VIAV 2027 회계연도 1분기 실적 발표회: 매출 56.9% 증가, 2분기 가이던스 강화

비아비 솔루션즈(NASDAQ: VIAV)가 2027 회계연도 1분기 매출과 비GAAP(non-GAAP) 수익성이 회사 가이던스 상단을 상회했다고 발표했습니다. 데이터 센터와 항공우주 및 방산 수요가 성장을 견인했으며, 경영진은 2분기에도 전분기 대비 매출 증가가 이어질 것으로 전망했습니다.

핵심 요약

• 2027 회계연도 1분기 매출은 4억 6,930만 달러를 기록하며 전년 동기 대비 56.9%, 전분기 대비 5.9% 증가해 회사의 가이던스 범위인 4억 5,000만~4억 6,000만 달러를 상회했습니다.
• 비GAAP 영업이익률은 29.0%로 전년 동기 대비 12.7%포인트 상승했습니다. 비GAAP EPS는 전년 동기 0.15달러에서 0.47달러로 증가했습니다.
• NSE 매출은 3억 7,610만 달러로 전년 동기 대비 74% 증가했으며, 데이터 센터 수요, 항공우주 및 방산 성장, 인수한 스파이런트(Spirent) 제품군에서 발생한 5,270만 달러 매출이 이를 뒷받침했습니다.
• 영업활동 현금흐름은 전년 동기 3,100만 달러에서 1억 470만 달러로 증가했습니다. 비아비는 약 395만 주를 1억 5,000만 달러에 매입했으며, 이사회는 새로운 5억 달러 규모의 자사주 매입 계획을 승인했습니다.
• 경영진은 회계연도 2분기 매출 가이던스를 5억 500만~5억 1,500만 달러, 비GAAP 영업이익률을 29.3%(±30bp), 비GAAP EPS를 0.50~0.52달러로 제시했습니다.
• 회사는 이전 예상보다 빠른 2분기 중 연간 20억 달러 규모의 매출 런레이트에 도달할 것으로 기대하고 있습니다.

주요 재무 데이터

이번 분기 실적에는 약 1,100만 달러의 관세 환급이 포함되었습니다. 추가 1주일간 발생한 일부 변동비를 반영한 후 경영진은 영업이익률 약 110bp, EPS 약 0.02달러의 순 이익 효과가 있었던 것으로 추정했습니다.

사업 및 영업 실적

데이터 센터 수요가 NSE 성장을 견인

비아비는 스케일업(scale-up), 스케일아웃(scale-out), 스케일어크로스(scale-across) 애플리케이션을 지원하는 연구소용, 생산용 및 현장용 계측기에 대한 데이터 센터 고객의 수요가 강력했다고 밝혔습니다. 회사는 고성능 반도체, 광 모듈, 네트워크 및 하이퍼스케일 고객사에 제품을 공급하고 있습니다.

경영진은 NPO 및 CPO 기술 채택에 따른 반도체 패키징 및 테스트 분야로의 확장도 강조했습니다. 1분기에 첫 출하가 시작되었으며, 9월 분기 매출은 약 100만 달러로 주로 CPO 애플리케이션과 관련이 있다고 설명했습니다.

회사는 반도체 조립 및 테스트 분야가 수년 내에 1억 달러 이상의 사업으로 성장할 수 있다고 믿고 있습니다. 이 추정치에는 광 회로 스위칭(OCS)의 별도 기회는 포함되지 않았습니다.

항공우주 및 방산 부문의 성장 모멘텀 유지

항공우주 및 방산 부문은 위치 추적, 항법 및 시각 동기화(PNT) 제품이 이끌며 전분기 및 전년 동기 대비 견조한 성장을 기록했습니다. 통신 및 항공 전자 제품 역시 강력한 수요를 보였습니다.

비아비의 TRX 시스템은 드론 대응 및 요격체 개발을 지원하는 시험장에서 복잡한 전자기 환경을 구축하기 위해 미국 육군 위협시스템관리국(TSMO)에 선정되었습니다. 경영진은 이를 수년에 걸친 대규모 잠재적 기회라고 설명했습니다.

통신서비스 제공업체 수요 개선, 반면 무선 분야는 약세 지속

통신서비스 제공업체(Service provider) 매출은 예상보다 강한 계절적 수요의 수혜를 입었습니다. 성장 분야에는 네트워크 구축을 위한 광섬유 모니터링 시스템과 DOCSIS 4.0 및 분산 액세스 아키텍처를 지원하는 케이블 계측기가 포함되었습니다.

경영진은 또한 2020년부터 2022년까지 구매된 통신서비스 제공업체 장비의 다년간에 걸친 교체 주기가 시작되는 초기 징후를 확인하고 있습니다. 그러나 무선 분야는 투자가 위축되면서 해당 사업 부문 중 가장 취약한 상태를 유지했습니다. 회사는 AI RAN, 6G 및 비지상 네트워크(NTN) 개발이 장기적인 회복을 뒷받침할 것으로 기대하고 있습니다.

OSP 부문, 물량 증가 및 제품 믹스 개선 수혜

OSP 매출은 3D 센싱, 위조 방지 및 기타 제품에 힘입어 전년 동기 대비 12.2% 성장했습니다. 경영진은 2분기에 계절적 약세를 예상하고 있으나, 출하량 증가와 우호적인 제품 믹스가 매출총이익률 확대를 이단시했습니다.

경영진 가이던스

경영진은 데이터 센터 및 항공우주/방산 수요의 지속과 통신서비스 제공업체의 계절적 호조에 힘입어 NSE 매출이 전분기 대비 증가할 것으로 예상합니다. OSP 매출은 3D 센싱 및 위조 방지 제품의 계절적 수요 감소로 인해 전분기 대비 감소할 것으로 예상됩니다.

회사는 수요 및 영업 전제 조건에 따라 2027 회계연도 잔여 기간 동안 분기별 총매출 성장이 지속될 것으로 기대하고 있습니다. 경영진은 데이터 센터 투자, 항공우주 및 방산 수요, 통신서비스 제공업체 교체 수요, 장기적인 무선 분야 회복을 4대 핵심 성장 동력으로 꼽았습니다.

리스크 및 주시해야 할 사항

• 1분기 이익률과 EPS는 관세 환급 혜택을 받았으나, 추가 1주일간 발생한 변동비로 일부 상쇄되었습니다.
• OSP는 통상적인 계절적 수요 패턴으로 인해 2분기에 전분기 대비 감소할 것으로 예상됩니다.
• 무선 분야 투자는 여전히 약세를 보이고 있으며, 경영진은 본격적인 물량 배포 회복이 시작되었다는 징후를 언급하지 않았습니다.
• 경영진은 법정 비용, 채용 및 연구개발(R&D) 시점의 영향으로 3월 분기 영업비용이 다소 증가할 것으로 예상하고 있습니다.
• 이번 전망은 데이터 센터, 통신서비스 제공업체, 항공우주 및 방산 고객의 지속적인 설비투자와 원활한 부품 수급 및 안정적인 거시경제 여건을 전제로 합니다.

애널리스트 Q&A 주요 내용

• 2분기 NSE 성장: 경영진은 예상 증가분의 약 40%는 데이터 센터에서, 약 3분의 1은 항공우주 및 방산 분야에서, 나머지는 통신서비스 제공업체에서 발생할 것으로 추정했습니다.
• 1.6T 광 모듈: 비아비는 1.6T 사이클이 아직 초기 단계에 있다고 기술했습니다. 경영진은 2027년 하반기에 양산 활동이 본격화될 것으로 예상하며, 1.6T가 800G를 넘어서는 시점은 빠르면 2027년 말이 될 것이라고 설명했습니다.
• CPO 및 반도체 테스트: 1분기에 초도 출하가 시작되었으며, 경영진은 다음 분기부터 가속화될 것으로 예상합니다. 기회는 웨이퍼 프로빙부터 광 엔진, 기판 및 최종 조립 테스트에 이르기까지 확장됩니다.
• 영업 레버리지: 경영진은 50%대 초중반의 한계 영업이익 전환율(fall-through rate)이 보수적인 기준이라고 말했지만, 비용 집행 시점과 성과급 보상에 따라 변동될 수 있습니다.
• 스파이런트 통합: 조직 통합은 수 분기 전에 완료되었습니다. 경영진은 제품군 통합 수준을 약 25%로 추정하며, 내년 말까지 75%를 넘어설 것으로 예상하고 있습니다.
• 데이터 센터 지출: 경영진은 고객 수요의 둔화를 관찰하지 못했으며 실제 지출이 이전 전제보다 더 견조했다고 밝혔습니다.

실적발표 콘퍼런스 콜 전체 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good afternoon. My name is Jonathan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions Fiscal First Quarter 2027 Earnings Call. Today's conference is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to Vibhuti Nayar, Head of Investor Relations.

Vibhuti Nayar

Please go ahead. Thank you, Jonathan. Good afternoon, everyone. Welcome to Viavi Solutions Fiscal First Quarter 2027 Earnings Call. My name is Vibhuti Nayar, Head of Investor Relations for Viavi Solutions. And with me on today's call are Oleg Khaykin, our President and CEO; and Ilan Daskal, our CFO.

Please note, this call will include forward-looking statements about the company's financial performance, outlook and longer-term growth strategy. These rest on a number of assumptions, such as sustained capital spending, particularly by data center ecosystem, service providers and aerospace and defense customers, our ability to maintain or gain market share and develop and deliver new products on time, adequate component availability and stable macroeconomic conditions. These assumptions are not exhaustive, and additional assumptions, risks and uncertainties are discussed in our filings with the SEC. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current estimations and expectations.

We attribute our most recent annual report on Form 10-K filed with the SEC on August 13, 2026, and our quarterly SEC filings, particularly the risk factors described in those filings for additional information regarding the assumptions, risks and uncertainties underlying these forward-looking statements. These forward-looking statements, including the guidance that we provide during this call and our expectations regarding the end markets, revenue growth and market expansion are valid only as of today. Viavi undertakes no obligation to update these statements.

Please also note that unless we state otherwise, all results discussed on this call except revenue are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release. The release as well as our supplemental earnings slides, which include historical financial tables, are available on Viavi's website at www.investor.viavisolutions.com. Finally, we are recording today's call. and will make the recording available on our website by 4:30 p.m. Pacific Time this evening.

With that, I would like to turn the call over to Ilan. Ilan?

Ilan Daskal

Thank you, everybody. Good afternoon, everyone. Now I would like to review the results of the first quarter of fiscal year 2027. Net revenue for the quarter was $469.3 million, which is above the high end of our guidance range of $450 million to $460 million. Revenue was up 5.9% sequentially and on a year-over-year basis was up 56.9%.

Operating margin for the first fiscal quarter was 29%, above the high end of our guidance range of 26.7% and to 27.5%. Operating margin expanded 5 percentage points from the prior quarter and on a year-over-year basis, was 12.7 percentage points higher. Operating margin included a net benefit of about 110 basis points from tariff refund of approximately $11 million, which was offset by the additional one week of some variable costs.

EPS at $0.47 was well above our guidance range of $0.40 to $0.42 and was up $0.13 sequentially. On a year-over-year basis, EPS was up $0.32. EPS includes a net benefit of about $0.02 from tariff refunds and from the additional one week of variable expenses.

Moving on to our Q1 results by business segment. NSE revenue for the first fiscal quarter came in at $376.1 million, which is above the high end of our guidance range of $360 million to $368 million. Revenue from Spire and product lines was $52.7 million. On a year-over-year basis, NSE revenue was up 74% and as a result of continued strong demand for our lead and production and field products, driven by the data as well as the acquisition of Spire and product lines. We also saw strong demand for our aerospace and defense products.

NSE gross margin for the quarter was 66.2%, and which is 310 basis points higher on a year-over-year basis and was mainly driven by the tariff refunds and product mix. NSE's operating margin for the quarter was 25.5% versus 8.2% during the same quarter last year. NSE operating margin was well above our guidance range of 22.6% to 23.6%, mainly as a result of higher fall-through.

OSP revenue for the first fiscal quarter came in at $93.2 million, which is also above the high end of our guidance range of $90 million to $92 million. On a year-over-year basis, OSP revenue was up 12.2%, driven by strength in 3D Sensing and anti-counterfeiting and other products. OSP gross margin was 57.1%, up 460 basis points on a year-over-year basis, primarily driven by higher volume and favorable product mix. OSP's operating margin was 43.2%, which is in line with our guidance range of 43% to 43.4%. The OSP operating margin increased 600 basis points on a year-over-year basis.

Moving on to the balance sheet and cash flow. Total cash and short-term investments at the end of Q1 were $535.3 million compared to $656.7 million in the fourth fiscal quarter of 2026. Cash flow from operating activities for the quarter was $104.7 million versus $31 million in the same period last year, and was driven by higher net income and timing of working capital. CapEx for the quarter was $12 million versus $8.5 million in the same period last year.

During the first quarter, we purchased about 3,949,000 shares of our stock for about $150 million at an average share price of $37.98. We have about $18 million remaining under the current authorized share repurchase program. And our Board of Directors has authorized a new buyback plan of $500 million. Our capital allocation strategy will continue to focus on organic growth potential M&A targets as well as opportunistic share buybacks.

The fully diluted share count for the quarter was 266.2 million shares up from 227.9 million shares in the prior year and versus 268 million shares in our guidance for the first fiscal quarter.

Moving on to our guidance for the second quarter of fiscal year 2027. We expect the second fiscal quarter revenue for Viavi to be up sequentially driven by continued strength in our key end markets. We expect quarter-over-quarter growth to continue throughout the rest of the fiscal year, driven by tailwinds in our end markets. For NSE, we expect second fiscal quarter revenue to be up as a result of continued strong demand for lab, production, and field products driven by the data center ecosystem as well as aerospace and defense customers. For OSP, we expect quarter-over-quarter revenue to be lower, in line with seasonality of lower demand for 3D sensing and anticounterfeiting and other products.

For the second fiscal quarter of 2027, we expect Viavi revenue in the range of $505 million and $515 million. We expect NSE revenue in the second fiscal quarter of 2027 between $426 million and $434 million. OSP revenue is expected to be in the range of $79 million and $81 million. Operating margin for Viavi is expected to be 29.3% and plus or minus 30 basis points. NSE operating margin is expected to be 28.1%, plus or minus 30 basis points. OSP operating margin is expected to be 35.7%, plus or minus 20 basis points, and EPS is expected to be between $0.50 and $0.52.

Our tax expenses for the second quarter are expected to be around $12 million plus or minus $500,000 as a result of jurisdictional mix. We expect other income and expenses to reflect a net expense of approximately $3.5 million and the share count is expected to be around 264 million shares.

With that, I will turn the call over to Oleg. Oleg?

Oleg Khaykin

Thank you, Ilan. The first quarter coming in above the high end of our guidance. Our fiscal 2027 is off to a good start. The year-on-year performance was driven by strong growth in many of our end markets. NSE revenue in fiscal Q1 grew approximately 74% year-over-year, primarily driven by continued strong demand from the data center and aerospace and defense customers.

More specifically, the data center segment, which includes high-performance semis, optical modules, NAMS and hyperscale's drove strong demand for lab, production and field instruments in support of the scale out and scale across applications. In addition to the traditional lab and production end markets, we also expanded our TAM to include the semiconductor packaging and test.

With the adoption of NPO and CPO technologies, we expect the semiconductor packaging and test segment to become a major new growth area for Viavi. The September quarter marked a major milestone as we commenced the initial shipments into that segment.

Data center demand for our products remains very strong, and we expect continued robust growth in this segment in calendar 2027. Our Aerospace and Defense business also saw another quarter of strong year-on-year and quarter-on-quarter growth, driven by demand for our positioning, navigation and timing products. Our communications and avionics products are also seeing robust demand.

Our TRX system was recently selected by the U.S. Army's Threat Systems Management Office to create complex realistic electromagnetic environments across newly opened army test ranges to support tons, counter drones and interceptor development. This is potentially a sizable growth opportunity for Viavi over the next several years. We expect strong momentum in our A&D business unit to continue into calendar 2027.

The service provider business, which includes field instruments, wireless and service enablement products, was up, driven by stronger-than-expected seasonal demand. The highlights included increased demand for our fiber monitoring systems in support of fiber build-outs and for our cable instruments in support of DOCSIS 4.0 and DAA cable architecture. In addition, we are seeing early signs of a multiyear refresh cycle from service providers as they begin to upgrade and replace the equipment purchased in 2020 through 2022.

Wireless products remains the only low it in the service provider segment due to the anemic spend environment. That said, we remain optimistic about the medium-term prospects for our wireless business as AI RAN and CSG development start to ramp up. Lastly, our OSP business unit also saw strong year-on-year revenue growth driven by 3D sensing and anticounterfeiting and other products.

Looking ahead to Q2, we expect a very strong quarter for NSE. We expect NSE revenue to be up quarter-on-quarter, driven by strong and growing demand from the data center and aerospace and defense customers. We also expect seasonal tailwinds from service providers. Conversely, we expect the OSP business unit to be down quarter-on-quarter, in line with the seasonally lower demand for both anti-counterfeiting and 3D sensing products.

Net-net, we expect the quarter quarter-on-quarter growth to be meaningfully up with strong NSC demand more than offsetting seasonally weaker OSP quarter. To summarize, our fiscal '27 is off to a very good start, and we expect a strong momentum to continue into the second half of the fiscal year. During this quarter, we expect to reach $2 billion revenue run rate, which is ahead of our prior expectations.

As we look ahead at our diverse end markets, customer dynamics and the expanding Viavi end market footprint, we expect the current growth momentum to continue over the next several years. We see four major drivers supporting our growth strategy. The first one is the continued growth of the data center segment driven by continued investment in scale up, scale out and scale across applications. Expanded Viavi TAM, including semiconductor assembly and test and fiber manufacturing, increased fiber penetration and densification in the data center and faster product replacement cycles.

The second driver is continued aerospace and defense growth driven by strong demand for our positioning, navigation and timing products. The third driver is multiyear service provider in the fresh cycle. And the fourth driver longer term, is the recovery of the wireless business driven by 6G and AI ramp.

Okay. In summary, I would like to thank the Viavi team for their continued strong innovation and execution and thank our customers and shareholders for their continued support.

With that, I will now turn it back over to the operator for Q&A.

Operator

[Operator Instructions] Your first question comes from the line of Ruben Roy from Stifel.

질의응답

Ruben Roy

Congrats to you Ilan and Oleg on the outlook to $2 billion run rate. Oleg, you talked about the strength going into the December quarter and some of the drivers there. I'm wondering, as you think about this 14% or so quarter-on-quarter guide for NSE into the fourth quarter. Can you maybe walk us through how much of the step-up is coming from the traditional data center ecosystem versus Spirent seasonality, which I think is strong typically in the December quarter and then A&D?

Oleg Khaykin

So yes, I mean, I think if you -- actually, every one of our product lines is growing into December quarter. I mean, clearly, I would say field instruments and service enablement is benefiting from seasonally stronger service provider spend. But I would say if I look at the projected NSE growth I'd say probably about 1/3 is coming from the data center growth, actually about maybe 40% coming from data center growth, about 1/3 is coming from aerospace and defense and the rest is a service provider. So it's actually in the NSE business, we're seeing nice growth across the board anywhere between 10% to 30%, depending on the product line.

Ruben Roy

Okay. Yes. Okay. Helpful. And then as a follow-up, Ilan talked about expectations for sequential growth to continue through the fiscal year. Typically, March is a seasonally weaker quarter. And I assume some of these data center tailwinds are continuing as you think about calendar '27. Oleg you also talked about entering the optical plane of semiconductor test, and we've been talking about things like Pan. Can you talk high level about the revenue opportunity for that new area of your business, who the early customers are? And if some of those revenues are considered in the guidance for continued sequential growth through fiscal '27?

Oleg Khaykin

Sure, yes. I mean the -- so traditionally, our lab & production, you sell into contract manufacturing, mostly making, I would say, the fiber optic modules, pluggables as we see the NPO and CPO penetrating, we're now actually opening a whole new market segment, which traditionally would be known also as an OSAT outsourced assembly and test. And that's selling our optical test products into the kind of probe stations at the foundry and of course, then the multiple insertions at the final assembly and test.

So that's a completely new market segments for Viavi. We made our first shipments this quarter. And we think this could be a sizable segment in a couple of years I mean, north of $100 million for Viavi just by itself. So it's a nice growth market, I mean, clearly, an attractive, more predictable segment than many of our service provider segments.

The other area is we talked about also densification of fiber and making these massive parallel connectors. And that's -- just like we are now seeing demand for our products in the semiconductor supply chain. We are also seeing a market opening up with the fiber optic and the connector manufacturers. So that's two new market segments that we are entering above and beyond our traditional kind of pluggable testing.

So that's very attractive, and it's clearly driven by market size and the volume. And to the extent we see more densification, more multi-core fibers, more integrated silicon photonics closer to the ASIC that is going to be the principal driver of demand in those markets. In terms of customers, those are all the usual suspects. I think you pretty much all the major AI processor and optical switch as well as the Ethernet switch vendors who are the early adopters of the CPO and NPO technologies.

Operator

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

Ryan Koontz

Great. Thanks for the question, and great outlook, guys. When I asked about a couple of product cycles within the data center and try to gain an understanding of where we are from your perspective, maybe starting with the 1.6T optical modules. Obviously, as we're at an inflection point here. And from your perspective of selling test gear has a lot of that production capacity been built out now for you? Or is there still a lot ahead for Viavi here in terms of selling into the production capacity side?

Oleg Khaykin

I would actually say it's still very early innings. I mean if you use baseball analogy or probably more like a second third inning. I think the 1.6T peak will be probably sometime in the second half of next year. I mean, in terms of approaching the high volume. I mean today, we are still the highest volume shipments is 800 gig. 1.6T just kind of starting to ramp up. And I can see 800 and 1.6 running concurrently for quite a while. But it will be probably until the end of next calendar year where the 1.6 will surpass 800 at the earliest.

Ryan Koontz

Got it. Helpful. And then maybe on some of these new OCS products that are coming to market for optical switching, I assume your fiber testers have monitoring have some potential here to sell into this new product cycle? How would you assess that opportunity for?

Oleg Khaykin

That one is I think OCS is probably -- from point of view of test content is probably one of the biggest sweet spots in the market. in terms of the dollar content for ports. So clearly, as these volumes grow, it's a very attractive segment for us.

Ryan Koontz

Got it. Great. And then with regards -- maybe just shifting gears over to your Defense and Aerospace side. Any color there in terms of kind of product mix? I assume this is mostly is it still dominated by your P&T into the drone ecosystem? Or are there other products that are contributing more?

Oleg Khaykin

I'd say it's the drone ecosystem both aerial, ground, sea and undersea drones, followed by the alternative GPS to GNSS. So it's all the products for anti-spoofing and iGaming equipment where you need to provide resilient timing and navigation system. So it's including retrofitting in the field system as well as the new products being launched?

Ryan Koontz

Got it. Maybe one last if I can squeeze it in around wireless. You talked about that hopefully bringing some recovery there. Are you thinking that this opportunity that where SpaceX was talking about building a new terrestrial carrier? Is that a real opportunity for you to sell your field gear in that and probably lab?

Oleg Khaykin

Well, I mean, clearly, if anybody is going to be doing it, you have to develop the equipment, so that will stimulate some of our sales. But I think I view it also is a positive because it's by introducing kind of the new player into the market. And clearly, I know as much about as you are in terms of all the initial pronouncements.

I think it's all going to be feeding into the 6G and AIRM deployment with the nonterrestrial network components. So I think the sooner somebody gets moving, it will be more of a change in equilibrium where things are kind of being currently in the limbo mode. I mean there is R&D going on, and we are selling into that. But until things kick into high gear with the planned deployment, that's when you'll actually see volume picking up. So we welcome more innovation.

Operator

Your next question is from the line of Michael Genovese from Rosenblatt.

Michael Genovese

There's a lot of interest out there, Oleg, in NPO CPO. So just any more color you can give us on whether there were revenues there in September or whether they really start in December and if they're more on the NPL or CPO from your perspective? And just any other color you can help give us on that as a growth driver in '27 and beyond. I think people would appreciate it.

Oleg Khaykin

I would say the -- I mean, as I said, our first milestone shipments were in the September quarter. Think of it as a single million dollar shipment. Just early beginning, it's accelerating in the December quarter. It's going to continue -- there's a little echo. It will continue to accelerate into the March quarter and so on and so forth. So it started kind of -- we initially shipped in September, and it's ramping in every quarter since going forward.

And it's predominantly supporting I think there may be some designs or NPO, but I think the overwhelming mix is supporting CPO.

Michael Genovese

Okay. And then on the operating margin, I mean, the operating income rose more than the revenue did in the quarter. So if we even if we back out the full $11 million tariff refund, I'm getting an incremental operating margin about 70%. So does that seem right to you? And since in the past, you've mentioned numbers that are more in the 40s, maybe in the 50s. Was that too low? And are we actually looking at a higher incremental operating margin just based on the evidence here?

Oleg Khaykin

Well, I think probably, all things being equal, there's always leading component versus lagging component. I mean, eventually, you bring up some OpEx costs and some bonuses and things like that. So early on when you get this incremental cost disproportional amount falls to the bottom line. But I think also I wouldn't say it's 70%. I think it's probably more in the high 50s, low 60s for this particular quarter. But I think the conservative good way to think about it is in the low to mid-50s as an incremental fall through to the bottom line.

Ilan Daskal

Yes. And Michael, so some of the operating expenses this quarter is about timing, similar for the December quarter. usually when you go to the March quarter, there is a little bit uptick on the operating expense.

Oleg Khaykin

All the statutory expense and others, et cetera.

Ilan Daskal

So Similarly, when we kind of hiring kind of R&D, et cetera. So it's all about timing, nothing else.

Oleg Khaykin

But I think you'll bring up the point, as we've been saying it for several quarters, we have a significant operating leverage in our business model as revenue goes up because effectively, it's just higher volume, not necessarily more work content or more head count and things like that.

And the other thing is, of course, as you noticed, our tax expense is now in the single digits, which is the second operating leverage driven by our heritage from JDS Uniphase where we inherited massive NOL. So that's finally all falling into place, and we are seeing very strong both operating as well as the appearing leverage at the gross margin as well as operating margin as well as the net profit.

Ilan Daskal

The effective tax rate this quarter was down to 8%. So that's kind of, I think, historically low for us.

Oleg Khaykin

Yes.

Michael Genovese

Great Okay. Perfect. And then I'll just get one more in here. Just -- I mean, this is a fantastic guide. I mean, especially considering how much OSP is down sequentially. I mean it's a really, really strong guide. The stock -- I mean, given where the stock is and the reaction is not as strong as I would expect. I mean, I think it's pretty clear that there's still credit concerns routing people. And now there's the politics and sort of just or general worries about data centers, -- so just you've got a good perspective on a lot of things. Do you have anything to add to help us kind of think through those issues?

Oleg Khaykin

Well, I think I agree with you. I think the somehow we are being treated as an AI play, which is -- we have a significant portion of our business exposed to data center. But remember, data centers I think the data center is not going away. The new technology is going to continue to go into data centers. The refresh cycle of technology in data center is about three to four years. okay? So the same technologies that go into AI data centers will go into even regular cloud data center, okay? And only a portion of the data center business is driven by volume of investment.

I mean then let's not forget, we also have expanded TAM we're getting into semiconductor test and into the fiber optic and connector manufacturing test. It doesn't matter if it's AI data center or the cloud data center replacement, it's still going to be a new market.

And then the whole thing is the shortening of product cycle, densification is all that. So I think only a portion of the data center spend for us is -- I mean, the big portion is driven, obviously, by the CapEx. But we are still very much lagging what was being spent or being committed. We are still way behind that curve in terms of what the actual demand is going to be. And that's only the data center.

Then there's aerospace and defense. I mean if you look at it, you could think about maybe there will be less defense spending. But I'll tell you one thing, there will be a hell a lot more money spent on anything autonomous such as drones and this lower cost weapon systems which require its own internal P&C, and we are very well positioned for that market.

And last but not least, we had a lot of sales in '20 to '22. All of these products are very long in the tooth, and there'll be probably a multiyear -- we're approaching a multiyear replacement a refresh cycle from service providers, and that's kind of like the tide that raises all the boats. So I think if somebody just takes it purely, Viavi is AI play. I think they are grossly undervaluing the diversification of our end markets and where we are playing in.

And eventually, wireless is also going to recover. So today, it's been the last three years, it's been very much of a headwind. Eventually, it will become a tailwind, and that's obviously we'll kick in another stage of the growth. So I feel pretty good about our business. We are not a one-trick pony. We're actually fairly well diversified. And there's multiple technology cycles that are favoring us and not only AI. But yes, it's clearly a big one.

Ilan Daskal

Mike, me in the prepared remarks, we specifically highlighted that we see a continued growth in the next few quarters. And that's updated. It has not changed due to the political kind of expect that you mentioned earlier. I mean, AI is not going anywhere and data centers will continue to...

Oleg Khaykin

Anybody thinks that AI is dead. I mean, it's delusional because there's still the rest of the world, and I mean there's a fundamental competition. So I think it may not grow rapidly, but it's still going to grow, and it's still at a pretty sizable investment already being committed. So I mean, that's just kind of my view on it.

And I would just add one more thing. We have never overhyped it. I mean there's been a lot of companies kind of got ahead of themselves. We always took a more measured and conservative view of how it's going to grow. In fact, we probably were a little too conservative. We thought we'll hit $500 million run rate at the end of next calendar year, then we have updated it to the middle of the calendar year and now it's pulled into the end of this calendar year.

So if anything, we probably should be accused of being overly conservative in that respect. So in a way, it kind of plays out.

Operator

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

Andrew Spinola

Oleg, along those lines on AI. I'm wondering from a high level, have you seen any changes in the buying by your customers, whether anyone is adjusted spend here or there or cut back in places? Or is it pretty much the same as it's been?

Oleg Khaykin

Well, actually, I would say, in many ways, we have seen our expectations, we were lagging the actual demand. And if anything, we've been getting more surprised by the increase in the spend. So I think we're playing catch-up to a large extent. I mean we as I was saying just before you came on is we thought we hit $500 million at the end of next calendar year, and we had to pull it in almost -- pretty much the entire year. So I don't see any slowdown.

But then again, I would say we probably were thinking much more conservatively in our outlook. So to the extent there will be some pullback, it still represents an upside for us.

Ilan Daskal

And that goes again to our prior remarks so that we see continued growth in the next few quarters. So again, it doesn't change anything for us.

Andrew Spinola

Got it. Ilan, I have a question on the NSE margin, right? As they mentioned earlier, quite strong in Q1 and the guide for Q2. Just wondering, are there any residual Spirent synergies that are flowing through here in H1? Or is this all related to scale in the business?

Ilan Daskal

This is all scaling the business. parent integration was already completed at least two or three quarters ago, it was pretty fast and successful. And everything that you see right now is the leverage that we have from the growth that we are experiencing.

Oleg Khaykin

And I think like this quarter, even last quarter, we are seeing initial products which were kind of good design, I would say, only be integrated. And probably next calendar year, we're going to launch products that are fully integrated between Spirent and the Viavi portfolio. So I think in that respect, the product lines -- I mean, the organizationally, we are fully integrated. The product lines wise, I think we are already, I'd say, 25% there. Probably exiting next year, we should be at over 75%.

Andrew Spinola

Got it. And one last one, Oleg for you. A couple of years ago, when I started covering you guys, I think the market was much tighter margins were a lot lower. You were a smaller business. You've obviously scaled up with Spirent and obviously, AI and data center has given you a lot of scale, much better margins. And I'm wondering, as you approach this business, does anything change for you in terms of your longer-term thinking in terms of where you're investing, what markets you're going after.

And one of the things I'm particularly curious about is you're talking about the semiconductor test and some of your success in some of these other markets. I'm wondering if you're capturing more share on the R&D side if you're seeing that? And if that's part of your strategy potentially going forward?

Oleg Khaykin

Well, so I think, look, when you started covering us, we were still heavily exposed to the service provider field instruments. But actually, gross margin-wise, maybe low 60s is not that much lower, but there -- because the company was a smaller size, the burden of R&D and sales was much higher. As a result, you had a much lower operating margins than NSE.

So the single biggest driver of expansion of operating margins is the top line growth, right? On top of it, bringing Inspire, it clearly comes at a higher margin, so that kind of helps the overall picture. But even if you look at it, Spain had the nice growth but it's low teens. I mean our organic business grew about 50% year-on-year for the September quarter. So just purely pure Viavi with no acquisitions, right? So in that respect, the products we're getting into clearly just volume of sales, a lot of it just falls right to the bottom line.

As we talk about the growth. I mean, clearly, one of the big areas we focused was the R&D task, and that is kind of the leading the market. But the single biggest volume that scale off when we talk about semiconductor test is the production, right? So clearly, we are in every lab for every high-performance semi company when they are testing their PCI Express or their 1.6 terabit Ethernet and so on and so forth. But it's the volumetrically, what drives the revenue and volume is when it goes into the production test.

And by production test, I'm talking about not only the traditional testing in and out of the pluggable, but it's now up to five insertions from the wafer probe to known Gudi testing to the optical engine test to the assembled substrate and the optical engine all the way to the final test.

And that's the piece where we are seeing our growth happening, and we started shipping in the first quarter into that market. And the other one is also came out as the complexity densification is going to going to multicore fiber and you go into a massive parallel fiber optic connectors, we're now seeing our recruitment also being pulled into the fiber optic and connector manufacturing supply chain. So it's going well beyond the traditional kind of optical module test.

And the last but not the least, I think, is the OCS, we've been in this market for many years. Now the volumes, they were fairly low, but now they're starting to scale, and we're seeing a lot of demand for our products also driven by the OCS growth.

Operator

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

Timothy Savageaux

Congrats on the great results. And I want to go back to the commentary on the CPO NPO opportunity. And I think you mentioned expectations that could be a $100 million plus business. And I want to try to relate that to what your customers are seeing, right, Lumena just talked about a $5 billion order there, I'm sure over multiple years. But can you relate revenue at that level to opportunity for Viavi. Should we be thinking something, I don't know, low to mid-single digits in terms of if this is a $2 billion annual business for your customers is $100 million for you.

On the one hand, on the other, would you say the same thing about OCS in terms of that potential to get to $100 million plus as you did about?

Oleg Khaykin

So when I talk about $100 million plus, it's purely semiconductor that does not include OCS, right? This is more like your Ethernet switching or AI processor and things like that. OCS is a different animal. There, the amount of content per port is quite significant because also the time the testing is quite sizable. So I would say, I mean, generally, people say they're going to do $2 billion. My question becomes over. Is it like an annual run rate? Or is it like over three years or what have you, right? Clearly, I mean, from there, we can .

Timothy Savageaux

Let's just say its annual.

Oleg Khaykin

Well, I mean, to support that much, that probably would be in the tens of millions of dollars maybe approaching between $50 million and $70 million and $100 million.

Timothy Savageaux

Great. And I wasn't I was only trying to say...

Oleg Khaykin

5% of your revenue.

Timothy Savageaux

Beautiful. No, what I was trying to say is to the extent we're talking about the CPO opportunity would OCS be a similar magnitude over time or greater understanding they're not related to each other?

Oleg Khaykin

I think the CPO with switches and ASICs is a higher volume opportunity because I mean they just volumetrically, it's a much bigger volume business, right? Because think about it, when you go through a CS, you're really getting into the core, so you don't need -- now you have a lot of test time for each one of them because you could have like 300x300 switch. But it's sitting at kind of at the center. If you go -- I mean, when you talk about the CPO with ASICs and CPUs, there's many more of them on the edge, and they need multiple insertions.

So there's -- I mean, it's kind of hard to tell because I think there's not enough data points to really see how things will shake out. But there, you have a much bigger volume of ASICs, right? Unit volumes are much higher and you need multiple insertions. So I'd say my bet on that is probably going to be somewhat maybe I'd say OCS is a lower volume but higher volume per shipment. And the CPO with ASIC, it's a much higher volume and lower volume per shipment.

Timothy Savageaux

Great. If I can fit one more in there. You mentioned organic growth at 50%. And I'm going to assume the data center growth was greater than that on a year-over-year basis and also now is more than 50% of NSE revenue are both of those fair statements at this point?

Oleg Khaykin

Yes. So if I look at September quarter last year versus this year, so NSE was $216 million in September '26. Sorry, the -- and today, it's '25. And then today, it's $376 million. So there is a $160 million growth, okay? $52 million of it is aspiring so you back it out, it's about $100 million growth.

And I would say the data center yes, it's clearly more than 50%, right? And I would say aerospace and defense is the second highest. And I would say aerospace and defense and field instruments are, I would say, a little bit north of 50% and data center is, I mean, like almost 2x.

Timothy Savageaux

Great. We're talking growth rates there, I assume. But thanks.

Oleg Khaykin

Yes.

Operator

We have now reached the Q&A session. I will now turn the call back over to Vibhuti Nayar for closing remarks.

Vibhuti Nayar

Thank you, Jonathan. This concludes our earnings call for today. Thank you for joining, everyone. Have a good afternoon.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.