Viavi Solutions Inc 10-Q for FY2027 Q1
Viavi Solutions Inc. (VIAV)
10-Q
2026-11-05
For: 2026-10-03
View Original
Added on
November 05, 2026
About this 10-Q
Viavi Solutions Inc filed this 10-Q on November 5, 2026, covering the quarter ended October 3, 2026 (FY2027 Q1).
Viavi Solutions Inc. reported net revenue of $469.3 million, up 56.9% year-over-year, and non-GAAP operating margin of 29.0%. GAAP net income was $76.0 million, while the acquired Spirent HSE and CE business contributed $52.7 million. AI summary
Headline figures
Quarter ended October 3, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $469.3M
- up 56.9% from $299.1M a year earlier
- Net income
- $76M
- compared with a net loss of $21.4M a year earlier
- Diluted EPS
- $0.29
- compared with -$0.10 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended October 3, 2026
OR
| For the transition period from | to | |||||||||||||||||||
Commission File Number 000-22874
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
(Address of principal executive offices including Zip code)
(408 ) 404-3600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of the exchange on which registered | ||||||||||||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| ☒ | Accelerated filer | ☐ | Non-accelerated filer (Do not check if a smaller reporting company) | ☐ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | ||||||||||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 31, 2026, the Registrant had 245,922,122 shares of common stock outstanding.
| TABLE OF CONTENTS | Page | ||||||||||
1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Product revenue | $ | $ | |||||||||||||||||||||
| Service revenue | |||||||||||||||||||||||
| Total net revenue | |||||||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Product cost of revenue | |||||||||||||||||||||||
| Service cost of revenue | |||||||||||||||||||||||
| Amortization of acquired technologies | |||||||||||||||||||||||
| Total cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Amortization of other intangibles | |||||||||||||||||||||||
| Restructuring and related benefits | ( | ( | |||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Loss on debt extinguishment (Note 11) | ( | ||||||||||||||||||||||
| Interest and other income, net | |||||||||||||||||||||||
| Interest expense | ( | ( | |||||||||||||||||||||
| Income (loss) before income taxes and equity investment earnings (losses) | ( | ||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Equity investment earnings (losses) | ( | ||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | ( | ||||||||||||||||||||
| Diluted | $ | $ | ( | ||||||||||||||||||||
| Shares used in per share calculations: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
2
VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Net change in cumulative translation adjustment, net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | ||||||||||||||||||||
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
3
VIAVI SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share and par value data)
(unaudited)
| October 3, 2026 | June 27, 2026 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Restricted cash | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories, net | |||||||||||
| Prepayments and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill, net | |||||||||||
| Intangibles, net | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued payroll and related expenses | |||||||||||
| Deferred revenue | |||||||||||
| Accrued expenses | |||||||||||
| Short-term debt | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 18) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
4
VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| Three Months Ended | |||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation expense | |||||||||||
| Amortization of acquired technologies and other intangibles | |||||||||||
| Stock-based compensation | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Amortization of debt issuance costs and accretion of debt discount | |||||||||||
| Net change in fair value of contingent liabilities | |||||||||||
| Deferred taxes, net | |||||||||||
| Amortization of inventory step-up | |||||||||||
| Restructuring | ( | ( | |||||||||
| Other | ( | ||||||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
| Accounts receivable | |||||||||||
| Inventories | ( | ( | |||||||||
| Other current and non-current assets | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Income taxes payable | |||||||||||
| Deferred revenue, current and non-current | ( | ( | |||||||||
| Accrued payroll and related expenses | ( | ( | |||||||||
| Accrued expenses and other current and non-current liabilities | ( | ||||||||||
| Net cash provided by operating activities | $ | $ | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of short-term investments | $ | ( | $ | ( | |||||||
| Maturities of short-term investments | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from the sale of assets | |||||||||||
| Acquisitions, net of holdbacks | ( | ||||||||||
| Purchase price adjustment related to business acquisition | ( | ||||||||||
| Other investing activities | |||||||||||
| Net cash used in investing activities | $ | ( | $ | ( | |||||||
| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from issuance of debt | $ | $ | |||||||||
| Payment of debt and equity issuance costs | ( | ( | |||||||||
| Repurchase and retirement of common stock | ( | ( | |||||||||
| Withholding tax payment on vesting of restricted stock and performance- based awards | ( | ( | |||||||||
| Payment of financing obligations | ( | ( | |||||||||
| Proceeds from employee stock purchase plan | |||||||||||
| Net cash (used in) provided by financing activities | $ | ( | $ | ||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | $ | ( | $ | ( | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash at the beginning of the period(1) | |||||||||||
Cash, cash equivalents and restricted cash at the end of the period(2) | $ | $ | |||||||||
(1)These amounts include both current and non-current balances of restricted cash totaling $12.0 million and $8.5 million as of June 27, 2026 and June 28, 2025, respectively.
(2)These amounts include both current and non-current balances of restricted cash totaling $11.5 million and $8.3 million as of October 3, 2026 and September 27, 2025, respectively.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
5
VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
| Three Months Ended October 3, 2026 | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at June 27, 2026 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
| Shares issued under employee stock plans, net of tax | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Balance at October 3, 2026 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Three Months Ended September 27, 2025 | ||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balance at June 28, 2025 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
| Shares issued under employee stock plans, net of tax | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
| Balance at September 27, 2025 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
6
| VIAVI SOLUTIONS INC. | ||
| 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 October 3, 2026 and September 27, 2025 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 27, 2026.
There have been no material changes to the Company’s accounting policies during the three months ended October 3, 2026 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 on Form 10-K for the year ended June 27, 2026, filed with the SEC on August 13, 2026.
The Consolidated Balance Sheet as of June 27, 2026 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 October 3, 2026 and September 27, 2025 may not be indicative of results for the fiscal year ending July 3, 2027 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 2027 is a 53-week year ending on July 3, 2027. The Company’s fiscal 2026 was a 52-week year ending on June 27, 2026. The Company’s first quarter of fiscal year 2027 was a 14-week quarter compared to the standard 13-week quarters.
Principles of Consolidation
The Consolidated Financial Statements include the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenue and expense and the disclosure of commitments and contingencies during the reporting periods. Estimates are based on historical factors, current circumstances and the experience and judgment of management. Under changed conditions, the Company’s reported financial position or results of operations may be materially impacted when using different estimates and assumptions, particularly with respect to significant accounting policies. If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect more readily available information.
7
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 2. Recently Issued Accounting Pronouncements
Recent Accounting Pronouncements Adopted
In July 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards 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. The Company adopted this ASU in the first quarter of fiscal 2027 with no material impact on our Consolidated Financial Statements or related disclosures.
Accounting Pronouncements Issued But Not Yet Adopted
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), which establish the recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. This guidance is effective for fiscal years beginning after December 15, 2027 (fiscal 2029 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 December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which provides guidance for a government grant received by a business entity. This guidance is effective for fiscal years beginning after December 15, 2028 (fiscal 2030 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 beginning after December 15, 2026 (fiscal 2028 for the Company), and interim periods within fiscal years beginning after December 15, 2027, with early and retrospective adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements-Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments clarify or improve disclosure and presentation requirements on various disclosure areas, including the statement of cash flows, earnings per share, debt, equity and derivatives. The amendments will align the requirements in the FASB Accounting Standards Codification (ASC) with the SEC’s regulations. The amendments in this ASU will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will not be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. This ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.
8
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 3. Earnings Per Share
The following table sets forth the computation of basic and diluted net income (loss) per share (in millions, except per share data):
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted shares - Convertible Notes | |||||||||||||||||||||||
| Effect of dilutive securities from stock-based compensation plans | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | ( | ||||||||||||||||||||
| Diluted | $ | $ | ( | ||||||||||||||||||||
In periods where the Company recognized a net loss, the impact of potentially dilutive outstanding stock-based awards and the “in-the money” conversion benefit feature above the conversion price of the 1.625 % Senior Convertible Notes due 2026 (2026 Notes) and 0.625 % Senior Convertible Notes due 2031 (2031 Notes) of $13.19 and $13.79 per share, respectively, have been excluded from the calculation of diluted loss per share as their inclusion would have an antidilutive effect.
The following table represents potential common shares that were not included in the computation of the diluted net income (loss) per share because their effect would have been anti-dilutive (in millions):
| Three Months Ended | |||||||||||||||||||||||
October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
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 investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations.
Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):
| Unrealized losses on available-for sale investments | Foreign currency translation adjustments | Change in unrealized components of defined benefit obligations | Total | ||||||||||||||||||||
| Beginning balance as of June 27, 2026 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||
| Net current period other comprehensive loss | ( | ( | |||||||||||||||||||||
| Ending balance as of October 3, 2026 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
9
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 5. Acquisitions
Direct Optical Research Company
On July 9, 2026, the Company completed the acquisition of substantially all of the assets of Direct Optical Research Company, a provider of optical fiber connector end-face quality measurement systems and interferometer technology. The acquisition will be included in the Network and Service Enablement (NSE) segment and is expected to strengthen the Company's optical measurement technology portfolio and expand its capabilities in fiber optic test and measurement solutions.
The total purchase consideration was approximately $18.2 million, consisting of $11.9 million paid in cash at closing, a $2.1 million indemnity holdback, and contingent consideration with a fair value of $4.2 million at the acquisition date (maximum potential payment of $5.0 million), payable upon the achievement of certain operational targets over a three-year period. The acquisition met the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired were recorded at the preliminary fair value on the acquisition date. Acquisition related costs incurred were approximately $0.2 million and were recorded within SG&A in the Consolidated Statements of Operations.
The total purchase consideration was allocated to tangible and intangible assets acquired based on the preliminary fair value on the acquisition date. The following table presents the preliminary allocation of the purchase price (in millions):
| Amount | |||||||||||||||||
| Accounts receivable, net | $ | ||||||||||||||||
| Inventory, net | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Identified intangible assets acquired | |||||||||||||||||
| Total purchase consideration | $ | ||||||||||||||||
The Company valued the customer relationships 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 customer relationships. Significant assumptions related to customer relationships included (i) projected revenues, (ii) projected expenses, (iii) contributory asset charges, (iv) discount rate, (v) income tax rate and (vi) customer attrition rate.
Developed technology relates to products used for our lab and production solutions. The Company valued the developed technology using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue from the developed technology. Significant assumptions related to developed technology included (i) projected revenues, (ii) royalty rate, (iii) discount rate, (iv) income tax rate and (v) 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 lives):
| Estimated Useful Life | Amount | ||||||||||||||||
| Developed technology | $ | ||||||||||||||||
| Customer relationships | |||||||||||||||||
| Total identifiable intangible assets acquired | $ | ||||||||||||||||
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 NSE segment. Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future lab and production offerings. The goodwill recognized is deductible for U.S. income tax purposes.
10
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The Company has included the financial results of Direct Optical Research Company 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.
High-speed Ethernet, Network Security and Channel Emulation Testing Business
On October 16, 2025, the Company acquired Spirent Communications plc’s (Spirent) high-speed ethernet, network security and channel emulation testing business (collectively, the HSE and CE business) from Keysight Technologies, Inc. (Keysight). The transaction provides a complementary addition to VIAVI’s ethernet testing platform within its NSE segment.
The cash consideration paid at closing of $399.3 million is subject to adjustment based on the final net working capital settlement. The acquisition met the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. Acquisition related costs incurred were approximately $20.6 million, of which $11.4 million was incurred in fiscal 2026, and were recorded within SG&A in the Consolidated Statements of Operations.
The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the preliminary fair value on the acquisition date. The Company elected to apply both practical expedients permitted under ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, in measuring contract assets and contract liabilities acquired in the acquisition. Specifically, we have elected the practical expedient that permits an entity to reflect the aggregate effect of all modifications (on a contract-by-contract basis) as if they occurred on the acquisition date. In addition, the Company elected to determine the standalone selling prices of performance obligations as of the acquisition date, rather than at contract inception, for purpose of allocating transaction consideration.
The Company is in the process of obtaining additional information to refine its preliminary fair value estimates related to certain acquired assets and assumed liabilities. We may revise the preliminary purchase price allocation during the remainder of the measurement period as additional information becomes available. Any such revisions or changes may be material.
11
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The following table presents the preliminary allocation of the purchase price (in millions):
| Amount | |||||||||||||||||
| Inventory, net | $ | ||||||||||||||||
| Prepayments and other current assets | |||||||||||||||||
| Property, plant and equipment, net | |||||||||||||||||
Goodwill(1) | |||||||||||||||||
| Identified intangible assets acquired | |||||||||||||||||
| Other non-current assets | |||||||||||||||||
Deferred revenue(2) | ( | ||||||||||||||||
| Accrued payroll and related expenses | ( | ||||||||||||||||
| Other current liabilities | ( | ||||||||||||||||
Other non-current liabilities(3) | ( | ||||||||||||||||
| Total purchase consideration | $ | ||||||||||||||||
(1)Goodwill at acquisition date of $111.3 million increased by $0.2 million for measurement period adjustments.
(2)Represents the current portion of deferred revenue.
(3)Includes long-term deferred revenue of $8.2 million.
The Company valued the customer relationships 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 customer relationships. Significant assumptions related to customer relationships included (i) projected revenues, (ii) projected expenses, (iii) contributory asset charges, (iv) discount rate, (v) income tax rate and (vi) customer attrition rate.
Developed technology relates to products used for our lab and production and wireless solutions. The Company valued the developed technology using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue from the developed technology. Significant assumptions related to developed technology included (i) projected revenues, (ii) royalty rate, (iii) discount rate, (iv) income tax rate and (v) 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 lives):
| Estimated Useful Life | Amount | ||||||||||||||||
| Customer relationships | $ | ||||||||||||||||
| Developed technology | |||||||||||||||||
| Backlog | |||||||||||||||||
| Trade name | |||||||||||||||||
| Total identifiable intangible assets acquired | $ | ||||||||||||||||
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 NSE segment. Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future solution offerings. The goodwill recognized is deductible for U.S. income tax purposes.
The Company has included the financial results of Spirent’s HSE and CE business 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.
12
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
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 was 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 contingent consideration 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 the fourth quarter of fiscal 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 adjustment of $0.7 million was paid in the first quarter of fiscal 2026 and refund of prepaid tax of $0.6 million is expected to be paid in fiscal 2027. In addition, the Company held back $15.0 million for indemnity claims. In fiscal 2026, the indemnity holdback amount was reduced by $1.1 million from noncash financing activities and the Company paid the remaining $13.9 million to the Inertial Labs shareholders. The acquisition met the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. Acquisition related costs incurred were approximately $11.7 million and were recorded within SG&A in the Consolidated Statements of Operations. These costs included $9.5 million in transaction bonuses that were paid at closing to key personnel and service providers of Inertial Labs.
13
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the fair value on the acquisition date. The following table presents the allocation of the purchase price ( in millions):
| Amount | |||||||||||||||||
| Cash and cash equivalents | $ | ||||||||||||||||
| Accounts receivable, net | |||||||||||||||||
| Inventory, net | |||||||||||||||||
| Prepayments and other current assets | |||||||||||||||||
| Property, plant and equipment, net | |||||||||||||||||
Goodwill(1) | |||||||||||||||||
| Identified intangible assets acquired | |||||||||||||||||
| Other non-current assets | |||||||||||||||||
| Accounts payable | ( | ||||||||||||||||
| Accrued payroll and related expenses | ( | ||||||||||||||||
| Deferred revenue | ( | ||||||||||||||||
| Accrued expenses | ( | ||||||||||||||||
Other non-current liabilities(2) | ( | ||||||||||||||||
| Total purchase consideration | $ | ||||||||||||||||
(1)Goodwill at acquisition date of $129.7 million increased by $0.6 million for purchase price and measurement period adjustments.
(2)Includes $25.0 million of deferred tax liability and $0.9 million of liability related to uncertain tax positions.
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 lives):
| Estimated Useful Life | Amount | ||||||||||||||||
| Developed technology | $ | ||||||||||||||||
| Customer relationships | |||||||||||||||||
| Tradename | |||||||||||||||||
| Backlog | |||||||||||||||||
| Total identifiable intangible assets acquired | $ | ||||||||||||||||
Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and intangible assets acquired and has been allocated to the 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.
14
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
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 civilian applications. The acquisition enables the Company to broaden its solutions offering into the rapidly developing PNT landscape. The total purchase consideration included approximately $49.9 million paid in cash at closing and additional contingent consideration of up to $117.0 million.
Acquisition related Contingent Consideration
Refer to “Note 8. Fair Value Measurements” for information on the contingent consideration activity for the three months ended October 3, 2026.
Note 6. Balance Sheet and Other Details
Contract Balances
Gross receivables include both billed and unbilled receivables (including Contract assets). As of October 3, 2026 and June 27, 2026, the Company had total unbilled receivables of $16.1 million and $22.7 million.
The Company also has short-term and long-term deferred revenue related to undelivered hardware 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):
| October 3, 2026 | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| Deferred revenue: | |||||||||||||||||
| Balance at beginning of period | $ | ||||||||||||||||
Revenue deferrals for new contracts(1) | |||||||||||||||||
Revenue recognized during the period(2) | ( | ||||||||||||||||
| Balance at end of period | $ | ||||||||||||||||
(1)This amount includes the effect of foreign currency exchange rate fluctuations.
(2)Revenue recognized during the period represents releases from the balance at the beginning of the period as well as releases from the current period deferrals.
Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that have not materialized, and currency fluctuations.
The value of the transaction price allocated to remaining performance obligations as of October 3, 2026, was $664.4 million. The Company expects to recognize approximately 93 % of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.
Accounts Receivable - Allowance for Credit losses
The following table presents the activities and balances for allowance for credit losses (in millions):
| June 27, 2026 | Charged to Costs and Expenses | Deductions(1) | October 3, 2026 | ||||||||||||||||||||||||||
| Allowance for credit losses | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
(1)Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.
15
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Inventories, net
The following table presents the components of inventories, net (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Work in process | |||||||||||
| Raw materials | |||||||||||
| Inventories, net | $ | $ | |||||||||
Prepayments and Other Current Assets
The following table presents the components of prepayments and other current assets (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||
| Advances to contract manufacturers | $ | $ | |||||||||
| Prepayments | |||||||||||
| Refundable income taxes | |||||||||||
| Other current assets | |||||||||||
| Prepayments and other current assets | $ | $ | |||||||||
Other Non-Current Assets
The following table presents the components of other non-current assets (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||
| $ | $ | ||||||||||
| Long-term restricted cash | |||||||||||
| Deferred contract cost | |||||||||||
| Long-term investment (Note 7) | |||||||||||
| Deposits | |||||||||||
| Debt issuance cost - Revolving Credit Facility | |||||||||||
| Other | |||||||||||
| Other non-current assets | $ | $ | |||||||||
16
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Other Current Liabilities
The following table presents the components of other current liabilities (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||
| Fair value of contingent consideration | $ | $ | |||||||||
| Income tax payable | |||||||||||
| Warranty accrual (Note 18) | |||||||||||
| Acquisition related holdback and related accruals | |||||||||||
| Restructuring accrual (Note 13) | |||||||||||
| Fair value of forward contracts | |||||||||||
| Interest payable | |||||||||||
| Other | |||||||||||
| Other current liabilities | $ | $ | |||||||||
Other Non-Current Liabilities
The following table presents components of other non-current liabilities (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||
| Pension and post-employment benefits | $ | $ | |||||||||
| Long-term deferred revenue | |||||||||||
| Fair value of contingent consideration | |||||||||||
| Financing obligation | |||||||||||
| Uncertain tax position | |||||||||||
| Deferred tax liability | |||||||||||
| Asset retirement obligations | |||||||||||
| Other | |||||||||||
| Other non-current liabilities | $ | $ | |||||||||
17
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 7. Investments and Forward Contracts
Short-Term Investments
As of October 3, 2026, the Company’s short-term investments of $2.1 million were primarily related to the deferred compensation plan and were invested in equity securities.
As of June 27, 2026, the Company’s short-term investments of $2.0 million were primarily related to the deferred compensation plan and were invested in equity securities.
Trading securities are reported at fair value, with unrealized gains or losses resulting from changes in fair value recognized in the Consolidated Statements of Operations as a component of Interest and other income, net.
Strategic Investment
During fiscal 2025, the Company invested $3.0 million in a non-marketable equity security in a privately held company. The investment is included in Other non-current assets on the Consolidated Balance Sheets and is classified as Level 3 within the fair value hierarchy.
This investment is carried at cost and because the investment does not have a readily determinable fair value it will be adjusted for changes resulting from observable price changes under the Measurement Alternative methodology. There were no impairments or adjustments to the carrying value for the three months ended October 3, 2026.
Equity Investment
The Company acquired an equity interest in Sensorsan Sensor Teknolojileri Anonim Sirketi (Sensorsan), a privately held entity and owns 40 percent of Sensorsan, through its acquisition of Inertial Labs.
The Company accounts for its investment in Sensorsan under the equity method of accounting. Under the equity method, the carrying value of the Company's investment is adjusted for its proportionate share of Sensorsan's net income or loss and the elimination of unrealized profits on transactions with Sensorsan, as applicable.
The Company recognized equity method earnings related to its investment in Sensorsan of $1.6 million for the three months ended October 3, 2026 and a net loss of $0.1 million for the three months ended September 27, 2025. As of October 3, 2026 and June 27, 2026, the carrying value of the Company’s investment in Sensorsan was $3.6 million and $2.0 million, respectively, and was included in Other non-current assets on the Consolidated Balance Sheets. The Company sells certain products to Sensorsan. During the three months ended October 3, 2026 and September 27, 2025, revenue from sales to Sensorsan was $5.4 million and $0.4 million, respectively.
Non-Designated Foreign Currency Forward Contracts
The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to foreign exchange risks. The Company utilizes foreign exchange forward contracts to manage foreign currency risk associated with foreign currency denominated monetary assets and liabilities, primarily certain short-term intercompany receivables and payables, and to reduce the volatility of earnings and cash flows related to foreign currency transactions. The Company does not use these foreign currency forward contracts for trading purposes.
As of October 3, 2026, the Company had forward contracts that were effectively closed but not settled with the counterparties as of the balance sheet date. Therefore, the fair value of these contracts of $1.1 million and $1.7 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively. As of June 27, 2026, the fair value of these contracts of $1.6 million and $2.5 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.
18
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near quarter end; therefore, the fair value of the contracts is not significant. As of October 3, 2026 and June 27, 2026, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $63.4 million and $66.2 million, respectively, and the notional amounts of forward contracts that the Company held to sell foreign currencies were $39.3 million and $38.9 million, respectively.
The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Consolidated Statements of Operations as a component of Interest and other income, net. The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities. The foreign exchange forward contracts incurred losses of $0.6 million and $0.2 million for the three months ended October 3, 2026 and September 27, 2025, respectively.
19
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 8. Fair Value Measurements
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are inputs which market participants would use in valuing an asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs which reflect the assumptions market participants would use in valuing an asset or liability.
The three levels of inputs that may be used to measure fair value are:
•Level 1: includes financial instruments for which quoted market prices for identical instruments are available in active markets. Level 1 assets of the Company include money market funds, U.S. Treasury securities and marketable equity securities as they are traded with sufficient volume and frequency of transactions.
•Level 2: includes financial instruments for which the valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. Level 2 instruments of the Company include asset-backed securities, foreign currency forward contracts and debt. To estimate their fair value, the Company utilizes pricing models based on market data. The significant inputs for the valuation model usually include benchmark yields, reported trades, broker and dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, and industry and economic events.
•Level 3: includes financial instruments for which fair value is derived from valuation-based inputs, that are unobservable and significant to the overall fair value measurement. The Company’s Level 3 assets consist of an investment in a non-marketable equity security in a privately held company. We measure the non-marketable equity security under the Measurement Alternative at cost minus impairment, if any, adjusted for observable price changes in orderly transactions for an identical or similar investment in the same issuer. The Company’s Level 3 liabilities consist of contingent purchase consideration liabilities related to business acquisitions. The fair value of such liabilities are generally determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the projected revenues of the acquired business over the earn-out period. The fair value of certain liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized as a component of SG&A in the Consolidated Statements of Operations.
20
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Fair Value Measurements
The Company’s assets and liabilities measured at fair value on a recurring basis for the periods presented are as follows (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Debt available-for-sale securities(1) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Money market funds(2) | |||||||||||||||||||||||||||||||||||||||||||||||
Trading securities(3) | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency forward contracts(4) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency forward contracts(5) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Contingent consideration(6) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1)Included in Other non-current assets on the Consolidated Balance Sheets.
(2)Includes, as of October 3, 2026, $282.3 million in Cash and cash equivalents, $6.0 million in Restricted cash and $2.9 million in Other non-current assets on the Consolidated Balance Sheets. Includes, as of June 27, 2026, $443.3 million in Cash and cash equivalents, $6.4 million in Restricted cash and $2.9 million in Other non-current assets on the Consolidated Balance Sheets.
(3)Included in Short-term investments on the Consolidated Balance Sheets.
(4)Included in Prepayments and other current assets on the Consolidated Balance Sheets.
(5)Included in Other current liabilities on the Consolidated Balance Sheets.
(6)As of October 3, 2026 and June 27, 2026, includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.
Contingent Consideration
As of October 3, 2026, the fair value of the contingent consideration liability was $93.0 million compared to $76.9 million at June 27, 2026. As of October 3, 2026, $72.9 million and $20.1 million of the liability are included in Other current liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheets. During the three months ended October 3, 2026, the Company made a contingent consideration payment of $0.5 million for Direct Optical Research Company which was classified as an investing outflow in the Consolidated Statements of Cash Flows.
The earn-out period for Jackson Labs ended on December 31, 2025. The Company was not required to make a contingent consideration payment as the revenue targets were not met.
The Company recorded a charge of $12.4 million from the change in fair value measurement of the contingent consideration liabilities within SG&A in the Consolidated Statements of Operations for the three months ended October 3, 2026.
Instrument Measured at Fair Value on Non-recurring Basis
Our non-marketable equity security accounted for using the Measurement Alternative is measured at fair value on a non-recurring basis and is classified within Level 3 of the fair value hierarchy because we use significant unobservable inputs to estimate its fair value. Refer to “Note 7. Investments and Forward Contracts” for additional information.
21
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Other Fair Value Measures
Fair Value of Debt: If measured at fair value on the Consolidated Balance Sheets, the Company’s 0.625 % Senior Convertible Notes (2031 Notes) and 3.75 % Senior Notes (2029 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.
The Company’s debt measured at fair value for the periods presented is as follows (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
| Debt: | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Note 9. Goodwill
The following table presents changes in goodwill allocated to the Company’s reportable segments (in millions):
| Network and Service Enablement | Optical Security and Performance Products | Total | |||||||||||||||
| Balance as of June 27, 2026 | $ | $ | $ | ||||||||||||||
Acquisition(1) | |||||||||||||||||
| Currency translation | |||||||||||||||||
| Balance as of October 3, 2026 | $ | $ | $ | ||||||||||||||
(1)Goodwill at acquisition date. Refer to “Note 5. Acquisitions” for more information.
The Company tests goodwill for impairment at the reporting unit level annually during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired. In the fourth quarter of fiscal 2026, the Company performed a qualitative assessment of goodwill impairment and concluded that it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and that no indication of impairment existed.
There were no events or changes in circumstances that triggered an impairment review during the three months ended October 3, 2026.
22
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 10. Intangibles
The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles as of October 3, 2026 and June 27, 2026 (in millions):
| As of October 3, 2026 | Weighted-Average Remaining Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||||||||
| Acquired developed technology | $ | $ | ( | $ | |||||||||||||||||||||||||
| Customer relationships | ( | ||||||||||||||||||||||||||||
Other(1) | ( | ||||||||||||||||||||||||||||
| Total intangibles | $ | $ | ( | $ | |||||||||||||||||||||||||
| As of June 27, 2026 | Weighted-Average Remaining Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||||||||
| Acquired developed technology | $ | $ | ( | $ | |||||||||||||||||||||||||
| Customer relationships | ( | ||||||||||||||||||||||||||||
Other(1) | ( | ||||||||||||||||||||||||||||
| Total intangibles | $ | $ | ( | $ | |||||||||||||||||||||||||
(1)Other intangibles consist of proprietary know-how and trade secrets, trademarks and trade names.
Amortization expense related to intangibles was $20.1 million and $8.4 million for the three months ended October 3, 2026 and September 27, 2025, respectively.
Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of October 3, 2026, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):
| Fiscal Years | |||||
| Remainder of 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total amortization | $ | ||||
23
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 11. Debt
As of October 3, 2026 and June 27, 2026, the Company’s debt on the Consolidated Balance Sheets, net of unamortized issuance costs, is as follows (in millions):
| October 3, 2026 | June 27, 2026 | ||||||||||
Principal amount of | $ | $ | |||||||||
Unamortized | ( | ( | |||||||||
| Short-term debt | $ | $ | |||||||||
Principal amount of | $ | $ | |||||||||
Unamortized | ( | ( | |||||||||
| Long-term debt | $ | $ | |||||||||
The Company was in compliance with all debt covenants as of October 3, 2026 and June 27, 2026.
Term Loan B
On October 16, 2025, concurrent with the closing of the acquisition of Spirent’s HSE and CE business, the Company entered into a $600.0 million senior secured term loan credit agreement (Term Loan Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent, and other lenders. The term loans, which mature on October 16, 2032, are secured by substantially all of the assets of the Company and those of its domestic subsidiaries. The proceeds from the term loans were used to finance a portion of the acquisition, acquisition related expenses and for general corporate purposes. In connection with the issuance of the term loans, the Company incurred $15.2 million of issuance costs. The debt issuance costs were capitalized in Long-term debt on the Consolidated Balance Sheets and were amortized to interest expense using the straight-line method except for the unamortized debt issuance costs derecognized as part of the extinguishments.
During fiscal 2026, the Company voluntarily prepaid the entire $600.0 million outstanding principal balance under the Term Loan Credit Agreement. The prepayments were accounted for as extinguishments, with the carrying amount of the debt prepaid, including the unamortized debt issuance costs, derecognized, and any difference between the reacquisition price and the carrying amount recognized as a loss on debt extinguishment. The total loss from the prepayments was $14.2 million recorded as Loss on debt extinguishment in the Consolidated Statements of Operations.
On August 20, 2025, the Company issued $250.0 million aggregate principal amount of 0.625 % Senior Convertible Notes due 2031 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company issued $100.9 million aggregate principal amount of the 2031 Notes to certain holders of the 1.625 % Senior Convertible Notes (2026 Notes) in exchange for $97.5 million principal amount of the 2026 Notes (the 2025 Exchange Transaction) and issued and sold $149.1 million aggregate principal amount of the 2031 Notes in a private placement to accredited institutional buyers (the 2025 Subscription Transactions).
The 2025 Exchange Transaction was accounted for as an extinguishment which resulted in the write-off of unamortized debt discount and issuance costs of $1.1 million on the extinguished notes. Accrued interest of $0.7 million on the 2026 Notes was included in the exchange for the 2031 Notes. The total loss from the exchange was $3.8 million recorded as Loss on debt extinguishment in the Consolidated Statements of Operations.
Concurrent with the transactions discussed above, the Company repurchased and subsequently retired 2.7 million shares of its common stock for $30.0 million under the repurchase plan authorized in September 2022.
In connection with the issuance of the 2031 Notes, the Company incurred $6.1 million of issuance costs. The debt issuance costs were capitalized and will be amortized to interest expense using the straight-line method until maturity.
24
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The 2031 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 0.625 %, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2026. The 2031 Notes will mature on March 1, 2031 unless earlier converted, redeemed or repurchased.
The 2031 Notes may be converted under certain circumstances, based on an initial conversion rate of 72.5295 shares (equivalent to an initial conversion price of approximately $13.79 per share) at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election. The initial conversion price represents a 25.0 % premium to the closing price of the Company’s common stock on the pricing date, August 13, 2025, which will be subject to customary anti-dilution adjustments.
During the first quarter of fiscal 2027, the closing price of the Company’s common stock exceeded 130 % of the applicable conversion price of the 2031 Notes, on at least 20 of the last 30 consecutive trading days of the calendar quarter, causing the 2031 Notes to be convertible by their holders for the period October 1, 2026 to December 31, 2026. As a result, the $245.1 million carrying value of the 2031 Notes has been classified as short-term debt.
As of October 3, 2026, the expected remaining term of the 2031 Notes is 4.4 years.
On March 6, 2023, the Company issued $250.0 million aggregate principal amount of 1.625 % Senior Convertible Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company issued $132.0 million aggregate principal amount of the 2026 Notes to certain holders of the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) in exchange for $127.5 million principal amount of the 2024 Notes (the 2023 Exchange Transaction) and issued and sold $118.0 million aggregate principal amount of the 2026 Notes in a private placement to accredited institutional buyers (the 2023 Subscription Transactions).
The 2023 Exchange Transaction was accounted for as a modification. The $127.5 million principal of the 2024 Notes was reduced by $10.1 million, with offsetting increase to additional paid-in capital, to account for the increase in the fair value of the embedded conversion option in the modification. The increase in principal and coupon interest, along with the increased option value, totaled $14.6 million and is a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets. This amount has been accreted as an adjustment to interest expense on a straight-line basis up to the full face value of the 2026 Notes through maturity on March 15, 2026.
The proceeds of the 2023 Subscription Transactions amounted to $113.8 million after issuance costs of $4.2 million. The exchange resulted in $2.2 million of the issuance costs recorded as Loss on convertible note modification in the Consolidated Statements of Operations. The remaining issuance costs of $2.0 million, as well as $0.3 million of unamortized costs carried over from the 2024 Notes at the exchange date were capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and were amortized to interest expense using the straight-line method until maturity on March 15, 2026.
On August 20, 2025, as part of the 2025 Exchange Transaction, the Company exchanged $97.5 million aggregate principal amount of the 2026 Notes for $100.9 million aggregate principal amount of the 2031 Notes.
On December 15, 2025, the Company entered into separate privately-negotiated agreements with certain holders of the 2026 Notes. On December 22, 2025, the Company settled $103.5 million principal amount of 2026 Notes in exchange for an aggregate of 7.9 million shares of its common stock, par value $0.001 per share. Accrued interest was paid in cash. The transaction was accounted for as a debt extinguishment. The exchange did not qualify as an induced conversion. The Company recorded a Loss on debt extinguishment of $38.7 million in the Company’s Consolidated Statements of Operations, representing the excess of the fair value of the shares issued over the carrying amount of the notes extinguished and transaction costs associated with the settlement.
On March 15, 2026, the outstanding $49.0 million principal amount of the 2026 Notes matured. Nearly all holders of the 2026 Notes chose to convert and the settlement of the conversion resulted in a cash payment of $49.4 million, including $49.0 million in principal and $0.4 million in accrued interest, and the issuance of 1.8 million shares of its common stock for conversion value above par.
25
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
On September 29, 2021, the Company issued $400.0 million aggregate principal amount of 3.75 % Senior Notes due 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. In connection with the issuance of the 2029 Notes, the Company incurred $7.0 million of issuance costs. The debt issuance costs were capitalized and will be amortized to interest expense using the straight-line method until maturity. The 2029 Notes are an unsecured obligation of the Company and bear annual interest of 3.75 %, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2022. The 2029 Notes will mature on October 1, 2029 unless earlier redeemed or repurchased. As of October 3, 2026, the expected remaining term of the 2029 Notes is 3.0 years.
Senior Secured Asset-Based Revolving Credit Facility
On December 30, 2021, we entered into a credit agreement (the Credit Agreement) with Wells Fargo as administrative agent, and other lender related parties. On October 16, 2025, the Company entered into an agreement with Wells Fargo to amend and extend the Credit Agreement. The Credit Agreement, as amended, provides for a senior secured asset-based revolving credit facility in a maximum aggregate amount of $200 million and matures on October 16, 2030. The Credit Agreement also provides that, under certain circumstances, the Company may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100 million so long as certain conditions are met. The proceeds from the credit facility established under the Credit Agreement will be used for working capital and other general corporate purposes. The obligations under the Credit Agreement are secured by substantially all of the assets of the Company and those of its subsidiaries that are borrowers and guarantors under the Credit Agreement.
Amounts outstanding under the Credit Agreement accrue interest as follows: (i) if the amounts outstanding are denominated in U.S. Dollars, at a per annum rate equal to either, at the Company’s election, SOFR plus a margin of 1.50 % to 2.00 % per annum, or a specified base rate plus a margin of 0.50 % to 1.00 %, in each case, depending on the average excess availability under the facility, (ii) if the amounts outstanding are denominated in Sterling, at a per annum rate equal to the Sterling Overnight Interbank Average Rate (SONIA) plus a margin of 1.50 % to 2.00 %, depending on the average excess availability under the facility, (iii) if the amounts outstanding are denominated in Euros, at a per annum rate equal to the Euro Interbank Offered Rate plus a margin of 1.50 % to 2.00 %, depending on the average excess availability under the facility, or (iv) if the amounts outstanding are denominated in Canadian Dollars, at a per annum rate equal to either, at the Company’s election, the adjusted Term Canadian Overnight Repo Rate Average (CORRA) plus a margin of 1.50 % to 2.00 %, or a specified base rate plus a margin of 0.50 % to 1.00 %, in each case, depending on the average excess availability under the facility.
The covenants of the Credit Agreement include customary restrictive covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the Credit Agreement contains certain financial covenants that require the Company to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if excess availability under the facility is less than the greater of 10 % of the lesser of maximum revolver amount and borrowing base and $13.3 million.
As of October 3, 2026, we had no borrowings under this facility and our available borrowing capacity was approximately $182.3 million, net of outstanding standby letters of credit of $3.8 million.
26
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Interest Expense
The following table presents the interest expense for contractual interest, amortization of debt issuance cost, accretion of debt discount and other (in millions):
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Interest expense-contractual interest | $ | $ | |||||||||||||||||||||
| Amortization of debt issuance cost | |||||||||||||||||||||||
| Accretion of debt discount | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total interest expense | $ | $ | |||||||||||||||||||||
Note 12. Leases
The Company is a lessee in several operating leases, primarily real estate facilities for office space. The Company's lease arrangements consist of operating leases with various expiration dates through March 31, 2042. The Company's leases do not contain any material residual value guarantees.
Lease expense and cash flow information related to our operating leases is as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
Operating lease costs(1) | $ | $ | |||||||||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | |||||||||||||||||||||
| Operating ROU assets obtained in exchange for operating lease obligations | $ | $ | |||||||||||||||||||||
(1)Total variable lease costs were immaterial during the three months ended October 3, 2026 and September 27, 2025. The total operating lease costs were included in Cost of revenues, R&D, and SG&A in the Consolidated Statements of Operations.
As of October 3, 2026 and September 27, 2025, the weighted-average remaining lease term was 5.4 years and 5.9 years, respectively, and the weighted-average discount rate was 6.5 % and 6.2 %, respectively.
Future minimum operating lease payments as of October 3, 2026 are as follows (in millions):
| Operating Leases | |||||||||||
| Remainder of fiscal 2027 | $ | ||||||||||
| Fiscal 2028 | |||||||||||
| Fiscal 2029 | |||||||||||
| Fiscal 2030 | |||||||||||
| Fiscal 2031 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less: Interest | ( | ||||||||||
| Present value of lease liabilities | $ | ||||||||||
27
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 13. Restructuring
The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions. The Company’s restructuring charges include severance, benefits and outplacement costs to eliminate a specified number of positions and costs to vacate facilities and consolidate operations. The timing of associated cash payments is dependent upon the jurisdiction of the affected employees and the type of restructuring charge and can extend over multiple periods.
Fiscal 2026 Plan
During the third quarter of fiscal 2026, management approved a restructuring and workforce reduction plan (the Fiscal 2026 Plan) across our NSE and Optical Security and Performance Products (OSP) segments and Corporate (Corp) functions intended to improve operational efficiencies, better align the Company’s workforce with current business needs and strategic growth opportunities and includes integration of recently acquired businesses. The Fiscal 2026 Plan includes a global workforce reduction, facilities rationalization and asset write-offs. The Company expects approximately 5 % of its global workforce to be affected. The Company anticipates the Fiscal 2026 Plan to be substantially complete by the end of calendar year 2026.
Balance as of June 27, 2026(1) | Restructuring and related benefits | Cash settlements | Balance as of October 3, 2026(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal 2026 Plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| NSE/Corp | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| OSP | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||
(1)Included in Other current liabilities on the Consolidated Balance Sheets as of October 3, 2026 and June 27, 2026.
In addition, the Company incurred $0.2 million in restructuring charges related to pending site closures during the three months ended October 3, 2026. The Company also recognized Fiscal 2026 Plan charges of $0.3 million of accelerated depreciation during the three months ended October 3, 2026, and were recorded within SG&A in the Consolidated Statements of Operations.
Fiscal 2024 Plan
28
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 14. Income Taxes
The Company recorded an income tax provision of $11.9 million and $19.0 million for the three months ended October 3, 2026 and September 27, 2025, respectively.
The income tax provision for the three months ended October 3, 2026 primarily relates to income taxes in certain foreign jurisdictions based on the Company’s forecasted pre-tax income. The income tax provision for the three months ended September 27, 2025 primarily relates to income tax in certain foreign jurisdictions based on the Company’s forecasted pre-tax income or loss and a $9.7 million provision related to a revaluation of the Company’s deferred tax assets due to a change in the German corporate income tax rate.
The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory tax rate to the Company’s income before income taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign earnings.
As of October 3, 2026 and June 27, 2026, the Company’s unrecognized tax benefits (net of Federal benefits) totaled $41.1 million and $41.0 million, respectively, and are included in deferred taxes and other non-current tax liabilities. The Company had $2.9 million accrued for the payment of interest and penalties as of October 3, 2026. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.
Note 15. Stockholders' Equity
Repurchase of Common Stock
In September 2022 the Board of Directors authorized a stock repurchase plan (2022 Repurchase Plan) of up to $300 million effective October 1, 2022, which will remain in effect until the amount authorized has been fully repurchased or until suspension or termination of the program. Under the 2022 Repurchase Plan, the Company is authorized to repurchase shares through a variety of methods, including open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans. The timing of repurchases under the plan will depend upon business and financial market conditions.
During the three months ended October 3, 2026, the Company repurchased and subsequently retired 3.9 million shares of its common stock for $150.0 million under the 2022 Repurchase Plan. As of October 3, 2026, the Company had remaining authorization of $18.4 million for future share repurchases under the 2022 Repurchase Plan.
Note 16. Stock-Based Compensation
The Company's stock-based compensation includes a combination of time-based restricted stock awards and performance-based awards. Restricted stock awards are granted without an exercise price and are converted to shares immediately upon vesting. When converted into shares upon vesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes.
The Company generally estimates the fair value of stock-based awards based on the closing market price of the Company’s common stock on the grant date. In the case of performance-based awards that include a market condition, the Company estimates the fair value of the award using a combination of the closing market price of the Company’s common stock on the grant date and the Monte Carlo simulation model. For performance-based awards, shares attained over target upon vesting are reflected as awards granted during the period.
Time-based restricted stock awards granted to eligible employees will generally vest in annual installments over a period of to four years subject to the employees’ continuing service to the Company and do not have an expiration date. The Company's performance-based awards may include performance conditions, market conditions, time-based service conditions or a combination thereof and are generally expected to vest in annual installments over a period of to four years . In addition, the actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the relevant performance or market-based conditions.
29
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Beginning in August 2026, the Company adopted a retirement eligibility provision applicable to future time-based restricted stock awards and performance-based awards granted to the Chief Executive Officer and certain senior executives who report directly to the Chief Executive Officer. Eligible participants who attain age 60, satisfy specified service requirements and provide at least 12 months' advance notice of retirement may continue to vest in outstanding time-based restricted stock awards after retirement in accordance with the original vesting schedule. Eligible performance-based awards remain subject to the applicable performance or market-based vesting conditions, and vesting following retirement is determined in accordance with the terms of the award agreements. As a result of this retirement eligibility provision, the Company recognizes stock-based compensation expense over a shortened requisite service period for affected awards, which accelerates the recognition of stock-based compensation expense.
During the three months ended October 3, 2026 and September 27, 2025, the Company granted 0.9 million and 3.3 million time-based restricted stock awards, respectively. The aggregate grant-date fair value of time-based restricted stock awards granted during the three months ended October 3, 2026 and September 27, 2025 were estimated to be $34.3 million and $37.1 million, respectively.
During the three months ended October 3, 2026 and September 27, 2025, the Company granted 0.3 million and 1.2 million performance-based awards, respectively. There were 0.6 million and less than 0.1 million performance-based shares attained over target during the three months ended October 3, 2026 and September 27, 2025, respectively. The aggregate grant-date fair value of performance-based awards granted during the three months ended October 3, 2026 and September 27, 2025 were estimated to be $13.9 million and $16.3 million, respectively.
As of October 3, 2026, $95.6 million of unrecognized stock-based compensation costs remain to be amortized.
The impact on the Company’s results of operations of recording stock-based compensation by function for the three months ended October 3, 2026 and September 27, 2025, is as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Cost of revenues | $ | $ | |||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | |||||||||||||||||||||
Approximately $1.4 million and $1.1 million of stock-based compensation was capitalized to inventory as of October 3, 2026 and September 27, 2025, respectively.
Note 17. Employee Pension and Other Benefit Plans
The Company sponsors significant qualified and non-qualified pension plans for certain past and present employees in the United Kingdom (U.K.) and Germany. The Company also is responsible for a defined benefit plan comprising of gratuity payments for present employees in India and non-pension post-retirement benefit obligation assumed from a past acquisition.
These pension plans, with the exception of India, have been closed to new participants and no additional service costs are being accrued, except for certain plans in Germany assumed in connection with an acquisition in fiscal 2010. Benefits are generally based upon years of service and compensation or stated amounts for each year of service.
As of October 3, 2026, the U.K. plan was fully funded, while the Indian plan was partially funded. The other plans were unfunded. The Company’s policy for funded plans is to make contributions equal to or greater than the requirements prescribed by law or regulation. For unfunded plans, the Company pays the post-retirement benefits when due. During the three months ended October 3, 2026, the Company contributed $0.4 million to the Indian plan and $0.9 million to the other plans. The funded plan assets consist primarily of managed investments.
30
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The following table presents the components of net periodic cost for the pension and benefits plans (in millions):
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||
| Service cost | $ | $ | |||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | |||||||||||||||||||||
| Net periodic benefit cost | $ | $ | |||||||||||||||||||||
The components of net periodic pension cost are included in Cost of revenues, R&D and SG&A in the Consolidated Statements of Operations.
Both the calculation of the projected benefit obligation and net periodic cost are based upon actuarial valuations. These valuations use participant-specific information such as salary, age, years of service, and assumptions about interest rates, compensation increases and other factors. At a minimum, the Company evaluates these assumptions annually and makes changes as necessary.
Based on actuarial assumptions, the Company expects to incur cash outlays of approximately $5.6 million related to its defined benefit pension plans during fiscal 2027 to make current benefit payments and fund future obligations. As of October 3, 2026, approximately $1.3 million had been incurred. These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at June 27, 2026.
Note 18. Commitments and Contingencies
Legal Proceedings
The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of its business. While management currently believes that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact on its financial position, results of operations or statement of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.
Guarantees
Outstanding Standby Letters of Credit and Performance Bonds
As of October 3, 2026, the Company had standby letters of credit of $9.5 million and performance bonds of $2.0 million collateralized by restricted cash.
Product Warranties
The following table presents the changes in the Company’s warranty reserve during the three months ended October 3, 2026 (in millions):
| October 3, 2026 | |||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| Balance as of beginning of period | $ | ||||||||||||||||||||||
| Provision for warranty | |||||||||||||||||||||||
| Utilization of reserve | ( | ||||||||||||||||||||||
| Adjustments to pre-existing warranties (includes changes in estimates) | ( | ||||||||||||||||||||||
| Balance as of end of period | $ | ||||||||||||||||||||||
31
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 19. Operating Segments and Geographic Information
The Company evaluates its operating segments in accordance with the authoritative guidance on segment reporting. The Company’s Chief Executive Officer as the Company’s Chief Operating Decision Maker (CODM) uses operating segment financial information to evaluate segment performance and to allocate resources.
The Company’s operating and reportable segments are:
(i) Network and Service Enablement (NSE):
NSE provides an integrated portfolio of test, monitoring, assurance and resilient PNT solutions that enable and secure critical infrastructure ranging from data center ecosystems and communication networks to military, aerospace, railway and first responder communications.
(ii) Optical Security and Performance Products (OSP):
OSP leverages its core optical coating technologies and volume manufacturing capability to design, manufacture, and sell technologies for the anti-counterfeiting, 3D sensing, aerospace, industrial and automotive markets.
Beginning in the fourth quarter of fiscal 2026, employer payroll taxes related to stock-based compensation were no longer allocated to the Company's segment results and are instead included in the “Other segment items” row of the segment presentation. Prior-period segment results have been recast to conform to the current presentation. The Company believes excluding employer payroll taxes related to stock-based compensation aligns the treatment of these taxes, which are highly variable, with the underlying stock-based compensation expense and provides a more consistent measure of operating performance. Accordingly, this modification is intended to enhance investors’ understanding of the Company’s operating performance. These changes have no impact on any of the Company’s previously reported U.S. GAAP results.
Segment Reporting
The CODM manages the Company in two broad business categories: NSE and OSP. The CODM evaluates segment performance of the NSE and OSP business based on segment operating margins. The CODM uses segment operating margin to make budgeting and forecasting decisions and to assess the performance of our segments, primarily by monitoring actual results versus the prior year, the annual budget and forecasted results. In addition, the CODM reviews inventory levels and certain other current assets by segment. The Company allocates corporate-level operating expenses to its segment results, except for certain non-core operating and non-operating activities as discussed below.
The Company does not allocate stock-based compensation, including related employer payroll taxes, acquisition and integration related charges, amortization of acquisition related intangibles, amortization of acquisition related inventory step-up, legal settlements, restructuring, changes in fair value of contingent consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments. These items are presented as “Unallocated other expenses” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.
32
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The following tables present information on the Company’s reportable segments for the three months ended October 3, 2026 and September 27, 2025 (in millions):
| Three Months Ended October 3, 2026 | ||||||||||||||||||||||||||
| Network and Service Enablement | Optical Security and Performance Products | Total | ||||||||||||||||||||||||
| Product revenue | $ | $ | $ | |||||||||||||||||||||||
| Service revenue | ||||||||||||||||||||||||||
| Net revenue | $ | $ | $ | |||||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||
Other segment items(1) | ||||||||||||||||||||||||||
| Total operating expense | ||||||||||||||||||||||||||
| Segment operating income | $ | $ | $ | |||||||||||||||||||||||
| Segment operating margin | % | % | ||||||||||||||||||||||||
| Unallocated other expenses | ( | |||||||||||||||||||||||||
| Interest and other income, net | ||||||||||||||||||||||||||
| Interest expense | ( | |||||||||||||||||||||||||
| Income before income taxes and equity investment earnings | $ | |||||||||||||||||||||||||
(1)Other segment items represents allocation of corporate level operating expenses.
| Three Months Ended September 27, 2025 | ||||||||||||||||||||||||||
| Network and Service Enablement | Optical Security and Performance Products | Total | ||||||||||||||||||||||||
| Product revenue | $ | $ | $ | |||||||||||||||||||||||
| Service revenue | ||||||||||||||||||||||||||
| Net revenue | $ | $ | $ | |||||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||
Other segment items(1) | ||||||||||||||||||||||||||
| Total operating expense | ||||||||||||||||||||||||||
| Segment operating income | $ | $ | $ | |||||||||||||||||||||||
| Segment operating margin | % | % | ||||||||||||||||||||||||
| Unallocated other expenses | ( | |||||||||||||||||||||||||
| Loss on debt extinguishment | ( | |||||||||||||||||||||||||
| Interest and other income, net | ||||||||||||||||||||||||||
| Interest expense | ( | |||||||||||||||||||||||||
| Loss before income taxes and equity investment losses | $ | ( | ||||||||||||||||||||||||
(1)Other segment items represents allocation of corporate level operating expenses.
33
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
The following table presents information on the assets of the Company’s reportable segments at October 3, 2026 and June 27, 2026 (in millions):
| October 3, 2026 | June 27, 2026 | |||||||||||||
| Assets: | ||||||||||||||
| Inventories: | ||||||||||||||
| NSE | $ | $ | ||||||||||||
| OSP | ||||||||||||||
| Total inventories, net | ||||||||||||||
Prepayments and other current assets - NSE(1) | ||||||||||||||
| Assets not attributed to segments | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
(1)The amount presented represents the prepayments and other current assets attributed to NSE that are reviewed by the CODM. Other NSE related prepayments and current assets are not included as they are not part of the CODM’s measure of segment assets.
The Company operates primarily in three geographic regions: Americas, Asia-Pacific, and Europe, Middle East and Africa (EMEA). Net revenue is assigned to the geographic region and country where the Company’s product is initially shipped. For example, certain customers may request shipment of the Company’s product to a contract manufacturer in one country, which may differ from the location of their end customers.
The following table presents net revenue by the three geographic regions in which the Company operates and net revenue from countries that exceeded 10% of the Company’s total net revenue for the three months ended October 3, 2026 and September 27, 2025 (in millions):
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||||||||||||||
| Product Revenue | Service Revenue | Total | Product Revenue | Service Revenue | Total | ||||||||||||||||||||||||||||||
| Americas: | |||||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Other Americas | |||||||||||||||||||||||||||||||||||
| Total Americas | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Asia-Pacific: | |||||||||||||||||||||||||||||||||||
| Greater China | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Other Asia-Pacific | |||||||||||||||||||||||||||||||||||
| Total Asia-Pacific | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| EMEA: | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total net revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
34
| VIAVI SOLUTIONS INC. | ||
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) | ||
Note 20. Subsequent Events
Share Repurchase Plan
35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Statements contained in this Quarterly Report on Form 10-Q, which we also refer to as the Report, which are not historical facts, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. A forward-looking statement may contain words such as “anticipate,” “believe,” “can,” “can impact,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “projects,” “should,” “will,” “will continue to be,” “would,” or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include statements, but are not limited to statements such as:
•Financial projections and expectations, including profitability of certain business units, synergies, benefits and other matters related to completed and contemplated acquisitions and strategic transactions, plans to reduce costs and improve efficiencies including through restructuring programs, the effects of seasonality on certain business units, the consolidation of the communication industry and continued reliance on key customers for a significant portion of our revenue, future sources of revenue, stock price volatility, demand for our AI and data center related products, competition and pricing pressures, the future impact of certain accounting pronouncements, and our estimation of the potential impact and materiality of litigation;
•Sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, stock repurchases, debt repayments and other matters;
•Our expectations regarding demand for our products and services, including industry trends and technological advancements that may drive such demand, the role we will play in those advancements and our ability to benefit from such advancements;
•Our plans for growth and innovation opportunities;
•Our plans for continued development, use and protection of our intellectual property;
•Our strategies for achieving our current business objectives, including related risks and uncertainties;
•Our plans or expectations relating to investments, execution of capital allocation and debt management strategies, acquisitions, partnerships and other strategic opportunities;
•Our research and development plans and investments and the expected impact of such plans on our financial performance;
•Our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues;
•Our expectations regarding the impact of tariffs and our strategies for mitigating such impact;
•Our expectations related to future tax liabilities resulting from future tax legislation; and
•Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions, including global tariffs, ongoing geopolitical tensions including the conflicts between Russia and Ukraine and in the Middle East, and political instability and economic uncertainty in the Middle East, on our business, operations and financial results.
Management cautions that forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. These forward-looking statements are only predictions and are subject to risks and uncertainties including those set forth in Part II, Item 1A “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in other documents we file with the U.S. Securities and Exchange Commission. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Forward-looking statements are made only as of the date of this Report and subsequent facts or circumstances may contradict, obviate, undermine or otherwise fail to support or substantiate such statements. We are under no duty to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results or to changes in our expectations.
In addition, Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 27, 2026.
36
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors” and “Forward-Looking Statements.”
37
Overview
Viavi Solutions Inc. (VIAVI, also referred to as the Company, we, our and us) is a global leader in test and measurement and optical technologies. Our test and measurement, and resilient position, navigation and timing solutions enable and secure critical infrastructure ranging from data center ecosystems and communication networks to military, aerospace, railway and first responder communications. In addition, we develop and advance technologies used in high-volume optical applications across anti-counterfeiting, consumer electronics, aerospace, industrial and automotive end markets.
To serve our markets we operate the following business segments:
•Network and Service Enablement (NSE); and,
•Optical Security and Performance Products (OSP).
During the first quarter of fiscal 2027, the NSE business grew year-over-year as a result of our acquisition of Spirent Communications plc’s (Spirent) high-speed ethernet, network security and channel emulation testing business (collectively, the HSE and CE business). Additionally, we continue to see strong demand for lab and production and field products, driven by the data center ecosystem, as well as demand for our aerospace and defense products. OSP performance improved year-over-year driven by anti-counterfeiting and other products (other products include government, industrial and automotive end markets) and 3D Sensing.
Our financial results and long-term growth model will continue to be driven by revenue growth, non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share (EPS) and cash flow from operations. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.
Looking Ahead
As we look forward to the second quarter of fiscal 2027, we expect revenue for VIAVI to be up sequentially driven by continued strength in many of our end markets in NSE. Our long-term focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure. We remain positive on our long-term growth drivers and will continue to focus on executing our strategic priorities over the long-term to:
•Defend and consolidate leadership in core business segments;
•Invest in secular trends to drive growth and expand total addressable market (TAM); and
•Extend VIAVI technologies and platforms into lucrative adjacent markets and applications.
In 2025, the U.S. administration imposed additional broad-based tariffs under the International Emergency Economic Powers Act (IEEPA). In February 2026, the U.S. Supreme Court ruled that IEEPA did not authorize those tariffs, after which the administration imposed temporary replacement tariffs.
During the three months ended October 3, 2026, the Company received approximately $11.2 million in refunds, comprised primarily of tariff refunds and related statutory interest associated with previously submitted IEEPA refund claims. We expect to file applications for additional tariff refunds before the end of February 2027. However, the ultimate availability, timing, and amount of any refunds of such tariffs remain uncertain and are subject to further legal, regulatory and administrative developments. The global tariff environment continues to evolve, and these tariffs, as well as any other tariffs or other trade actions affecting China or other jurisdictions relevant to VIAVI, may increase the cost of certain materials and/or products, thereby adversely affecting our profitability. We continue to take actions to optimize our supply chain, control costs and implement pricing actions to mitigate the impact of evolving tariff policies.
38
Financial Highlights
First quarter fiscal 2027 results included the following notable items:
•Net revenue of $469.3 million, up $170.2 million or 56.9% year-over-year.
•GAAP operating margin of 17.4%, up 1,490 bps year-over-year.
•Non-GAAP operating margin of 29.0%, up 1,270 bps year-over-year.
•GAAP net income of $76.0 million, up $97.4 million or 455.1% year-over-year.
•Non-GAAP net income of $125.8 million, up $91.1 million or 262.5% year-over-year.
•GAAP diluted EPS of $0.29, up $0.39 or 390.0% year-over-year.
•Non-GAAP diluted EPS of $0.47, up $0.32 or 213.3% year-over-year.
Beginning in the fourth quarter of fiscal 2026, the Company modified its non-GAAP presentation to exclude employer payroll taxes related to stock-based compensation. Consistent with this modification, employer payroll taxes related to stock-based compensation are no longer allocated to the Company's segment results. Prior-period non-GAAP financial measures and segment results have been recast to conform to the current presentation. Management believes excluding employer payroll taxes related to stock-based compensation aligns the treatment of these taxes, which are highly variable, with the underlying stock-based compensation expense and provides a more consistent measure of operating performance. Accordingly, this modification is intended to enhance investors’ understanding of the Company’s operating performance. These changes have no impact on any of the Company’s previously reported U.S. GAAP results.
39
A reconciliation of GAAP financial measures to Non-GAAP financial measures is provided below (in millions, except EPS amounts):
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Operating Income | Operating Margin | Operating Income | Operating Margin | ||||||||||||||||||||||||||||||||||||||||||||
| GAAP measures | $ | 81.7 | 17.4 | % | $ | 7.6 | 2.5 | % | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 15.9 | 3.4 | % | 13.4 | 4.5 | % | |||||||||||||||||||||||||||||||||||||||||
| Employer payroll tax on employee share-based awards | 5.7 | 1.2 | % | 1.6 | 0.5 | % | |||||||||||||||||||||||||||||||||||||||||
| Change in fair value of contingent liability | 12.4 | 2.7 | % | 10.9 | 3.7 | % | |||||||||||||||||||||||||||||||||||||||||
| Acquisition and integration related charges | 0.2 | — | % | 3.9 | 1.3 | % | |||||||||||||||||||||||||||||||||||||||||
| Other charges unrelated to core operating performance | 0.9 | 0.2 | % | 0.6 | 0.2 | % | |||||||||||||||||||||||||||||||||||||||||
| Amortization of acquisition related inventory step-up | — | — | % | 2.6 | 0.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles | 20.1 | 4.3 | % | 8.4 | 2.8 | % | |||||||||||||||||||||||||||||||||||||||||
| Restructuring and related benefits | (0.8) | (0.2) | % | (0.3) | (0.1) | % | |||||||||||||||||||||||||||||||||||||||||
| Total related to Cost of Revenues and Operating Expenses | 54.4 | 11.6 | % | 41.1 | 13.8 | % | |||||||||||||||||||||||||||||||||||||||||
| Non-GAAP measures | $ | 136.1 | 29.0 | % | $ | 48.7 | 16.3 | % | |||||||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | Diluted EPS | Net (Loss) Income | Diluted EPS | ||||||||||||||||||||||||||||||||||||||||||||
| GAAP measures | $ | 76.0 | $ | 0.29 | $ | (21.4) | $ | (0.10) | |||||||||||||||||||||||||||||||||||||||
| Items reconciling GAAP Net Income (Loss) and EPS to Non-GAAP Net Income and EPS: | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 15.9 | 0.06 | 13.4 | 0.06 | |||||||||||||||||||||||||||||||||||||||||||
| Employer payroll tax on employee share-based awards | 5.7 | 0.02 | 1.6 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of contingent liability | 12.4 | 0.05 | 10.9 | 0.05 | |||||||||||||||||||||||||||||||||||||||||||
| Acquisition and integration related charges | 0.2 | — | 3.9 | 0.02 | |||||||||||||||||||||||||||||||||||||||||||
| Other charges unrelated to core operating performance | 0.9 | — | 0.6 | — | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquisition related inventory step-up | — | — | 2.6 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles | 20.1 | 0.07 | 8.4 | 0.04 | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring and related benefits | (0.8) | — | (0.3) | — | |||||||||||||||||||||||||||||||||||||||||||
Interest expense and other (income) expense, net(1) | (5.0) | (0.02) | 4.8 | 0.02 | |||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 0.4 | — | 10.2 | 0.04 | |||||||||||||||||||||||||||||||||||||||||||
| Total related to Net Income and EPS | 49.8 | 0.18 | 56.1 | 0.25 | |||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP measures | $ | 125.8 | $ | 0.47 | $ | 34.7 | $ | 0.15 | |||||||||||||||||||||||||||||||||||||||
| Shares used in per share calculation for Non-GAAP EPS | 266.2 | 227.9 | |||||||||||||||||||||||||||||||||||||||||||||
(1)Included in the three months ended October 3, 2026 is a gain of $5.0 million on proceeds from an insurance settlement. Included in the three months ended September 27, 2025 is a loss of $3.8 million in connection with the extinguishment of certain 1.625% Senior Convertible Notes (2026 Notes).
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Use of Non-GAAP (Adjusted) Financial Measures
The Company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP EPS financial measures as supplemental information regarding the Company’s operational performance and believes providing this additional information allows investors to see Company results through the eyes of management, to evaluate more clearly and consistently the Company’s core operational performance and expenses and evaluate the efficacy of the methodology used by management to measure such performance. The Company uses the measures disclosed in this Report to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represents its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition related intangibles, amortization expense related to acquisition related inventory step-up, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities, certain investing and acquisition related expenses and other activities and income tax expenses or benefits that management believes are not reflective of such ordinary, ongoing and core operating activities. The non-GAAP adjustments are outlined below.
Cost of revenues, costs of research and development and costs of selling, general and administrative: The Company’s GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, plant and equipment and intangibles, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans with a specific and defined term, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, including related employer payroll taxes, (v) amortization expense related to acquired intangibles, (vi) amortization expense related to acquisition related inventory step-up, (vii) changes in fair value of contingent consideration liabilities, (viii) acquisition related transaction and integration costs related to acquired entities, (ix) significant legal settlements and other contingencies and (x) other charges unrelated to our core operating performance comprised mainly of other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations and reorganizations. The Company excludes these items in calculating non-GAAP operating margin, non-GAAP net income and non-GAAP EPS.
Non-cash interest expense and other expense: The Company excludes certain non-cash interest and other expenses, including loss on debt extinguishment, accretion of debt discount, and other non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, when calculating non-GAAP net income and non-GAAP EPS.
Income tax expense or benefit: The Company excludes certain non-cash tax expense or benefit items, such as (i) the utilization of net operating losses (NOLs) where valuation allowances were released, (ii) intra-period tax allocation benefit and (iii) the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP EPS.
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP operating income is operating income. The GAAP measure most directly comparable to non-GAAP operating margin is operating margin. The GAAP measure most directly comparable to non-GAAP net income is net income. The GAAP measure most directly comparable to non-GAAP EPS is earnings per share.
41
RESULTS OF OPERATIONS
The results of operations for the current period are not necessarily indicative of results to be expected for future periods. The following table summarizes selected Consolidated Statements of Operations items (in millions):
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | Change | Percent Change | ||||||||||||||||||||||||||||||||||||||||||||
| Segment net revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| NSE | $ | 376.1 | $ | 216.0 | $ | 160.1 | 74.1 | % | |||||||||||||||||||||||||||||||||||||||
| OSP | 93.2 | 83.1 | 10.1 | 12.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total net revenue | $ | 469.3 | $ | 299.1 | $ | 170.2 | 56.9 | % | |||||||||||||||||||||||||||||||||||||||
| Amortization of acquired technologies | $ | 12.7 | $ | 6.9 | $ | 5.8 | 84.1 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 2.7 | % | 2.3 | % | |||||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 287.3 | $ | 169.0 | $ | 118.3 | 70.0 | % | |||||||||||||||||||||||||||||||||||||||
| Gross margin | 61.2 | % | 56.5 | % | |||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 69.5 | $ | 56.0 | $ | 13.5 | 24.1 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 14.8 | % | 18.7 | % | |||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | $ | 129.5 | $ | 104.2 | $ | 25.3 | 24.3 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 27.6 | % | 34.8 | % | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of other intangibles | $ | 7.4 | $ | 1.5 | $ | 5.9 | 393.3 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 1.6 | % | 0.5 | % | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring and related benefits | $ | (0.8) | $ | (0.3) | $ | (0.5) | 166.7 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 0.2 | % | 0.1 | % | |||||||||||||||||||||||||||||||||||||||||||
| Loss on debt extinguishment | $ | — | $ | (3.8) | $ | 3.8 | (100.0) | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | — | % | 1.3 | % | |||||||||||||||||||||||||||||||||||||||||||
| Interest and other income, net | $ | 10.3 | $ | 1.3 | $ | 9.0 | 692.3 | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 2.2 | % | 0.4 | % | |||||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (5.7) | $ | (7.4) | $ | 1.7 | (23.0) | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 1.2 | % | 2.5 | % | |||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 11.9 | $ | 19.0 | $ | (7.1) | (37.4) | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 2.5 | % | 6.4 | % | |||||||||||||||||||||||||||||||||||||||||||
| Equity investment earnings (losses) | $ | 1.6 | $ | (0.1) | $ | 1.7 | (1,700.0) | % | |||||||||||||||||||||||||||||||||||||||
| Percentage of net revenue | 0.3 | % | — | % | |||||||||||||||||||||||||||||||||||||||||||
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Net Revenue
Revenue from our service offerings exceeds 10% of our total consolidated net revenue and is presented separately in our Consolidated Statements of Operations. Service revenue primarily consists of maintenance and support, extended warranty, professional services and post-contract support in addition to other services such as calibration and repair services. When evaluating the performance of our segments, management focuses on total net revenue, gross profit and segment operating income and not the product or service categories. Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit and segment operating income consistent with our approach for managing the business.
Three Months Ended October 3, 2026 and September 27, 2025
Net revenue increased by $170.2 million, or 56.9%, during the three months ended October 3, 2026 compared to the same period a year ago. This increase was primarily from strong demand for lab and production and field products, driven by the data center ecosystem, our acquisition of Spirent’s HSE and CE business, as well as demand for our aerospace and defense products. Our acquisition of Spirent’s HSE and CE business contributed $52.7 million during the three months ended October 3, 2026. OSP performance improved year-over-year driven by anti-counterfeiting and other products and 3D sensing.
Product revenues increased by $158.3 million, or 61.5%, during the three months ended October 3, 2026 compared to the same period a year ago, driven by volume increases in NSE and OSP. Product revenues from Spirent’s HSE and CE business contributed $39.0 million during the three months ended October 3, 2026.
Service revenues increased by $11.9 million, or 28.5%, during the three months ended October 3, 2026 compared to the same period a year ago, driven by the acquisition of Spirent’s HSE and CE business which contributed $13.7 million offset by a decline primarily in legacy Wireless during the three months ended October 3, 2026.
Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties. For example, uncertainty around the timing of our customers’ procurement decisions on infrastructure maintenance and upgrades and decisions on new infrastructure investments or uncertainty about speed of adoption of new and emerging technologies at a commercially viable scale. This may limit our visibility, and consequently, our ability to predict future revenue, seasonality, profitability and general financial performance, which could create period-over-period variability in our financial measures and present foreign exchange rate risks. Global tariffs could increase our costs and impact our business.
We cannot predict when or to what extent these uncertainties will be resolved. Our revenues, profitability and general financial performance may also be affected by: (a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors and a general commoditization trend for certain products; (b) strategic execution challenges arising from competition with larger and more well-resourced competitors; (c) product mix variability in our markets, which affects revenue and gross margin; (d) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility; (e) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NSE customer base and adds additional risk and uncertainty to our financial and business projections; (f) the impact of ongoing global trade policies, tariffs and sanctions; and (g) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of new and emerging technologies and platforms.
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Revenue by Region
We operate in three geographic regions, including the Americas, Asia-Pacific and Europe Middle East and Africa (EMEA). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue (in millions):
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Americas: | |||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | 178.8 | 38.1 | % | $ | 106.7 | 35.7 | % | |||||||||||||||||||||||||||||||||||||||
| Other Americas | 27.2 | 5.8 | % | 22.1 | 7.4 | % | |||||||||||||||||||||||||||||||||||||||||
| Total Americas | $ | 206.0 | 43.9 | % | $ | 128.8 | 43.1 | % | |||||||||||||||||||||||||||||||||||||||
| Asia-Pacific: | |||||||||||||||||||||||||||||||||||||||||||||||
| Greater China | $ | 80.4 | 17.1 | % | $ | 56.5 | 18.9 | % | |||||||||||||||||||||||||||||||||||||||
| Other Asia-Pacific | 82.3 | 17.6 | % | 35.6 | 11.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Total Asia-Pacific | $ | 162.7 | 34.7 | % | $ | 92.1 | 30.8 | % | |||||||||||||||||||||||||||||||||||||||
| EMEA: | $ | 100.6 | 21.4 | % | $ | 78.2 | 26.1 | % | |||||||||||||||||||||||||||||||||||||||
| Total net revenue | $ | 469.3 | 100.0 | % | $ | 299.1 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||
Net revenue from customers outside the Americas represented 56.1% and 56.9% of net revenue, respectively, during the three months ended October 3, 2026 and September 27, 2025.
We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.
Amortization of Acquired Technologies (Cost of revenues)
Amortization of acquired technologies within Cost of revenues increased $5.8 million or 84.1% during the three months ended October 3, 2026 compared to the same period a year ago. This increase is primarily due to the amortization of intangibles acquired through Spirent’s HSE and CE business.
Gross Margin
Gross margin increased by 4.7 percentage points during the three months ended October 3, 2026 from 56.5% in the same period a year ago to 61.2% in the current period. The increase was primarily driven by the higher volume, favorable product mix and tariff refunds of $10.2 million, partially offset by an increase in amortization of intangibles.
As discussed in more detail under “Net Revenue” above, we sell products in certain markets that are consolidating, undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive (increasingly due to Asia-Pacific-based competition), are price sensitive and/or are affected by customer seasonal and mix variant buying patterns. We expect these factors to continue to result in variability of our gross margin.
Research and Development
Research and Development (R&D) expense increased by $13.5 million, or 24.1%, during the three months ended October 3, 2026 compared to the same period a year ago. This increase was primarily due to incremental cost from the acquisition of Spirent’s HSE and CE business of $11.6 million and higher variable expenses, partially offset by R&D tax credits. As a percentage of net revenue, R&D expense decreased by 3.9 percentage points during the three months ended October 3, 2026 compared to the same period a year ago.
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We believe that continuing our investments in R&D is critical to attaining our strategic objectives. We plan to continue to invest in R&D and new products that will further differentiate us in the marketplace.
Selling, General and Administrative
Selling, General and Administrative (SG&A) expense increased by $25.3 million, or 24.3%, during the three months ended October 3, 2026 compared to the same period a year ago. This increase was primarily due to the incremental cost from the acquisition of Spirent’s HSE and CE business of $7.1 million, higher stock-based compensation, including related employer payroll taxes and higher variable expenses, partially offset by lower acquisition and integration related charges. As a percentage of net revenue, SG&A expense decreased 7.2 percentage points during the three months ended October 3, 2026 compared to the same period a year ago.
Amortization of Intangibles (Operating expenses)
Amortization of intangibles within Operating expenses increased $5.9 million or 393.3% during the three months ended October 3, 2026 compared to the same period a year ago. This increase is primarily due to the amortization of intangibles acquired through Spirent’s HSE and CE business, partially offset by certain intangibles becoming fully amortized.
Restructuring
The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions.
During the third quarter of fiscal 2026, management approved a restructuring and workforce reduction plan (the Fiscal 2026 Plan) across our NSE and OSP segments and Corporate functions intended to improve operational efficiencies, better align the Company’s workforce with current business needs and strategic growth opportunities and includes integration of recently acquired businesses. The Fiscal 2026 Plan includes a global workforce reduction, facilities rationalization and asset write-offs. The Company expects approximately 5% of its global workforce to be affected. We estimate annualized gross cost savings of approximately $30.0 million upon completion of the Fiscal 2026 plan, excluding any one-time charges as a result of the restructuring activities. The Company anticipates the Fiscal 2026 Plan to be substantially complete by the end of calendar year 2026.
During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across various functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs. The Fiscal 2024 Plan affected approximately 7% of its global workforce and resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges. The Fiscal 2024 Plan was completed during fiscal 2026.
During the three months ended October 3, 2026, the Company recorded restructuring benefits of $1.0 million related to employee severance and charges of $0.2 million from pending site closures related to the Fiscal 2026 Plan. During the three months ended September 27, 2025, the Company recorded restructuring benefits of $0.3 million related to the Fiscal 2024 Plan.
As of October 3, 2026, our total restructuring accrual was $3.0 million. We expect the payments to be funded by operating cash flow.
Refer to “Note 13. Restructuring” for more information.
Loss on Debt Extinguishment
During the three months ended September 27, 2025, the Company issued $100.9 million aggregate principal amount of 0.625% Senior Convertible Notes due 2031 (2031 Notes) to certain holders of the 1.625% Senior Convertible Notes (2026 Notes) in exchange for $97.5 million principal amount of the 2026 Notes. This exchange transaction was accounted for as an extinguishment which resulted in the write-off of unamortized debt discount and issuance costs of $1.1 million on the extinguished notes. Accrued interest of $0.7 million on the 2026 Notes was included in the exchange for the 2031 Notes. The total loss from the exchange was $3.8 million recorded as Loss on debt extinguishment in the Consolidated Statements of Operations.
Refer to “Note 11. Debt” for more information.
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Interest and other income, net
Interest and other income, net, was $10.3 million during the three months ended October 3, 2026 compared to $1.3 million during the same period a year ago. This $9.0 million increase was primarily driven by an increase in other income related to a gain of $5.0 million on proceeds from an insurance settlement, favorable foreign exchange impact as the balance sheet hedging program provided more favorable offset to the remeasurement of underlying foreign exchange exposures during the current period and an increase in interest income due to higher average cash balances and higher yields during the current period.
Interest Expense
Interest expense decreased by $1.7 million, or 23.0%, during the three months ended October 3, 2026 compared to the same period a year ago. This decrease was primarily a result of the maturity of the 2026 Notes in March 2026 as the interest expense in the same period a year ago included interest expense and accretion of debt discount on the 2026 Notes.
Provision for Income Taxes
We recorded an income tax provision of $11.9 million and $19.0 million for the three months ended October 3, 2026 and September 27, 2025, respectively.
The income tax provision for the three months ended October 3, 2026, primarily relates to income taxes in certain foreign jurisdictions based on our forecasted pre-tax income. The income tax provision for the three months ended September 27, 2025 primarily relates to income tax in certain foreign jurisdictions based on our forecasted pre-tax income or loss and a $9.7 million provision related to a revaluation of our deferred tax assets due to a change in the German corporate income tax rate.
The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory tax rate to our income before income taxes primarily due to changes in the valuation allowance for deferred tax assets attributable to our domestic and foreign earnings.
As of October 3, 2026 and June 27, 2026, our unrecognized tax benefits (net of Federal benefits) totaled $41.1 million and $41.0 million, respectively, and are included in deferred taxes and other non-current tax liabilities. We had $2.9 million accrued for the payment of interest and penalties as of October 3, 2026. The timing and resolution of income tax examinations are uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.
Operating Segment Information
Information related to our operating segments was as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | Change | Percentage Change | ||||||||||||||||||||||||||||||||||||||||||||
| Network and Service Enablement | |||||||||||||||||||||||||||||||||||||||||||||||
| Net revenue | $ | 376.1 | $ | 216.0 | $ | 160.1 | 74.1 | % | |||||||||||||||||||||||||||||||||||||||
| Gross profit | 248.8 | 136.3 | 112.5 | 82.5 | % | ||||||||||||||||||||||||||||||||||||||||||
| Gross margin | 66.2 | % | 63.1 | % | |||||||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 95.8 | $ | 17.8 | $ | 78.0 | 438.2 | % | |||||||||||||||||||||||||||||||||||||||
| Operating margin | 25.5 | % | 8.2 | % | |||||||||||||||||||||||||||||||||||||||||||
| Optical Security and Performance Products | |||||||||||||||||||||||||||||||||||||||||||||||
| Net revenue | $ | 93.2 | $ | 83.1 | $ | 10.1 | 12.2 | % | |||||||||||||||||||||||||||||||||||||||
| Gross profit | 53.2 | 43.6 | 9.6 | 22.0 | % | ||||||||||||||||||||||||||||||||||||||||||
| Gross margin | 57.1 | % | 52.5 | % | |||||||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 40.3 | $ | 30.9 | $ | 9.4 | 30.4 | % | |||||||||||||||||||||||||||||||||||||||
| Operating margin | 43.2 | % | 37.2 | % | |||||||||||||||||||||||||||||||||||||||||||
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Network and Service Enablement
NSE net revenue increased by $160.1 million, or 74.1%, during the three months ended October 3, 2026 compared to the same period a year ago, primarily driven by higher volume in Lab and Production ($52.7 million contributed by our acquisition of Spirent’s HSE and CE business), Fiber and Access Solutions and Aerospace and Defense, partially offset by lower volume in Wireless.
NSE gross margin increased by 3.1 percentage points during the three months ended October 3, 2026 to 66.2% from 63.1% in the same period a year ago primarily due to tariff refunds, higher volume and favorable product mix.
NSE operating margin increased by 17.3 percentage points during the three months ended October 3, 2026 to 25.5% from 8.2% in the same period a year ago primarily due to higher volume resulting in operating leverage.
Optical Security and Performance Products
OSP net revenue increased by $10.1 million, or 12.2%, during the three months ended October 3, 2026 compared to the same period a year ago, primarily driven by higher anti-counterfeiting and other products and 3D sensing revenues.
OSP gross margin increased by 4.6 percentage points during the three months ended October 3, 2026 to 57.1% from 52.5% in the same period a year ago primarily due to higher volume and favorable product mix.
OSP operating margin increased by 6.0 percentage points during the three months ended October 3, 2026 to 43.2% from 37.2% in the same period a year ago primarily due to higher volume resulting in operating leverage.
Liquidity and Capital Resources
We believe our existing liquidity and sources of liquidity, namely operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet our liquidity needs, including but not limited to, contractual obligations, working capital and capital expenditure requirements, contingent consideration liabilities, financing strategic initiatives, funding debt maturities and executing purchases under our share repurchase program over the next twelve months and beyond. However, there are a number of factors that could positively or negatively impact our liquidity position, including:
•Global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers;
•Changes in accounts receivable, inventory or other operating assets and liabilities which affect our working capital;
•Increase in capital expenditure to support the revenue growth opportunity of our business;
•Changes in customer payment terms and patterns, which typically results in customers delaying payments or negotiating favorable payment terms to manage their own liquidity positions;
•Timing of payments to our suppliers;
•Factoring or sale of accounts receivable;
•Volatility of our stock price and/or equity markets;
•Volatility in fixed income and credit markets which impact the liquidity and valuation of our investment portfolios;
•Volatility in credit markets that impact our ability to obtain additional financing on favorable terms or at all;
•Volatility in foreign exchange markets which impacts our financial results;
•Possible investments or acquisitions of complementary businesses, products or technologies;
•Principal payment obligations of our 3.75% Senior Notes due 2029 and 0.625% Senior Convertible Notes due 2031 (together the “Notes”) and covenants that restrict our debt level and credit facility capacity;
•Issuance or repurchase of debt which may include open market purchases of the Notes prior to their maturity;
•Issuance or repurchase of our common stock or other equity securities;
•Challenges in repatriating funds from certain foreign jurisdictions;
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•Factors beyond our control that may impact timing of and/or appropriation of government funding for certain of our strategic research and development programs;
•Potential funding of pension liabilities either voluntarily or as required by law or regulation;
•Compliance with covenants and other terms and conditions related to our financing arrangements; and
•The risks and uncertainties detailed in Item 1A “Risk Factors” section of this Quarterly Report on Form 10-Q.
Cash and Cash Equivalents and Short-Term Investments
Our cash and cash equivalents and short-term investments mainly consist of investments in institutional money market funds and short-term deposits at major global financial institutions. Our strategy is focused on capital preservation and supporting our liquidity requirements that meet high credit quality standards, as specified in our investment policy approved by the Audit Committee of our Board of Directors. Our investments in debt securities and marketable equity securities are primarily classified as available for sale or trading assets and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive income (loss) and reported as a separate component of stockholders’ equity. As of October 3, 2026, U.S. subsidiaries owned approximately 30.6% of our cash and cash equivalents, short-term investments and restricted cash.
As of October 3, 2026, the majority of our cash investments have maturities of 90 days or less and are of high credit quality. Nonetheless we could realize investment losses under adverse market conditions. During the three months ended October 3, 2026, we have not realized material investment losses but we can provide no assurance that the value or liquidity of our investments will not be impacted by adverse conditions in the financial markets. In addition, we maintain cash balances in operating accounts with third-party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor the cash balances in our operating accounts and adjust as appropriate, these cash balances could be impacted if the underlying financial institutions fail.
Senior Secured Asset-Based Revolving Credit Facility
On December 30, 2021, we entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent, and other lender-related parties. The Credit Agreement provides for a senior secured asset-based revolving credit facility. On October 16, 2025, we amended the Credit Agreement to reduce the commitment from a maximum aggregate amount of $300.0 million to $200.0 million to be in line with borrowing base availability and extend the maturity from December 30, 2026 to October 16, 2030. The Credit Agreement also provides that, under certain circumstances, we may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100.0 million so long as certain conditions are met.
As of October 3, 2026, we had no borrowings under this facility and our available borrowing capacity was approximately $182.3 million, net of outstanding standby letters of credit of $3.8 million.
Refer to “Note 11. Debt” for more information.
Convertible Notes
During the first quarter of fiscal 2027, the closing price of the Company’s common stock exceeded 130% of the applicable conversion price of the 2031 Notes, on at least 20 of the last 30 consecutive trading days of the calendar quarter, causing the 2031 Notes to be convertible by their holders for the period October 1, 2026 to December 31, 2026. As a result, the $245.1 million carrying value of the 2031 Notes has been classified as short-term debt.
Contingent Consideration
As of October 3, 2026, the fair value of the contingent consideration liabilities for Inertial Labs and Direct Optical Research Company totaled $93.0 million with $72.9 million and $20.1 million included in Other current liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheets.
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Cash Flows for the Three Months Ended October 3, 2026
As of October 3, 2026, our combined balance of cash and cash equivalents and restricted cash decreased by $121.6 million to $538.2 million from $659.8 million as of June 27, 2026.
During the three months ended October 3, 2026, Cash provided by operating activities was $104.7 million, consisting of net income of $76.0 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) totaling $51.6 million, including changes in deferred tax balances, and changes in operating assets and liabilities that used $22.9 million. Changes in our operating assets and liabilities related to an increase in inventory of $22.4 million related to demand changes, a decrease in accrued payroll and related expenses of $15.7 million due primarily to variable pay and timing of payroll, a decrease in accrued expenses and other current and non-current liabilities of $12.5 million, a decrease in deferred revenue of $2.5 million due to timing of support billings and project acceptances and an increase in other current and non-current assets of $0.7 million. These were partially offset by a decrease in accounts receivable of $15.1 million due to collections outpacing billings, an increase in accounts payable of $13.6 million driven by timing of purchases and related payments and an increase in income taxes payable of $2.2 million.
During the three months ended October 3, 2026, Cash used in investing activities was $18.7 million, primarily resulting from $12.0 million used for capital expenditures, $11.9 million used for the acquisition of Direct Optical Research Company, $0.5 million related to contingent consideration liability payment and $0.1 million other investing activities. These were partially offset by $5.0 million in proceeds from insurance settlement and $0.8 million in proceeds from the sale of assets.
During the three months ended October 3, 2026, Cash used in financing activities was $206.6 million, primarily resulting from $150.0 million cash paid to repurchase common stock under our share repurchase program, $59.8 million in withholding tax payments on the vesting of restricted stock and performance-based awards, $0.6 million of equity issuance costs paid and $0.1 million in other financing activities. These were partially offset by $3.9 million in proceeds from the issuance of common stock under our employee stock purchase plan.
Share Repurchase Program
During the three months ended October 3, 2026, we repurchased and subsequently retired 3.9 million shares of our common stock for $150.0 million pursuant to our 2022 Repurchase Plan. As of October 3, 2026, the Company had remaining authorization of $18.4 million for future share repurchases under the 2022 Repurchase Plan.
Refer to “Note 15. Stockholders’ Equity” for more information.
On November 1, 2026, the Board of Directors authorized a new common stock repurchase program (2026 Repurchase Plan) that will allow the Company to repurchase up to $500 million of the Company’s common stock. Under the new repurchase program, the Company may purchase shares of common stock from time to time through a variety of methods, which may include but are not limited to open market purchases, the implementation of a 10b5-1 plan, accelerated stock repurchases, privately negotiated transactions and/or any other available methods in accordance with Securities and Exchange Commission and other applicable legal requirements. The 2026 Repurchase Plan will remain in effect until the amount authorized has been fully repurchased or until the Company suspends or terminates the program.
Refer to “Note 20. Subsequent Events” for more information.
Contractual Obligations
There were no material changes to our existing contractual commitments during the first quarter of fiscal 2027.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as such term is defined in rules promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors, other than the guarantees discussed in “Note 18. Commitments and Contingencies.”
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Employee Equity Incentive Plan
Our stock-based benefit plans are a broad-based, long-term retention program that is intended to attract and retain employees and align stockholder and employee interests. Refer to “Note 16. Stock-Based Compensation” for more details.
Employee Defined Benefit Plans and Other Post-retirement Benefits
We sponsor significant qualified and non-qualified pension plans for certain past and present employees in the U.K. and Germany. The Company also is responsible for a defined benefit plan comprising of gratuity payments for present employees in India. These pension plans, with the exception of India, have been closed to new participants and no additional service costs are being accrued, except for certain plans in Germany assumed in connection with an acquisition in fiscal 2010.
The U.K. plan was fully funded while the Indian plan was partially funded. The German plans, which were initially established as “pay-as-you-go” plans, are unfunded. As of October 3, 2026, our pension plans were under-funded by $44.6 million since the projected benefit obligation (PBO) exceeded the fair value of plan assets. Pension plan assets are managed by external third parties and we monitor the performance of our investment managers. As of October 3, 2026, the fair value of plan assets had decreased approximately 9.3% since June 27, 2026, our most recent fiscal year end.
We are also responsible for the non-pension post-retirement benefit obligation PBO assumed from a past acquisition of $0.3 million.
In estimating the expected return on plan assets, we consider historical returns on plan assets, adjusted for forward-looking considerations, inflation assumptions and the impact of active management of the plan’s invested assets. While it is not possible to accurately predict future rate movements, we believe our current assumptions are appropriate. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details.
Recently Issued Accounting Pronouncements
Refer to “Note 2. Recently Issued Accounting Pronouncements” regarding the effect of certain recent accounting pronouncements on our Consolidated Financial Statements.
Critical Accounting Estimates
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), which require management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. Our estimates are based on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We believe that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates and such differences may be material.
Business Combinations - Valuation of Intangible Assets
Accounting for business combinations requires significant judgment in determining the estimated fair values assigned to identifiable assets acquired and liabilities assumed. The valuation of acquired identifiable intangible assets is inherently subjective and requires management to make estimates regarding future operating results and market participant assumptions. Significant assumptions used in valuing customer relationships include projected revenues, projected expenses, contributory asset charges, discount rate, income tax rate and customer attrition rate. Significant assumptions used in valuing developed technology include projected revenues, royalty rate, discount rate, income tax rate and technology obsolescence rate. Changes in these assumptions could materially affect the estimated fair values assigned to acquired intangible assets and goodwill, as well as future amortization expense.
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Contingent Purchase Consideration
For contingent purchase consideration, the fair value of such earn-out liabilities are generally determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the projected revenues of the acquired business over the earn-out period. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement. The estimates used to determine the fair value of the contingent consideration liability are subject to significant judgment and given the inherent uncertainties in making these estimates, actual results are likely to differ from the amounts originally recorded and could be materially different.
Projected benefit obligation (PBO)
A key actuarial assumption in calculating the net periodic cost and the PBO is the discount rate. Changes in the discount rate impact the interest cost component of the net periodic benefit cost calculation and PBO due to the fact that the PBO is calculated on a net present value basis. Decreases in the discount rate will generally increase pre-tax cost, recognized expense and the PBO. Increases in the discount rate tend to have the opposite effect. We estimate a 50-basis point decrease or increase in the discount rate would cause a corresponding increase or decrease, respectively, in the PBO of approximately $3.5 million based upon data as of June 27, 2026.
Item 3. Quantitative and Qualitative Disclosure About Market Risks
The Company’s market risk has not changed materially from the foreign exchange and interest rate risks disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2026.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), which are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of October 3, 2026.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures of our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems will be achieved. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company, have been detected. Accordingly, our disclosure controls and procedures provide reasonable assurance of achieving their objective.
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PART II—OTHER INFORMATION
We are subject to a variety of claims and suits that arise from time to time in the ordinary course of our business. While management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact on our financial position, results of operations or statement of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. If an unfavorable final outcome were to occur, it may have a material adverse impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.
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ITEM 1A. Risk Factors
Global Risks
Geopolitical conditions, including political turmoil and volatility, regional conflicts, terrorism and war could result in market instability, which could negatively impact our business results.
We operate globally and sell our products in countries throughout the world. Escalations in regional conflicts, including the ongoing conflicts between Russia and Ukraine and in the Middle East, ongoing and expanding economic sanctions, political instability and economic uncertainty in the Middle East, and the risk of increased tensions between the U.S. and China, could curtail or prohibit our ability to transfer certain technologies, to sell our products and solutions, or to continue to operate in certain locations. Foreign companies with a presence in China are facing increasing operational challenges and enhanced scrutiny from governmental entities in the region. Further, it is possible that the U.S.-Chinese geopolitical tensions could result in government measures that could adversely impact our business. The U.S. administration has implemented and could implement further broad-based global tariffs that could adversely impact trade relations and result in higher costs. Tariff rates continue to evolve and therefore the impact, including those of any potential retaliatory tariffs, is difficult to forecast. International conflict has contributed to (i) increased pressure on the supply chain and increased energy and fuel costs, which could increase the cost of manufacturing, selling and delivering products and solutions; (ii) inflation, which could result in increases in the cost of manufacturing products, reduced customer purchasing power, increased price pressure, and reduced or cancelled orders; (iii) increases in cybersecurity attacks; and (iv) general market instability, all of which could adversely impact our financial results.
Risks Related to Our Business Strategy and Industry
Our future profitability is not assured.
Our profitability in a particular period will be impacted by revenue, product mix and operational costs that vary significantly across our product portfolio and business segments.
Specific factors that may undermine our profit and financial objectives include, among others:
•Uncertainty around timing, investment level and demand for our products used in connection with AI, data centers and related network infrastructure;
•Uncertainty around the timing of our customers’ procurement decisions on infrastructure maintenance and upgrades;
•Uncertain future telecom carrier and cable operator capital and R&D spending levels, which particularly affect our NSE segment;
•Adverse changes to our product mix, both fundamentally (resulting from new product transitions, the declining profitability of certain legacy products and the termination of certain products with declining margins, among other things) and due to quarterly demand fluctuations;
•Pricing pressure across our NSE product lines due to competitive forces, particularly from Asia-based competitors, advanced chip component shortages, and a highly concentrated customer base for many of our product lines, which may offset some of the cost improvements;
•Strategic execution challenges arising from competition with larger and more well-resourced competitors;
•Our OSP segment operating margin may experience some downward pressure as a result of a higher mix of 3D sensing products and increased operating expenses;
•Longer lead times for components and resources for our products, including recent memory chip shortages which lead to higher component prices;
•Resource rationing, including rationing of utilities like electricity by governments and/or service providers;
•Budgetary constraints that impact or slow customer inventory consumption;
•Increasing commoditization of previously differentiated products, and the attendant negative effect on average selling prices and profit margins;
•Execution challenges, which limit revenue opportunities and harm profitability, market opportunities and customer relations;
•Decreased revenue associated with terminated or divested product lines;
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•Redundant costs related to periodic transitioning of manufacturing and other functions to lower-cost locations;
•Ongoing costs associated with organizational transitions, consolidations and restructurings, which are expected to continue in the near term;
•Cyclical demand for our currency products;
•Changing market and economic conditions, including tariffs, economic sanctions and export restrictions, the ongoing conflicts between Russia and Ukraine and in the Middle East; political instability and economic uncertainty in the Middle East; tensions and trade sanctions between the U.S. and China; supply chain constraints; and pricing and inflationary pressures;
•A limited number of customers may account for a substantial portion of our revenue in any given period and our operating results may be adversely affected by the timing, size, and concentration of large customer orders, including orders from government entities;
•The impact of any prolonged government shutdown on our business, particularly in the aerospace and defense sectors, along with any governmental actions impacting the defense sector;
•Ability of our customers, partners, manufacturers and suppliers to purchase, market, sell, manufacture and/or supply our products and services, including as a result of disruptions arising from supply chain constraints;
•Financial stability of our customers, including the solvency of private sector customers and statutory authority for government customers to purchase goods and services; and
•Factors beyond our control resulting from pandemics and similar outbreaks, manufacturing restrictions, travel restrictions and shelter-in-place orders to control the spread of a disease regionally and globally, and limitations on the ability of our employees and our suppliers’ and customers’ employees to work and travel.
Taken together, these factors limit our ability to predict future profitability levels and to achieve our long-term profitability objectives. If we fail to achieve profitability expectations, the price of our debt and equity securities, as well as our business and financial condition, may be materially adversely impacted.
Rapid technological change in our industry presents significant risks and challenges, and failure to keep pace could cause customers to purchase fewer of our products.
Our success depends upon our ability to deliver both our current product offerings and new products and technologies on time and at an acceptable cost to our customers. The markets for our products are characterized by rapid technological change, frequent new product introductions, substantial capital investment, changes in customer requirements and a constantly evolving industry. Our future performance will depend on the successful development, introduction and market acceptance of new and enhanced products that address these issues and provide solutions that meet our customers’ current and future needs. As a technology company, we also constantly encounter quality, volume and cost concerns such as:
•Our continuing cost reduction programs, which include site and organization consolidations, asset divestitures, outsourcing the manufacture of certain products to contract manufacturers, other outsourcing initiatives and reductions in employee headcount, requirements related to re-establishment and re-qualification by our customers of complex manufacturing lines, and modifications to systems, planning and operational infrastructure. During this process, we have experienced, and may continue to experience, additional costs, delays in re-establishing volume production levels, planning difficulties, inventory issues, factory absorption concerns and systems integration problems.
•Variability of manufacturing yields caused by difficulties in the manufacturing process, the effects from a shift in product mix, changes in product specifications and the introduction of new product lines. These difficulties can reduce yields or disrupt production and thereby increase our manufacturing costs and adversely affect our margin.
•Potentially significant costs to correct defective products (despite rigorous testing for quality both by our customers and by us), which could include lost future sales of the affected product and other products, and potentially severe customer relations problems, litigation and damage to our reputation.
•Our dependence on a limited number of vendors, who are often small and specialized, for raw materials, packages and standard components. We also rely on contract manufacturers around the world to manufacture certain products. Our business could continue to be adversely affected by this dependency. Specific concerns we periodically encounter with our suppliers include stoppages or delays of supply, insufficient vendor resources to supply our requirements, substitution of more expensive or less reliable parts, receipt of defective parts or contaminated materials, increases in the price of supplies and an
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inability to obtain reduced pricing from our suppliers in response to competitive pressures. Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control. Any such failure could have a material impact on our ability to meet customers’ expectations and may materially impact our operating results. Increased demand for AI-related products may cause suppliers to allocate manufacturing capacity, materials or other resources to higher-volume or higher-margin products or customers, reduce production of components used in our products, or impose less favorable pricing, lead times or allocation terms.
•New product programs and introductions, which involve changing product specifications and customer requirements, unanticipated engineering complexities, difficulties in reallocating resources and overcoming resource limitations and increased complexity, exposing us to yield and product risk internally and with our suppliers.
These factors could cause strain on our execution capabilities and customer relations. We expect the impact of these issues will become more pronounced as we continue to introduce new product offerings and when overall demand increases. We have seen and could continue to see periodic difficulty responding to customer delivery expectations for some of our products, and yield and quality problems, particularly with some of our new products and higher volume products which could require additional funds and other resources to respond to these execution challenges. From time to time, we have had to divert resources from new product R&D and other functions to assist with resolving these matters. If we do not improve our performance in these areas, our operating results may be harmed, the commercial viability of new products may be challenged, and our customers may choose to reduce or terminate their purchases of our products and purchase additional products from our competitors.
Unfavorable, uncertain or unexpected conditions in the transition to new technologies may cause our growth forecasts to be inaccurate and/or cause fluctuations in our financial results.
Our growth forecasts and estimates of market opportunities related to network infrastructure, 3D sensing and other developing technologies, including AI, are subject to significant uncertainty. They rely on assumptions and estimates informed by our internal analysis, industry experience and third-party data that may prove inaccurate. These markets may not develop in the manner or within the time periods we anticipate, and our estimated market opportunities may prove materially inaccurate.
If domestic and global economic conditions worsen, including as a result of pricing and inflationary pressures, overall spending on infrastructure, 3D sensing and other developing technologies may be reduced, which would adversely impact demand for our products in these markets. In addition, unfavorable developments with evolving laws and regulations worldwide related to such technologies may limit or slow the rate of global adoption, impede our strategy, and negatively impact our long-term expectations in these markets.
Our growth and ability to serve a significant portion of these markets are subject to many factors including our success in implementing our business strategy as well as market adoption and expansion of network infrastructure, 3D sensing and other applications for consumer electronics. We may not be able to serve a significant portion of these markets and our growth forecasts should not be taken as indicative of our future growth. Even if the markets and rates of adoption develop in the manner or in the time periods we anticipate, if we do not have timely, competitively priced, market-accepted products available to meet our customers’ planned roll-out of infrastructure platforms and systems, 3D sensing products and other technologies, we may miss a significant opportunity and our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Demand for our products used in connection with AI, data centers and related network infrastructure depends in part on the level, timing and composition of investment by our customers and participants in their end markets. Such investment may be concentrated among a limited number of market participants, fluctuate significantly, or fail to generate anticipated returns for us. Continued growth in AI adoption or announced infrastructure investment does not necessarily result in corresponding growth in demand for our products.
The construction, expansion and deployment of data centers and related infrastructure may also be constrained by the availability, reliability and cost of electricity and grid connections; water and cooling resources; suitable land; permits and other approvals; construction capacity and skilled labor; computing, networking and other equipment; and stakeholder sentiment. Furthermore, in some regions, data center development has led to increased public controversy and regulatory scrutiny, including with respect to environmental impact and resource allocation, including as relates to power, land and water use. These constraints may affect our customers or their customers even when underlying demand remains strong and may result in projects being delayed, relocated,
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reduced in scope or cancelled. Any resulting reduction or change in the timing or mix of demand for our products could materially adversely affect our business, financial condition, results of operations and cash flows.
We may experience increased pressure on our pricing and contract terms due to our reliance on a limited number of customers for a significant portion of our sales.
We believe that we will continue to rely upon a limited number of customers for a significant portion of our revenues for the foreseeable future. Any failure by us to continue capturing a significant share of key customer sales could materially harm our business. Dependence on a limited number of customers exposes us to the risk that order reductions from any one customer can have a material adverse effect on periodic revenue. Due to the current trend of communication industry consolidation, we may have increased dependence on fewer customers who may be able to exert increased pressure on our prices and other contract terms. Customer consolidation activity and periodic manufacturing and inventory initiatives could also create the potential for disruptions in demand for our products as a consequence of such customers streamlining, reducing or delaying purchasing decisions.
We have a strategic alliance with SICPA to market and sell our OVP and OVMP product lines for banknote anti-counterfeiting applications worldwide. A material reduction in sales, or loss of the relationship with SICPA, may harm our business and operating results as we may be unable to find a substitute marketing and sales partner or develop these capabilities ourselves in a timely manner.
Movement towards virtualized networks and software solutions may result in lower demand for our hardware products and increased competition.
The market for our NSE segment is increasingly looking towards virtualized networks and software solutions. This trend may result in lower demand for our legacy hardware products. Additionally, barriers to entry are generally lower for software solutions, which may lead to increased competition for our products, solutions and services.
We face a number of risks related to our strategic transactions.
Our strategy continues to include periodic acquisitions and divestitures of businesses and technologies. Strategic transactions of this nature involve numerous risks, including the following:
•Competition for suitable acquisition targets;
•Inability to consummate deals on favorable or acceptable terms, including due to failure to obtain stockholder, government, regulatory or other necessary approvals or satisfy other closing conditions;
•Diversion of management’s attention from normal daily operations of the business;
•Potential difficulties in completing projects associated with in-process R&D;
•Difficulties in entering markets in which we have no or limited prior experience and where competitors have stronger market positions;
•Difficulties in obtaining or providing sufficient transition services and accurately projecting the time and cost associated with providing these services;
•Failure of an acquisition to further our business strategy, overpayment for an acquisition, or inability to realize the expected return on our investments;
•Expected earn-outs may not be achieved in the time frame or at the level expected or at all;
•Inability to recognize or capitalize on expected growth, synergies or cost savings;
•Insufficient net revenue to offset increased expenses associated with acquisitions;
•Potential loss of key employees of the acquired companies;
•Difficulty in forecasting revenues and margins; and
•Inadequate internal control procedures and disclosure controls to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or poor integration of a target company’s or business’s procedures and controls.
Acquisitions may also cause us to:
•Issue common stock that would dilute our current stockholders’ percentage ownership and may decrease earnings per share;
•Assume liabilities, some of which may be unknown at the time of the acquisitions;
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•Record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges;
•Incur additional debt to finance such acquisitions;
•Incur amortization expenses related to certain intangible assets; and/or
•Acquire, assume, or become subject to litigation related to the acquired businesses or assets.
VIAVI is subject to risks associated with its acquisitions, and any failure to realize anticipated benefits of such acquisitions.
VIAVI may not be able to realize the benefits of any completed or contemplated acquisitions and strategic transactions, including synergies, value creation or other benefits of such acquisitions, fully or at all, or on the timeline VIAVI expects. At times, the resources of VIAVI and the acquired businesses or the attention of certain members of their management may be focused on completion and integration of the acquisition and diverted from day-to-day business operations, which may disrupt ongoing business. In addition, the process of integrating, and any failure to successfully integrate, the acquired businesses may have an adverse impact on the Company, including from risks related to significant transaction and integration costs, unknown liabilities, employee turnover, divergence of management attention, litigation and/or regulatory actions related to the acquisition or if the acquired business does not perform as expected, which may cause an adverse financial impact on the Company.
We may not generate positive returns on our research and development strategy.
Developing our products is expensive, and investments in product development may involve a long payback cycle. We expect to continue investing heavily in R&D to expand the capabilities of 3D sensing and smartphone sensors, handheld spectrometer solutions and portable test instruments, introduce new products and features and build upon our technology. The timing and size of these investments may affect our results of operations, and the investments may take several years to generate positive returns, if ever.
Operational Risks
Our restructuring activities could adversely affect our business and results of operations.
We have from time to time engaged in restructuring activities to realign our cost base with current and anticipated future market conditions, including the restructuring programs initiated during fiscal 2024 and fiscal 2026. Significant risks associated with these types of actions that may impair our ability to achieve the anticipated cost reductions or disrupt our business include delays in the implementation of anticipated workforce reductions in highly regulated locations outside of the U.S. and the failure to meet operational targets due to the loss of key employees. In addition, our ability to achieve the anticipated cost savings and other benefits from these actions within the expected timeframe is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our business and results of operations could be adversely affected.
Management transitions and talent retention create uncertainties that could harm our business.
Management changes could adversely impact our results of operations and our customer relationships and may make recruiting for future management positions more difficult. Our executives and other key personnel are generally at-will employees. We generally do not have employment or non-compete agreements with our other employees, and we cannot assure you that we will be able to retain them. We have in the past experienced, and could continue to experience, changes in our leadership team. Competition for people with the specific technical and other skills we require is significant. We could be impacted by new restrictions on, or curtailment of, H-1B and other work visas and permits imposed by the U.S. government. We and our impacted and prospective employees may face a greater evidentiary burden to prove eligibility for immigration benefits. Further, employees in certain categories may not be able to renew work authorizations or benefit from automatic extensions of work permits. We may face difficulties in attracting, retaining and motivating employees. If we are unable to attract and retain qualified executives and employees, or to successfully integrate any newly hired personnel within our organization, we may be unable to achieve our operating objectives, which could negatively impact our financial performance and results of operations.
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We face risks related to our international operations and revenue.
Our customers are located throughout the world. In addition, we have significant operations outside North America, including product development, manufacturing, sales and customer support operations.
Our international presence exposes us to certain risks, including the following:
•Fluctuations in exchange rates between the U.S. dollar and among the currencies of the countries in which we do business may adversely affect our operating results by negatively impacting our revenues or increasing our expenses;
•Our ability to comply with the laws and regulations of the countries in which we do business, including, among others, customs, import/export, product compliance, economic sanctions, anti-bribery, anti-competition, climate/sustainability regulations, and tax and data privacy laws, which may be subject to sudden and unexpected changes;
•Difficulties in establishing and enforcing our intellectual property rights;
•Tariffs and other trade restrictions;
•Political, legal and economic instability in foreign markets, particularly in those markets in which we maintain manufacturing and product development facilities;
•Strained or worsening relations between the U.S., Russia, China and the Middle East and related impacts on other countries;
•Difficulties in staffing and management;
•Language and cultural barriers;
•Seasonal reductions in business activities in the countries where our international customers are located;
•Integration of foreign operations;
•Longer payment cycles;
•Difficulties in management of foreign distributors; and
•Potential adverse tax consequences.
International conflicts and global and regional health pandemics have affected and may in the future affect the manufacturing and shipment of goods globally. Delays in the production, delivery or shipment of our products, including due to extended closures of our suppliers’ plants, and increased logistics costs could adversely impact our business.
We expect that net revenue from customers outside North America will continue to account for a significant portion of our total net revenue. Lower sales levels that typically occur during the summer months in Europe and some other overseas markets may materially and adversely affect our business. In addition, the revenues we derive from many of our customers depend on international sales and further expose us to the risks associated with such international sales.
Information Security, Technology and Intellectual Property Risks
Our business and operations could be adversely impacted in the event of a failure of information technology infrastructure.
We rely upon the capacity, reliability and security of our information technology infrastructure and our ability to expand and continually update this infrastructure in response to our changing needs. In some cases, we rely upon third-party hosting and support services to meet these needs. We and our third-party providers have experienced increasingly sophisticated cybersecurity attacks, which can take the form of phishing emails, malware, malicious websites, ransomware, exploitation of application vulnerabilities, and nation-state attacks. The development and use of AI technologies, including agentic AI, by threat actors may further increase the sophistication, frequency and scale of such attacks and make them more difficult to detect and prevent, as further discussed in the AI risk factor below. Cybersecurity incidents may also result from intentional or inadvertent actions by our employees, contractors or other persons with whom we have commercial relationships. These kinds of attacks or threats of attacks can lead to increased operational impairment; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risks; and reputational risks. The growing and evolving cyber-risk environment means that individuals, companies, and organizations of all sizes, including ourselves, our customers, suppliers and our hosting and support partners, are increasingly vulnerable to attacks
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and disruptions on their networks and systems by a wide range of actors on an ongoing and regular basis. We also design and manage IT systems and products that contain IT systems for various customers, and generally face the same threats for those systems as for our own internal systems.
Our network security controls are comprised of administrative, physical and technical controls, which include, but are not limited to, the implementation of firewalls, anti-virus protection, patches, log monitors, routine backups, off-site storage, network audits and other routine updates and modifications. We also routinely monitor and develop our internal information technology systems to address risks to our information systems. However, there can be no assurance that the controls we implement and internal information technology systems we develop will be adequate and successful. Our systems are regularly targeted by bad actors and, in some cases, have been affected by computer viruses, natural disasters, unauthorized access and other similar disruptions and attacks that continue to emerge and evolve, particularly with the use of AI. Any system failure, accident or security breach could result in disruptions to our business processes, network degradation, and system downtime, along with the potential that a third party will gain unauthorized access to, or acquire intellectual property, proprietary business information, and data related to our employees, customers, suppliers, and business partners, including personal data. While we maintain system data and security logs, our logging also may not be sufficient to fully investigate a security incident. To the extent that any disruption, degradation, downtime or other security event results in a loss or damage to our data or systems, or in inappropriate disclosure of confidential or personal information, it could adversely impact us and our clients, potentially resulting in, among other things, financial losses, loss of customers or business, our inability to transact business on behalf of our clients, adverse impact on our brand and reputation, violations of applicable privacy and other laws, regulatory fines, penalties, litigation, reimbursement or other compensation costs, and/or additional compliance costs, as well as regulatory enforcement relating to cybersecurity matters, which has increased in recent years. We may also incur additional costs related to cybersecurity risk management and remediation. We or our service providers, if applicable, may suffer losses relating to cyber-attacks or other information security breaches in the future and any insurance coverage may not be adequate to cover all the costs resulting from such events, or continue to be available to us on economically reasonable terms, or at all. Our efforts to reduce the risk of such attacks or to detect attacks that occur may not be successful.
If we have insufficient proprietary rights or if we fail to protect those we have, our business would be materially harmed.
We seek to protect our products and our product roadmaps in part by developing and/or securing proprietary rights relating to those products, including patents, trade secrets, know-how and continuing technological innovation. The steps taken by us to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products and the costs associated with protecting our intellectual property may outweigh the benefits. Other companies may be investigating or developing other technologies that are similar to our own. It is possible that patents may not be issued from any of our pending applications or those we may file in the future and, if patents are issued, the claims allowed may not be sufficiently broad to deter or prohibit others from making, using or selling products that are similar to ours. We do not own patents in every country in which we sell or distribute our products, and thus others may be able to offer identical products in countries where we do not have intellectual property protection. In addition, the laws of some territories in which our products are or may be developed, manufactured or sold, including Europe, Asia-Pacific or Latin America, may not protect our products and intellectual property rights to the same extent as the laws of the U.S.
Any patents issued to us may be challenged, invalidated or circumvented. Additionally, we are currently a licensee in all of our operating segments for a number of third-party technologies, software and intellectual property rights from academic institutions, our competitors and others, and are required to pay royalties to these licensors for the use thereof. Unless we are able to obtain such licenses on commercially reasonable terms, patents or other intellectual property held by others could inhibit our development of new products, impede the sale of some of our current products, substantially increase the cost to provide these products to our customers, and could have a significant adverse impact on our operating results. In the past, licenses generally have been available to us where third-party technology was necessary or useful for the development or production of our products. However, in the future licenses to third-party technology may not be available on commercially reasonable terms, if at all.
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Our products may be subject to claims that they infringe the intellectual property rights of others.
Lawsuits and allegations of patent infringement and violation of other intellectual property rights occur in our industry on a regular basis. We have received in the past, and anticipate that we will receive in the future, notices from third parties claiming that our products infringe their proprietary rights. Over the past several years there has been a marked increase in the number and potential severity of third-party patent infringement claims, primarily from two distinct sources. First, large technology companies, including some of our customers and competitors, are seeking to monetize their patent portfolios and have developed large internal organizations that have approached us with demands to enter into license agreements. Second, patent-holding companies, entities that do not make or sell products (often referred to as “patent trolls”), have claimed that our products infringe upon their proprietary rights. We will continue to respond to these claims in the course of our business operations. In the past, the resolution of these disputes has not had a material adverse impact on our business or financial condition; however, this may not be the case in the future. Further, the litigation or settlement of these matters, regardless of the merit of the claims, could result in significant expense to us and divert the efforts of our technical and management personnel, whether or not we are successful. If we are unsuccessful, we could be required to expend significant resources to develop non-infringing technology or to obtain licenses to the technology that is the subject of the litigation. We may not be successful in such development, or such licenses may not be available on terms acceptable to us, if at all. Without such a license, we could be enjoined from future sales of the infringing product or products, which could adversely affect our revenues and operating results.
The use of open-source software may harm our intellectual property position.
Certain of the software and/or firmware that we use and distribute (as well as that of our suppliers, manufacturers and customers) may be, derived from, or contain, “open-source” software, which is software that is generally made available to the public by its authors and/or other third parties. Such open-source software is often made available under licenses which impose obligations in the event the software or derivative works thereof are distributed or re-distributed. These obligations may require us to make source code for the derivative works available to the public, and/or license such derivative works under a particular type of license, rather than the forms of license customarily used to protect our own software products. In the event that a court rules that these licenses are unenforceable, or in the event the copyright holder of any open-source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work. Additionally, open-source licenses are subject to occasional revision. In the event future iterations of open-source software are made available under a revised license, such license revisions may adversely affect our ability to use such future iterations.
Our use of artificial intelligence may expose us to risks.
Generative artificial intelligence (GenAI) technology and, more recently, agentic AI have proliferated, including as features in existing commercially available products, some of which we use. GenAI is a type of machine-learning model capable of generating various types of content, including data, text and images. Agentic AI refers to autonomous or semi-autonomous AI systems that can reason, plan, and take actions to achieve complex, multi-step goals with minimal human supervision. Use of these tools could expose us to data and network security risks. These risks include the exposure of our intellectual property, confidential and proprietary information (including customer information) to unknown recipients; the introduction of malware into our network; and the creation of content subject to copyright, trademark, or other intellectual property protection of an unknown third party.
In addition, the development and implementation of AI technologies may increase exposure to or exacerbate the risks of cyberattacks or other security incidents, particularly where such technologies are exploited by third parties to breach our systems or those of our third-party service providers, customers or suppliers, as well as the data stored on such systems. The deployment of agentic AI systems with access to infrastructure, data and third-party tools also creates an expanded attack surface, as threat actors may exploit inadequate controls to manipulate agents into executing unauthorized actions or conducting multi-step attacks that evade traditional security controls before detection occurs.
AI-generated outputs may also be inaccurate, incomplete, biased or otherwise unreliable, even when they appear correct, and may contain defects that are difficult to identify. Furthermore, our controls may not prevent unauthorized or inappropriate use of AI by employees, contractors or service providers. Reliance on such outputs in our operations, product development, services or decision-making could result in errors, additional costs, delays, customer harm, legal liability or reputational damage.
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Our investments in AI may not generate expected efficiencies, improvements or returns, and competitors or new market entrants may use AI more effectively to develop competing or substitute solutions. To the extent we use third-party AI, our ability to do so may also depend on the continued availability, performance and commercially acceptable terms of models, tools and infrastructure that we do not control.
Furthermore, AI technologies, including those used by us or our vendors, are subject to evolving laws and regulations and increased scrutiny, including with respect to data privacy, cybersecurity and intellectual property. Domestic or foreign legislation or regulatory requirements concerning AI may require us to expend significant resources on compliance or change our products, services or business practices, or may prevent or limit our use of AI.
Even where we have contractual protections from third parties from whom we source AI tools, those protections may not adequately limit our liability or be sufficient to allow us to obtain indemnification or recovery for our damages. In addition, we may face allegations of misrepresentation or “AI washing” if our disclosures about our AI capabilities or AI-related governance are deemed to be exaggerated or misleading, which could result in enforcement actions, litigation or reputational harm.
Legal, Regulatory and Compliance Risks
Certain of our products are subject to governmental and industry regulations, certifications and approvals.
The commercialization of certain of the products we design, manufacture and distribute may be more costly due to required government approval and industry acceptance processes. For example, in our OSP segment, development of applications for our anti-counterfeiting and special effects pigments may require significant testing that could delay our sales. In addition, durability testing by the automobile industry of our special effects pigments used with automotive paints can take up to three years. If we change a product for any reason, including technological changes or changes in the manufacturing process, prior approvals or certifications may be invalid and we may need to go through the approval process again. If we are unable to obtain these or other government or industry certifications in a timely manner, or at all, our operating results could be adversely affected.
We receive formal and informal government inquiries or audits related to our products, practices or services from time to time.
We receive formal and informal inquiries from, or become subject to, investigations by various government authorities regarding our business and compliance with federal, state and local laws, regulations, or standards. Any determination or allegation that our operations, products, activities, or the activities of our employees, contractors or agents, are not in compliance with existing laws, regulations or standards, could adversely affect our business. Even if such inquiries or investigations do not result in the imposition of fines, interruptions to our business, loss of suppliers or other third-party relationship or terminations of necessary licenses and permits, the existence of those inquiries or investigations alone could create negative publicity that could cause business or reputational harm.
Government trade actions and restrictions could have an adverse impact on our business, financial position, and results of operations.
Trade tensions between the U.S. and China have continued to escalate, with the U.S. and China both imposing a variety of trade barriers against the other, including various export control restrictions and tariffs.
Huawei Technologies Co. Ltd. and a score of non-U.S. affiliates (collectively, Huawei) are on the Entity List of the Bureau of Industry and Security of the U.S. Department of Commerce (BIS), which imposes limitations on the supply of most U.S. items and product support to Huawei. U.S. export controls also restrict all persons from sharing many items produced domestically and abroad from U.S. technology and software with Huawei. Certain of our products are subject to the restrictions.
Additionally, the BIS "Affiliates Rule" (50% Rule) automatically extends export restrictions to any non-U.S. entity owned 50% or more (directly or indirectly) by restricted parties. It is currently suspended until January 10, 2027, after which it will permanently reimpose strict compliance and licensing obligations on global supply chains. The BIS Affiliates Rule represents a significant shift in export compliance expectations. Historically, Entity List and Military End-User (MEU) List screening focused primarily on identifying parties that were expressly named on a BIS restricted party list. Under the Affiliates Rule, companies must also assess whether a counterparty is owned, directly or indirectly, by listed entities. If the rule is reinstated, we will have to perform enhanced due diligence and beneficial ownership screenings and it could further impact our business with Huawei and potentially other customers.
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Moreover, the additional tariffs imposed by the U.S. administration in 2025 (and, following the U.S. Supreme Court ruling that the IEEPA did not authorize such tariffs, the temporary replacement tariffs imposed in 2026), and any other tariffs or other trade actions that may be implemented targeting China or other jurisdictions relevant to us, may increase the cost of certain materials and/or products, thereby adversely affecting our profitability. These actions could require us to pass these costs to our customers, which could decrease demand for our products, and could adversely impact our business.
Furthermore, the geopolitical and economic uncertainty and/or instability that may result from changes in the relationship among the United States, Taiwan and China may, directly or indirectly, materially harm our business, financial condition and results of operations. For example, certain of our suppliers depend on products sourced from Taiwan, particularly in semiconductor manufacturing. In addition, in August 2026, China’s Ministry of Commerce placed the Responsible Business Alliance (RBA), a global industry association that promotes responsible business practices in global supply chains, on its countermeasures list under China’s Anti-Foreign Sanctions Law and prohibited entities within China from engaging in relevant transactions with the RBA. As with many other multinational companies, we are an affiliate member of the RBA. Following the designation of RBA, there could be supply chain disruptions. These measures, including related compliance uncertainty relating to conflicts of laws, as well as other similar developments may result in greater restrictions on, or disruptions to, our suppliers’ ability to operate facilities or do business in these jurisdictions may increase the cost of certain materials or limit the supply of products. This may result in deterioration of our profit margins or a need to increase our pricing, which may decrease demand for our products and thereby adversely impact our revenue or profitability.
Due to the ongoing conflict between Russia and Ukraine, the U.S., European Union (E.U.), and United Kingdom (U.K.) have broadened restrictions on supply to Russia of various items, including shipments of many technology, telecommunications and consumer electronics products. We suspended transactions in the region effective February 2022, which negatively impacted our business in the region. The ongoing situation in Ukraine as well as the potential for additional trade actions or retaliatory cyber-attacks aimed at infrastructure or supply chains, could have an impact on our future operations and financial results.
Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may harm our business.
Complex local, state, national, foreign, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. These privacy laws and regulations are rapidly evolving, with new or modified laws and regulations frequently proposed and implemented and existing laws and regulations subject to new or different interpretations. In addition, our legal and regulatory obligations in jurisdictions outside of the U.S. are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations, or to increase penalties significantly. Complying with these laws and regulations can be costly and can impede the development and offering of new products and services. For example, the E.U. General Data Protection Regulation (GDPR) imposes stringent data protection requirements and provides for significant penalties for noncompliance. Additionally, the California Consumer Privacy Act (CCPA) requires, among other things, covered companies to provide disclosures to California consumers and allow such consumers to opt out of certain sales of personal data. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. In recent years, many other states have enacted privacy laws that have taken or will take effect and impose additional data protection obligations on covered businesses, including consumer rights, limitations on data uses, new audit requirements for higher-risk data, and opt-outs for certain uses of sensitive data. These new and proposed privacy laws may result in further uncertainty and would require us to incur additional expenditures to comply. These regulations and legislative developments have potentially far-reaching consequences and may require us to modify our data management practices and incur substantial compliance expense.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our reputation, and loss of goodwill, any of which could have a material adverse effect on our operations, financial performance, and business.
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Responsible Business Risks
We may be subject to environmental liabilities.
We are subject to various federal, state and foreign laws and regulations, including those governing pollution and the protection of human health and the environment, as well as more recent requirements restricting the presence of certain substances in electronic products and holding producers financially responsible for the collection, treatment, recycling and disposal of certain products. Such laws and regulations, passed in several jurisdictions in which we operate, are often complex and are subject to frequent changes. We will need to ensure that we comply with such laws and regulations as they are enacted, as well as all other environmental laws and regulations. As appropriate or required, our component suppliers must also comply with such laws and regulations. If we fail to comply with such laws, we could face sanctions for such noncompliance, and our customers may refuse to purchase our products, which would have a material adverse effect on our business, financial condition and results of operations.
With respect to compliance with environmental laws and regulations in general, we have incurred, and in the future could incur, substantial costs for the cleanup of contaminated properties, either those we own or operate or to which we have sent wastes in the past, or to comply with such environmental laws and regulations. Additionally, we could be subject to disruptions to our operations and logistics as a result of such clean-up or compliance obligations. If we were found to be in violation of these laws, we could be subject to governmental fines and liability for damages resulting from such violations. If we have to make significant capital expenditures to comply with environmental laws, or if we are subject to significant expenditures in connection with a violation of these laws, our financial condition or operating results could be materially adversely impacted.
Our business is subject to evolving regulations and expectations with respect to sustainability matters that could expose us to numerous risks.
Regulators, customers, investors, employees and other stakeholders continue to focus on sustainability-related matters and related disclosures. These developments have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting sustainability-related requirements and expectations. For example, developing and acting on sustainability-related initiatives and collecting, measuring and reporting sustainability-related information and metrics can be costly, difficult and time-consuming and are subject to evolving reporting standards, including reporting requirements in California, the European Union and other jurisdictions that may apply to us. We may also communicate certain initiatives and goals regarding sustainability-related matters in our public disclosures. These sustainability-related initiatives and goals could be difficult and expensive to implement. The technologies needed to implement them may not be cost-effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Further, statements about our sustainability-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. If our sustainability-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our sustainability-related goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
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We may be subject to risks related to climate change, natural disasters and catastrophic events.
We operate in geographic regions which face a number of climate and environmental challenges. Our corporate headquarters is located in Chandler, Arizona, a desert climate subject to extreme heat and drought. The geographic location of our Northern California offices and production facilities subjects them to drought, earthquake and wildfire risks. It is impossible to predict the timing, magnitude or location of such natural disasters or their impacts on the local economy and on our operations. If a major earthquake, wildfire or other natural disaster were to damage or destroy our facilities or manufacturing equipment, we may experience impacts ranging from production and shipping delays to lost profits and revenues. In the past, we temporarily closed our Santa Rosa, California facility due to wildfires in the region and the facility’s close proximity to the wildfire evacuation zone, resulting in a production stoppage. The location of our production facility could subject us to production delays and/or equipment and property damage. Moreover, the public electric utility in our Northern California region has previously implemented and may continue to implement widespread blackouts during the peak wildfire season to avoid and contain wildfires sparked during strong wind events by downed power lines or equipment failure. Ongoing blackouts, particularly if prolonged or frequent, could impact our operations going forward. Additionally, the occurrence of adverse public health developments, epidemic disease or pandemics may adversely affect our business, operations, financial condition, and results of operations. The extent to which global pandemics impact our business going forward will depend on factors such as the duration and scope of the pandemic; actions by governments, businesses and individuals in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability. Measures to contain a global pandemic may intensify other risks described in these Risk Factors.
Risks Related to Our Liquidity and Indebtedness
Any deterioration or disruption of the capital and credit markets may adversely affect our access to sources of funding.
Global economic conditions have caused and may cause volatility and disruptions in the capital and credit markets. When the capital or credit markets deteriorate or are disrupted, our ability to incur additional indebtedness to fund a portion of our working capital needs and other general corporate purposes, or to refinance maturing obligations as they become due, may be constrained. In the event that we were to seek to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time, if at all. We may seek to access the capital or credit markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. For example, in December 2021, we entered into a $300 million asset-based secured credit facility (Senior Secured Asset-Based Revolving Credit Facility), originally maturing in December 2026, which has certain limitations based on our borrowing base capacity. We reduced the commitment under our Senior Secured Asset-Based Revolving Credit Facility to $200 million to be in line with borrowing base capacity and extended the maturity to October 2030. Our access to the financial markets and the pricing and terms we receive in the financial markets could be adversely impacted by various factors, including changes in financial markets and interest rates. In addition, if we do access the capital or credit markets, agreements governing any borrowing arrangement could contain covenants restricting our operations.
Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt.
We and our subsidiaries may be able to incur significant additional indebtedness in the future. The indentures that govern our 3.75% Senior Notes due 2029 and our 0.625% Senior Convertible Notes due 2031 (the “2031 Notes” and, together with our 3.75% Senior Notes due 2029, the “Notes”) and the agreements that govern our secured credit facility contain restrictions on the incurrence of additional indebtedness, which are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness under the agreements governing our existing debt.
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Our notes increase our overall leverage and our convertible notes could dilute our existing stockholders and lower our reported earnings per share.
The issuance of the Notes substantially increased our principal payment obligations. The degree to which we are leveraged could materially and adversely affect our ability to successfully obtain financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. In addition, the holders of the 2031 Notes are entitled to convert the 2031 Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.
Our ability to make payments on our indebtedness when due, to make payments upon conversion with respect to our convertible senior notes or to refinance our indebtedness as we may need or desire, depends on our future performance and our ability to generate cash flow from operations, which is subject to economic, financial, competitive and other factors beyond our control. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. We may not be able to engage in these activities on desirable terms or at all, which may result in a default on our existing or future indebtedness and harm our financial condition and operating results.
Our outstanding indebtedness may limit our operational and financial flexibility.
Our level of indebtedness could have important consequences, including:
•Impairing our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes;
•Requiring us to dedicate a substantial portion of our operating cash flow to paying principal and interest on our indebtedness, thereby reducing the funds available for operations;
•Limiting our ability to grow and make capital expenditures due to the financial covenants contained in our debt arrangements;
•Impairing our ability to adjust rapidly to changing market conditions, invest in new or developing technologies, or take advantage of significant business opportunities that may arise;
•Making us more vulnerable if a general economic downturn occurs or if our business experiences difficulties; and
•Resulting in an event of default if we fail to satisfy our obligations under the Notes or our other debt or fail to comply with the financial and other restrictive covenants contained in the indentures governing the Notes or any other debt instruments, which event of default, if not cured or waived, could result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on our assets securing such debt. This could have a material adverse effect on our business, operating results or financial condition.
We may not generate sufficient cash flow to meet our debt service and working capital requirements, which may expose us to the risk of default under our debt obligations.
To meet our debt service and working capital needs, we must implement our business strategy successfully and on a timely basis and generate sufficient operating cash flow. We may fail to implement our strategy or achieve its anticipated results. Our ability to make scheduled payments on our indebtedness, including the Notes, is also affected by general and regional economic, financial, competitive, business and other factors beyond our control. For example, we generate cash in jurisdictions around the world, including China, where difficulties repatriating funds may affect our overall liquidity.
In the event our cash flow is inadequate to meet our debt service and working capital requirements, we may be required, to the extent permitted under the indentures covering the Notes and any other debt agreements, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets or reduce or delay planned capital or operating expenditures. Any insufficient cash flow may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all.
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The terms of the indentures that govern the Notes and the agreements that govern our secured credit facility restrict our current and future operations.
The indentures governing the Notes and the agreements governing the secured credit facility contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:
•Incur or guarantee additional indebtedness;
•Incur or suffer to exist liens securing indebtedness;
•Make investments;
•Consolidate, merge or transfer all or substantially all of our assets;
•Sell assets;
•Pay dividends or other distributions on, redeem or repurchase capital stock;
•Enter into transactions with affiliates;
•Amend, modify, prepay or redeem subordinated indebtedness;
•Enter into certain restrictive agreements;
•Engage in a new line of business;
•Amend certain material agreements, including material leases and debt agreements; and
•Enter into sale-leaseback transactions.
Tax Risks
Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations and/or changes in regulations.
Changes in U.S. federal income or other tax laws or the interpretation of tax laws may impact our tax liabilities. Utilization of our net operating losses (NOLs) and tax credit carryforwards may be subject to a substantial annual limitation if the ownership change limitations under Sections 382 and 383 of the Internal Revenue Code and similar state provisions are triggered by changes in the ownership of our capital stock. In general, an ownership change occurs if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Accordingly, purchases of our capital stock by others could limit our ability to utilize our NOLs and tax credit carryforwards in the future.
We may not generate sufficient taxable income to utilize our NOLs and tax credit carryforwards before they expire. Because of uncertainty regarding the timing and extent of our future profitability and our ability to utilize these carryforwards, we continue to record a valuation allowance against our U.S. and certain foreign deferred tax assets.
If any of these events occur, we may not derive some or all of the expected benefits from our NOLs and tax credit carryforwards.
Changes in tax legislation or policies could materially impact our financial position and results of operations.
We operate in many jurisdictions around the world. Global tax policy continues to evolve, with particular focus on Base Erosion and Profit Shifting ("BEPS"), transfer pricing and broader corporate tax reform initiatives. Changes in domestic or international tax laws, regulations, guidance, or interpretations, as well as related enforcement activities or legislative initiatives, could materially adversely affect our business, increase the amount of taxes we are required to pay and adversely impact our financial condition and results of operations.
The Organization for Economic Co-operation and Development (OECD) Pillar Two framework establishes a 15% global minimum tax rate applicable to certain multinational groups. Many jurisdictions in which we operate have enacted or are in the process of implementing Pillar Two legislation, including qualified domestic minimum top-up taxes. Although the OECD/G20 Inclusive Framework agreed in January 2026 to a package that generally provides relief from certain Pillar Two rules for qualifying U.S.-parented groups, the effectiveness of these measures depends on implementation by individual jurisdictions and continued eligibility for applicable relief. Future developments in the implementation, interpretation or application of these rules, including qualified domestic
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minimum top-up taxes, could increase our effective tax rate, cash tax obligations, compliance costs and administrative complexity and could adversely affect our financial condition and results of operations.
General Risks
Certain provisions in our charter and under Delaware laws could hinder a takeover attempt.
We are subject to the provisions of Section 203 of the Delaware General Corporation Law prohibiting, under some circumstances, publicly-held Delaware corporations from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock. Our certificate of incorporation and bylaws contain provisions granting our Board of Directors the authority to establish additional series of preferred stock and to designate the rights, preferences and privileges of such shares (commonly known as “blank check preferred”), and provisions permitting our stockholders to take action only at a duly called annual or special meeting of stockholders, which may only be called by the Chairman of the Board, the Chief Executive Officer or the Board of Directors. These provisions may have the effect of deterring hostile takeovers or delaying changes in control or changes in our management.
Our stock price has experienced significant volatility and may continue to fluctuate, which could adversely affect the value of an investment in our common stock.
The trading price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
•actual or anticipated fluctuations in our financial results or guidance;
•the timing and magnitude of customer orders, particularly in our data center, telecommunications, aerospace and defense end markets;
•our ability to successfully integrate acquired businesses and realize anticipated synergies;
•changes in investor sentiment regarding AI infrastructure spending, cloud investment cycles, optical networking, or defense spending;
•changes in analyst estimates, recommendations or coverage;
•announcements by us or our competitors regarding new products, technologies, acquisitions, strategic relationships or other developments;
•changes in macroeconomic conditions, interest rates, inflation, tariffs, geopolitical events or supply chain disruptions;
•general market conditions affecting technology companies or equity markets more broadly; and
•sales of our common stock by existing stockholders or perceptions that such sales may occur.
In addition, securities of technology companies have historically experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to their operating performance. As investor expectations surrounding AI infrastructure, high-speed networking and related technologies evolve, our stock price may experience increased volatility as market participants reassess growth prospects for our business and the broader industry. Even if our operating results meet our expectations, our stock price may decline if investors perceive that our future growth opportunities have moderated or if valuations across the technology sector contract.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our common stock is traded on the Nasdaq Global Select Market under the symbol “VIAV”. As of October 31, 2026, we had 1,223 holders of record of our common stock. We have not paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
The following table provides stock repurchase activity during the three months ended October 3, 2026, (in millions, except per share amounts):
| Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Dollar Value of Shares that May Still Be Purchased Under the Plans or Programs (1) | |||||||||||||||||||||||
| Period | ||||||||||||||||||||||||||
| June 28 - July 25, 2026 | — | — | — | $ | 168.4 | |||||||||||||||||||||
| July 26 - August 22, 2026 | 1.3 | $38.69 | 1.3 | $ | 118.4 | |||||||||||||||||||||
| August 23 - October 3, 2026 | 2.6 | $37.64 | 2.6 | $ | 18.4 | |||||||||||||||||||||
| Total | 3.9 | 3.9 | ||||||||||||||||||||||||
(1)Share repurchases were made under our 2022 Repurchase Plan with authorization up to $300 million. Refer to “Note 15. Stockholders' Equity” for more details.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
None of VIAVI’s directors or Section 16 officers adopted terminated
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Item 6. Exhibits
The exhibits required to be filed herewith by Item 601 of Regulation S-K, as described in the following index of exhibits, are attached hereto unless otherwise indicated as being incorporated by reference, as follows:
| Incorporated by Reference | Filed | Furnished | ||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | Herewith | Not Filed | ||||||||||||||||||||||||||||||||
| X | ||||||||||||||||||||||||||||||||||||||
| X | ||||||||||||||||||||||||||||||||||||||
| X | ||||||||||||||||||||||||||||||||||||||
| X | ||||||||||||||||||||||||||||||||||||||
| 10-K | 10.6 | 8/13/2026 | ||||||||||||||||||||||||||||||||||||
| 10-K | 10.7 | 8/13/2026 | ||||||||||||||||||||||||||||||||||||
| 10-K | 10.8 | 8/13/2026 | ||||||||||||||||||||||||||||||||||||
| 10-K | 10.9 | 8/13/2026 | ||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
+Indicates management contract or compensation plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 5, 2026 | VIAVI SOLUTIONS INC. | |||||||
| (Registrant) | ||||||||
| By: | /s/ ILAN DASKAL | |||||||
| Name: | ILAN DASKAL | |||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||
| (Duly Authorized Officer and Principal Financial and Accounting Officer) | ||||||||
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Exhibit 31.1
VIAVI SOLUTIONS INC.
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Oleg Khaykin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Viavi Solutions Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 5, 2026
| /s/ OLEG KHAYKIN | |||||
Oleg Khaykin Chief Executive Officer (Principal Executive Officer) | |||||
Exhibit 31.2
VIAVI SOLUTIONS INC.
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ilan Daskal, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Viavi Solutions Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 5, 2026
| /s/ ILAN DASKAL | |||||
| Ilan Daskal | |||||
| Executive Vice President and Chief Financial Officer | |||||
| (Duly Authorized Officer and Principal Financial and Accounting Officer) | |||||
Exhibit 32.1
VIAVI SOLUTIONS INC.
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Viavi Solutions Inc. (the “Company”) on Form 10-Q for the quarter ended October 3, 2026 as filed with the Securities and Exchange Commission (the “Report”), I, Oleg Khaykin, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Dated: November 5, 2026
| /s/ OLEG KHAYKIN | |||||
| Oleg Khaykin | |||||
| Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Exhibit 32.2
VIAVI SOLUTIONS INC.
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Viavi Solutions Inc. (the “Company”) on Form 10-Q for the quarter ended October 3, 2026 as filed with the Securities and Exchange Commission (the “Report”), I, Ilan Daskal, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.
Dated: November 5, 2026
| /s/ ILAN DASKAL | |||||
| Ilan Daskal | |||||
| Executive Vice President and Chief Financial Officer | |||||
| (Duly Authorized Officer and Principal Financial and Accounting Officer) | |||||