KEYS — Keysight Technologies, Inc.

Keysight Technologies Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Orders: $2.05 billion, up 56% year-over-year (YoY); core orders grew 48%.
• Revenue: $1.72 billion, up 31% YoY; core revenue increased 24%.
• Earnings Per Share (EPS): $2.87, a 69% increase YoY; adjusted EPS (excluding one-time tariff impacts) was $2.58, up 52%.
• Gross Margin: 72.3% (reported); 67.6% (adjusted for one-time items), up 300 basis points.
• Free Cash Flow: Record $472 million.
• Cash and Cash Equivalents: $2.41 billion at quarter-end.

2. Strategic Updates and Business Highlights

• Record Performance: Best quarter in company history, driven by strong demand across all business segments.
• Communication Solutions Group (CSG): Revenue of $1.23 billion, up 35% YoY, with strong growth in both commercial communications and aerospace defense.
• Electronic Industrial Solutions Group (EISG): Revenue of $486 million, up 24% YoY, with growth across general electronics, semiconductors, and automotive sectors.
• AI Infrastructure: Significant growth in AI-related business, with expectations for continued momentum in wireline and semiconductor markets.
• Acquisitions: On track to contribute $375 million in FY 2026 revenue, with expected cost synergies exceeding $100 million.

3. Forward Guidance and Outlook

• Q3 2026 Revenue Guidance: Expected in the range of $1.73 billion to $1.75 billion, representing approximately 29% YoY growth at the midpoint.
• EPS Guidance for Q3: Projected between $2.43 and $2.49, indicating 43% YoY growth at the midpoint.
• Full-Year Revenue Growth: Raised expectations for FY 2026 to high-20s percent growth, supported by a strong pipeline and market demand.

4. Bad News, Challenges, or Points of Concern

• Tariff Impact: The company recognized a $40 million reduction in revenue and a $97 million reduction in costs due to tariff refunds, which may create volatility in future results.
• Supply Chain Management: While currently manageable, there are ongoing concerns about supply chain dynamics and the ability to meet robust demand.
• Market Dynamics: The company acknowledged the need to navigate market dynamics, including potential shifts in customer buying behavior and economic conditions.

5. Notable Q&A Insights

• Backlog Management: The backlog remains within a six-month delivery window, with no significant changes expected.
• AI Business Dynamics: Strong customer urgency in the AI sector is driving faster order conversions, with a notable increase in the number of customers in this space.
• Growth Algorithms: Management expressed confidence in the company's ability to outperform in various economic conditions, with a focus on long-term growth opportunities across multiple sectors, including AI, defense, and quantum computing.
• Incremental Margins: The company reported incremental margins approaching 50%, driven by high growth rates and effective expense management.
• Quantum Technology: The company is actively investing in quantum technology, which is expected to contribute to long-term growth, particularly in defense applications.

Overall, Keysight Technologies reported a strong quarter with record financial results, driven by robust demand across its diverse portfolio, particularly in AI and defense sectors. The company remains optimistic about future growth while acknowledging potential challenges in supply chain management and market dynamics.