Network testing solutions company Viavi Solutions (NASDAQ: VIAV) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 36.4% year on year to $369.3 million. On top of that, next quarter’s revenue guidance ($393 million at the midpoint) was surprisingly good and 10% above what analysts were expecting. Its non-GAAP profit of $0.22 per share was 17.2% above analysts’ consensus estimates.

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"VIAVI's performance for the second quarter came in at the high end of our guidance, driven by strength across most of our end markets. We expect the strong momentum and demand in the data center ecosystem and aerospace and defense applications to continue driving our anticipated growth this calendar year," said Oleg Khaykin, VIAVI's President and Chief Executive Officer.

Company Overview

Once known as JDS Uniphase before its 2015 rebranding, Viavi Solutions (NASDAQ: VIAV) provides testing, monitoring and assurance solutions for telecommunications, cloud, enterprise, military, and other critical networks and infrastructure.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Viavi Solutions grew its sales at a sluggish 2.3% compounded annual growth rate. This fell short of our benchmarks and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Viavi Solutions’s annualized revenue growth of 10.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

This quarter, Viavi Solutions reported wonderful year-on-year revenue growth of 36.4%, and its $369.3 million of revenue exceeded Wall Street’s estimates by 1.1%. Company management is currently guiding for a 38% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 18.6% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Viavi Solutions was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.5% was weak for an industrials business. This result is surprising given its high gross margin as a starting point.

Looking at the trend in its profitability, Viavi Solutions’s operating margin decreased by 9.7 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Viavi Solutions’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Viavi Solutions generated an operating margin profit margin of 3.1%, down 5.1 percentage points year on year. Since Viavi Solutions’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Viavi Solutions, its EPS declined by 3.1% annually over the last five years while its revenue grew by 2.3%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into Viavi Solutions’s earnings to better understand the drivers of its performance. As we mentioned earlier, Viavi Solutions’s operating margin declined by 9.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Viavi Solutions, its two-year annual EPS growth of 30.8% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q4, Viavi Solutions reported adjusted EPS of $0.22, up from $0.13 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Viavi Solutions’s full-year EPS of $0.65 to grow 13.5%.

Key Takeaways from Viavi Solutions’s Q4 Results

We were impressed by Viavi Solutions’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. On the other hand, its EBITDA missed. Overall, this print had some key positives. The stock traded up 2.7% to $21.61 immediately following the results.

Sure, Viavi Solutions had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).