Viavi Sees AI Optics, CPO Testing Driving Path Toward $500M Quarterly Revenue

AI-driven optical networking is expanding Viavi’s testing opportunity as 800G and 1.6T technologies, optical circuit switches and co-packaged optics require more complex testing across development and production. Viavi’s data center business is a major growth driver, while aerospace and defense revenue has more than doubled in two years.

The company also sees longer-term potential in AI-related wireless infrastructure and edge connectivity. Management said Viavi could reach $500 million in quarterly revenue earlier than previously expected, potentially as soon as the December quarter, with operating margins in the high-30% range possible at that scale.

Viavi Solutions NASDAQ: VIAV expects rising complexity in optical networking, co-packaged optics and aerospace applications to expand the company’s testing and measurement opportunities, executives said during the Rosenblatt Age of AI Technology conference. President and CEO Oleg Khaykin said data center-related revenue accounted for about half of revenue in the company’s Network Service Enablement, or NSE, segment in the recently reported fiscal fourth quarter. Aerospace and defense represented roughly 17%, while telecommunications made up the remainder, according to the discussion.

Khaykin said Viavi works with all five of the world’s largest transceiver manufacturers and has particularly deep engagement with four of them. He said the company is used in development labs and in manufacturing environments by several leading suppliers. As optical speeds advance from 400G to 800G and 1.6T, the amount and precision of testing required increases, Khaykin said. At 800G, manufacturers require more detailed laser, insertion-loss and transceiver testing than at prior generations. At 1.6T, testing becomes more optical and includes more functional testing on production lines.

“The content for test is actually increasing,” Khaykin said, adding that manufacturers also need additional equipment to test advanced fiber types and multi-fiber connectors. He said defects in a single fiber can render an entire connector unusable, increasing the importance of surface inspection and interferometry. Viavi has been selling 1.6T equipment to developers for more than a year, according to Khaykin. He characterized production deployments as having begun in early stages at the beginning of the year and described the market as being in the “second” or “third inning.” He said a 1.6T tester can also test 800G and 400G modules, improving economics on a cost-per-bit basis, even as the cost of a full testing system rises. Khaykin said the price of a 1.6T test box is generally about 50% higher than an 800G equivalent because of higher component costs.

The company sees a growing role in testing optical circuit switches, or OCS, and co-packaged optics, or CPO. Khaykin said Viavi is the dominant merchant-equipment supplier for OCS testing, though some companies may build internal equipment. For highly complex products such as OCS, he estimated that the test-and-measurement market could represent roughly 10% of annual market size, while noting that the figure could change as yields improve and manufacturers modify testing practices. CPO creates more testing opportunities per port than pluggable transceivers, Khaykin said. The technology requires testing of electronic integrated circuits and photonic integrated circuits before assembly, retesting after they are combined into optical engines, testing of interconnect p...