Keysight Technologies Inc. (KEYS) Earnings & Analysis

Latest quarter

Keysight reported Q3 FY2026 revenue of $1.8 billion, up 36.5% from $1.4 billion a year earlier; revenue, as the consensus counts it, was $1.8 billion against a $1.7 billion consensus. The company reported adjusted EPS, as the consensus counts it, of $3.07, compared with the $2.46 consensus, or 24.8% above the consensus. Against the company’s Q3 revenue guidance of $1.7 billion–$1.8 billion, Keysight reported $1.8 billion, which the company’s guidance comparison identifies as above the guide.

Keysight’s filing says revenue increased in both the Communications Solutions Group and the Electronic Industrial Solutions Group, with demand in high-speed networks, aerospace and defense solutions, advanced semiconductor technologies, automotive and energy applications contributing to growth. The company reported gross margin of 65.9%, up 4.2 percentage points year over year, and operating margin of 25.0%, up 7.7 percentage points. Keysight attributed the gross-margin increase primarily to higher volume, favorable mix and acquisitions, partly offset by higher people-related costs and acquisition-related amortization. The company reported free cash flow of $408.0 million, compared with $291.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On the Q3 call, President and CEO Satish Dhanasekaran said commercial communications momentum continued as the AI infrastructure ecosystem scaled, with wireline orders more than doubling from a year earlier. He said Keysight was participating in customer activity from pre-silicon design through component validation, system-level emulation and manufacturing, while investments in 800G and 1.6T optical transceivers continued to ramp.

Dhanasekaran said wireless orders grew as customers invested in next-generation connectivity, including AI RAN, integrated sensing and communication, and non-traditional networks. In aerospace, defense and government, he said orders rose by double digits across regions, citing defense modernization and demand for radar, spectrum, autonomous-platform and satellite-related applications. He also said EISG revenue grew 21%, with growth across general electronics, semiconductors, and automotive and energy, including demand tied to advanced semiconductor capacity, silicon photonics, software-defined vehicles and charging infrastructure.

In the question-and-answer session, Executive Vice President and CFO Neil Dougherty said demand was not the limiting factor, while supply constraints had shifted from internal capacity for new-product ramps toward incoming parts facing high demand. Dougherty said Keysight had made progress on earlier internal-capacity constraints. He said higher volume helped gross margin, mix continued to matter, and upper-60s gross-margin levels were sustainable.

On fiscal 2027 operating leverage, Dougherty said Keysight expected to outperform its 40% target on an operational basis after adjusting for one-time tariff effects that increased fiscal 2026 profitability and would not recur. He also said the company had largely completed integration of recently completed acquisitions and did not quantify potential follow-on efficiencies. Dougherty said software and services were growing at double-digit rates, though more slowly than hardware businesses.

Guidance

Keysight said it raised its outlook for Q4 and fiscal 2026. For Q4 FY2026, Dougherty said the company expects revenue of $1.930 billion to $1.950 billion and EPS of $3.34 to $3.40. He said this outlook implies fiscal 2026 revenue growth of 32% and EPS growth of approximately 60% at the midpoint. For fiscal 2027, Dougherty said Keysight expects to outperform its 40% operating-leverage target on an operational basis after adjusting for the nonrecurring tariff effect.