Keysight Technologies
Keysight Technologies · Test & Measurement
01Wall Street Consensus
02Earnings Results
Key Takeaways
- Revenue $1.72B (+31% YoY, +24% core) — vs consensus $1.35B (+27% beat)
- EPS $2.87 (+69%) — vs consensus $2.32 (+24% beat), ex-tariff $2.58 (+52%)
- Total Orders $2.05B (+56%) — backlog rebuilds, AI chip test + 6G R&D dual demand
- FCF $472M — record quarterly FCF
- Q3 FY26 guide $1.730-1.750B (mid +29% YoY) → full-year raised
- Management: 'Strongest quarter in company's history, capping a record first half'
- AI 800G/1.6T interface test + 6G R&D ramp + defense tailwinds as triple drivers
Key Checkpoints
- 01Communications Solutions Group (CSG) revenue — 5G, 800G, AI test demand
- 02Electronic Industrial Solutions Group (EISG) revenue recovery
- 03Order growth rate and book-to-bill ratio above 1.0
- 04Software and recurring revenue percentage — 35%+ target
- 05800G/1.6T test solutions demand from optical transceiver ramp
- 06Gross margin 66%+ from software mix and operational efficiency
Upside Catalysts
- 800G/1.6T optical test demand — every transceiver manufacturer needs Keysight equipment
- AI chip design validation — growing need for high-speed SerDes and PCIe Gen6 test
- Defense and aerospace test spending increasing — Iran conflict driving military R&D
- 5G Advanced and 6G early R&D creating new test platform demand
- Software-centric model driving higher margins and recurring revenue
Risk Factors
- Order recovery slower than expected — post-inventory correction lingering
- China revenue exposure — export control and macro headwinds
- Competition from Rohde & Schwarz and Anritsu in communications test
- Iran conflict — defense test spending up but commercial customers deferring
- Semiconductor test market cyclicality — tied to industry capex cycles
1Final Verdict
Keysight Technologies is the leading test and measurement company for next-generation communications — from 800G optical to AI chip validation. Consensus EPS $1.75, Revenue $1.35B. The company is recovering from a post-inventory correction downturn with orders expected to inflect positive.
The AI infrastructure buildout drives demand for Keysight's test solutions across the entire value chain — from semiconductor design validation (SerDes, PCIe Gen6) to optical transceiver production testing (800G/1.6T). Every chip and transceiver must be tested before deployment.
The Iran conflict is mixed — defense test spending is accelerating, but commercial customers in affected regions are deferring purchases.
2Test Solutions for AI Infrastructure
800G/1.6T Optical Testing:
- Production test solutions for optical transceiver manufacturers
- Design validation for silicon photonics and coherent optics
- Growing at 30%+ YoY as transceiver production scales
AI Chip Validation:
- High-speed SerDes test (112G, 224G PAM4)
- PCIe Gen5/Gen6 compliance testing
- HBM memory interface validation
- Customers: NVIDIA, AMD, Broadcom, Marvell, and their OSAT partners
5G and Beyond:
- 5G Advanced test platforms for O-RAN and private 5G
- 6G early research: THz frequency test solutions
- Carrier capex recovery would drive additional demand
3Business Model & Defense
Software-Centric Transformation:
- Software and recurring revenue: 35%+ of total (and growing)
- PathWave design and test automation platform
- Higher margins (80%+ gross margin on software) improving blended profitability
Defense & Aerospace:
- ~25% of revenue from government/defense customers
- Iran conflict driving increased military R&D spending on electronic warfare, radar, comms
- Multi-year contracts with DOD, NATO allies
- Counter-drone and electronic warfare test platforms seeing strong demand
Financial Profile:
- Gross margin: 66%+ — premium for test equipment industry
- Operating margin: 28-30% target
- Free cash flow conversion: 90%+ of net income
- Post-recovery target: $6B+ annual revenue by FY2028
SEPS 서프라이즈 히스토리
분기별 EPS 컨센서스 대비 서프라이즈(%) — 막대: EPS, 점선: 매출
컨센서스 대비 실제 EPS/매출 서프라이즈 (%)