VIAVI Solutions (VIAV) Positioned for Growth

by MarketNewsData

Date: Dec 15, 2025
Rating: HOLD
Risk: High (Leverage + Cyclicality)
Time Horizon: 6–12 months

Investment Summary

VIAVI has executed a credible operational turnaround, transitioning from low-growth telecom cyclicality toward higher-margin lab and data-center-driven testing. Revenue momentum and margin expansion are real, but the stock has already re-rated materially (~75% YTD). Elevated leverage following recent M&A and significant insider selling activity cap near-term upside. Risk/reward is balanced at current levels.

Business Overview

VIAVI provides test, measurement, and assurance solutions across:

  • Network & Service Enablement (NSE): Fiber, wireless, and high-speed ethernet testing (400G / 800G / 1.6T)
  • Optical Security & Performance (OSP): Anti-counterfeiting, 3D sensing, and optical components

The strategic shift toward lab and production testing supports structurally higher margins versus traditional field instruments.

Fundamentals

  • FY25 Revenue: ~$1.08B (+8% YoY) with acceleration exiting the year
  • Q4 FY25 Revenue: ~$291M (+15% YoY)
  • Margins: Non-GAAP operating margin expanded to ~14–15%, reflecting operating leverage
  • Earnings: FY25 non-GAAP EPS up ~40%+ YoY
  • Cash Flow: Improving, though partially offset by higher interest expense

Strategic Developments

  • Acquisition of Spirent High-Speed Ethernet Assets
    • Strengthens competitive position in hyperscaler lab testing
    • Improves long-term product mix and margin profile
    • Introduces integration and execution risk in the near term

Valuation

  • P/S: ~3.5x TTM (discount to Keysight ~6x, consistent with lower recurring revenue mix)
  • Forward P/E: ~38x (above historical 15–20x range)
  • Implication: Current valuation reflects high confidence in sustained execution

Balance Sheet & Capital Structure

  • Pro-Forma Net Leverage: ~4.5–5.0x Debt / EBITDA
  • Assessment: Leverage is manageable but limits valuation upside until a visible de-leveraging path (<3x) is established

Insider Activity (Fact-Based Disclosure)

CEO – Oleg Khaykin

  • Multiple S – Sale transactions between Dec 1–5, 2025
  • Individual blocks of approximately 40K–58K shares
  • Sale prices ranged from $17.10 to $17.81
  • Aggregate shares sold: ~268K

CFO – Ilan Daskal

  • Multiple S – Sale transactions on Dec 2–3, 2025
  • Largest single transaction: 105,191 shares at ~$17.43
  • Aggregate shares sold: ~170K

Assessment: Insider activity is a material disclosure item due to size and timing, but does not, on its own, alter the fundamental thesis.

Thesis Drivers (Bull Case)

  • Structural mix shift toward higher-margin lab and production testing
  • AI data-center capex driving demand for high-speed ethernet testing
  • Operating leverage supporting EPS growth above revenue growth

Key Risks

  • Elevated leverage in a cyclical capex environment
  • Potential slowdown in hyperscaler spending
  • Integration risk related to Spirent asset acquisition
  • Insider selling acting as a near-term valuation overhang

Catalysts

Near-Term

  • Q2 FY26 earnings: margin sustainability and integration progress
  • Commentary on debt reduction trajectory

Medium-Term

  • Net leverage trending toward <3x
  • Adoption of 1.6T ethernet testing platforms
  • Stabilization in insider trading activity

Conclusion

VIAVI is a confirmed operational turnaround, but no longer undervalued. At current levels, the stock requires continued margin expansion and balance-sheet improvement to justify further upside.

Recommendation: HOLD
Fair Value Range:

  • Bear: $14–15
  • Base: $17–19
  • Bull: $22–24 (requires margin expansion and de-leveraging)

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