Keysight Technologies Q3 Earnings Call Highlights

Keysight Technologies NYSE: KEYS reported record fiscal third-quarter 2026 results, with revenue, orders and earnings exceeding the high end of its guidance range, as demand accelerated across AI infrastructure, semiconductor, aerospace and defense, and industrial markets.

Chief Executive Officer Satish Dhanasekaran said orders increased 56% year over year, revenue rose 36%, and earnings per share grew 79%. He said the company was raising its outlook for the fiscal fourth quarter and full year, citing broad-based customer investment in increasingly complex engineering applications.

“The outperformance was driven by strong execution by the team and demand extending across Keysight's full suite of differentiated products and solutions,” Dhanasekaran said. He identified AI infrastructure, advanced semiconductors, defense modernization and next-generation communications as major growth drivers.

Chief Financial Officer Neil Dougherty said third-quarter orders totaled $2.09 billion, up 56% on a reported basis. Acquisitions added 5 percentage points of growth, while currency reduced growth by 1 percentage point; core orders growth was 52%. Revenue was $1.85 billion, up 36% reported and 31% on a core basis. Gross margin was 69%, while operating margin rose 820 basis points year over year to 33.2%, above the company’s long-term target range of 31% to 32%.

Keysight reported net income of $531 million, or $3.70 per share. The core business produced a 34.7% operating margin and 66% operating-margin incremental. Cash flow from operations was $437 million. Free cash flow was $403 million. Cash and cash equivalents totaled $2.61 billion at quarter-end. The company repurchased about 640,000 shares for $210 million during the quarter, at an average price of about $326 per share. Fiscal-year-to-date share repurchases totaled $517 million.

Software and services revenue both grew at double-digit rates and represented about 33% of total revenue. Annual recurring revenue accounted for 24% of the company’s revenue mix.

The Communications Solutions Group generated $1.35 billion in revenue, up 43% reported and 36% on a core basis. Its operating margin was 34%, and gross margin was 70.8%. Commercial communications revenue reached its first billion-dollar quarter, rising 56% to $1.01 billion. Wireline revenue exceeded wireless revenue for the first time, supported by AI-related demand. Dougherty said wireline was also larger than wireless on a year-to-date basis. Dhanasekaran said wireline orders more than doubled from a year earlier, driven by AI infras...