VIAVI Solutions — First Quarter Fiscal 2027 Earnings Summary

Financial Performance:

• Net revenue reached $469.3 million, representing a 56.9% year-over-year increase and a 5.9% sequential increase from Q4 FY2026.
• GAAP operating margin was 17.4%, an improvement of 1,490 basis points year-over-year and 360 basis points sequentially.
• Non-GAAP operating margin was 29.0%, an improvement of 1,270 basis points year-over-year and 500 basis points sequentially.
• GAAP net income was $76.0 million, a 455.1% increase year-over-year compared to a net loss of $21.4 million in Q1 FY2026.
• Non-GAAP net income was $125.8 million, a 262.5% increase year-over-year.
• GAAP diluted EPS was $0.29, up 390.0% year-over-year.
• Non-GAAP diluted EPS was $0.47, up 213.3% year-over-year.
• Gross margin was 61.2% GAAP (up 470 bps YoY) and 64.4% Non-GAAP (up 430 bps YoY).
• Cash flow from operations generated $104.7 million during the quarter.
• Total cash, short-term investments, and short-term restricted cash held as of October 3, 2026, was $535.3 million.
• Deferred revenue was $98.1 million as of October 3, 2026, down from $101.9 million at the end of the prior quarter.
• Total debt included $250.0 million in 0.625% Senior Convertible Notes and $400.0 million in 3.75% Senior Notes, with a total net carrying value of $642.5 million.

Guidance and Future Outlook:

• For the second quarter of fiscal 2027 ending January 2, 2027, the company expects net revenue between $505 million and $515 million.
• Non-GAAP EPS is expected to be between $0.50 and $0.52 for the second quarter.
• Management anticipates growth momentum to continue driven by market demand in data center and aerospace and defense end markets.
• The company noted it cannot provide a meaningful GAAP reconciliation for the upcoming quarter due to the inherent difficulty in forecasting the timing and amounts of certain reconciling items, including restructuring, acquisition, and integration charges.

Business Segments and Product Lines:

• Network and Service Enablement segment revenue was $376.1 million, up 74.1% year-over-year and 6.3% sequentially.
• Optical Security and Performance Products segment revenue was $93.2 million, up 12.2% year-over-year and 4.5% sequentially.
• Network and Service Enablement gross margin was 66.2%, while Optical Security and Performance Products gross margin was 57.1%.
• Geographic revenue distribution for the quarter was 43.9% Americas, 34.7% Asia-Pacific, and 21.4% EMEA.

Market and Competitive Landscape:

• The company operates in test and measurement and optical technologies, serving data center ecosystems, communication networks, military, aerospace, railway, and first responder communications.
• Management cited inherent market demand and expanding opportunities in data center and aerospace/defense as key growth drivers.
• The press release mentions the acquisition of the high-speed ethernet, network security, and channel emulation testing business of Spirent Communications plc as a factor in future expectations.

Risks and Challenges:

• Risks include limited visibility across product lines, quarter-over-quarter product mix fluctuations affecting profitability, and industry/customer base consolidations.
• Potential challenges include competitive pressures, deceleration in demand for new products, and delays in technology roll-outs such as 3D sensing.
• Supply chain constraints, component shortages, and manufacturing disruptions due to climate conditions (e.g., wildfires, droughts in Arizona) are noted.
• Geopolitical tensions, trade wars, sanctions, and cyber-attacks pose risks to the supply chain and operations.
• The company faces risks related to the integration of acquired businesses and realizing expected synergies.

Management Commentary and Tone:

• Oleg Khaykin, President and CEO, stated that fiscal 2027 started strong with first-quarter performance exceeding the high end of guidance.
• Management expressed confidence in continued growth momentum driven by specific end markets.
• The tone is positive, highlighting significant year-over-year improvements in revenue, margins, and earnings.

Other Key Points:

• On November 1, 2026, the Board of Directors authorized a new stock repurchase program allowing the repurchase of up to $500 million of common stock.
• This new authorization is in addition to the $300 million previously authorized under the 2022 Repurchase Plan, which had approximately $18.4 million remaining.
• The company generated a $5.0 million gain on proceeds from an insurance settlement included in the quarter's results.
• The financial results presented are preliminary and subject to change prior to the filing of the Form 10-Q.