Keysight Q3 Orders Surge 56%, Raises Full-Year Guidance

Keysight Technologies shares rose in Wednesday premarket trading. The company reported better-than-expected third-quarter results and issued above-consensus fourth-quarter guidance after Tuesday's close.

Results Snapshot

Adjusted EPS came in at $3.07, beating the $2.48 analyst estimate, while revenue reached $1.85 billion, surpassing the $1.74 billion consensus expectation.

Orders grew 56% year-over-year to $2.091 billion, revenue rose 36% to a record $1.846 billion, and EPS increased 79%.

Management stated that customer investment remains strong across AI infrastructure, advanced semiconductors, defense modernization, and next-generation communications, supporting confidence in sustainable long-term growth.

Operating margin expanded 820 basis points to 33.2%, exceeding the company's long-term target of 31%-32%. The company's core business achieved a 34.7% operating margin and 66% incremental operating profit.

Keysight ended the quarter with $2.605 billion in cash and cash equivalents, operating cash flow of $437 million, and free cash flow of $403 million.

During the quarter, the company repurchased $210 million worth of shares, bringing fiscal 2026 year-to-date buybacks to $517 million.

Business Performance

The Communications Solutions Group revenue grew 43% to $1.345 billion, up 36% on a core basis, with orders setting a new record for the ninth consecutive quarter.

Commercial communications delivered its first $1 billion revenue quarter, with revenue up 56% to $1.006 billion.

Wired revenue more than doubled year-over-year, surpassing wireless revenue for the first time, supported by AI infrastructure expansion, rate conversion, silicon photonics, and system-level simulation.

The Electronic Industrial Solutions Group posted record revenue of $501 million, up 21%, with double-digit order growth across general electronics, semiconductors, and automotive and energy segments.

General electronics benefited from AI-driven innovation and infrastructure spending, particularly growing test demand for high-performance components such as multilayer PCBs and capacitors.

Semiconductor revenue was supported by advanced process node capacity expansion, high-bandwidth memory, and silicon photonics, with commercial silicon photonics production accelerating at leading foundries and integrated device manufacturers.

Automotive and energy orders also grew at a solid double-digit rate, driven by investments in software-defined vehicle architectures, in-vehicle networking, cybersecurity testing, high-power charging, energy storage, and infrastructure validation.

Keysight participates across the entire AI infrastructure development cycle, from pre-silicon design and chip and component validation to data center rack and cluster simulation and high-value manufacturing.

Growing demand for high-speed optical infrastructure is also driving transceiver manufacturers to expand 800-gigabit and 1.6-terabit optical products using Keysight's 224-gigabit digital communications analyzer.

Guidance

For the fourth quarter, the company expects adjusted EPS of $3.34-$3.40, versus the $2.70 estimate, and revenue of $1.93 billion-$1.95 billion, versus the $1.81 billion estimate.

Keysight expects fiscal 2026 adjusted EPS of $11.46, versus the analyst estimate of $10.24.

The company raised its fiscal 2026 sales guidance from a previous range of $6.826 billion-$6.934 billion to $7.095 billion, versus the $6.884 billion estimate.

Keysight said integration of its recent acquisition is largely complete, with system migration finishing one quarter ahead of schedule. The company expects to achieve 80%-90% of its $100 million cost synergies on a run-rate basis by the end of fiscal 2026.

KEYS stock activity: Keysight Technologies shares rose 2.34% to $348.99 in Wednesday premarket trading.