Viavi Solutions surges 15% on restructuring plan
Cost-cutting initiative targets $30 million in annual savings as communications equipment maker posts earnings beat
Viavi Solutions shares surged 15.5% to $24.29 on Wednesday, extending a rally that has sent the stock to its highest level since early 2023, as investors embraced the communications equipment maker's restructuring plan and stronger-than-expected quarterly results.
The stock's $3.26 gain pushed shares above the previous 52-week high of $21.52, giving the San Jose-based company a market capitalization of approximately $4.6 billion. The rally reflects renewed confidence in Viavi's ability to deliver improved profitability through operational efficiency measures.
Viavi announced on January 23 that its board approved a restructuring initiative affecting approximately 5% of the company's global workforce. The plan is expected to generate about $30 million in annualized cost savings upon completion, though the company anticipates incurring roughly $32 million in restructuring charges, with the majority recognized by June 2026, according to a press release. The company expects the restructuring to be largely completed by the end of calendar year 2026.
"These actions are designed to streamline our operations and align our cost structure with our strategic priorities," the company stated in its earnings materials. "We remain focused on driving sustainable growth and improving profitability for our shareholders."
The restructuring announcement came alongside fiscal second-quarter results that topped analyst expectations. Viavi reported adjusted earnings per share of $0.22, surpassing the consensus estimate of $0.19, while revenue reached $369.3 million compared to projections of $365.25 million, according to Investing.com. The company also raised its outlook for the third quarter.
The strong performance comes after a period of robust momentum for the stock, which had already gained 16.19% over the past 30 days and 22.98% over the last 90 days leading up to the earnings release, according to Simply Wall St.
Viavi Solutions provides network testing, monitoring, and assurance solutions to communication service providers, enterprises, network equipment manufacturers, and government organizations. The company's products help clients enhance network performance, security, and reliability amid increasing global demand for connectivity infrastructure.
Despite Wednesday's surge, analysts see more room for upside. The consensus target price of $20.14 represents roughly 17% downside from current levels, though nearly 88% of analysts covering the stock rate it as a buy or strong buy, with no sell ratings, according to market data.
The stock's forward price-to-earnings ratio of 28.41 suggests investors are pricing in substantial growth from the restructuring efforts. The company has demonstrated improving revenue trends, with quarterly revenue growth of 16.6% year-over-year, even as earnings faced pressure from prior investments.
Options activity ahead of the earnings announcement signaled that traders were positioning for significant movement. Call options significantly outpaced put options in the period leading up to the results, indicating market anticipation of a positive catalyst, according to GuruFocus.
Investors will be watching closely in coming quarters for evidence that the restructuring is delivering the expected cost savings while Viavi maintains its revenue growth trajectory. The company's ability to execute on its operational efficiency initiatives while capitalizing on increased demand for network infrastructure technology will be key to sustaining the stock's momentum.