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Viavi Solutions Inc. VIAV reported solid third-quarter fiscal 2025 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The company reported an increase in revenues backed by healthy growth in the Network Enablement (NE) and Service Enablement (SE) segments. Management’s strong emphasis on various markets such as wireless & fiber, optical transport, Ethernet, broadband access, video test and storage network testing are key growth drivers. However, a constrained spending environment owing to macroeconomic challenges is worrisome.
Net Income
On a GAAP basis, net income in the quarter was $19.5 million or 9 cents per share against a net loss of $24.6 million or a loss of 11 cents per share in the year-ago quarter. The significant improvement in GAAP earnings was primarily due to top-line growth.
Non-GAAP net income improved to $33.9 million or 15 cents per share from $13.2 million or 6 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 3 cents.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Viavi Solutions Inc. price-consensus-eps-surprise-chart | Viavi Solutions Inc. Quote
Revenues
Quarterly revenues were $284.8 million, up 15.8% year over year. The healthy demand in the NE and SE segments cushioned the top line. Revenues beat the Zacks Consensus Estimate of $282 million.
Net sales in the NE segment were $188 million, up from $151.7 million in the year-ago quarter. The 23.9% growth was primarily driven by the strong demand from service providers and network equipment manufacturers for fiber lab and production products.
Revenues from the SE segment were $20.2 million, up 11.6% year over year, owing to healthy demand trends.
Optical Security and Performance Products (OSP) revenues increased marginally to $76.6 million from $76.2 million, primarily due to strength in anti-counterfeiting products.
Net sales from America contributed $108.1 million to revenues, up from $88.3 million reported a year ago. Revenues from Asia-Pacific were $100.7 million, up 12.3% from the year-earlier quarter’s tally of $89.7 million. Revenues from EMEA increased to $76 million from $68 million a year ago.
Other Details
In the third quarter of fiscal 2025, the non-GAAP gross margin was 60%, up 210 basis points (bps) from the prior-year quarter. Non-GAAP gross margin in the NE segment was 63.4%, up 190 bps led by higher volume and product mix. SE segment’s gross margin decreased to 59.9% from 60.8% in the prior-year quarter due to unfavorable product mix. OSP segment’s gross margin increased to 51.6% from 50.1%. The year-over-year improvement was primarily driven by lower volume and product mix.
Total non-GAAP operating margin increased 740 bps year over year to 16.7%. Operating margin in the Network and Service Enablement (NSE) business increased 1,220 bps to 10.4%, driven by a higher gross margin fall through and a $4 million government R&D grant in Europe. OSP segment’s operating margin decreased to 33.9% from 34.3% in the prior-year quarter.