VIAVI Revenue Jumps 25% Amidst Rising Costs, Deeper Net Loss

TL;DR

**VIAV's revenue growth is impressive, but the widening net loss and increased debt are red flags; proceed with caution.**

AI Summary

VIAVI SOLUTIONS INC. reported a significant increase in total net revenue to $299.1 million for the three months ended September 27, 2025, up from $238.2 million in the prior year, primarily driven by a robust 30.3% surge in product revenue to $257.4 million. Despite this revenue growth, the company experienced a net loss of $21.4 million, a substantial increase from the $1.8 million net loss in the same period last year. This deterioration was largely due to a $3.8 million loss on convertible note extinguishment, a higher provision for income taxes of $19.0 million (up from $9.0 million), and increased operating expenses, with selling, general and administrative expenses rising to $104.2 million from $74.1 million. The acquisition of Inertial Labs, Inc. on January 28, 2025, for approximately $134.4 million in cash and up to $175.0 million in contingent consideration, broadened VIAVI's PNT solutions offering. Cash and cash equivalents increased to $543.8 million from $423.6 million, while long-term debt rose to $640.5 million from $396.3 million, reflecting new debt issuance of $149.1 million. The company also repurchased $30.0 million of common stock during the quarter.

Why It Matters

This 10-Q reveals a mixed bag for VIAVI investors: strong top-line growth, particularly in product revenue, but a concerning increase in net loss and operating expenses. The strategic acquisition of Inertial Labs positions VIAVI to capitalize on the growing PNT market, potentially enhancing its competitive edge against rivals like Keysight Technologies and Anritsu. However, the significant increase in long-term debt and the loss on convertible note extinguishment could signal financial strain or aggressive capital restructuring. Employees at Inertial Labs will see retention bonuses tied to revenue targets, while customers can expect an expanded portfolio of PNT solutions. The broader market will watch if VIAVI can translate its revenue momentum into profitability, especially given the increased tax provision and SG&A costs.

Risk Assessment

Risk Level: medium — The company reported a net loss of $21.4 million for the quarter, significantly higher than the $1.8 million loss in the prior year, indicating a challenge in translating revenue growth into profitability. Additionally, long-term debt increased substantially to $640.5 million from $396.3 million, raising concerns about leverage, especially with a $3.8 million loss on convertible note extinguishment.

Analyst Insight

Investors should closely monitor VIAV's next earnings call for management's strategy to improve profitability and manage its increased debt load. While the Inertial Labs acquisition offers growth potential, the current financial performance suggests a 'wait and see' approach before making new investments, focusing on whether the company can effectively integrate acquisitions and control rising operating expenses.

Financial Highlights

debt To Equity

N/A

revenue

$299.1M

operating Margin

2.5%

total Assets

$2,082.1M

total Debt

$791.6M

net Income

$-21.4M

eps

$-0.10

gross Margin

56.5%

cash Position

$543.8M

revenue Growth

+25.6%

Revenue Breakdown

Key Numbers

• $299.1M — Total net revenue (Increased from $238.2M in prior year, a 25.6% increase)
• $21.4M — Net loss (Increased from $1.8M net loss in prior year)
• $257.4M — Product revenue (Increased from $197.5M in prior year, a 30.3% increase)
• $104.2M — Selling, general and administrative expenses (Increased from $74.1M in prior year)
• $19.0M — Provision for income taxes (Increased from $9.0M in prior year)
• $3.8M — Loss on convertible note extinguishment (New expense not present in prior year)
• $134.4M — Cash paid for Inertial Labs acquisition (Initial cash consideration for the acquisition)
• $175.0M — Contingent consideration for Inertial Labs (Potential additional payment based on revenue targets)
• $640.5M — Long-term debt (Increased from $396.3M as of June 28, 2025)
• $30.0M — Repurchase of common stock (Amount spent on stock repurchases during the quarter)

Key Players & Entities

• VIAVI SOLUTIONS INC. (company) — Registrant in 10-Q filing
• Inertial Labs, Inc. (company) — Acquired company specializing in PNT solutions
• SEC (regulator) — Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• Nasdaq Stock Market LLC (regulator) — Exchange where common stock is registered
• Keysight Technologies (company) — Competitor in the PNT market
• Anritsu (company) — Competitor in the PNT market

FAQ

Risk Factors

• Convertible Note Extinguishment Loss [medium — financial]: The company incurred a $3.8 million loss on convertible note extinguishment during the quarter. This is a new expense that negatively impacted net income and was not present in the prior year period.
• Increased Tax Provision [medium — financial]: The provision for income taxes significantly increased to $19.0 million from $9.0 million in the prior year. This substantial rise contributed to the widened net loss.
• Rising SG&A Expenses [medium — operational]: Selling, general and administrative expenses increased by $30.1 million to $104.2 million from $74.1 million in the prior year. This rise in operating expenses, alongside other factors, contributed to the net loss.
• Increased Long-Term Debt [medium — financial]: Long-term debt increased substantially to $640.5 million from $396.3 million, reflecting new debt issuance of $149.1 million. This increases financial leverage and interest expense.
• Acquisition Integration Risk [medium — operational]: The acquisition of Inertial Labs, Inc. for approximately $134.4 million in cash plus contingent consideration introduces integration risks. Successful integration is crucial for realizing the expected benefits of the acquisition.

Industry Context

VIAVI Solutions operates in the test and measurement equipment sector, serving telecommunications, data center, and aerospace/defense markets. The industry is characterized by rapid technological advancements, requiring continuous R&D investment. Competition is intense, with players focusing on innovation and expanding product portfolios through strategic acquisitions to capture market share in areas like 5G deployment and cloud infrastructure.

Regulatory Implications

VIAVI must comply with various financial reporting regulations, including U.S. GAAP and SEC disclosure requirements, as evidenced by this 10-Q filing. Changes in tax laws or accounting standards could impact future financial reporting and tax liabilities. The company's international operations also expose it to varying regulatory environments.

What Investors Should Do

1. Monitor SG&A expense control
2. Analyze acquisition synergies
3. Assess debt management strategy
4. Evaluate tax provision impact

Key Dates

• 2025-09-27: End of the three-month period reported in the 10-Q — Represents the most recent financial performance data available for VIAVI Solutions Inc.
• 2025-01-28: Acquisition of Inertial Labs, Inc. — Expanded VIAVI's PNT solutions offering, with potential future impacts on revenue and expenses.
• 2025-06-28: End of Fiscal Year 2025 — Provides the prior period balance sheet data for comparison.

Glossary

Convertible Note Extinguishment

The act of retiring or paying off a convertible debt security before its maturity date, which can result in a gain or loss. (A $3.8 million loss from this activity significantly contributed to the company's net loss in the current period.)

Provision for income taxes

An estimate of the income tax liability a company expects to pay for a given period. (The provision more than doubled compared to the prior year, negatively impacting net income.)

Selling, general and administrative expenses (SG&A)

Costs incurred by a company for selling products and managing the business, excluding direct costs of production. (A significant increase in SG&A expenses contributed to the company's net loss despite revenue growth.)

Contingent Consideration

An additional payment made in a business acquisition that is dependent on the achievement of certain future performance targets. (VIAVI has potential future payments of up to $175.0 million related to the Inertial Labs acquisition, which could impact future cash flows.)

Accumulated Other Comprehensive Loss (AOCL)

A component of equity that includes unrealized gains and losses on certain investments, foreign currency translations, and pension adjustments that have not yet been realized in net income. (The company's AOCL increased due to foreign currency translation adjustments, impacting total equity.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, VIAVI Solutions Inc. demonstrated strong revenue growth, with total net revenue increasing by 25.6% to $299.1 million, largely driven by a 30.3% surge in product revenue. However, profitability deteriorated significantly, with the net loss widening from $1.8 million to $21.4 million. This was primarily due to a substantial increase in the provision for income taxes (up $10 million) and a significant rise in SG&A expenses (up $30.1 million), compounded by a new $3.8 million loss on convertible note extinguishment.

Key Financial Figures

• $0.001 — registered Common Stock, par value of $0.001 per share VIAV The Nasdaq Stock Marke

Filing Documents

• viav-20250927.htm (10-Q) — 1675KB
• termloancreditagreement.htm (EX-10.1) — 1596KB
• wf-viavixablamendmentno4an.htm (EX-10.2) — 2118KB
• viavisolutions-directorcom.htm (EX-10.3) — 28KB
• viavq1fy2610-q1ex311x302ceo.htm (EX-31.1) — 10KB
• viavq1fy262xex312x302cfo.htm (EX-31.2) — 11KB
• viavq1fy263xex321x906ceo.htm (EX-32.1) — 6KB
• viavq1fy264xex322x906cfo.htm (EX-32.2) — 6KB
• 0000912093-25-000153.txt ( ) — 14453KB
• viav-20250927.xsd (EX-101.SCH) — 60KB
• viav-20250927_cal.xml (EX-101.CAL) — 118KB
• viav-20250927_def.xml (EX-101.DEF) — 363KB
• viav-20250927_lab.xml (EX-101.LAB) — 808KB
• viav-20250927_pre.xml (EX-101.PRE) — 617KB
• viav-20250927_htm.xml (XML) — 1550KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 2 Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 2 Consolidated Statements of Operations for the Three Months Ended September 2 7 , 202 5 and September 28 , 2024 2 Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended September 2 7 , 2025 and September 28 , 2024 3 Consolidated Balance Sheets as of September 27, 2025 and June 28, 2025 4 Consolidated Statements of Cash Flows for the Three Months E nded September 2 7 , 2025 and September 28 , 2024 5 Consolidated Statements of Stockholders' Equity for the Three Months Ended September 2 7 , 2025 and September 28 , 2024 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 3 . Quantitative and Qualitative Disclosure About Market Risks 46 Item 4.

Controls and Procedures

Controls and Procedures 46

- OTHER INFORMATION

PART II - OTHER INFORMATION 48 Item 1.

Legal Proceedings

Legal Proceedings 48 Item 1A.

Risk Factors

Risk Factors 49 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 63 Item 3. Defaults Upon Senior Securities 63 Item 4. Mine Safety Disclosures 63 Item 5. Other Information 63 Item 6. Exhibits 64

SIGNATURES

SIGNATURES 65 1 Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements VIAVI SOLUTIONS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) (unaudited) Three Months Ended September 27, 2025 September 28, 2024 Revenues: Product revenue $ 257.4 $ 197.5 Service revenue 41.7 40.7 Total net revenue 299.1 238.2 Cost of revenues: Product cost of revenue 107.1 81.9 Service cost of revenue 16.1 16.9 Amortization of acquired technologies 6.9 3.3 Total cost of revenues 130.1 102.1 Gross profit 169.0 136.1 Operating expenses: Research and development 56.0 49.4 Selling, general and administrative 104.2 74.1 Amortization of other intangibles 1.5 1.1 Restructuring and related benefits ( 0.3 ) — Total operating expenses 161.4 124.6 Income from operations 7.6 11.5 Loss on convertible note extinguishment (Note 11) ( 3.8 ) — Interest and other income, net 1.3 3.2 Interest expense ( 7.4 ) ( 7.5 ) (Loss) income before income taxes and equity investment losses ( 2.3 ) 7.2 Provision for income taxes 19.0 9.0 Equity investment losses ( 0.1 ) — Net loss $ ( 21.4 ) $ ( 1.8 ) Net loss per share: Basic $ ( 0.10 ) $ ( 0.01 ) Diluted $ ( 0.10 ) $ ( 0.01 ) Shares used in per share calculations: Basic 222.9 222.0 Diluted 222.9 222.0 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements. 2 Table of Contents VIAVI SOLUTIONS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in millions) (unaudited) Three Months Ended September 27, 2025 September 28, 2024 Net loss $ ( 21.4 ) $ ( 1.8 ) Other comprehensive (loss) income: Net change in cumulative translation adjustment, net of tax ( 4.5 ) 30.3 Amortization of net actuarial gains and other pension adjustments — 0.1 Net change in accumulated other comprehensive loss (income) ( 4.5 ) 30.4 Comprehensive (loss) income $ ( 25.9 ) $ 28.6 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements. 3 Tabl

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation The financial information for Viavi Solutions Inc. (VIAVI, also referred to as the Company, we, our and us) for the three months ended September 27, 2025 and September 28, 2024 is unaudited and includes all normal and recurring adjustments the Company's management considers necessary for a fair statement of the financial information set forth herein. The accompanying Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual Consolidated Financial Statements. For further information please refer to the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 28, 2025. There have been no material changes to the Company's accounting policies during the three months ended September 27, 2025 as compared to the significant accounting policies presented in "Note 1. Basis of Presentation" of the Notes to the Consolidated Financial Statements included in the Company's Annual Report for the year ended June 28, 2025 on Form 10-K, filed with the SEC on August 11, 2025. The Consolidated Balance Sheet as of June 28, 2025 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results for the three months ended September 27, 2025 and September 28, 2024 may not be indicative of results for the fiscal year ending June 27, 2026 or any future periods. Fiscal Years The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company's fiscal 2026 is a 52-we

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 2. Recently Issued Accounting Pronouncements Accounting Standards Issued But Not Yet Adopted In July 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606: Revenue from Contracts with Customers, including those assets acquired in a business combination. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the current accounts receivable and current contract assets. This guidance is effective for fiscal years beginning after December 15, 2025 (fiscal 2027 for the Company), and interim periods within those annual reporting periods, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disaggregated disclosure of income statement expenses for public business entities. The objective of this guidance is to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization and depletion) in commonly presented expense captions such as Cost of revenues, Research and development (R&D) and Selling, general and administrative (SG&A). This guidance is effective for fiscal years

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3. Earnings Per Share The following table sets forth the computation of basic and diluted net loss per share ( in millions, except per share data ): Three Months Ended September 27, 2025 September 28, 2024 Numerator: Net loss $ ( 21.4 ) $ ( 1.8 ) Denominator: Weighted-average shares outstanding: Basic 222.9 222.0 Diluted 222.9 222.0 Net loss per share: Basic $ ( 0.10 ) $ ( 0.01 ) Diluted $ ( 0.10 ) $ ( 0.01 ) The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net loss per share because their effect would have been anti-dilutive ( in millions ): Three Months Ended September 27, 2025 (1)(2) September 28, 2024 (2) Restricted stock units 1.5 2.5 (1) The Company's 0.625 % Senior Convertible Notes due 2031 (2031 Notes) are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the "in-the-money" conversion benefit feature at the conversion price above $ 13.79 per share is payable in cash, shares of the Company's common stock or a combination of both at the Company's election. Refer to "Note 11. Debt" for more details. (2) The Company's 1.625 % Senior Convertible Notes due 2026 (2026 Notes) are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the "in-the-money" conversion benefit feature at the conversion price above $ 13.19 per share is payable in cash, shares of the Company's common stock or a combination of both at the Company's election. Refer to "Note 11. Debt" for more details. Note 4. Accumulated Other Comprehensive Loss The Company's accumulated other comprehensive loss consists of the accumulated net unrealized gains or losses on available-for-sale

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 5. Acquisitions Inertial Labs, Inc. On January 28, 2025, the Company acquired all of the equity of Inertial Labs, Inc. (Inertial Labs), a privately held company which specializes in resilient positioning, navigation and timing (PNT) solutions for aerospace, defense and industrial applications. The acquisition enables the Company to further broaden its solutions offering into the rapidly developing PNT landscape. The total purchase consideration included approximately $ 134.4 million paid in cash at closing and additional contingent consideration of up to $ 175.0 million, payable upon the achievement of certain revenue targets over the course of a four-year period beginning in January 2025. As of the acquisition date, the fair value of the contingent consideration was $ 116.2 million. The net cash paid for the acquisition, with purchase price adjustment, was $ 121.6 million, which reflects the cash paid less cash acquired of $ 16.5 million. From the contingent consideration of $ 175.0 million, $ 3.4 million shall be set aside for the payment of retention bonuses over the four-year earn-out period to key personnel and service providers, contingent on continued service to the Company. Any forfeited amount will be removed from the retention bonus pool and re-distributed to the shareholders of Inertial Labs upon the achievement of the earn-out targets. The portion of the estimated fair value of the earn-out liability allocated to the retention bonuses will be accounted for as post combination expense over the requisite service period. The cash consideration paid at closing included an escrow payment of $ 1.0 million subject to final net working capital adjustments. The Company paid $ 3.7 million in our fourth fiscal quarter of 2025 comprised of the net working capital holdback of $ 3.0 million and $ 0.7 million of the purchase price adjustment of $ 1.4 million. The remainder of the purchase price adjustmen

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Developed technology relates to products used for PNT solutions for aerospace, defense and industrial applications. The Company valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology. Significant assumptions used in the discounted cash flow analysis include (i) projected revenues, (ii) discount rate, and (iii) technology obsolescence rate. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition ( in millions, except useful life ): Estimated Useful Life Amount Developed technology 4 to 7 years $ 102.0 Customer relationship 6 years 9.6 Tradename 3 years 0.8 Backlog 2 years 5.2 Total identifiable assets acquired $ 117.6 Goodwill represents the excess of the preliminary estimated purchase consideration over the preliminary estimates of the fair value of the net tangible and intangible assets acquired and has been allocated to the Network and Service Enablement (NSE) segment. Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future PNT offerings. None of the goodwill recognized is deductible for U.S. income tax purposes. The Company has included the financial results of Inertial Labs in its Consolidated Financial Statements from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Consolidated Statements of Operations. Jackson Labs Technologies, LLC On October 5, 2022, the Company acquired all of the equity of Jackson Labs Technologies, LLC (Jackson Labs), a privately held company which specializes in PNT solutions for critical infrastructure serving both military and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 6. Balance Sheet and Other Details Contract Balances Gross receivables include both billed and unbilled receivables (including Contract assets). As of September 27, 2025, and June 28, 2025, the Company had total unbilled receivables of $ 14.6 million and $ 14.1 million, respectively. The Company also has short-term and long-term deferred revenues related to undelivered product and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed and accepted by the customer. The following table presents the activity related to deferred revenue ( in millions ): Three Months Ended September 27, 2025 Deferred revenue: Balance at be

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