Keysight Technologies (NYSE:KEYS) shares are trading higher premarket on Wednesday. The company reported better-than-expected third quarter results and issued fourth quarter guidance above estimates after market close on Tuesday.
Earnings Snapshot
Adjusted EPS of $3.07, beat the $2.48 analyst estimate, while revenue of $1.85 billion exceeded the $1.74 billion consensus.
Orders climbed 56% year over year to $2.091 billion, while revenue rose 36% to a record $1.846 billion and EPS increased 79%.
Management said customer investment continues to be strong across AI infrastructure, advanced semiconductors, defense modernization and next-generation communications, supporting its confidence in sustained long-term growth.
Operating margin expanded 820 basis points to 33.2%, exceeding the company’s 31%-32% long-term target. The company’s core business delivered a 34.7% operating margin and 66% operating margin incremental.
Keysight ended the quarter with $2.605 billion in cash and cash equivalents, with operating cash flow of $437 million and free cash flow of $403 million.
During the quarter, the company repurchased shares worth $210 million, bringing fiscal 2026 year-to-date share repurchases to $517 million.
Business Performance
Communications Solutions Group revenue increased 43% to $1.345 billion, or 36% on a core basis, with orders reaching a new record for the ninth consecutive quarter.
Commercial Communications posted its first $1 billion revenue quarter, with revenue rising 56% to $1.006 billion.
Wireline revenue more than doubled year over year and surpassed wireless revenue for the first time, supported by AI infrastructure scaling, speed transitions, silicon photonics and system-level emulation.
Electronic Industrial Solutions Group delivered record revenue of $501 million, increasing 21%, as orders recorded double-digit growth across General Electronics, Semiconductors, and Automotive and Energy.
General Electronics benefited from AI-driven innovation and infrastructure spending, particularly from rising testing needs for high-performance components such as multilayer PCBs and capacitors.
Semiconductor revenue was supported by capacity expansion for advanced nodes, high-bandwidth memory and silicon photonics, with commercial silicon photonics production accelerating among leading foundries and integrated device manufacturers.
Automotive and Energy orders also increased at solid double-digit rates, driven by investments in software-defined vehicle architectures, in-vehicle networking, cybersecurity testing, high-power charging, energy storage and infrastructure validation.
Keysight is involved across the AI infrastructure development cycle, from pre-silicon design and chip and component validation to data-center rack and cluster emulation and high-value manufacturing.
Growing demand for high-speed optical infrastructure is also prompting transceiver manufacturers to scale 800-gigabit and 1.6-terabit optical products using Keysight’s 224-gigabit digital communication analyzers.
Outlook
For the fourth quarter, the company expects adjusted EPS of $3.34-$3.40 versus $2.70 expected, and revenue of $1.93 billion-$1.95 billion versus the $1.81 billion estimate.
Keysight projects fiscal 2026 adjusted EPS of $11.46, compared with the $10.24 analyst estimate.
The company increased its fiscal 2026 sales guidance from the previous range of $6.826 billion to $6.934 billion to $7.095 billion, versus the $6.884 billion estimate.
Keysight said the integration of its recent acquisition is largely complete, with systems migrations finished one quarter ahead of schedule. The company expects to achieve 80%-90% of the $100 million in cost synergies on a run-rate basis by the end of fiscal 2026.
KEYS Stock Price Activity: Keysight Techs shares were up 2.34% at $348.99 during premarket trading Wednesday.
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