KEYS — Keysight Technologies, Inc.

Keysight Technologies Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Total Revenue: $1.600 billion, up 23% year-over-year (YoY), with 14% growth on a core basis (excluding acquisitions and currency impacts).
• Earnings Per Share (EPS): $2.17, up 19% YoY.
• Gross Margin: 66.7%, an increase of 90 basis points YoY.
• Operating Margin: 27.4%, up 20 basis points YoY.
• Net Income: $376 million.
• Orders: $1.645 billion, up 30% YoY on a reported basis and 22% on a core basis.
• Cash Flow: Generated $441 million from operations, with free cash flow of $407 million.

2. Strategic Updates and Business Highlights

• Demand Acceleration: Keysight reported robust growth across all business segments, driven by AI technology transformations, next-gen connectivity, and defense modernization.
• Communications Solutions Group: Revenue of $1.124 billion, up 27% YoY, with a notable shift where wireline surpassed wireless orders for the first time.
• Aerospace, Defense, and Government: Achieved record orders, reflecting increased global defense spending and modernization efforts.
• Electronic Industrial Solutions Group: Revenue grew 15%, with strong performance across general electronics, semiconductors, and automotive sectors.
• Acquisitions: Integration of recent acquisitions is on track, with expectations for $375 million in acquisition-related revenue for fiscal 2026.

3. Forward Guidance and Outlook

• Q2 2026 Revenue Guidance: Expected in the range of $1.690 billion to $1.710 billion, representing approximately 30% YoY growth at the midpoint.
• EPS Guidance for Q2: Anticipated between $2.27 and $2.33, indicating 35% YoY growth.
• Full Year Outlook: Total annual revenue and earnings growth expected to be just above 20%, with a strong pipeline and market momentum.

4. Challenges and Points of Concern

• Supply Chain Risks: While Keysight is managing supply chain constraints, there are concerns about rising prices in memory components, which could impact costs.
• Tariff Impacts: The company is assessing the implications of a recent Supreme Court decision regarding tariffs, which could affect future guidance.
• Acquisition Dilution: Recent acquisitions may initially dilute operating margins, but are expected to become accretive as synergies are realized.

5. Notable Q&A Insights

• AI Business Growth: The AI segment is expanding rapidly, with a doubling of customer engagement and significant order growth, indicating a broadening customer base beyond traditional clients.
• Customer Base Expansion: Keysight is seeing a shift from primarily U.S. customers to a more global footprint, including increased activity in Southeast Asia.
• Competitive Landscape: Keysight maintains a competitive edge through its solutions-oriented approach, integrating deep physics into its software offerings to stay ahead of customer needs.
• Future Opportunities: The company is optimistic about continued growth in aerospace and defense, driven by increasing budgets and modernization efforts, along with ongoing investments in AI and semiconductor technologies.

Overall, Keysight Technologies reported a strong start to fiscal 2026, with robust growth across its business segments, driven by strategic investments and favorable market conditions, while also navigating potential supply chain and tariff-related challenges.