Viavi Solutions Stock: Is Growth Worth the Premium Valuation Now?

Viavi Solutions Inc. VIAV enters fiscal 2027 with a sharp improvement in revenue, earnings and operating margins. Fiscal 2026 revenues rose 40% year over year to $1.5 billion, while earnings increased 112.8% to $1 per share. The Zacks Consensus Estimate calls for fiscal 2027 revenues of $1.874 billion, implying 23.5% growth, while earnings are projected to rise to $1.22 per share.

The growth outlook is supported by data center and AI infrastructure demand, broader testing capabilities and the integration of Spirent assets. However, VIAV's valuation remains above its five-year median, while its Zacks Rank and Style Scores point to a less favorable quantitative setup.

VIAV's Growth Profile Is Accelerating

Viavi's fiscal 2026 results show a meaningful change in the company's growth profile. Revenues reached $1.518 billion, up 40% from fiscal 2025, with Network and Service Enablement (NSE) revenues rising 52.3% to $1.183 billion. NSE accounted for 77.9% of total fiscal 2026 revenues.

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The Zacks Consensus Estimate projects fiscal 2027 revenues of $1.874 billion, up 23.5% from fiscal 2026. The consensus EPS estimate is $1.22, compared with $1.00 in fiscal 2026. Estimates for fiscal 2028 call for revenues of $2.082 billion and EPS of $1.50, indicating that analysts expect the growth trajectory to extend beyond the current fiscal year.

The near-term outlook is also supported by management's fiscal first-quarter 2027 guidance. Viavi expects revenues of $450-$460 million and non-GAAP EPS of 40-42 cents. Management expects NSE revenues of $360-$368 million, compared with $353.9 million in the fiscal fourth quarter.

Viavi Solutions Shows Strong Earnings Momentum

The fiscal fourth quarter provided further evidence of operating leverage. Viavi reported revenues of $443.1 million, up 52.5% year over year, while non-GAAP EPS of 34 cents exceeded the Zacks Consensus Estimate of 30 cents by 13.3%. Revenue also topped the consensus mark by 2.3%.

Non-GAAP operating margin expanded to 24.0% from 14.4% a year earlier, a 960-basis-point improvement. Non-GAAP operating income more than doubled to $106.4 million. Higher revenues, increased volume and favorable product mix helped improve profitability.

NSE provided much of the operating leverage. Fourth-quarter NSE revenue increased 69.2% year over year to $353.9 million, while its gross margin rose 190 basis points to 64.1%. NSE operating margin reached 20%, up 1,540 basis points year over year.

VIAV's Valuation Limits the Upside Case

The earnings outlook is improving, but the stock already reflects part of that growth. VIAV trades at 34.4X forward 12-month earnings, above its five-year median of 27.5X. The shares have traded between 12.3X and 65.9X over the past five years, placing the current multiple above the historical midpoint.
 

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The valuation premium becomes more relevant when compared with broader benchmarks. VIAV's forward earnings multiple is below the 40.2X average for the Zacks sub-industry but above the 21.5X sector multiple and 20.7X multiple for the S&P 500.

Among its industry peers, VIAV's quantitative profile is mixed. Knowles Corporation KN carries a Zacks Rank #2 (Buy) and an Outperform recommendation, while ADTRAN Holdings ADTN carries a Zacks Rank #4 (Sell) and an Underperform recommendation. VIAV's Zacks Rank #3 (Hold) therefore places it between these two peers on the Zacks short-term ranking scale. The comparison highlights that the industry's growth opportunities do not translate into equally favorable quantitative setups across individual stocks.

The valuation data also show a price-to-book multiple of about 7.0X. That leaves less room for execution setbacks if revenue growth or margin expansion slows. The Zacks price target of $47 reflects 8.9X forward 12-month earnings, substantially below the stock's current forward multiple.

Viavi Solutions Gains From Spirent Integration

The integration of acquired Spirent product lines has broadened Viavi's testing portfolio. The company cited contributions from certain Spirent product lines as one of the drivers of fourth-quarter NSE growth, alongside demand from the data center ecosystem and aerospace and defense markets.

The acquired high-speed Ethernet and network security testing assets also expand Viavi's addressable market across enterprise and data center applications. New offerings, including Observer Threat Forensics and the CyberFlood product family, extend the portfolio into network validation, security testing and performance assurance.

The opportunity is tied closely to rising network complexity. Viavi has added capabilities such as PCIe 7.0 analysis, the CyberFlood CF1000 and its Ultra Ethernet Transport validation platform to address AI infrastructure, encrypted traffic and next-generation networking requirements. These products expand the company's potential market, although the financial contribution from newer offerings and acquired assets will depend on customer adoption and execution.

VIAV's Rank and Style Scores Favor a Cautious View

VIAV currently carries a Zacks Rank #3 (Hold). Its Zacks Style Scores include a Value Score of D, Growth Score of D, Momentum Score of D and VGM Score of F. The stock also has a Neutral Zacks Recommendation for the six- to 12-month horizon.

The Zacks Rank focuses on earnings estimate revision trends over the one- to three-month horizon, while the Zacks Style Scores provide complementary measures of value, growth and momentum. The VGM Score combines the weighted individual Style Scores.

The peer comparison further reinforces the cautious view. KN's Zacks Rank #2 (Buy) and Outperform recommendation contrast with ADTN's Zacks Rank #4 and Underperform recommendation, while VIAV sits in the middle with a Hold ranking. This suggests investors should evaluate VIAV not only on its strong operating growth but also on how its valuation and quantitative characteristics compare with other communication-components stocks.

The weak Style Scores are notable because the framework favors higher grades, with A and B scores providing the more favorable profiles. For a Zacks Rank #3 stock, the D scores and F VGM Score suggest that the company's improving fundamentals have not translated into an across-the-board favorable quantitative setup.

VIAV therefore presents a growth-versus-valuation decision rather than a straightforward buy case. Revenue and EPS are expected to grow at a healthy pace, margins are expanding and Spirent-related capabilities broaden the company's exposure to data center and cybersecurity testing. At the same time, the forward valuation sits above its five-year median, while the Zacks Rank #3 and weak Style Scores argue for waiting for a more favorable valuation or clearer improvement in the stock's quantitative profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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