Why Is Viavi Solutions (VIAV) Down 7.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Viavi Solutions (VIAV). Shares have lost about 7.5% in that time frame, underperforming the S&P 500.But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Viavi Solutions due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Viavi Solutions Inc. before we dive into how investors and analysts have reacted as of late.Viavi Q3 Earnings Surpass Estimates on Healthy Top-Line GrowthViavi reported strong third-quarter fiscal 2026 results, with both top and bottom lines surpassing the Zacks Consensus Estimate.The company posted a solid 42.8% year-over-year increase in revenues, supported by strong demand from data centers, continued 5G and fiber network upgrades, steady aerospace and defense demand, and contributions from the Spirent product line buyout.Net IncomeNet income on a GAAP basis was $6.4 million or 3 cents per share compared with $19.5 million or 9 cents per share in the prior-year quarter. Despite top-line growth, higher operating expenses and taxes impacted the bottom line.Non-GAAP net income in the reported quarter was $67.6 million or 27 cents per share compared with $33.9 million or 15 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 3 cents.RevenuesNet sales increased to $406.8 million from $284.8 million in the year-ago quarter, primarily driven by strong performance in its Network and Service Enablement (NSE) and Optical Security and Performance Products (OSP) segments. The top line beat the consensus estimate of $393.5 million.In the third quarter of fiscal 2026, the NSE segment generated $321.5 million in revenues, up 54.4% year over year. The segment accounted for 79% of total revenues. Acquisition of Spirent product lines and strong demand across lab, production and field products, mainly from the data center ecosystem and aerospace & defense sectors, drove solid sales growth in this segment.The OSP segment revenues were $85.3 million, up 11.4% year over year, driven by strong demand for 3D Sensing and anti-counterfeiting.Net sales from the Americas totaled $182.8 million, up from $108.1 million in the year-ago quarter. Revenues from Asia-Pacific were $128.2 million, up 27.3% year over year. Revenues from Europe, Middle East, and Africa increased to $95.8 million from the prior-year quarter’s tally of $76 million.Other DetailsNon-GAAP gross profit was $252.9 million compared with $170.8 million in the year-ago quarter. with respective margins of 62.2% and 60%. Non-GAAP operating expenses increased to $167.4 million from $123.1 million a year ago. Non-GAAP operating income was $85.5 million compared with $47.7 million in the year-ago quarter.Cash Flow & LiquidityAs of March 28, 2026, VIAV had $499 million in cash and cash equivalents and $836.3 million of long-term debt. The company used $26.3 million of cash for operating activities in the quarter against a cash flow of $7.8 million in the year-earlier quarter.OutlookFor the fourth quarter of fiscal 2026, management expects revenues in the range of $427-$437 million. Non-GAAP operating margin is expected to be 22.7% (+/- 0.5 %) with non-GAAP earnings per share between 29 cents and 31 cents.For the NSE segment, revenues are projected to be between $340 million and $348 million, with a non-GAAP operating margin of 18.7% (+/- 0.5 %). Revenues for the OSP segment are anticipated to be in the range of $87-$89 million, with a non-GAAP operating margin of 38.4% (+/- 0.4 %).How Have Estimates Been Moving Since Then?Since the earnings release, investors have witnessed a upward trend in estimates review.The consensus estimate has shifted 31.17% due to these changes.VGM ScoresCurrently, Viavi Solutions has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock has a score of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Viavi Solutions has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Performance of an Industry PlayerViavi Solutions belongs to the Zacks Communication - Components industry. Another stock from the same industry, Knowles (KN), has gained 21.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2026.Knowles reported revenues of $153.1 million in the last reported quarter, representing a year-over-year change of +15.8%. EPS of $0.27 for the same period compares with $0.18 a year ago.Knowles is expected to post earnings of $0.30 per share for the current quarter, representing a year-over-year change of +25%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Knowles. 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