Viavi's Data-Center Transformation Is Paying Off — Now the Street Has to Believe It

NSE growth hits 69%, data center crosses 50% of segment mix, and the $500M quarterly milestone gets pulled forward — even as the AI-adjacent tape sells off.

VIAV · Earnings Call · 2026-08-05

A Pivot Reaching Escape Velocity

Viavi Solutions has quietly become one of the more interesting leverage plays on the AI data-center build-out — and its fiscal Q4 results make the magnitude of that shift explicit. The company's data center ecosystem business — spanning high-performance semis, optical modules, network equipment makers and hyperscalers — is now roughly half of NSE revenue (which itself grew ~69% year-over-year). CEO Oleg Khaykin was characteristically direct: “our data center is now running at about 50% of the NSE revenue. A&D is, I would say, probably about 17%, and the rest is service provider business.” — Oleg Khaykin, President and CEO · 2026-08-05 That is a fundamental re-weighting of the company. A year ago the mix was flipped: at the October 2025 call, Khaykin described the portfolio as “45% service provider, 40% data center and 15% aerospace.” — Oleg Khaykin, President and Chief Executive Officer · 2025-10-29 By January the split had moved to “40% service provider, 45% data center, around 15% aerospace and defense.” — Oleg Khaykin, President and CEO · 2026-01-28 The trend toward data-center acceleration is unmistakable — a step-function repricing of what this company actually sells, not a slow drift. The growth is critically organic in the core. Even stripping out the acquired Spirent product lines, the data-center business has more than doubled year-over-year, per Khaykin: “that business, even if I take out Spirent, it's more than doubled for us year-over-year.” — Oleg Khaykin, President and CEO · 2026-08-05 This is the kind of acceleration that turns a test-and-measurement supplier into a compound-growth story.

The Milestone Gets Pulled Forward

The clearest signal of confidence is the pulled-forward $500M quarterly revenue milestone.

I would say this quarter, I think the $500 million will likely come a bit sooner than what we were originally thinking, given the trajectory and the growth.
Oleg Khaykin, President and CEO · 2026-08-05

Originally pegged to exiting fiscal 2028, management now sees it landing sometime in calendar 2027 — roughly a year earlier. That is a meaningful upgrade in trajectory, and it is consistent with the fundamentals — revenue has climbed from $271M in the December quarter to $407M in the March quarter (up 43% YoY), heading to a guided $450–460M in the September quarter. The forward catalysts are co-packaged optics and optical circuit switching — areas where Viavi has a structural testing-intensity advantage. The company's own keyword history flagged this early: co package optics was the top keyword with high momentum in the April 2026 quarter. On the current call, Khaykin pushed back on yield-scare narratives: “CPO and all that thing is moving forward. Are there issues? Of course, there are... I have POs to show for that.” — Oleg Khaykin, President and CEO · 2026-08-05 He framed the CPO economics neatly in terms of nanometer silicon — co-packaging effectively turns a 3nm chip into a 2nm-class performer to justify the complexity and yield risk.

Momentum vs. The Tape

Here's the tension: the fundamental story is accelerating, but the stock is not participating right now. Price-to-revenue sits at 5.7x, up 139% year-over-year — the market has already re-rated Viavi as a growth name. But the tape shows VIAV down ~30% from its May 2026 peak of $55.33, and the recent 90-day price series remains in decline. That drop is part of a broader selloff in the AI-adjacent complex: AI data centers was among the 30-day decliners across a wide basket of tickers, alongside "high bandwidth memory," "High performance computing," and "co packaged optics." So the debate is now about durability: can data-center-driven growth hold as the market questions AI capex plans? Management's answer is yes, and the operating leverage supports it. On the prior call Khaykin described the incremental drop-through as “every incremental dollar just drops right to the big chunk of it drops to the bottom line.” — Oleg Khaykin, President and Chief Executive Officer · 2025-10-29 This quarter he extended the trajectory: “mid- to high 20% operating margins in a not-too-distant future is probably the expectation.” — Oleg Khaykin, President and CEO · 2026-08-05 With operating margin at 24% in Q4 (up 960 bps YoY) and guidance at 27.1% for Q1, the margin expansion is real — the business is dropping through at a higher rate as data-center volumes scale.

Tariff Refunds: A Small but Telling Theme

One notable new item in the quarter is the tariff refund, which surfaced as the company's #1 keyword this period — and is part of a broader market theme around IEEPA refund across many reporters this cycle. Viavi received $1.5M in Q4 and $11M in July, a net benefit that modestly aided operating margin (about 100 bps of the Q1 guide). It's small in absolute terms — but it signals the tariff-noise tail is beginning to reverse, and it's a theme that recurs across this earnings season, with many other companies booking similar refunds. There are real caveats. Effective net cash is still negative at -$323M following the Spirent deal, and the follow-on offering added dilution (share count up from ~227M to ~261M). R&D spend rose 42% YoY as the company reinvested for the 1.6T/3.2T cycle. But the direction is clear: Viavi has successfully repositioned itself from a cyclical telecom test supplier to a first-mover supplier to the data-center optical build-out, and it is now being paid for that positioning in both growth and margins. The question is whether the tape's current AI de-rating presents an entry, or a warning about the cycle's maturity — either way, this is a name in genuine motion.