Viavi Solutions Inc. (VIAV) saw its stock surge approximately 20% in early trading Thursday, following the release of fiscal third-quarter results that surpassed analyst expectations. Shares traded at $54.65, near the session high of $60.69, as investors responded to robust revenue growth and an optimistic outlook for the coming quarter.
The company reported net revenue of $406.8 million for the quarter ended March 28, a 42.8% increase year-over-year, exceeding the consensus estimate of $393.5 million. Adjusted earnings per share came in at $0.27, beating the Zacks consensus of $0.24. This performance was driven by sustained demand from AI data centers, as well as from aerospace and defense clients, which helped offset weakness in other telecom segments.
Viavi's outlook for the fiscal fourth quarter also impressed. The company projected revenue in the range of $427 million to $437 million, with adjusted EPS between $0.29 and $0.31. This guidance surpassed analyst forecasts, keeping attention on the company's growth trajectory beyond the single-quarter beat.
CEO Oleg Khaykin attributed the strong results to gains in both data center and aerospace and defense markets. During the earnings call, he noted that data center demand momentum is expected to continue through calendar 2026, as customers seek optical transport, silicon photonics, and high-speed ethernet testing equipment.
The company's largest segment, Network and Service Enablement, generated $321.5 million in revenue, a 54.4% increase from the prior year. The Optical Security and Performance Products unit, which includes light-management technology for 3D sensing and anti-counterfeiting, posted $85.3 million in revenue, up 11.4%.
Viavi's acquisition of certain Spirent assets contributed $54.2 million in revenue for the quarter. CFO Ilan Daskal estimated the annual run rate for that segment at roughly $200 million, though some orders slipped from the previous quarter into March. The Spirent deal positions Viavi to compete more directly with Keysight Technologies in the test-equipment market.
Analysts responded positively to the results. Needham & Co. raised its price target for Viavi to $68 from $53, maintaining a Buy rating, while B. Riley had already increased its target to $53 from $26 ahead of the earnings release, citing strong data center demand and the Spirent acquisition.
However, the quarter also had its challenges. GAAP net income fell sharply to $6.4 million from $19.5 million a year earlier, and operating cash flow turned negative at -$26.3 million, partly due to contingent consideration payments. Management noted that the results are preliminary pending the official quarterly filing.
Despite the positive sentiment, downside risks remain. A slowdown in AI data center demand, persistent weakness in service-provider spending, or a normalization of Spirent's order flow could pressure the stock. Viavi ended the quarter with $1.08 billion in total net debt, against $508 million in cash, short-term investments, and restricted cash.