Operating margin ~14% (±100 bps); EPS $0.10–$0.13; NSE revenue around $207M (±$5M) and OSP around $75M (±$1M). Inertial Labs contribution is embedded in the NSE estimate with a target annual revenue run rate of roughly $50M. Management sentiment indicates ongoing recovery across NSE markets with continued stabilization in traditional end markets and growing demand from fiber lab/production, aerospace and defense, and 5G-related segments. The OSP business is expected to be roughly flat YoY with a seasonally weaker 3D sensing component; anti-counterfeiting and industrial segments provide offsetting strength. Risks to this outlook include a slower-than-expected ramp in SE AI ops adoption, potential macro softness in enterprise IT budgets, and the timing of production ramps for the 1.6T/800G fiber ecosystems. Investors should monitor NSE order cadence in North America and Europe, the integration trajectory of Inertial Labs (PNT offerings, aviation/defense opportunities), and the pace of private network deployments as catalysts for the remainder of calendar 2025.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
VIAV Focus
59.38%
8.20%
1.33%
62.09%
LITE
24.80%
-12.80%
-6.98%
-23.86%
NTGR
22.20%
-25.60%
-9.83%
-2.38%
KVHI
30.70%
-10.10%
-1.66%
-8.91%
TSAT
51.50%
40.50%
4.78%
1.18%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Viavi enters a disciplined recovery phase driven by NSE stabilization and key secular growth levers. The QQ2 2025 results affirm that the company can generate meaningful cash flow while executing on a diversified growth strategy that includes the expansion of 800G/1.6T optics, AI-enabled SE offerings, and the PNT-focused Inertial Labs acquisition. The Q3 2025 guidance implies continued momentum with a mid-teens EBITDA-like profitability level at the segment and consolidated level when non-GAAP adjustments are considered. The most material upside hinges on sustaining NSE order velocity from North America to Europe, accelerating wireless field instrument orders in line with 5G deployment, and the Inertial Labs integration delivering design-win momentum in aerospace, defense, and autonomous systems. Valuation remains a consideration given Viavi’s P/E metrics relative to peers; however, the combination of strong cash generation, strategically valuable acquisitions, and a robust growth runway in data-center optics and PNT justifies a constructive long-term stance for investors with a tolerance for near-term volatility tied to macro cycles and integration milestones. Monitored catalysts include: Inertial Labs’ contribution to PNT pipeline, NSE order intake ramp, and private networks deployment progress.
Key Investment Factors
Growth Potential
Strategic expansion in NSE driven by fiber monitoring demand from service providers and hyperscalers; rapid adoption of higher-bandwidth optics (800G, 1.6T) across lab, production, and module development; expansion into PNT via Inertial Labs complements existing timing technology and positions VIAVI in aerospace/defense, autonomous systems, and alternative navigation markets; AI ops growth in SE and private networks as longer-cycle, high-margin opportunities.
Profitability Risk
Cyclicality and budget sensitivity in NSE end-markets (telcos and hyperscalers) could temper near-term growth; SE AI ops deployment remains ramping, with potential delays in converting engagements to revenue; OSP remains exposed to 3D-sensing inventory phasing and channel inventory adjustments; integration risk and execution costs relating to Inertial Labs; macroeconomic uncertainty and FX exposure in international markets.
Financial Position
Very solid liquidity profile and modest leverage: cash and cash equivalents around $488M and total cash + ST investments ~$509.4M; total debt ~$687.6M and net debt ~ $199.6M; current ratio 3.55 and quick ratio 3.18; consolidated gross margin ~59.38% and EBITDA margin ~14.8%; GAAP operating margin ~8.2% with non-GAAP operating margin implied around mid-teens; free cash flow generation ~ $36.5M in the quarter; ongoing M&A activity (Inertial Labs) supported by robust cash flow and a disciplined financing approach.
SWOT Analysis
Strengths
Diversified portfolio across NSE, NE, SE, and OSP providing multi-growth vectors
Strong liquidity position with ~$496M cash and ~$509M cash+short-term investments; manageable debt and favorable liquidity ratios