Viavi Solutions (VIAV) Rosenblatt's 6th Annual Technology Summit: The Age of AI (Part II) summary

Market trends and technology evolution

• Data center segment now represents about 50% of NSE revenues, with rapid growth driven by 800G and 1.6T transceiver testing and increasing test complexity as speeds rise.

• Test content and equipment needs are expanding with new technologies like co-packaged optics (CPO), hollow-core, and multi-core fiber, opening new manufacturing markets.

• 1.6T test equipment has seen early production adoption, with a 50% ASP uplift over 800G, and is backward compatible, improving cost efficiency per bit.

• Optical circuit switch (OCS) testing is a high-share, high-growth area, with test content per unit increasing as complexity rises.

• CPO and NPO technologies are advancing, with CPO offering significant performance and power advantages, and driving higher test content per port.

Business segment performance and growth drivers

• Data center and aerospace & defense now account for over two-thirds of NSE revenues, with data center ecosystem growth outpacing traditional telco.

• Aerospace and defense business has more than doubled in two years, driven by resilient PNT solutions and the rise of drones and autonomous systems.

• OSP segment remains steady with mid to high single-digit growth, benefiting from new applications in consumer electronics and aerospace.

• Field instrumentation business is now over 40% data center driven, as hyperscalers invest in advanced fiber monitoring and automation.

• Wireless remains a laggard but is expected to see renewed growth as AI inference moves to the edge, requiring upgrades in latency and bandwidth.

Financial outlook and strategic initiatives

• Sequential revenue growth suggests reaching $500 million per quarter ahead of previous targets, possibly as soon as the next year if demand holds.

• Operating margin could reach high 30% range at $500 million revenue, supported by strong operating leverage and low incremental tax rates.

• Balance sheet strengthened by recent equity offering and debt reduction, with significant NOLs converted to amortizable assets.

• M&A strategy remains disciplined, focusing on high-value, synergistic deals like DORC and Inertial Labs, with preference for organic high growth.

• Upcoming presence at ECOC conference in Malaga to showcase latest technologies and engage with clients.