Keysight Technologies, Inc. (KEYS) Stock Analysis and Metrics

Keysight Technologies

NYSE: KEYS

$317.21 ▲ +8.09 (+2.62%)

At close: Jul 8, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap57.75 Bn

P/E58.86

P/S10.17

Div. Yield0.00

ROIC (Qtr)0.00

Total Debt (Qtr)2.53 Bn

Revenue Growth (1y) (Qtr)23.27

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About

Keysight Technologies, Inc. is a global technology company that designs, develops, and manufactures electronic measurement equipment and software solutions. The company provides tools that help engineers in the communications, aerospace and defense, automotive, semiconductor, and general electronics industries to design, emulate, validate, and optimize electronic systems. Its product portfolio includes oscilloscopes, signal analyzers, network analyzers, spectrum analyzers, power supplies, modular test platforms, and a range of design automation and simulation software. Keysight also offers calibration, repair, and technical support services that accompany its hardware and software offerings.

Keysight generates revenue primarily from the sale of its hardware instruments and associated software licenses. The company also earns income from maintenance contracts, calibration services, and training programs. Recurring revenue streams, such as software subscriptions and service agreements, represent an increasing portion of total sales. Customers acquire products directly from Keysight or through a global network of distributors and value added resellers. International sales account for a substantial portion of the company’s total revenue.

The company operates through the following segments: Communications Solutions Group and Electronic Industrial Group.

• Communications Solutions Group: This segment focuses on test and measurement solutions for wireless and wired communications technologies. Its products support the development and deployment of cellular networks, including 5G, broadband access, and optical transport systems. The segment provides instruments such as vector signal analyzers, network analyzers, and protocol testers, along with software for signal generation and analysis. These tools enable equipment manufacturers and service providers to verify performance, ensure compliance with standards, and accelerate time to market for new communication products.

• Electronic Industrial Group: This segment supplies a broad range of general purpose measurement instruments and software used across aerospace, defense, automotive, semiconductor, and industrial markets. Its offerings include benchtop oscilloscopes, spectrum analyzers, power supplies, DC electronic loads, and modular test systems such as PXI and PCIe based platforms. The segment also provides design and simulation software for electronic circuit design, EMI analysis, and power integrity verification. These solutions help customers validate product performance, troubleshoot failures, and reduce development costs across a wide variety of applications.

Keysight holds a leading position in the electronic test and measurement industry, competing with established firms such as Tektronix, Rohde & Schwarz, National Instruments, and Anritsu. The company’s competitive advantages stem from its deep expertise in high frequency and high speed measurement technologies, a broad portfolio that integrates hardware with software enabled workflows, and strong relationships with research and development teams at major technology manufacturers. Keysight invests a significant portion of its revenue in research and development, which fuels continuous innovation and helps maintain its technology edge. The company dedicates approximately 14% of its annual revenue to research and development activities.

Keysight serves a diverse customer base that includes equipment manufacturers, telecommunications carriers, aerospace and defense contractors, automotive manufacturers, semiconductor foundries, and research laboratories. Specific customers mentioned in the filing include companies such as Apple, Samsung, Boeing, Lockheed Martin, and Intel. The company also serves government agencies, university research centers, and independent test labs that require precise measurement capabilities for product development and quality assurance.

Investment Thesis

▲ Bull case

Keysight is uniquely positioned to capitalize on the sustained and accelerating investments in AI data center infrastructure, where its comprehensive portfolio of solutions spans from silicon photonics and co-packaged optics to system-level emulation and validation, creating a durable competitive advantage as hyperscalers and network equipment manufacturers demand end-to-end testing capabilities to ensure reliability and yield in increasingly complex architectures. This is underscored by the CEO's statement that the AI-related business has already surpassed the levels achieved in all of 2025 within just the first half of fiscal 2026, indicating a structural shift in demand rather than a temporary spike, and the company's early investments in optical and photonics technologies, including the industry-first 220-gigahertz Lightwave component analyzer and 3D interconnect designer, are enabling it to capture value as the industry transitions to these architectures, with management noting strong adoption for newly introduced ultra-high interconnect solutions that enable rapid characterization of rack backplanes for next-generation scale-up networks. The breadth of the portfolio, which allows participation in both electrical and optical domains, is particularly valuable as the AI infrastructure stack becomes more heterogeneous, with customers adopting Keysight solutions for end-to-end interoperability and system validation across multiple vendors and networking technologies such as Ethernet, UALink, PCIe, NVMe, and CXL, a trend reinforced by collaborations like the industry-first public interoperability demonstration of Ultra Ethernet Consortium specifications with Broadcom, positioning Keysight as a critical enabler of production-ready AI-optimized Ethernet fabrics. Furthermore, the company's ability to leverage its expertise in networking applications to develop solutions for the new mobility market, particularly in automotive and energy where orders grew for the third consecutive quarter across software-defined vehicles and EV charging solutions, demonstrates successful diversification beyond its core communications and semiconductor markets, reducing reliance on any single end market and creating multiple avenues for sustained growth.
The company's strategic focus on emerging secular growth areas such as defense technology, space, 6G, and quantum computing is beginning to yield tangible results, with the aerospace defense and government segment showing broad-based global momentum led by Europe and supported by continued strength in the Americas, driven by global defense modernization priorities translating into new programs and investments in next-generation systems, particularly in radar, electromagnetic spectrum operations, and space satellite and autonomous systems, where Keysight's ability to accurately simulate radar signals and emulate threat environments is a key differentiator creating higher-value system-level opportunities with defense contractors and government agencies worldwide, as evidenced by the key win with the US Air Force to enable next-generation operational flight line testing with more stringent requirements, and the increasing attach rate for value-added services to enable mission readiness and operations in this mission-critical market. Simultaneously, the non-terrestrial networks (NTN) opportunity, while still a sub-1% contributor to annualized revenue, is positioned to scale significantly as the industry targets direct-to-cell deployments in the next few quarters, with Keysight's orbit emulation and Spirent's PNT solutions providing a differentiated ability to validate next-generation NTN systems amid increasing complexity in LEO environments, including speed, dynamic link conditions, and stringent positioning requirements, and the company's early position in this ecosystem, highlighted by collaborations with Qualcomm on RF digital twins and joint demonstrations with Samsung on AI RAN workflows at Mobile World Congress, along with hosting the 3GPP meeting in Singapore to solidify the 6G standardization timeline, reinforces its leadership as the ecosystem evolves toward commercialization.
Keysight's financial strength and capital allocation strategy provide significant downside protection and upside potential, with record free cash flow generation of $472 million in Q2 FY26 enabling disciplined share repurchases (approximately 780 thousand shares at an average price of $283 per share for $220 million) while simultaneously funding increased investments to meet higher growth levels, as reflected in the raised capital expenditures outlook for FY26 from $160 million to $200 million, which is being directed to ramp new products enabling AI build-out, particularly MPIs from Keysight that are seeing unprecedented ramp following introduction, and the company's vertical integration—where a significant portion of highly specialized chips and assemblies are manufactured in-house—provides unique control over supply chain and cost structure, mitigating risks associated with external supplier delays or decommits, a point emphasized by the CFO when noting that while supply chain management is more active, there are no major concerns from a supply perspective, and the strong balance sheet with $2.41 billion in cash and cash equivalents provides ample liquidity to navigate any near-term volatility while continuing to invest in R&D and strategic acquisitions, such as the expected $375 million in FY26 revenue from acquisitions and greater than $100 million in cost synergies, with about 80% of those synergies expected to be realized on a run-rate basis exiting the fiscal year.

Keysight is uniquely positioned to capitalize on the sustained and accelerating investments in AI data center infrastructure, where its comprehensive portfolio of solutions spans from silicon photonics and co-packaged optics to system-level emulation and validation, creating a durable competitive advantage as hyperscalers and network equipment manufacturers demand end-to-end testing capabilities to ensure reliability and yield in increasingly complex architectures. This is underscored by the CEO's statement that the AI-related business has already surpassed the levels achieved in all of 2025 within just the first half of fiscal 2026, indicating a structural shift in demand rather than a temporary spike, and the company's early investments in optical and photonics technologies, including the industry-first 220-gigahertz Lightwave component analyzer and 3D interconnect designer, are enabling it to capture value as the industry transitions to these architectures, with management noting strong adoption for newly introduced ultra-high interconnect solutions that enable rapid characterization of rack backplanes for next-generation scale-up networks. The breadth of the portfolio, which allows participation in both electrical and optical domains, is particularly valuable as the AI infrastructure stack becomes more heterogeneous, with customers adopting Keysight solutions for end-to-end interoperability and system validation across multiple vendors and networking technologies such as Ethernet, UALink, PCIe, NVMe, and CXL, a trend reinforced by collaborations like the industry-first public interoperability demonstration of Ultra Ethernet Consortium specifications with Broadcom, positioning Keysight as a critical enabler of production-ready AI-optimized Ethernet fabrics. Furthermore, the company's ability to leverage its expertise in networking applications to develop solutions for the new mobility market, particularly in automotive and energy where orders grew for the third consecutive quarter across software-defined vehicles and EV charging solutions, demonstrates successful diversification beyond its core communications and semiconductor markets, reducing reliance on any single end market and creating multiple avenues for sustained growth.
The company's strategic focus on emerging secular growth areas such as defense technology, space, 6G, and quantum computing is beginning to yield tangible results, with the aerospace defense and government segment showing broad-based global momentum led by Europe and supported by continued strength in the Americas, driven by global defense modernization priorities translating into new programs and investments in next-generation systems, particularly in radar, electromagnetic spectrum operations, and space satellite and autonomous systems, where Keysight's ability to accurately simulate radar signals and emulate threat environments is a key differentiator creating higher-value system-level opportunities with defense contractors and government agencies worldwide, as evidenced by the key win with the US Air Force to enable next-generation operational flight line testing with more stringent requirements, and the increasing attach rate for value-added services to enable mission readiness and operations in this mission-critical market. Simultaneously, the non-terrestrial networks (NTN) opportunity, while still a sub-1% contributor to annualized revenue, is positioned to scale significantly as the industry targets direct-to-cell deployments in the next few quarters, with Keysight's orbit emulation and Spirent's PNT solutions providing a differentiated ability to validate next-generation NTN systems amid increasing complexity in LEO environments, including speed, dynamic link conditions, and stringent positioning requirements, and the company's early position in this ecosystem, highlighted by collaborations with Qualcomm on RF digital twins and joint demonstrations with Samsung on AI RAN workflows at Mobile World Congress, along with hosting the 3GPP meeting in Singapore to solidify the 6G standardization timeline, reinforces its leadership as the ecosystem evolves toward commercialization.
Keysight's financial strength and capital allocation strategy provide significant downside protection and upside potential, with record free cash flow generation of $472 million in Q2 FY26 enabling disciplined share repurchases (approximately 780 thousand shares at an average price of $283 per share for $220 million) while simultaneously funding increased investments to meet higher growth levels, as reflected in the raised capital expenditures outlook for FY26 from $160 million to $200 million, which is being directed to ramp new products enabling AI build-out, particularly MPIs from Keysight that are seeing unprecedented ramp following introduction, and the company's vertical integration—where a significant portion of highly specialized chips and assemblies are manufactured in-house—provides unique control over supply chain and cost structure, mitigating risks associated with external supplier delays or decommits, a point emphasized by the CFO when noting that while supply chain management is more active, there are no major concerns from a supply perspective, and the strong balance sheet with $2.41 billion in cash and cash equivalents provides ample liquidity to navigate any near-term volatility while continuing to invest in R&D and strategic acquisitions, such as the expected $375 million in FY26 revenue from acquisitions and greater than $100 million in cost synergies, with about 80% of those synergies expected to be realized on a run-rate basis exiting the fiscal year.

▼ Bear case

Despite the strong headline growth in Q2 FY26, there are signs of potential deceleration and execution risks that the market may be overlooking, particularly in the sustainability of the current order momentum, as the CFO acknowledged that Q3 revenue guidance at the midpoint of $1.74 billion represents only slight sequential growth from Q2's $1.72 billion, implying a potential pause in the rapid revenue acceleration seen in the first half, and while management attributes this to the timing of new product introductions and revenue conversion influenced by product mix, the fact that orders grew 56% year-over-year while revenue grew only 31% suggests a significant buildup in backlog, and when questioned about backlog age, management reiterated that the majority of business is still booked and recognized within a 6-month period, which, combined with the CEO's comment about a stronger sense of customer urgency in the AI business translating to faster pipeline velocity, raises concerns that the current order strength may reflect pull-forward demand or temporary acceleration rather than enduring structural growth, especially if customers are front-loading purchases in anticipation of supply constraints or price increases, a risk that could manifest as a sharp slowdown in conversions once the backlog is worked down.
The company's gross margin expansion, while impressive on the surface, may not be durable, as the reported 72.3% gross margin in Q2 FY26 was significantly boosted by one-time tariff refund impacts, which reduced revenue by $40 million and costs and expenses by $97 million, and when excluding these impacts, gross margin was 67.6%, up 300 basis points year-over-year, but the CFO noted that post-accretion from acquisitions—which were accretive to gross margins—the right level at these volumes remains in the mid-67 range, suggesting that the underlying organic business margin improvement may be more modest than the headline numbers indicate, and with operating expenses at $669 million and the company guiding for increased CapEx to $200 million for FY26 to support product ramps, there is a risk that incremental investments in R&D, sales, and manufacturing capacity to sustain growth could pressure margins if revenue growth does not consistently exceed expectations, particularly given that the incremental margin on a core basis was just under 506%, a figure driven more by the high rate of growth than by structural improvements, and as growth normalizes to more sustainable levels, the incremental margin could revert toward the historical 40% level seen in mid-single-digit growth environments, exposing the business to margin compression if operating leverage diminishes.
Keysight's exposure to cyclical and politically sensitive end markets presents latent risks that are not being adequately priced in, with the aerospace defense and government segment, while showing strength in the current quarter, remaining vulnerable to shifts in government spending priorities, budget delays, or geopolitical developments that could delay or cancel programs, as highlighted by the CEO's acknowledgment that the business is influenced by program spend and budget stability in the US and Europe, and any disruption to this stability—such as prolonged budget debates, shifting defense priorities away from radar and electromagnetic spectrum operations, or delays in space satellite and autonomous systems funding—could significantly impact orders and revenue in this segment, which, while currently contributing meaningfully to overall performance, is not immune to the inherent lumpiness and long lead times of defense procurement cycles, and similarly, the automotive and energy segment, though showing stabilization with three consecutive quarters of order growth, remains tied to the volatile EV charging and software-defined vehicle markets, where adoption rates can fluctuate based on macroeconomic conditions, interest rates, and changes in regulatory incentives, and the company's reliance on leveraging its networking expertise to develop solutions for this new mobility market may not yield the anticipated scale if OEMs and Tier 1 suppliers delay investments in connected vehicle platforms due to economic uncertainty or supply chain challenges in the broader automotive industry.

Despite the strong headline growth in Q2 FY26, there are signs of potential deceleration and execution risks that the market may be overlooking, particularly in the sustainability of the current order momentum, as the CFO acknowledged that Q3 revenue guidance at the midpoint of $1.74 billion represents only slight sequential growth from Q2's $1.72 billion, implying a potential pause in the rapid revenue acceleration seen in the first half, and while management attributes this to the timing of new product introductions and revenue conversion influenced by product mix, the fact that orders grew 56% year-over-year while revenue grew only 31% suggests a significant buildup in backlog, and when questioned about backlog age, management reiterated that the majority of business is still booked and recognized within a 6-month period, which, combined with the CEO's comment about a stronger sense of customer urgency in the AI business translating to faster pipeline velocity, raises concerns that the current order strength may reflect pull-forward demand or temporary acceleration rather than enduring structural growth, especially if customers are front-loading purchases in anticipation of supply constraints or price increases, a risk that could manifest as a sharp slowdown in conversions once the backlog is worked down.
The company's gross margin expansion, while impressive on the surface, may not be durable, as the reported 72.3% gross margin in Q2 FY26 was significantly boosted by one-time tariff refund impacts, which reduced revenue by $40 million and costs and expenses by $97 million, and when excluding these impacts, gross margin was 67.6%, up 300 basis points year-over-year, but the CFO noted that post-accretion from acquisitions—which were accretive to gross margins—the right level at these volumes remains in the mid-67 range, suggesting that the underlying organic business margin improvement may be more modest than the headline numbers indicate, and with operating expenses at $669 million and the company guiding for increased CapEx to $200 million for FY26 to support product ramps, there is a risk that incremental investments in R&D, sales, and manufacturing capacity to sustain growth could pressure margins if revenue growth does not consistently exceed expectations, particularly given that the incremental margin on a core basis was just under 506%, a figure driven more by the high rate of growth than by structural improvements, and as growth normalizes to more sustainable levels, the incremental margin could revert toward the historical 40% level seen in mid-single-digit growth environments, exposing the business to margin compression if operating leverage diminishes.
Keysight's exposure to cyclical and politically sensitive end markets presents latent risks that are not being adequately priced in, with the aerospace defense and government segment, while showing strength in the current quarter, remaining vulnerable to shifts in government spending priorities, budget delays, or geopolitical developments that could delay or cancel programs, as highlighted by the CEO's acknowledgment that the business is influenced by program spend and budget stability in the US and Europe, and any disruption to this stability—such as prolonged budget debates, shifting defense priorities away from radar and electromagnetic spectrum operations, or delays in space satellite and autonomous systems funding—could significantly impact orders and revenue in this segment, which, while currently contributing meaningfully to overall performance, is not immune to the inherent lumpiness and long lead times of defense procurement cycles, and similarly, the automotive and energy segment, though showing stabilization with three consecutive quarters of order growth, remains tied to the volatile EV charging and software-defined vehicle markets, where adoption rates can fluctuate based on macroeconomic conditions, interest rates, and changes in regulatory incentives, and the company's reliance on leveraging its networking expertise to develop solutions for this new mobility market may not yield the anticipated scale if OEMs and Tier 1 suppliers delay investments in connected vehicle platforms due to economic uncertainty or supply chain challenges in the broader automotive industry.

Segments Breakdown of Revenue (2025)

Peer Comparison

Companies in the Scientific & Technical Instruments

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	COHR	Coherent Corp.	3,591.32 Bn	8,242.43	543.97	3.19 Bn
2	NOVT	Novanta Inc	69.39 Bn	1,291.61	69.04	0.24 Bn
3	KEYS	Keysight Technologies, Inc.	57.75 Bn	58.86	10.17	2.53 Bn
4	TDY	Teledyne Technologies Inc	30.63 Bn	32.80	4.92	2.48 Bn
5	FTV	Fortive Corp	19.14 Bn	-1,495.03	4.52	3.49 Bn
6	TRMB	Trimble Inc.	12.33 Bn	27.03	3.34	1.41 Bn
7	CGNX	Cognex Corp	11.87 Bn	83.30	11.34	-
8	ST	Sensata Technologies Holding plc	6.78 Bn	139.80	1.82	2.83 Bn

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Investment Thesis

Segments Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

Research Tools

Developers

About

Investment Thesis

Segments Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

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