Aviat Networks (NASDAQ:AVNW) closed out its fiscal 2026 on August 27, with a quarter that captures the company in two different lights at once. Revenue hit $120.9 million in the fourth quarter, up 4.8% from a year earlier, capping a sixth straight year of annual growth and pushing backlog to $367 million, up 14% from a year ago. But the same quarter saw non-GAAP earnings per share drop to $0.64 from $0.83, a reminder that growth and profitability aren’t moving in lockstep right now.
A Backlog That Keeps Building
The headline number is consistency. Aviat posted at least $100 million in quarterly revenue in all four quarters of fiscal 2026, the first time that’s happened in over a decade, and management is framing fiscal 2027 guidance of $455 million to $470 million in revenue as the next step in that streak. North America did the heavy lifting in the fourth quarter, growing 17.8% to $68.3 million on demand from mobile service providers and private network customers. A big piece of that comes from a new multi-dwelling unit order worth $25 million to $30 million from an existing customer, with the full amount set to land in fiscal 2027.
Aviat now operates or is slated to operate MDU offerings in 25 markets, up from roughly 13 previously, an expansion the company is counting on to keep contributing. Private networks now make up about 45% of the total business, and management pointed to state and local government budgets projected to grow 6.4% and 4.2% as a tailwind, alongside a newer thread tying grid and power infrastructure buildouts to demand for secure utility communications. International business had its own bright spot in EMEA, where revenue jumped 53% in the quarter and 33% for the full year, driven by private network wins with defense and energy customers.
Margins Take A Hit From Component Costs
The quarter’s soft spot was gross margin, which fell to 30.9% on a non-GAAP basis from 34.7% a year earlier. The culprit was a shortage of memory, printed circuit boards, capacitors, and FPGAs, along with the price inflation that came with it, and management says it plans to pass those higher costs on to customers, which is easier said than executed without denting demand. GAAP operating income fell to $5.8 million from $8.9 million, and the EPS decline mirrors that pressure. International revenue outside EMEA didn’t help either, with total international sales down 8.3% in the quarter to $52.6 million because of the timing of certain mobile network projects, and full-year international revenue slipped to $219.6 million from $227 million in fiscal 2025. Add in $97 million of total debt, against $72.8 million in cash and marketable securities, and the balance sheet still carries some leverage even as net debt sits at a manageable $24.2 million.
What The Market Is Pricing In
Hedge fund ownership rose to 17 funds from 14 the prior quarter, a modest pickup in institutional interest. Short interest sits at 7.66% of float, high enough to suggest a real contingent of skeptics rather than routine hedging. Meanwhile, the stock trades at a forward P/E of just 7.13 as of August 31, a multiple that implies the market isn’t pricing in much of the growth management is guiding to. That combination points to a stock where sentiment hasn’t caught up to the guidance yet.
Two Stories, One Stock
Aviat’s growth engine looks intact: backlog is up, guidance points higher, and the MDU and private network pushes are diversifying revenue away from the core microwave business. The gross margin hit from component shortages is the piece that could complicate that story if it lingers into fiscal 2027, especially with price increases still working their way to customers. For the growth case to hold, North America and EMEA momentum need to keep offsetting the international softness seen this quarter.
READ NEXT: 10 Best Future Stocks to Buy Under $10 and 12 Best Performing Semiconductor Stocks to Invest In.
Disclosure: None. Follow Insider Monkey on Google News.
Hedge Fund Resource Center