Network testing solutions company Viavi Solutions (NASDAQ: VIAV) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 25.6% year on year to $299.1 million. On top of that, next quarter’s revenue guidance ($365 million at the midpoint) was surprisingly good and 22.1% above what analysts were expecting. Its non-GAAP profit of $0.15 per share was 14.2% above analysts’ consensus estimates.

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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

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Viavi Solutions struggled to consistently increase demand as its $1.15 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Viavi Solutions’s annualized revenue growth of 4.7% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Viavi Solutions reported robust year-on-year revenue growth of 25.6%, and its $299.1 million of revenue topped Wall Street estimates by 1.7%. Company management is currently guiding for a 34.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 27.6% 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 spur better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Viavi Solutions has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.1%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Viavi Solutions’s operating margin decreased by 8 percentage points over the last five years. Even though its historical margin was healthy, shareholders will want to see Viavi Solutions become more profitable in the future.

In Q3, Viavi Solutions generated an operating margin profit margin of 2.5%, down 2.3 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 5.9% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Diving into the nuances of Viavi Solutions’s earnings can give us a better understanding of its performance. As we mentioned earlier, Viavi Solutions’s operating margin declined by 8 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 16.9% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q3, Viavi Solutions reported adjusted EPS of $0.15, up from $0.06 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 $0.56 to grow 27%.

Key Takeaways from Viavi Solutions’s Q3 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. Zooming out, we think this was a solid print. The stock remained flat at $18.15 immediately after reporting.

Should you buy the stock or not? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.