Viavi Solutions Inc. Q1 FY2026 Earnings Call

Good afternoon. My name is Jale, and I will be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions Fiscal First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Vibhuti Nayar, Head of Investor Relations. Please go ahead.

Thank you, Jale. Good afternoon, everyone. And welcome to Viavi Solutions Fiscal First Quarter of 2026 Earnings Call. My name is Vibhuti Nayar, Head of Investor Relations for Viavi Solutions. With me on today's call is Oleg Khaykin, our President and CEO; and Ilan Daskal, our CFO. Please note this call will include forward-looking statements about the company's financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings. The forward-looking statements including the guidance that we provide during this call and our expectations regarding the acquired business are valid only as of today. Viavi undertakes no obligation to update these statements. Please also note that unless we state otherwise, all results discussed on this call, except revenue, are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release. The release as well as our supplemental earnings slides, which include historical financial tables, are available on Viavi's website at www.investor.viavisolutions.com. Lastly, we are recording today's call and will make the recording available on our website by 4:30 p.m. Pacific Time this evening. With that, I would now like to turn the call over to Ilan.

Thank you, Vibhuti. Good afternoon, everyone. Now I would like to review the results of the first quarter of fiscal year 2026. Net revenue for the quarter was $299.1 million which is above the high end of our guidance range of $290 million and $298 million. Revenue was up 3% sequentially and on a year-over-year basis was up 25.6%. Operating margin for the first fiscal quarter was 15.7%, above the high end of our guidance range of 14.6% to 15.4%. Operating margin increased 130 basis points from the prior quarter and on a year-over-year basis was up 570 basis points. EPS at $0.15 was also above the high end of our guidance range of $0.13 to $0.14, and was up $0.02 sequentially. On a year-over-year basis, EPS was up $0.09. Moving on to our Q1 results by business segment. NSE revenue for the first fiscal quarter came in at $216 million, which is above the high end of our guidance range of $208 million to $214 million. On a year-over-year basis, NSE revenue was up 35.5% as a result of strong demand for lab and production as well as field products and was mainly driven by data center ecosystem as well as the acquisition of Inertial Labs. NSE gross margin for the quarter was 63%, which is 210 basis points higher on a year-over-year basis and primarily driven by higher volume and favorable product mix. NSE's operating margin for the quarter was 7.5% compared to negative 4.6% during the same quarter last year. NSE operating margin was above the high end of our guidance range of 5.4% to 6.2% primarily driven by higher fall-through. OSP revenue for the first fiscal quarter came in at $83.1 million, which is in line of our guidance range of $82 million to $84 million, and was up 5.5% on a year-over-year basis. The increase in revenue for the quarter was primarily a result of strength in Anti-Counterfeiting and Other products. OSP gross margin was 52.3%, down 300 basis points from the same period last year and was mainly due to unfavorable product mix. OSP's operating margin was 37.1%, which is below our guidance range of 38.1% to 38.5% due to product mix and higher manufacturing costs. The operating margin decreased 250 basis points on a year-over-year basis. Moving on to the balance sheet and cash flow. Total cash and short-term investments at the end of Q1 were $549.1 million compared to $429 million in the fourth quarter of fiscal 2025. Cash flow from operating activities for the quarter was $31 million versus $13.5 million in the same period last year. CapEx for the quarter was $8.5 million versus $7.3 million in the same period last year. During the quarter, we successfully refinanced our $250 million, 1.625%, 3-year convertible notes due in March 2026 with $250 million, 0.625% 5.5 years convertible notes due in March 2031. As part of this transaction, existing convert holders exchanged about $100 million for the new convert and the remaining $150 million raised will serve to pay off the balance of the March 2026 convert. This remaining $150 million is included in the cash balance of $549 million at the end of the first fiscal quarter of 2026. In conjunction with this transaction, we purchased approximately 2.7 million shares of our stock for about $30 million. We have almost $170 million remaining under our current authorized share repurchase program. The fully diluted share count for the quarter was 227.9 million shares up from 224 million shares in the prior quarter and versus 228.6 million shares in our guidance for the first fiscal quarter. Moving on to our guidance for the second quarter of fiscal 2026. In mid-October, we successfully closed the acquisition of Spirent's High-Speed Ethernet, network security and channel emulation business lines from Keysight. The acquisition of these business lines is expected to add about $200 million of annual revenue run rate, which is above our prior estimate of around $188 million. We also concurrently closed the previously announced $600 million Term Loan B, which was used to fund the transaction at close as well as general corporate purposes. In addition to the acquisition of Spirent's business lines, we expect the second fiscal quarter revenue for Viavi to reflect continued strength in many of our end markets. Our guidance includes financial performance of Spirent's business line for approximately 10 weeks. For NSE, we expect continued strong demand for lab and production as well as field products driven by the data center ecosystem. For OSP, we expect quarter-over-quarter revenue to be lower, in line with seasonality of lower demand for both anti-counterfeiting and 3D sensing. For the second fiscal quarter of 2026, we expect Viavi revenue in the range of $360 million and $370 million. We expect total NSE revenue between $283 million and $293 million, including revenue from Spirent between $45 million and $55 million. OSP revenue is expected to be approximately $77 million. Operating margin for Viavi is expected to be 17.9%, plus or minus 60 basis points. Total NSE operating margin is expected to be 13.6%, plus or minus 70 basis points. This includes Spirent's contribution, which is expected to be slightly accretive to existing NSE margin for this quarter. OSP operating margin is expected to be 34%, plus or minus 50 basis points. EPS is expected to be between $0.18 and $0.20. Viavi stand-alone EPS is expected to be about $0.18 and we estimate Spirent contribution to EPS is in the range of $0.00 to $0.02 after allocating pro-rata interest on debt. Historically, Spirent's agency revenue has been stronger in the second half of the calendar year. This strength in revenue is reflected in the guidance for the fiscal second quarter. We currently plan to leverage the complementary product portfolio and capabilities and record NSE as one business segment going forward. Our tax expense for the second quarter is expected to be around $10 million, plus or minus $500,000 as a result of jurisdictional mix. We expect other and other income and expense to reflect a net expense of approximately $12.2 million, which increased mainly due to the interest on the TLB, and the share count is expected to be around 228.7 million shares. With that, I will turn the call over to Oleg.

Thank you, Ilan. The first quarter of fiscal '26 saw the continuation of strong momentum from the fourth quarter of fiscal '25 coming in above the high end of our guidance. It was also significantly up year-on-year and countercyclically up quarter-on-quarter. NSE revenue in Q1 grew approximately 35% year-on-year, primarily driven by strong demand from the data center ecosystem in aerospace and defense customers. The data center ecosystem, which includes high-performance semiconductors, optical modules, and NAMs drove strong demand for lab and production products in support of the AI data center build-out. We saw strong demand across all optical networking product lines, including the 800-gig and 1.6 terabit Ethernet tests, chip-to-chip interconnects, and a broad range of production test equipment. In addition, we are now also seeing a growing demand for our traditional field instruments by hyperscalers as they build out and operate their new AI data centers. We expect this strong momentum to continue well into fiscal 2026. Lastly, with the recent acquisition of the highly complementary Spirent's High-Speed Ethernet product line, we have further strengthened our position in the data center ecosystem, significantly increasing our business footprint there. Our Aerospace and Defense business also saw another strong quarter of growth, driven by continued high-end demand for our positioning, navigation, and timing products. We expect the strong demand to continue throughout fiscal 2026. The service provider business was generally stable during the quarter. The gradual recovery in fiber was mostly offset by the continued soft demand for wireless products. We expect this trend to continue in the medium term. Looking ahead, we expect strong quarter-on-quarter growth in NSE driven by both the continued strong demand from the data center ecosystem and aerospace and defense customers for Viavi classic products and the incremental revenue from the recently acquired Spirent product lines. Now turning to OSP. OSP saw strong year-on-year revenue growth, driven mostly by recovery in anti-counterfeiting in other products. The demand for 3D sensing was in line with seasonal expectations. We expect fiscal Q2 to be down quarter-on-quarter, in line with the seasonally lower demand for both anti-counterfeiting and 3D sensing products. In summary, we expect the strong start in Q1 to continue throughout fiscal '26, supported by the stabilization and recovery of our mature end markets, including the service providers, anti-counterfeiting pigments, and 3D sensing. And the continued strong demand by the data center ecosystem and aerospace and defense customers. In conclusion, I would like to welcome our new employees to Viavi and thank the Viavi team for its continued strong innovation and execution. Lastly, I would also like to thank our customers and shareholders for their continued support. With that, I will now turn it back to the operator for the Q&A.

Your first question comes from the line of Ruben Roy of Stifel.

Great to see the progress and congrats on the closing of the Spirent business. I guess the first question would be as you continue down the road of diversifying your revenue, maybe you can give us an update of what the mix is. If you think about your core telecom service provider revenue in NSE versus some of the new products that you're selling into hyperscale. And then obviously, you've been talking a lot about aerospace and defense doing very well with expectations of continued growth. So maybe if you could just give us the mix as the first question.

Sure. Thanks. So I would say if we look at our exit of the fiscal year, we did about 50-30-20, so 50% service provider, 30% data center ecosystem, and 20% aerospace and defense. And as we close the Spirent business, it's about 45%, about 40%, and then the remainder. So 45% is service provider, 40% data center, and 15% aerospace and defense, purely as you average it out. So we are now getting to the point where the data center revenue is almost approaching the traditional service provider, which significantly derisks the volatility of the service provider spend, and the aerospace and defense continues to grow as well. So I think as we look forward, we are going to probably, I would say, exiting this year when we see data center ecosystem surpass service provider and service provider will still grow, but it's growing at a much lower rate than data center, and our aerospace defense will also continue to grow. So we'll have a much more balanced portfolio and less, I would say, dependent on the neurotic service provider spend.

Great. And if I take Spirent out of the guidance, it looks like my math is right, you're still growing around 10% sequentially on that core NSE business, almost 20% year-over-year. And I was wondering if you could maybe break out given that service providers still sort of mix with wireless still having some headwinds, etc. If you think about that growth on the core business, can you break it out between sort of what you're seeing in data center versus the aerospace and defense business?

Sure. When we consider the data center sector, we focus on everything that supports data centers. We expect to see strong demand for our field instruments, particularly due to the data center ecosystem and the specialized fiber companies involved in interconnect. Recently, NVIDIA's investment in Nokia highlights the evolving landscape. Initially, the emphasis was on constructing data centers, but there is now a recognition of the importance of fiber interconnectivity between them. As a result, there’s a shift away from relying on traditional fiber network providers, leading to significant investments in specialist fiber interconnect companies that are enhancing the reliability and performance of fiber networks. This trend is also boosting the revenue of our traditional field instrument business. The core data center products, including the 1.6 terabit, 800-gig, and optical production test equipment, continue to grow robustly into the December quarter, with additional momentum expected into the March quarter. The aerospace defense sector is also showing steady growth. However, the wireless business remains relatively weak due to spending dynamics among major wireless carriers. Notably, we anticipated that the inadequacies of existing fiber would prompt investments, which is now occurring. This shift is affecting the overall data center-to-fiber network relationship. The next challenge for the AI ecosystem is the wireless RAN, which explains NVIDIA's $1 billion investment in AI-RAN through Nokia. We see this as a catalyst for advancing 5G and 6G development, and we expect other companies to increase their investments as well. We believe our wireless business will be the last area to see growth in the upcoming year. This overview should provide insight into the various aspects of our NSE business.

Yes, absolutely. If I could sneak one in for Ilan. Great to see the operating margin guidance for NSE, obviously, Spirent's starting to contribute there. But can you give us maybe how you're thinking about operating margins as you sort of run rate the business to full quarter, kind of exiting fiscal '26 and into fiscal '27?

Sure. Thanks for the question, Ruben. So currently, including Spirent, we are towards kind of the $160 million a quarter. I believe that, obviously, we are still working on or just starting to work on integration, et cetera. So probably for the early part of 2026 calendar, it can reach maybe $5 million higher or so at around the $165 million range.

Your next question comes from the line of Mehdi Hosseini of SIG.

Two from my end. Oleg, let's assume wireless doesn't come back. It was kind of a worst-case scenario. Given the Spirent and the baseline assumption that it would be $0.08 accretive and the strength in fiber, and perhaps a slightly higher growth rate for smartphones next year. It seems to me that you should be exiting calendar year '26 at close to like $1 annualized EPS. And if wireless were to come back, there will be growth above that target. And I'm not asking for a guide, but given the scenario you laid out, wireless could come back and just be extra and help you with a higher earning power. Any thoughts here would be great.

As you can see, when our business faced cutbacks in service providers in 2022, we experienced significant operating deleverage. Now that we're heading in a positive direction, we're achieving significant operating leverage, with every additional dollar contributing directly to our bottom line. If things continue as they are, it's entirely possible that we'll be nearing $1 per share next year. You're also right that the wireless sector could provide a significant boost once it picks up, as it has been somewhat overlooked during this recovery. Clearly, as it begins to improve, it will greatly impact our bottom line.

Okay. Great. And just double-clicking on the OSP and given the upcoming changes to the form factor for smartphone applications, should I assume that some of the past pricing pressure is going to abate and go away? And at least you should have some operating leverage there without contemplating what the real smartphone unit growth would be?

Sure. I think you're right. I mean, it's a more maturing segment. I mean, the volumes, I mean, we're fairly saturated in that market. So the only incremental growth comes from the unit growth and maybe greater adoption of the world-facing 3D cameras. But we are seeing actually also incremental upticks of the facial recognition technologies with the Android players in Asia. Not the big ones like Samsung, but it's mostly the Chinese. So we do think it will provide some additional growth. And there, we sell wafers to module integrators. And so it provides a bit more leverage there. But also the automotive market with LiDAR and Asia is becoming a big consumer of the 3D sensing filters. Now we got to put it in perspective. It's kind of hard to compete with 300-plus million units. I mean, automotive is like maybe 10 million. But let's say, it's a nice welcome growth in the unit volume. And in terms of the ASP erosion, I think it's fairly stabilized at this point. And I'd say the volume is the only thing that matters right now in terms of growing the revenue in that segment.

Your next question comes from the line of Ryan Koontz of Needham & Company.

If we could double-click on the data center opportunity. I think that's been a little bit of a quiet market for you in terms of, I think, investors understanding your exposure there. Great to hear you're working that up. Look, do you feel like your execution in that customer segment is where it needs to be today? Do you invest more in go-to-market and do those customers have different product requirements that you might need to re-spin new products for data center? Or is it largely the same products as your traditional OSPs.

Well, it's a great question. We've been investing in this business for the last 3 years. And the term that I've borrowed from the distribution business is turns and earns, and let me just clarify what I mean. So what we're seeing today, as we shifted from telecom service providers driving the road map to the data center driving our road map, you're going from anywhere from 6 to 8 years between the generations of products to about 2 to 3 years. We see a very much faster turnover of the technologies. It means you got to deliver your products now every 2 to 3 years but also because it is driven by engineering labs and new product development, it comes in at a much higher margin. So you are turning the product portfolio much faster, which means you don't have this like a long value of waiting for the next generation, and you're earning higher percentage gross profits because it's a first to market always wins big. So in that respect, we really like it because it’s increasingly the size of the market for us and it's accelerating the revenue velocity for us, and we get paid for the value we deliver by being always the leader in this market. So today, I mean, the reason I use the term data center ecosystem is because our products don't just address a particular segment; they address everything along the entire value chain. It's your processor companies. You all know who they are. It's your physical layer communication companies, and it's your system companies, optical gear, and it's ultimately the actual hyperscaler who have extensive internal R&D, developing anything from optical modules to MEMS switches to full-blown data center equipment. So I mean, this is like the best thing you can have. And you're dealing with engineering budgets and the intense competition where everybody is trying to be first to market with a better technology. So I mean, this is like truly living inside of a tornado, and our team loves it because that actually plays very well to our traditional strength to be at the bleeding edge of bringing leading-edge technology to optical networking.

That's super helpful. Would you say like you had...

And actually, I would add one more thing...

Sure.

I would add one more thing. We always discuss speeds of 400, 800, 1.6, and 3.2, which represent network speeds. In addition, there is the chip-to-chip interconnect, progressing from PCIe 3.0, 4.0, and 5.0; currently at 6.0, and next year moving to 7.0. Every time you increase speed, a corresponding PCI Express upgrade is necessary. Therefore, it creates a cycle where delivering network speed immediately requires a complete replacement of all the chip-to-chip interconnect, significantly enhancing the overall growth of data centers.

Yes. That's really great. And would you say you have a similar set of competitors and similar share in the data center relative to your legacy customer base?

I would say that in the areas of Layer 0 and Layer 1, we hold a significantly larger market share due to the traditional strengths of JDS UniPhase and Viavi. With our acquisition of Spirent, we have also expanded our capabilities into Layer 2 through Layer 7. In this space, there are two main competitors: Spirent and Keysight, the latter having acquired Ixia. Currently, the major players are Viavi and Keysight, with around four to five smaller players operating across different layers worldwide. However, it's primarily dominated by these key players because of the high demand for rapid product launches. This sector involves considerable research and development investment, so I would reiterate that the main competitors are Keysight and Viavi.

Great. And maybe just a follow-up, if I could, on the aerospace and defense area. Can you kind of characterize those products? Are those P&T like modules you're selling in typically? Or what's the fulfillment model look like? You're selling to drone companies and the like or defense companies?

Yes. So it goes into everything. So we have a smorgasbord. We can sell you inertial measurement units. It looks like a chip in a specialized package. Then we can sell you a module that has multiple of these chips with our controller and logic that does the inertial navigation system, or we can sell you a full-blown inertial navigation system with sensor fusion receiving sensor data from cameras, satellite antennas, and everything else. So we have a full solution and depending on which customer we engage and what their relative capabilities are, we'll sell them individual components, we will sell them the modules, or we will sell them the complete solution. So if you're looking at some of these drone companies, I would say, in Central and Eastern Europe, I mean, they may buy the entire solution. If you're dealing with more sophisticated U.S. companies, I mean, they may be buying modules or individual components that go into their critical systems. But it's all about autonomous vehicles, air, ground, sea, or undersea. I mean, you name it, that's what we are servicing. And the nice thing about it is it's the same platform that can address all these different markets, including the mining, agricultural, and surveillance drones and all these things that you need. If you think about the fully GPS independent autonomous kind of robotic vehicles.

Your next question comes from Michael Genovese of Rosenblatt Securities.

Look, I think my phone broke up because I think you gave a new annual revenue number for the HSE acquisition, but I just didn't hear what it was.

Yes. So Ilan, go ahead.

So basically, currently, once we close the transaction, we got a little bit more insight. Currently, on an annual run rate, we believe it's about $200 million, including the emulation piece, the channel emulation. And prior to that, we thought more about $188 million. So yes, it is higher right now.

Okay. So I guess my question is...

Spirent business, right?

Yes, yes, yes. And so my question has to do with, does that change on higher revenue or any other reason kind of bring an accretion date sooner than 12 months? Or are we still thinking 12 months before it becomes accretive?

So it depends also on seasonality. Remember that there are stronger half fees on the second calendar half. So that's the reason that this quarter, we see some positive EPS, most likely in the first calendar half; it's a little bit softer. But when you think about it from a full calendar year, yes, it's slightly higher, but when you compare it to our fiscal year, the dynamic changes a little bit.

Yes. But net-net, clearly higher revenue makes the accretion sooner rather than later.

And then I think most of my questions were asked, but I just want to ask specifically on large service providers like AT&T, Verizon, or the cable companies. If we look at the wireline part of the network. We heard weak wireless from you on that. But and then it sounds like a lot of the optical activity is being done by optical specialists. But is there anything to say about the Tier 1 large cable and telcos on the wireline side? Is there any trend there that you can call?

I would describe the situation as a gradual recovery. Fiber is indeed experiencing growth. We anticipate that major cable operators and service providers will soon release significant RFPs. When I analyze the fiber segment, we are beginning to differentiate between professional grade fiber operators and consumer grade ones. For instance, AT&T largely falls into the consumer grade category, continually promoting the addition of fiber customers, which is encouraging for us. However, I need to see the tangible results to fully believe it. They have made some optimistic announcements, and we expect an increase in purchasing next year, which is promising. On the other hand, there are professional grade fiber operators, like Lumen and similar companies in Europe, focusing solely on connecting data centers. The next challenge will be ensuring connectivity between the wireless base stations and towers, as reliable 10-gig and 100-gig traffic will need to reach all towers. We foresee growth in both traditional and professional grade fiber operators continuing into next year. Even considering the base business, the traditional service providers show positive trends, as a rising tide lifts all boats. We shouldn’t simply label them as base businesses; rather, think of the professional grade fiber operators, semiconductors, modules, and NEMs as speedboats that are outpacing overall market growth. It's also reassuring to see base service providers increasing their spending.

Your next question comes from the line of Andrew Spinola of UBS.

I have one question. Could you give more details about the Spirent business that you acquired? Is its margin profile in line with the overall business, or is it better or worse? As I plan to model it for the next 12 months when it starts to contribute positively, do you think you can achieve margins in that acquired business similar to your target of 20% for NSE? Or do you believe you can exceed that target? How should I approach this?

I believe that the business has a higher gross margin and higher operating profit compared to the average in the NSE. Overall, it is beneficial, and I think we can further increase their margins through integration and improved efficiency. Additionally, we should perform better in terms of cost of goods due to our increased scale in parts procurement and better leverage of engineering and sales resources.

And Andrew just specifically on the gross margin, we see it from the mid- to high 60s, which is, as Oleg mentioned, definitely above our corporate average. So it's a nice contribution there.

Got it. And is that business seeing the same acceleration that you're seeing in the rest of your data center business?

Yes, it might not be the same percentage since it’s from a larger base, but they definitely have an exciting product. There is a traditional high-speed Ethernet test sold to chip companies, modules, systems, and enterprise data centers. Additionally, there’s a variant called AI, high-speed Ethernet, which generates AI workloads to test how well the network handles AI traffic and data. This area is growing even faster.

I wanted to ask one last question about the data center business. I'm considering that business in terms of units and other growth drivers. If the number of switches produced is doubling or tripling, how does that benefit you? Is most of your growth driven by the increase in units of these products, or is it more due to increased investment in research and development, new SKUs, and new players in the market? How should I approach this?

It's a combination. So when we talk about sales to the lab, i.e., to the R&D equipment, it's a number of companies, number of projects, number of chips. And remember, I also said the very fast product turn cycle, right? Like every 2, 3 years, next generation. So that drives, the more like the lab sales, are driven by projects, right? So it's a number of companies, number of projects, and how quickly one generation transitions to the next. And when we talk about production, that is driven purely by units. So the more units you're producing, the more you're shipping, the more you need to buy to set up more production lines. So this is more like if you think about contract manufacturers; the more lines they add, the more equipment they need to buy.

Your next question comes from the line of Tim Savageaux of Northland Capital.

Congratulations on the results and the guidance. I want to focus on that, particularly regarding Spirent. You mentioned that there’s a larger base interested, and I’m curious about the context of that statement. It seems like, based on your guidance, Spirent will be significantly exposed to data center operations, possibly above 50%. Is that an accurate assessment?

Yes. The percentage I mentioned refers to exiting this calendar year, specifically December, and includes the new Spirent business. When I talk about the data center ecosystem, I mean that the majority of their business is in that area. However, they also have segments related to enterprise and enterprise data centers. So, when I refer to the data center ecosystem, I'm talking about chips, modules, systems, and hyperscalers. They also work with enterprises in sectors like finance and insurance, testing their firewalls and similar products. I would estimate that it's probably an 80-20 split.

Okay. That makes sense. Looking at the organic guide, which is still quite impressive at $310 million to $320 million, and considering you're seeing a healthier contribution from Spirent despite the shorter timeframe, you explained that well. However, as I look at this and having asked a similar question before, we've observed some strong spending trends from the major U.S. carriers in Q4. I might have expected that organic figure to reflect an old-fashioned budget flush, but it seems that isn't the case. Am I correct in assuming that for the traditional Tier 1 telecom providers, you're anticipating a flat figure from Q3 to Q4?

No, there is some incremental growth for the traditional sector. The incremental demand is coming from what I refer to as the professional grade, Tier 2 and Tier 3 focused players. You can call it budget flash, but I believe their products are driven by projects and contracts they've secured with hyperscalers. What we're increasingly observing is that previously, we sold over 90 percent of field instruments to service providers; now, around a quarter to a third of our revenue is going into the entire data center-driven service provider ecosystem.

Okay. So you look at that organic growth going September to December.

Tim also mentioned that while we're not providing guidance for March, we don't anticipate anything materially different as we head into that month.

The only point I want to make about Tier 1s is that every 0.25% decrease in interest rates provides them with more cash to operate, and there is significant pent-up demand. Essentially, they have been managing their assets for the past 3 to 4 years, and like anything else, that can take a toll; it's time for an upgrade. I believe as they feel more reassured about their debt and interest burden, they have been sending positive signals, which is encouraging for us. This is likely to further accelerate or boost overall demand.

That concludes our Q&A session. I will now turn the conference back over to Vibhuti for closing remarks.

Thank you, Jale. This concludes our earnings call for today. Thank you for joining. Have a good evening.

This concludes today's conference call. You may now disconnect.