Table of Contents FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 001-36334 KEYSIGHT TECHNOLOGIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (State or other ju ...

Core Insights - Keysight's total revenue for the quarter ending April 2025 was $1.32 billion, reflecting an 8% increase [4] - The analysis of international operations is essential for understanding Keysight's financial strength and growth potential [1][2] International Revenue Breakdown - Asia Pacific generated $488 million, accounting for 37.08% of total revenue, which was a -3.81% surprise compared to the projected $507.31 million [5] - Europe contributed $259 million, making up 19.68% of total revenue, exceeding the consensus estimate of $238.77 million by +8.47% [6] Future Revenue Expectations - Analysts expect Keysight to report $1.31 billion in total revenue for the current fiscal quarter, indicating a 7.8% increase from the prior year [7] - For the full year, total revenue is projected to reach $5.29 billion, up 6.1% from the previous year, with Asia Pacific and Europe expected to contribute $2.04 billion (38.7%) and $998.23 million (18.9%) respectively [8] Market Dynamics - Keysight's reliance on international markets presents both opportunities and challenges, necessitating close monitoring of international revenue trends to forecast future performance [9] - The intricate global interdependence and geopolitical factors are critical for analysts when adjusting earnings forecasts for companies with international operations [10]

Core Viewpoint - The article highlights the challenges in semiconductor parameter extraction due to the complexity of device models and the inefficiencies of traditional optimization algorithms. It introduces Keysight's ML Optimizer, a machine learning-based global optimizer that significantly improves the parameter extraction process, reducing the time from days to hours and enhancing accuracy and consistency in model fitting [1]. Group 1: Challenges in Semiconductor Parameter Extraction - The complexity of semiconductor device models has made parameter extraction increasingly challenging [1]. - Traditional optimization algorithms struggle with unclear gradient changes, often getting trapped in local optima, leading to unsatisfactory extraction results [1]. - The presence of numerous interrelated parameters in modern semiconductor models further complicates the efficiency of traditional methods, requiring engineers to break down the extraction process into lengthy sub-steps [1]. Group 2: Introduction of ML Optimizer - Keysight has launched the ML Optimizer, which utilizes machine learning to revolutionize semiconductor parameter extraction [1]. - The ML Optimizer can process vast amounts of data in a single step, greatly simplifying the parameter extraction workflow [1]. - The time required for parameter extraction is reduced from several days to just a few hours, significantly enhancing work efficiency [1]. Group 3: Advantages of ML Optimizer - The ML Optimizer excels in navigating non-convex parameter spaces, overcoming the limitations of traditional methods [1]. - It provides more accurate global optimum solutions, improving the precision of parameter extraction and the overall consistency of model fitting [1]. - This advancement offers a solid foundation for the accurate construction of semiconductor device models [1]. Group 4: Upcoming Live Event - A live event will showcase the effectiveness of the ML Optimizer in various device modeling tasks, including diodes, GaN HEMT, MOSFET, and BJT [2]. - The event is scheduled for June 10, 2025, from 14:00 to 14:45 [4]. - Participants will have the opportunity to engage in interactive activities, including a lottery for prizes [2]. Group 5: Key Speakers - Li Yiao, a device modeling application engineer at Keysight, specializes in applying artificial neural networks and ML Optimizer in device modeling [7]. - Deng Jiayuan, a product manager at Keysight, has extensive experience in providing technical support for semiconductor customers and is involved in the development of modeling products [10].

Company Overview - Keysight Technologies Inc. is perceived to be overvalued at its current price, indicating a potential for a market correction soon [1]. Analyst Perspective - The analysis reflects a cautious outlook on Keysight Technologies, suggesting that current market enthusiasm may not be justified [1]. Investment Strategy - The investment approach focuses on identifying companies with strong fundamentals and competitive advantages, particularly in sectors like technology, healthcare, consumer goods, and industrials [1]. Community Engagement - The analysis aims to connect with like-minded investors and provide insights that contribute to thoughtful discussions about market dynamics [1].

Core Insights - Keysight Technologies Inc. reported strong second-quarter fiscal 2025 results, with both revenue and net income exceeding Zacks Consensus Estimates, driven by growth in AI data-center, aerospace, defense, and government markets [1][2][3] Financial Performance - Net income on a GAAP basis was $257 million or $1.49 per share, compared to $126 million or $0.72 in the same quarter last year [2] - Non-GAAP net income was $295 million or $1.70 per share, up from $247 million or $1.41 in the prior-year quarter, surpassing the Zacks Consensus Estimate by $0.06 [2] - Quarterly net sales increased to $1.31 billion from $1.22 billion year-over-year, exceeding the high end of guidance, with total orders rising 8% to $1.31 billion [3] Segment Performance - The Communication Solutions Group (CSG) generated $913 million in revenues, a 9% increase from $840 million in the prior-year quarter, driven by demand for AI data-center network solutions [4] - The Electronic Industrial Solutions Group (EISG) revenues rose to $393 million from $376 million, supported by investments in advanced nodes and high-bandwidth memory, although automotive orders declined [6] Regional Performance - Asia-Pacific revenues reached $573 million, up from $496 million year-over-year, while revenues from the Americas improved by 4% to $510 million [7] - European revenues were $223 million, down 2% from $227 million in the prior-year quarter [7] Profitability Metrics - Non-GAAP gross profit totaled $844 million with gross margins of 64.6%, compared to $790 million and 65% in the prior-year quarter [8] - Non-GAAP operating margin was 25.2%, up from 24.2% year-over-year, with CSG at 25.9% and EISG at 23.4% [8] Cash Flow and Liquidity - In the first half of fiscal 2025, Keysight generated $862 million in cash from operating activities, compared to $438 million a year ago, with $3.11 billion in cash and cash equivalents as of April 30, 2025 [10] Outlook - For the second quarter of fiscal 2025, Keysight expects revenues between $1.3 billion and $1.32 billion, with non-GAAP earnings estimated between $1.63 and $1.69 per share [11]

Core Insights - Keysight Technologies (NYSE: KEYS) has shown modest performance over the past year, with a stock gain of only 2% [1] - The stock experienced a 5% increase in after-hours trading following the release of better-than-expected results and guidance, indicating a potential bottoming out [1] Company Performance - The recent financial results and guidance from Keysight Technologies suggest a positive outlook, which has contributed to the stock's after-hours surge [1] - The company's performance may signal a turnaround, attracting investor interest [1]

Core Insights - Keysight reported revenue of $1.32 billion for the quarter ended April 2025, reflecting an 8% increase year-over-year and surpassing the Zacks Consensus Estimate of $1.28 billion by 2.85% [1] - Earnings per share (EPS) for the quarter was $1.70, up from $1.41 in the same quarter last year, exceeding the consensus EPS estimate of $1.64 by 3.66% [1] Revenue Breakdown - Communications Solutions Group generated $913 million, exceeding the average estimate of $884.15 million by analysts, marking an 8.7% year-over-year increase [4] - Commercial Communications revenue reached $612 million, surpassing the estimated $588.52 million, also reflecting an 8.7% increase compared to the previous year [4] - Aerospace, Defense & Government revenue was $301 million, slightly above the estimated $295.62 million, with an 8.7% year-over-year growth [4] - Electronic Industrial Solutions Group reported $393 million, slightly below the estimated $395.34 million, but still showing a 4.5% increase year-over-year [4] Operational Performance - Income from operations for the Electronic Industrial Solutions Group was $92 million, exceeding the average estimate of $81.74 million [4] - Income from operations for the Communications Solutions Group was $236 million, slightly below the estimated $238.62 million [4] Stock Performance - Keysight's shares have returned +23.4% over the past month, outperforming the Zacks S&P 500 composite's +13.1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Keysight reported revenue of $1.3 billion and earnings per share of $1.7, exceeding the high end of guidance, marking the second consecutive quarter of revenue growth [6][19] - Orders grew 8% year over year and 4% sequentially to $1.3 billion, indicating a solid demand environment [6][19] - Gross margin was reported at 65%, with operating margin at 25%, an increase of 100 basis points year over year [19] Business Segment Data and Key Metrics Changes - The Communications Solutions Group (CSG) generated revenue of $913 million, up 9% on both reported and core basis, driven by strong demand in wireline and wireless sectors [21] - The Electronics Industrial Solutions Group (EISG) reported revenue of $393 million, a 5% increase, with growth in semiconductor and general electronics offsetting declines in automotive [21] - Software and services accounted for approximately 36% of total revenue, with annual recurring revenue at 28% [22] Market Data and Key Metrics Changes - Orders in the aerospace, defense, and government sector grew, driven by strength in the U.S. and Europe, with notable contracts awarded [12][61] - The demand environment in China was mixed, with overall orders flat but strengths in certain sectors [96] Company Strategy and Development Direction - The company is focused on long-term investments aligned with technology trends, particularly in AI and digital infrastructure [17][32] - Keysight is maintaining a diversified global supply chain with minimal exposure to China, actively working to mitigate tariff impacts [8][24] - The company is pursuing a balanced return of capital while investing for long-term growth, having returned over $1.7 billion to investors via repurchases over the past twelve quarters [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the market leadership and operating model, noting no material adverse effects on demand from tariffs [8][25] - The company raised its full-year growth expectations, now anticipating revenue growth at the midpoint of the 5% to 7% long-term target [25] - Management highlighted a healthy pipeline of opportunities and strong customer engagements entering the second half of the fiscal year [6][25] Other Important Information - The company ended the quarter with $3.12 billion in cash and cash equivalents, generating $484 million in cash flow from operations [22] - Keysight is progressing through regulatory reviews for pending acquisitions, including Spirent and Optical Solutions Group [22][23] Q&A Session Summary Question: Update on AI traction and its significance for the business - Management views AI as a long-term secular trend with a multiyear roadmap, contributing to growth in wireline business [32][33] Question: Incremental view on top-line outlook - The company raised top-line expectations based on strong performance in the first half and a solid pipeline of opportunities [40][42] Question: Clarification on tariff impact - The estimated annual exposure to tariffs is approximately $75 million to $100 million, with efforts underway to mitigate this impact [47][48] Question: Insights on aerospace and defense orders - Orders grew in the aerospace and defense sector, with strong bookings from prime contractors in the U.S. and Europe [61][62] Question: Wireless business performance - The wireless business remains stable, with strength in network infrastructure and ongoing investments in new technologies [71] Question: Growth in Software and Services - The company is focused on growing software and services, which have shown resilience during downturns [73][74] Question: Demand for wireline testing - The wireline business is heavily R&D oriented, benefiting from increased manufacturing activity as the industry ramps up for digital infrastructure [103][104] Question: Competitive landscape for semiconductor testing - The company is well-positioned to address the complexities of semiconductor testing, with ongoing investments in optical and electrical capabilities [108][116]

Financial Data and Key Metrics Changes - Keysight reported revenue of $1.3 billion and earnings per share of $1.7, exceeding the high end of guidance, marking the second consecutive quarter of revenue growth [5][18] - Orders grew 8% year over year and 4% sequentially to $1.3 billion, indicating a solid demand environment [5][18] - Gross margin was reported at 65%, with operating margin increasing by 100 basis points to 25% year over year [18] Business Segment Data and Key Metrics Changes - The Communications Solutions Group (CSG) generated revenue of $913 million, up 9% on both reported and core basis, driven by strong demand in wireline and wireless sectors [21] - Aerospace, Defense and Government revenue increased by 9% to $300 million, reflecting strong order growth in the U.S. and Europe [21] - The Electronics Industrial Solutions Group (EISG) saw revenue return to growth at $393 million, a 5% increase, with semiconductor and general electronics growth offsetting declines in automotive [21] Market Data and Key Metrics Changes - Orders in the aerospace and defense sector grew, driven by investments in defense modernization in the U.S., Europe, and Asia [11][12] - The demand environment in Asia was strong, particularly in commercial communications and semiconductor sectors, although automotive demand in China remained weak [92] Company Strategy and Development Direction - Keysight is focused on long-term investments aligned with technology trends, emphasizing a diversified global supply chain with minimal exposure to China [6][24] - The company is pursuing a balanced return of capital while investing for long-term growth, having returned over $1.7 billion to investors through share repurchases [6][7] - Keysight's strategy includes expanding its software and services segment, which now accounts for approximately 36% of revenue, with a focus on simulation and virtual prototyping [70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in market leadership and the strength of the operating model despite macroeconomic uncertainties [6][25] - The company raised its full-year revenue growth expectations to the midpoint of its 5% to 7% long-term target, anticipating a strong Q3 based on a solid backlog [25] - Management noted that while tariffs pose risks, they have not seen material adverse effects on demand and are actively working to mitigate tariff impacts [24][25] Other Important Information - Keysight's cash flow from operations was strong at $484 million, with free cash flow of $457 million [22] - The company has a backlog of $2.4 billion entering Q3, indicating a solid scheduled shipment position [25] - Keysight is progressing through regulatory reviews for pending acquisitions, including Spirent and Optical Solutions Group [22] Q&A Session Summary Question: Update on AI traction and its significance for the business - Management views AI as a long-term trend with a multiyear roadmap, contributing to growth in wireline business, which grew double digits in the first half [30][33] Question: Incremental improvement in top-line outlook - The increase in top-line expectations is based on strong performance in the first half and a solid pipeline of opportunities [39] Question: Clarification on tariff impact - The estimated annual tariff exposure is $75 million to $100 million, with efforts underway to mitigate this impact [44][45] Question: Insights on aerospace and defense orders - Orders grew in the U.S. and Europe, with notable contracts awarded, indicating a strong spending environment [56] Question: Understanding the wireless business performance - The wireless business remains stable, with strength in network infrastructure and ongoing investments in new technologies [66] Question: Growth in Software and Services segment - The company is focused on growing software and services, which have shown resilience during downturns, with double-digit growth in simulation business [70] Question: Demand in wireline and semiconductor testing - The wireline business remains heavily R&D oriented, benefiting from increased manufacturing activity as the industry ramps up for digital infrastructure [96]

Keysight Technologies Q2 Fiscal Year 2025 Results May 20, 2025 Safe Harbor This communication contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created therein. Statements preceded by, followed by, or that otherwise include the words "anticipate," "assume," "plan," "estimate," "expect," "guidance," "intend," "implied," "target," "believe," "outlook," a ...