Core Insights - Keysight is a significant player in the design, emulation, and test solutions market, with over $5 billion in annual revenue primarily linked to customer R&D applications [1][2] - The company has successfully transitioned from a hardware-centric business model to a software-centric solutions provider, capitalizing on larger market opportunities [2] Company Strategy - Since becoming an independent public company, Keysight has focused on transforming its business model to enhance its software offerings [2] - The shift in investment strategy has allowed Keysight to better align with the evolving needs of its customers across various industries, including Aerospace & Defense (A&D), Communications, Automotive, and Industrial sectors [1][2]

Keysight (NYSE:KEYS) 2025 Conference September 08, 2025 01:50 PM ET Company ParticipantsNeil Dougherty - Executive VP & CFOSatish Dhanasekaran - Director, President & CEOConference Call ParticipantsMark Delaney - Analyst - US Autos & Industrial TechNoneThe following session is not open to the press. The following session is not open to the press.Satish DhanasekaranOkay.Mark DelaneyOkay. All right. Great. Thank you, everybody. Thank you, everybody, for joining us. My name is Mark Delaney, and I have the plea ...

Group 1 - Keysight will showcase innovations in radio frequency (RF) and millimeter-wave (mmWave) technologies [1] - The demonstration will cover applications across various industries, including IoT networks, 5G, and 6G [1]

Core Insights - The company has raised its growth expectations for fiscal year 2025, increasing from an initial estimate of 5% to 6% at the end of Q2, and further to 7% at the end of Q3, indicating a positive trend in performance [1] - Strong performance in the wireline sector has exceeded expectations, contributing significantly to the overall growth [1] - The semiconductor market has rebounded more robustly than anticipated, further supporting the company's improved growth outlook [1]

Summary of Keysight (KEYS) 2025 Conference Call Company Overview - **Company**: Keysight Technologies (KEYS) - **Date**: September 03, 2025 Key Industry Insights 1. Growth Expectations - Full year guidance for fiscal 2025 has been raised from 5% to 7% over two quarters, indicating stronger than expected performance driven by several factors [2][3][4] 2. Performance by Segment - **Wireline**: Strong growth, driven by AI and semiconductor markets, with expectations for continued momentum into FY 2026 [3][6] - **Wireless**: Initially expected to stabilize, but has shown unexpected growth, contributing significantly to overall company growth [3][4] - **Aerospace and Defense**: Anticipated strong performance due to increased U.S. defense budgets and commitments from NATO allies [7][36] - **Automotive**: Caution noted due to challenges in EV manufacturing, although there is investment in software-defined vehicles [7][9] 3. Technological Advancements - Transition to higher speeds in wireline technology (400G to 1.6T) is ongoing, with significant R&D activity in both 800G and early 1.6T developments [20][21] - AI-driven acceleration is propelling growth in wireline business, particularly among chipset manufacturers and data center interconnects [12][18] 4. Wireless Market Dynamics - The 5G market is transitioning, with ongoing R&D and a focus on non-terrestrial networks (satellite applications) [22][24][26] - Six G research is gaining traction, with expectations for commercialization by the end of the decade [62][66] Financial Performance 5. Software Business - Software now constitutes approximately 25% of the company's revenue, with a significant recurring revenue component [49] - The software business is expected to provide margin benefits and stability, with ongoing updates to keep pace with industry standards [50][51] 6. M&A Activity - Keysight is pursuing three pending acquisitions aimed at expanding capabilities in live wireless networks and precision GPS markets, with regulatory approvals in progress [52][54] - The acquisitions are expected to enhance the design engineering software portfolio and support growth in aerospace and defense sectors [55][56] Strategic Outlook 7. Capital Allocation - The company plans to maintain a balanced capital allocation strategy, focusing on integration of acquisitions while continuing to return capital to shareholders [57][58] 8. Market Positioning - Keysight has a broad and deep portfolio across various sectors, including aerospace, defense, and telecommunications, positioning it well for future growth [68][70] 9. R&D Investment - The company has consistently invested more in R&D than competitors, which is expected to support market share gains as industry trends evolve [70] Conclusion - Keysight Technologies is experiencing robust growth across multiple segments, driven by technological advancements and strategic investments. The company is well-positioned to capitalize on emerging opportunities in the wireline, wireless, and aerospace defense markets while maintaining a strong focus on software and R&D.

Core Insights - Keysight Technologies (KEYS) demonstrated a total revenue of $1.35 billion for the quarter ending July 2025, reflecting an 11.1% increase year-over-year [4] - The company's international revenue performance is crucial for understanding its financial resilience and growth prospects [2][9] International Revenue Performance - Asia Pacific region generated $569 million, accounting for 42.1% of total revenue, surpassing Wall Street's expectation of $529.87 million by 7.39% [5] - Europe contributed $217 million, representing 16.1% of total revenue, falling short of the expected $239.41 million by 9.36% [6] Future Revenue Projections - Analysts project Keysight's revenue for the ongoing fiscal quarter to reach $1.38 billion, a 7.2% increase from the previous year, with Asia Pacific and Europe expected to contribute $550.63 million (39.9%) and $249.66 million (18.1%) respectively [7] - For the full year, total revenue is anticipated to be $5.32 billion, marking a 6.7% increase, with contributions from Asia Pacific and Europe projected at $2.14 billion (40.3%) and $971.07 million (18.3%) respectively [8] Market Dynamics - The reliance on international markets provides both opportunities and challenges, necessitating close monitoring of revenue trends to accurately forecast future performance [9][10] - The interconnected global economy and geopolitical factors significantly influence the company's ability to navigate international markets [2][3]

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements and detailed notes for the three and nine months ended July 31, 2025 and 2024 [Condensed Consolidated Statement of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations) Provides a summary of the company's revenues, expenses, and net income for the specified interim periods Metric (in millions, except per share data) | Metric (in millions, except per share data) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $1,352 | $1,217 | $3,956 | $3,692 | | Income from operations | $234 | $205 | $659 | $603 | | Net income | $191 | $389 | $617 | $687 | | Net income per share: Basic | $1.11 | $2.23 | $3.58 | $3.94 | | Net income per share: Diluted | $1.10 | $2.22 | $3.56 | $3.92 | - Total revenue increased by **11%** for the three months ended July 31, 2025, and **7%** for the nine months ended July 31, 2025, compared to the same periods last year However, net income decreased by **51%** and **10%** for the respective periods, primarily due to a prior year income tax benefit from one-time discrete tax items[10](index=10&type=chunk)[111](index=111&type=chunk) [Condensed Consolidated Statement of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) Details changes in equity from non-owner sources, including net income and other comprehensive income or loss Metric (in millions) | Metric (in millions) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $191 | $389 | $617 | $687 | | Other comprehensive income (loss) | $(2) | $32 | $69 | $29 | | Total comprehensive income | $189 | $421 | $686 | $716 | - Total comprehensive income decreased by **55%** for the three months ended July 31, 2025, and **4%** for the nine months ended July 31, 2025, primarily reflecting the decrease in net income and a shift from other comprehensive income to loss in the three-month period[11](index=11&type=chunk) [Condensed Consolidated Balance Sheet](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) Presents the company's financial position, including assets, liabilities, and equity, at specific dates Metric (in millions) | Metric (in millions) | July 31, 2025 | October 31, 2024 | | :------------------- | :------------ | :--------------- | | Total assets | $10,651 | $9,269 | | Total liabilities | $4,981 | $4,164 | | Total stockholders' equity | $5,670 | $5,105 | - Total assets increased by **$1,382 million** (**14.9%**) from October 31, 2024, to July 31, 2025, driven by a significant increase in cash and cash equivalents Total liabilities also increased by **$817 million** (**19.6%**) during the same period, primarily due to an increase in long-term debt[14](index=14&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities over periods Metric (in millions) | Metric (in millions) | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $1,184 | $693 | | Net cash used in investing activities | $(97) | $(781) | | Net cash provided by (used in) financing activities | $487 | $(753) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $1,583 | $(839) | | Cash, cash equivalents, and restricted cash at end of period | $3,397 | $1,649 | - Net cash provided by operating activities significantly increased by **$491 million** for the nine months ended July 31, 2025, compared to the prior year[16](index=16&type=chunk)[158](index=158&type=chunk) - Investing activities saw a decrease in cash used by **$684 million**, largely due to lower acquisition payments[160](index=160&type=chunk) - Financing activities shifted from a net use of **$753 million** to a net provision of **$487 million**, primarily driven by proceeds from new senior notes[163](index=163&type=chunk) [Condensed Consolidated Statement of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Equity) Outlines changes in stockholders' equity, including net income, share repurchases, and other comprehensive income Metric (in millions, except shares in thousands) | Metric (in millions, except shares in thousands) | Balance as of Oct 31, 2024 | Balance as of July 31, 2025 | | :----------------------------------------------- | :------------------------- | :-------------------------- | | Common Stock (shares) | 201,008 | 202,074 | | Common Stock (value) | $2 | $2 | | Additional Paid-in Capital | $2,664 | $2,819 | | Treasury Stock (shares) | (28,424) | (30,219) | | Treasury Stock (cost) | $(3,422) | $(3,698) | | Retained Earnings | $6,225 | $6,842 | | Accumulated Other Comprehensive Loss | $(364) | $(295) | | Total Stockholders' Equity | $5,105 | $5,670 | - Total stockholders' equity increased by **$565 million** from October 31, 2024, to July 31, 2025, primarily due to net income of **$617 million** and an increase in additional paid-in capital, partially offset by treasury stock repurchases[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=1.%20OVERVIEW%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Keysight Technologies, Inc. is a global innovator in the computing, communications, and electronics market, providing design and test solutions - Keysight Technologies, Inc. is a global innovator in the computing, communications, and electronics market, focused on design and test solutions[21](index=21&type=chunk) - The company's fiscal year ends October 31, with quarters ending January 31, April 30, and July 31[22](index=22&type=chunk) - New accounting pronouncements, ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Taxes), and ASU 2024-03 (Expense Disaggregation), are being evaluated ASU 2023-07 is not expected to impact financial results[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [2. ACQUISITIONS](index=10&type=section&id=2.%20ACQUISITIONS) Keysight completed the acquisition of ESI Group SA in two phases, acquiring 50.6% for $477 million in November 2023 and the remaining share capital for $458 million in January 2024 Pro forma operating results for the nine months ended July 31, 2024, show a net income of $717 million if ESI Group had been included since the beginning of fiscal 2023 - Keysight acquired **50.6%** of ESI Group SA for **$477 million** in November 2023 and the remaining share capital for **$458 million** in January 2024[33](index=33&type=chunk) Pro Forma Operating Results (Nine Months Ended July 31, 2024) | Metric (in millions, except per share amounts) | Nine Months Ended July 31, 2024 | | :--------------------------------------------- | :------------------------------ | | Net revenue | $3,692 | | Net income | $717 | | Net income per share - Basic | $4.11 | | Net income per share - Diluted | $4.09 | [3. REVENUE](index=11&type=section&id=3.%20REVENUE) Revenue is disaggregated by geographic region, end market, and timing of recognition for the Communications Solutions Group (CSG) and Electronics Industrial Solutions Group (EISG) Total revenue for the three months ended July 31, 2025, was $1,352 million, with CSG contributing $940 million and EISG $412 million For the nine months, total revenue was $3,956 million (CSG $2,736 million, EISG $1,220 million) Contract liabilities (deferred revenue) were $765 million as of July 31, 2025 Total Revenue by Segment (in millions) | Segment | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | CSG | $940 | $847 | $2,736 | $2,526 | | EISG | $412 | $370 | $1,220 | $1,166 | | Total | $1,352 | $1,217 | $3,956 | $3,692 | Revenue by End Market (Three Months Ended July 31, 2025, in millions) | End Market | CSG | EISG | Total | | :------------------------------ | :--- | :--- | :---- | | Aerospace, Defense & Government | $296 | $— | $296 | | Commercial Communications | $644 | $— | $644 | | Electronic Industrial | $— | $412 | $412 | | Total revenue | $940 | $412 | $1,352| - Contract liabilities (deferred revenue) were **$765 million** as of July 31, 2025, with **$446 million** of revenue recognized during the nine months ended July 31, 2025, that was deferred at the beginning of the period[40](index=40&type=chunk) [4. SHARE-BASED COMPENSATION](index=13&type=section&id=4.%20SHARE-BASED%20COMPENSATION) Keysight recognizes share-based compensation expense for various awards including RSUs, ESPP, and LTP Total share-based compensation expense for the three months ended July 31, 2025, was $32 million, and for the nine months, it was $131 million, an increase from the prior year Total Share-Based Compensation Expense (in millions) | Period | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total | $32 | $32 | $131 | $118 | - Share-based compensation expense for the nine months ended July 31, 2025, increased by **$13 million** (**11%**) compared to the same period last year[43](index=43&type=chunk) [5. INCOME TAXES](index=13&type=section&id=5.%20INCOME%20TAXES) The effective tax rate for the three and nine months ended July 31, 2025, was 20.8% and 18.8%, respectively, significantly higher than the prior year's benefit rates due to one-time discrete tax benefits in 2024 The company has analyzed the impact of the newly enacted OBBBA and Pillar Two minimum taxes, which are reflected in the current period but are not material to the tax rate Keysight is pursuing a $107 million tax refund related to GILTI regulations and benefits from tax incentives in Singapore and Malaysia Income Tax Details (in millions, except percentages) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income before taxes | $241 | $213 | $760 | $617 | | Provision (benefit) for income taxes | $50 | $(176) | $143 | $(70) | | Effective tax rate | 20.8% | (81.9%) | 18.8% | (11.2%) | - The higher income tax expense in 2025 compared to 2024 is primarily due to one-time discrete tax benefits from U.S. amended tax return filings related to GILTI and a Malaysia uncertain tax position settlement in 2024[47](index=47&type=chunk) - Keysight filed a lawsuit seeking a **$107 million** tax refund related to GILTI tax deductions for intangible asset amortization from a 2018 Singapore restructuring[49](index=49&type=chunk)[92](index=92&type=chunk) - Tax incentives in Singapore (expires July 31, 2029) and Malaysia (expires October 31, 2025) decreased income taxes by **$49 million** for the nine months ended July 31, 2025[50](index=50&type=chunk) [6. NET INCOME PER SHARE](index=15&type=section&id=6.%20NET%20INCOME%20PER%20SHARE) The basic net income per share for the three and nine months ended July 31, 2025, was $1.11 and $3.58, respectively Diluted net income per share was $1.10 and $3.56 for the same periods These figures represent a decrease compared to the prior year, consistent with the overall net income trend Net Income Per Share (in millions, except per-share amounts) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income per share - basic | $1.11 | $2.23 | $3.58 | $3.94 | | Net income per share - diluted | $1.10 | $2.22 | $3.56 | $3.92 | [7. GOODWILL AND OTHER INTANGIBLE ASSETS](index=15&type=section&id=7.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill increased to $2,429 million as of July 31, 2025, from $2,388 million at October 31, 2024, primarily due to foreign currency translation and minor acquisition activity Other intangible assets, net, decreased to $524 million from $607 million over the same period, mainly due to amortization No goodwill impairments were identified Goodwill by Segment (in millions) | Segment | Goodwill at October 31, 2024 | Goodwill at July 31, 2025 | | :------ | :--------------------------- | :------------------------ | | CSG | $1,240 | $1,252 | | EISG | $1,148 | $1,177 | | Total | $2,388 | $2,429 | Other Intangible Assets, Net (in millions) | Asset Type | July 31, 2025 | October 31, 2024 | | :---------------------- | :------------ | :--------------- | | Developed technology | $338 | $359 | | Backlog | $7 | $12 | | Trademark/Tradename | $— | $2 | | Customer relationships | $156 | $189 | | In-Process R&D | $23 | $45 | | Total | $524 | $607 | - Amortization of other intangible assets was **$97 million** for the nine months ended July 31, 2025, down from **$106 million** in the prior year[55](index=55&type=chunk) [8. FAIR VALUE MEASUREMENTS](index=16&type=section&id=8.%20FAIR%20VALUE%20MEASUREMENTS) Keysight measures financial assets and liabilities at fair value using a three-level hierarchy As of July 31, 2025, total assets measured at fair value were $3,134 million, primarily consisting of money market funds ($2,965 million) and equity investments ($122 million), mostly classified as Level 1 Total liabilities measured at fair value were $53 million, mainly derivative instruments and deferred compensation, classified as Level 2 Fair Value Measurements of Financial Assets (in millions) | Asset Type | July 31, 2025 Total | July 31, 2025 Level 1 | July 31, 2025 Level 2 | October 31, 2024 Total | October 31, 2024 Level 1 | October 31, 2024 Level 2 | | :-------------------------- | :------------------ | :-------------------- | :-------------------- | :--------------------- | :----------------------- | :----------------------- | | Money market funds | $2,965 | $2,965 | $— | $1,141 | $1,141 | $— | | Derivative instruments | $12 | $— | $12 | $38 | $— | $38 | | Equity investments | $122 | $122 | $— | $80 | $80 | $— | | Investments - other | $35 | $— | $— | $29 | $— | $— | | Total assets | $3,134 | $3,087 | $12 | $1,288 | $1,221 | $38 | Fair Value Measurements of Financial Liabilities (in millions) | Liability Type | July 31, 2025 Total | July 31, 2025 Level 2 | October 31, 2024 Total | October 31, 2024 Level 2 | | :-------------------------- | :------------------ | :-------------------- | :--------------------- | :----------------------- | | Derivative instruments | $15 | $15 | $6 | $6 | | Deferred compensation liability | $38 | $38 | $34 | $34 | | Total liabilities | $53 | $53 | $40 | $40 | - Net unrealized gains on equity and other investments still held were **$42 million** for the nine months ended July 31, 2025, compared to **$13 million** in the prior year[63](index=63&type=chunk) [9. DERIVATIVES](index=17&type=section&id=9.%20DERIVATIVES) Keysight uses derivative instruments, primarily foreign exchange forward contracts, to hedge foreign currency exchange rate and interest rate exposures As of July 31, 2025, the company had 192 open cash flow hedges and 84 non-designated hedging instruments A net gain of $33 million was recognized from non-designated foreign exchange contracts for the nine months ended July 31, 2025, related to a planned acquisition - Keysight uses foreign exchange contracts as cash flow hedges for forecasted operational cash flow exposures and non-designated hedges for monetary assets and liabilities[65](index=65&type=chunk)[67](index=67&type=chunk) Aggregated Notional Amounts of Derivatives by Currency (July 31, 2025, in millions) | Currency | Cash Flow Hedging Relationships (Buy/Sell) | Not Designated as Hedging Instruments (Buy/Sell) | | :-------------- | :----------------------------------------- | :----------------------------------------------- | | Euro | $6 | $141 | | Pounds Sterling | $13 | $1,658 | | Singapore Dollar| $31 | $(3) | | Malaysian Ringgit| $120 | $13 | | Japanese Yen | $(144) | $(64) | | Other currencies| $(34) | $48 | | Total | $(8) | $1,793 | - For the nine months ended July 31, 2025, non-designated foreign exchange contracts resulted in a gain of **$33 million**, primarily related to mitigating currency risk for a planned acquisition[68](index=68&type=chunk)[71](index=71&type=chunk) [10. DEBT](index=20&type=section&id=10.%20DEBT) Keysight's total debt increased to $2,533 million as of July 31, 2025, from $1,790 million at October 31, 2024, primarily due to the issuance of $750 million in 2030 Senior Notes in April 2025 The company also maintains a $750 million Revolving Credit Facility and a Bridge Facility, with no outstanding borrowings under either as of July 31, 2025 Components of Debt (in millions) | Debt Type | July 31, 2025 | October 31, 2024 | | :---------------- | :------------ | :--------------- | | 2027 Senior Notes | $699 | $698 | | 2029 Senior Notes | $498 | $498 | | 2030 Senior Notes | $742 | $— | | 2034 Senior Notes | $594 | $594 | | Total debt | $2,533 | $1,790 | - In April 2025, Keysight issued **$750 million** in unsecured 2030 Senior Notes with a fixed interest rate of **5.35%** per annum, maturing on July 30, 2030[73](index=73&type=chunk) - The company has a **$750 million** Revolving Credit Facility expiring July 30, 2026, and a Bridge Facility, which was decreased to **752 million pounds sterling** No borrowings were outstanding under either facility as of July 31, 2025[76](index=76&type=chunk)[77](index=77&type=chunk) [11. RETIREMENT PLANS AND POST-RETIREMENT BENEFIT PLANS](index=21&type=section&id=11.%20RETIREMENT%20PLANS%20AND%20POST-RETIREMENT%20BENEFIT%20PLANS) Keysight's net periodic benefit cost for pensions and post-retirement plans for the nine months ended July 31, 2025, was $7 million for U.S. defined benefit plans, a benefit of $(16) million for non-U.S. defined benefit plans, and a benefit of $(4) million for the U.S. post-retirement benefit plan The company contributed $3 million to non-U.S. defined benefit plans during this period and expects to contribute an additional $3 million for the remainder of 2025 Net Periodic Benefit Cost (Benefit) (Nine Months Ended July 31, in millions) | Plan Type | 2025 | 2024 | | :------------------------------ | :--- | :--- | | U.S. Defined Benefit Plans | $7 | $12 | | Non-U.S. Defined Benefit Plans | $(16)| $1 | | U.S. Post-Retirement Benefit Plan | $(4) | $(3) | - Keysight contributed **$3 million** to non-U.S. defined benefit plans during the nine months ended July 31, 2025, and expects to contribute an additional **$3 million** for the remainder of 2025[80](index=80&type=chunk)[81](index=81&type=chunk) [12. SUPPLEMENTAL FINANCIAL INFORMATION](index=21&type=section&id=12.%20SUPPLEMENTAL%20FINANCIAL%20INFORMATION) This section provides supplemental details on cash, cash equivalents, and restricted cash, which increased to $3,397 million as of July 31, 2025, largely due to proceeds from the 2030 Senior Notes Inventory remained stable at $1,021 million Operating lease costs were $45 million for the nine months ended July 31, 2025 The standard warranty accrual was $29 million, and other current assets increased significantly to $1,255 million, primarily due to short-term restricted cash Cash, Cash Equivalents, and Restricted Cash (in millions) | Metric | July 31, 2025 | October 31, 2024 | | :----- | :------------ | :--------------- | | Cash and cash equivalents | $2,636 | $1,796 | | Restricted cash (current) | $759 | $— | | Restricted cash (other) | $2 | $18 | | Total | $3,397 | $1,814 | - Restricted cash increased primarily due to net proceeds from the 2030 Senior Notes, held in a designated money market fund to support a planned acquisition[82](index=82&type=chunk)[88](index=88&type=chunk) Inventory (in millions) | Category | July 31, 2025 | October 31, 2024 | | :---------------------------- | :------------ | :--------------- | | Finished goods | $393 | $375 | | Purchased parts and fabricated assemblies | $628 | $647 | | Total inventory | $1,021 | $1,022 | Standard Warranty Accrual (in millions) | Metric | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :-------------- | :------------------------------ | :------------------------------ | | Beginning balance | $31 | $36 | | Accruals | $17 | $16 | | Settlements | $(19) | $(20) | | Ending balance | $29 | $32 | [13. COMMITMENTS AND CONTINGENCIES](index=23&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) Keysight is involved in several legal proceedings, including patent infringement lawsuits filed by Centripetal Networks in the U.S., Germany, and the Unified Patent Court, which the company is aggressively defending Additionally, Keysight filed a lawsuit against the U.S. government seeking a $107 million tax refund related to GILTI regulations, the outcome of which is uncertain but could materially impact the effective tax rate if unsuccessful - Centripetal Networks filed patent infringement lawsuits against Keysight in the U.S., Germany, and the Unified Patent Court, which Keysight is aggressively defending[90](index=90&type=chunk) - Keysight filed a lawsuit against the U.S. government on January 23, 2025, seeking a **$107 million** tax refund related to GILTI tax deductions for intangible asset amortization[92](index=92&type=chunk) - The outcome of litigation is inherently uncertain, and an adverse outcome could result in significant monetary damages or injunctive relief, potentially impacting financial results[93](index=93&type=chunk) [14. STOCKHOLDERS' EQUITY](index=24&type=section&id=14.%20STOCKHOLDERS'%20EQUITY) Keysight's board of directors approved a stock repurchase program authorizing up to $1,500 million, with $210 million remaining as of July 31, 2025 For the nine months ended July 31, 2025, the company repurchased 1.79 million shares for $275 million Accumulated other comprehensive loss decreased from $(364) million to $(295) million from October 31, 2024, to July 31, 2025, primarily due to foreign currency translation gains - Keysight has a stock repurchase program authorizing up to **$1,500 million**, with **$210 million** remaining as of July 31, 2025[95](index=95&type=chunk) - For the nine months ended July 31, 2025, Keysight repurchased **1,794,568 shares** of common stock for **$275 million**[97](index=97&type=chunk) Accumulated Other Comprehensive Loss (in millions) | Component | As of October 31, 2024 | As of July 31, 2025 | | :-------------------------------------- | :--------------------- | :------------------ | | Foreign currency translation | $(136) | $(64) | | Net defined benefit pension cost and post-retirement plan costs | $(317) | $(315) | | Gains (losses) on derivatives | $89 | $84 | | Total | $(364) | $(295) | [15. SEGMENT INFORMATION](index=26&type=section&id=15.%20SEGMENT%20INFORMATION) Keysight operates in two reportable segments: Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG) For the nine months ended July 31, 2025, CSG revenue was $2,736 million with $722 million in segment income from operations, while EISG revenue was $1,220 million with $298 million in segment income from operations Total segment income from operations was $1,020 million Segment Revenue and Income from Operations (Nine Months Ended July 31, in millions) | Segment | Revenue | Segment Income from Operations | | :------ | :------ | :----------------------------- | | CSG | $2,736 | $722 | | EISG | $1,220 | $298 | | Total | $3,956 | $1,020 | - Total reportable segments' income from operations increased by **$74 million** (**7.8%**) for the nine months ended July 31, 2025, compared to the same period last year[102](index=102&type=chunk)[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(Unaudited)) This section provides management's perspective on Keysight's financial condition and results of operations for the three and nine months ended July 31, 2025 and 2024 It covers an executive summary of performance, R&D investments, impact of tariffs, detailed analysis of revenue, gross margin, operating expenses, and net income, as well as a segment-by-segment review The discussion also includes an outlook on market trends and a comprehensive analysis of liquidity and capital resources, including cash flows, debt, and future cash requirements for acquisitions and capital expenditures [Overview and Executive Summary](index=27&type=section&id=Overview%20and%20Executive%20Summary) Provides an executive overview of Keysight's business, strategic focus, and key financial performance highlights - Keysight is a global innovator in computing, communications, and electronics, focusing on design and test solutions to accelerate innovation[106](index=106&type=chunk) - The company invests significantly in R&D for new software and hardware products, aligning with strategic growth opportunities in next-generation technologies like 5G, 6G, AI, and electric vehicles[107](index=107&type=chunk)[112](index=112&type=chunk) - Total orders increased by **7%** for the three months and **6%** for the nine months ended July 31, 2025, with revenue increasing by **11%** and **7%** respectively, compared to the prior year[109](index=109&type=chunk)[110](index=110&type=chunk) - Net income decreased for both periods, primarily due to a prior year income tax benefit from one-time discrete tax items, higher people-related costs, and the net impact of tariffs[111](index=111&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Discusses the company's critical accounting policies and estimates, noting no material changes in the period - There were no material changes to critical accounting estimates during the three and nine months ended July 31, 2025, as compared to the Annual Report on Form 10-K for fiscal year ended October 31, 2024[113](index=113&type=chunk) [Adoption of New Accounting Pronouncements](index=29&type=section&id=Adoption%20of%20New%20Accounting%20Pronouncements) Refers to Note 1 for details on new accounting pronouncements and their potential impact on financials - Refer to Note 1, 'Overview and Summary of Significant Accounting Policies,' for a description of new accounting pronouncements[114](index=114&type=chunk) [Currency Exchange Rate Exposure](index=29&type=section&id=Currency%20Exchange%20Rate%20Exposure) Explains the company's exposure to foreign currency fluctuations and its use of derivative instruments for hedging - Keysight is exposed to foreign currency exchange rate fluctuations due to global operations and uses derivative instruments, primarily forward contracts, to hedge short-term exposures (up to twelve months)[115](index=115&type=chunk) - The hedging program is not designed to offset currency movements in every category, leading to some fluctuations within financial statements[115](index=115&type=chunk) [Results from Operations - Three and nine months ended July 31, 2025 and 2024](index=29&type=section&id=Results%20from%20Operations%20-%20Three%20and%20nine%20months%20ended%20July%2031,%202025%20and%202024) Analyzes the company's operating results, including revenue, gross margin, and net income, for the specified periods Summary of Operating Results (in millions, except margin data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | YoY Change (3 Months) | YoY Change (9 Months) | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | :-------------------- | :-------------------- | | Revenue | $1,352 | $1,217 | $3,956 | $3,692 | 11% | 7% | | Gross margin | 61.7% | 62.0% | 62.4% | 63.1% | — | (1) ppt | | R&D | $250 | $226 | $749 | $686 | 11% | 9% | | SG&A | $354 | $329 | $1,075 | $1,052 | 7% | 2% | | Income from operations | $234 | $205 | $659 | $603 | 14% | 9% | | Operating margin | 17.3% | 16.8% | 16.7% | 16.3% | — | — | | Net income | $191 | $389 | $617 | $687 | (51)% | (10)% | [Revenue](index=29&type=section&id=Revenue) Details revenue performance by geographic region and segment, highlighting growth drivers and currency impacts Year-over-Year Change in Revenue by Geographic Region | Geographic Region | Three Months Ended July 31, 2025 (Actual) | Three Months Ended July 31, 2025 (Currency Impact Favorable) | Nine Months Ended July 31, 2025 (Actual) | Nine Months Ended July 31, 2025 (Currency Impact Favorable) | | :---------------- | :---------------------------------------- | :----------------------------------------------------------- | :--------------------------------------- | :---------------------------------------------------------- | | Americas | 13% | — | 8% | — | | Europe | (2)% | 4 ppts | (1)% | 1 ppt | | Asia Pacific | 15% | 2 ppts | 10% | — | | Total revenue | 11% | 2 ppts | 7% | — | - For the three months ended July 31, 2025, revenue increased in the Americas and Asia Pacific, partially offset by a decline in Europe For the nine months, revenue increased across all regions[119](index=119&type=chunk) [Gross Margin, Operating Margin and Income Before Taxes](index=30&type=section&id=Gross%20Margin,%20Operating%20Margin%20and%20Income%20Before%20Taxes) Examines trends in gross margin, operating expenses, and income before taxes, noting key influencing factors - Gross margin for the three months ended July 31, 2025, was flat YoY, as tariffs and higher people-related costs were offset by higher revenue volume and favorable pricing For the nine months, gross margin decreased **1 percentage point** due to tariffs and unfavorable mix, partially offset by favorable pricing and higher revenue volume[120](index=120&type=chunk) - R&D expense increased by **11%** (3 months) and **9%** (9 months) YoY, driven by investments in key growth opportunities and higher variable people-related costs[121](index=121&type=chunk) - SG&A expense increased by **7%** (3 months) and **2%** (9 months) YoY, primarily due to higher acquisition and integration costs, people-related costs, and infrastructure/travel costs[122](index=122&type=chunk) - Interest income increased by **64%** (3 months) and **18%** (9 months) YoY, mainly from interest on cash balances Interest expense increased by **35%** (3 months) and **12%** (9 months) YoY, primarily due to the 2030 Senior Notes[124](index=124&type=chunk) - Other income (expense), net, decreased for the three months due to derivative losses but increased significantly for the nine months due to net gains on equity investments and derivative instruments[125](index=125&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) Analyzes income tax provision, effective tax rates, and the impact of discrete tax items and new tax regulations Income Tax Details (in millions, except percentages) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Nine Months Ended July 31, 2025 | Nine Months Ended July 31, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income before taxes | $241 | $213 | $760 | $617 | | Provision (benefit) for income taxes | $50 | $(176) | $143 | $(70) | | Effective tax rate | 20.8% | (81.9%) | 18.8% | (11.2%) | - The effective tax rate for 2025 was higher than 2024 due to one-time discrete tax benefits in 2024 related to GILTI regulations and a Malaysia tax position settlement[130](index=130&type=chunk) - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA) and Pillar Two global minimum tax framework, which are reflected in current period results but are not material to the tax rate[128](index=128&type=chunk)[129](index=129&type=chunk) [Segment Overview](index=32&type=section&id=Segment%20Overview) Provides an overview of the financial performance and strategic focus of Keysight's two reportable segments [Communications Solutions Group (CSG)](index=32&type=section&id=Communications%20Solutions%20Group%20(CSG)) Details CSG's revenue and gross margin performance, driven by investments in high-speed networks and defense solutions - CSG revenue increased by **11%** (3 months) and **8%** (9 months) YoY, driven by higher investments in high-speed networks for AI capabilities and aerospace and defense solutions[141](index=141&type=chunk) - Commercial communications revenue increased by **13%** (3 months) and **9%** (9 months) YoY, primarily due to R&D investments in terabit solutions and expanding 400G/800G transceiver manufacturing capacity for AI demand[142](index=142&type=chunk)[143](index=143&type=chunk) - Aerospace, defense, and government revenue increased by **8%** (3 months) and **7%** (9 months) YoY, driven by strong growth in space and satellite solutions and continued investments in radar and spectrum operations[144](index=144&type=chunk) - CSG gross margin was flat YoY for the three months, and decreased **1 percentage point** for the nine months, impacted by tariffs and people-related costs, partially offset by revenue volume and pricing[145](index=145&type=chunk) [Electronic Industrial Solutions Group (EISG)](index=33&type=section&id=Electronic%20Industrial%20Solutions%20Group%20(EISG)) Reviews EISG's revenue and margin performance, noting mixed demand and strategic initiatives in key industrial markets - EISG revenue increased by **11%** (3 months) and **5%** (9 months) YoY, with mixed demand across markets, including increases in semiconductor and general electronics measurements, offset by a decline in automotive and energy[150](index=150&type=chunk) - Customer engagement remained high in strategic initiatives like AI-driven semiconductor technologies, software-defined vehicles, and industrial IoT[150](index=150&type=chunk) - EISG gross margin was flat YoY for the three months and decreased **1 percentage point** for the nine months, affected by tariffs and people-related costs, partially offset by revenue volume and pricing[151](index=151&type=chunk) - EISG operating margin increased by **2 percentage points** (3 months) and **1 percentage point** (9 months) YoY, primarily driven by lower operating expenses as a percentage of revenue[155](index=155&type=chunk) [Financial Condition](index=35&type=section&id=Financial%20Condition) Assesses Keysight's liquidity, capital resources, and cash flow dynamics, including debt and future cash requirements [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Summarizes the company's cash flow activities and overall liquidity position, including debt and equity financing Overview of Cash Flows (Nine Months Ended July 31, in millions) | Activity | 2025 | 2024 | | :---------------------------------------- | :---- | :----- | | Net cash provided by operating activities | $1,184| $693 | | Net cash used in investing activities | $(97) | $(781) | | Net cash provided (used) in financing activities | $487 | $(753) | [Operating Activities](index=35&type=section&id=Operating%20Activities) Analyzes cash generated from core business operations, highlighting drivers of changes in operating cash flow - Net cash provided by operating activities increased by **$491 million** for the nine months ended July 31, 2025, compared to the prior year[158](index=158&type=chunk) - This increase was driven by lower net income adjustments, improved working capital (accounts receivable, inventory, accounts payable), and favorable movements in income taxes receivable and other assets/liabilities[161](index=161&type=chunk) [Investing Activities](index=35&type=section&id=Investing%20Activities) Details cash flows related to acquisitions, capital expenditures, and other investment-related transactions - Net cash used in investing activities decreased by **$684 million** for the nine months ended July 31, 2025, primarily due to **$673 million** less cash used for acquisitions compared to the prior year[160](index=160&type=chunk) [Financing Activities](index=36&type=section&id=Financing%20Activities) Explains cash flows from debt issuance, share repurchases, and other financing-related transactions - Net cash provided by financing activities increased by **$1,240 million** for the nine months ended July 31, 2025, compared to the prior year[163](index=163&type=chunk) - This increase was primarily driven by **$748 million** from the issuance of 2030 Senior Notes and **$458 million** less cash used for the acquisition of non-controlling interests in ESI Group in the prior year[163](index=163&type=chunk) [Treasury Stock Repurchases](index=36&type=section&id=Treasury%20Stock%20Repurchases) Details the company's stock repurchase program, including shares bought back and remaining authorization - Keysight's board approved a stock repurchase program of up to **$1,500 million**, with **$210 million** remaining as of July 31, 2025[164](index=164&type=chunk) [Debt and Debt Facilities](index=36&type=section&id=Debt%20and%20Debt%20Facilities) Outlines the company's debt structure, including senior notes and credit facilities, and recent issuances Debt and Debt Facilities (in millions) | Metric | July 31, 2025 | October 31, 2024 | | :---------------------- | :------------ | :--------------- | | Senior Notes (par value)| $2,550 | $1,800 | | Revolving Credit Facility | $750 | $750 | | Bridge Facility | £752 | £1,232 | - The company issued **$750 million** in 2030 Senior Notes in April 2025 No borrowings were outstanding under the **$750 million** Revolving Credit Facility or the Bridge Facility as of July 31, 2025[166](index=166&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [Cash and cash requirements](index=37&type=section&id=Cash%20and%20cash%20requirements) Presents cash balances, their geographic distribution, and future cash requirements for acquisitions and capital spending Cash, Cash Equivalents and Restricted Cash (in millions) | Location | July 31, 2025 | October 31, 2024 | | :------- | :------------ | :--------------- | | U.S. | $2,217 | $626 | | Non-U.S. | $1,180 | $1,188 | | Total | $3,397 | $1,814 | - Cash, cash equivalents, and restricted cash increased to **$3,397 million** as of July 31, 2025, from **$1,814 million** as of October 31, 2024, including proceeds from the 2030 Senior Notes[171](index=171&type=chunk) - Keysight intends to acquire Spirent Communications PLC for **$1,463 million**, with closing expected in Q4 fiscal year 2025, subject to regulatory review The company also plans to acquire Synopsys' Optical Solutions Group[174](index=174&type=chunk)[175](index=175&type=chunk) - Capital spending is expected to be approximately **$135 million** in 2025, primarily for capacity expansion and technology investments[179](index=179&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no material changes to the quantitative and qualitative disclosures about market risk during the nine months ended July 31, 2025, compared to the information reported in the Annual Report on Form 10-K for the fiscal year ended October 31, 2024 - No material changes to market risk disclosures were reported for the nine months ended July 31, 2025[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Keysight's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of July 31, 2025 There were no material changes in internal control over financial reporting during the third quarter of fiscal 2025 - Disclosure controls and procedures were deemed effective as of July 31, 2025[182](index=182&type=chunk) - No material changes in internal control over financial reporting occurred during the third quarter of fiscal 2025[183](index=183&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Details ongoing patent infringement lawsuits and a tax refund claim, noting potential material financial impacts - Centripetal Networks filed patent infringement lawsuits against Keysight in the U.S., Germany, and the Unified Patent Court, which Keysight is aggressively defending[185](index=185&type=chunk) - Keysight filed a lawsuit against the U.S. government on January 23, 2025, seeking a **$107 million** tax refund related to GILTI tax deductions[187](index=187&type=chunk) - The outcome of litigation is inherently uncertain, and an adverse outcome could result in significant monetary damages or injunctive relief, potentially impacting financial results[188](index=188&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) Outlines key risks including economic volatility, geopolitical instability, supply chain issues, and cybersecurity threats - Global economic volatility, including inflation, potential recession, increased tariffs, and trade tensions, may adversely impact operating results and financial condition[190](index=190&type=chunk)[191](index=191&type=chunk)[198](index=198&type=chunk) - Geopolitical turmoil, such as regional conflicts and war, could limit the ability to transfer technologies, sell products, and lead to market instability and increased costs[199](index=199&type=chunk) - Failure to introduce successful new solutions and services in a timely manner, or if investments in innovative technologies are not profitable, could lead to obsolescence and harm operating results[207](index=207&type=chunk)[208](index=208&type=chunk) - The company's commitment to net zero emissions by fiscal year 2040 and science-based targets may incur significant costs, regulatory compliance challenges, and potential reputational damage if not met[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) - Significant cybersecurity attacks or disruptions in IT systems could adversely affect business, reputation, and operating results, despite implemented security measures[243](index=243&type=chunk)[244](index=244&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports common stock repurchases under the board-approved program, detailing shares bought and remaining authorization Issuer Purchases of Equity Securities (Quarterly Period Ended July 31, 2025) | Period | Total Number of Shares of Common Stock Purchased | Weighted Average Price Paid per Share of Common Stock | Maximum Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Program | | :----------------------------------- | :----------------------------------------------- | :---------------------------------------------------- | :------------------------------------------------------------------------------------------------- | | May 1, 2025 through May 31, 2025 | — | — | $259,733,010 | | June 1, 2025 through June 30, 2025 | 113,963 | $162.35 | $241,231,632 | | July 1, 2025 through July 31, 2025 | 190,487 | $164.56 | $209,884,397 | | Total | 304,450 | | | - As of July 31, 2025, **$209,884,397** remained authorized for repurchase under the stock repurchase program[275](index=275&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) Discloses Rule 10b5-1 trading plans adopted by certain directors and officers for future common stock sales Rule 10b5-1 Trading Plans Adopted (Three Months Ended July 31, 2025) | Name & Title | Action | Date | Rule 10b5-1 | Non-Rule 10b5-1 | Aggregate number of securities to be sold | | :----------------------------------------------- | :------- | :----------- | :---------- | :-------------- | :---------------------------------------- | | Satish Dhanasekaran, President and CEO | Adoption | May 23, 2025 | ☒ | ☐ | 24,435 | | Ingrid A Estrada, SVP, Chief of Supply Chain & Ops | Adoption | June 26, 2025| ☒ | ☐ | 11,168 | | Jeffrey K Li, SVP, General Counsel and Secretary | Adoption | June 3, 2025 | ☒ | ☐ | 10,295 | | John Page, SVP and President of Global Services | Adoption | June 2, 2025 | ☒ | ☐ | 8,183 | - No terminations of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements occurred during the three months ended July 31, 2025[278](index=278&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) Lists filed exhibits, including CEO/CFO certifications and XBRL documents for interactive data filing - Includes CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL interactive data files (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[279](index=279&type=chunk) [Signatures](index=55&type=section&id=Signatures) Confirms the report's official signing by the Executive Vice President and CFO, and Vice President and Corporate Controller - The report was signed by Neil Dougherty, Executive Vice President and Chief Financial Officer, and Lisa M. Poole, Vice President and Corporate Controller, on August 29, 2025[282](index=282&type=chunk)

Summary of Keysight Technologies (KEYS) Conference Call Company Overview - **Company**: Keysight Technologies - **Industry**: Test and measurement equipment, transitioning towards software solutions - **Key Markets**: Commercial communications, aerospace defense, industrial (automotive), semiconductor, and general electronics [5][6] Core Insights and Arguments Financial Performance - **Q3 Results**: Keysight reported a sales growth increase to 7% for fiscal year 2025, up from an initial forecast of 5% [8][10] - **Revenue Composition**: Approximately 40% of revenues now come from software and services, with a shift towards software continuing [7] - **EPS Growth**: Despite tariff headwinds, Keysight has managed to increase EPS growth expectations [13] Market Dynamics - **End Market Recovery**: The company noted a cyclical downturn in 2024 but observed recovery in various end markets, particularly wireline and aerospace defense [9][11] - **AI Influence**: Significant growth in wireline business attributed to AI investments, with expectations for continued growth in FY '26 and beyond [17][18] - **Wireless Business**: Although still larger than wireline, the gap is closing; AI is influencing test product development in wireless networks [22][23] Tariff Impact - **Tariff Costs**: Keysight anticipates a quarterly tariff headwind of approximately $40 million due to two rounds of tariff announcements [14][16] - **Mitigation Strategies**: The company has implemented cost actions and operational efficiencies to offset tariff impacts, with plans to fully offset the April tariffs by Q1 and August tariffs by Q2 [15][16] Aerospace and Defense - **Increased Spending**: There is a positive outlook for aerospace and defense due to increased budgets from NATO allies and bipartisan support for defense technology investments [39][40] - **Long-term Opportunities**: The company expects significant opportunities in defense technology, particularly in communications and signal operations [40][41] Automotive Sector - **Transition to EVs**: Keysight's EV business is seen as derisked, with opportunities in software-defined vehicles and autonomous driving technologies [42][44] - **Global Positioning**: Despite China's advancements, Keysight believes there will be ample opportunities for competition and growth in the automotive sector [47] Semiconductor and General Electronics - **AI-Driven Demand**: The semiconductor business is experiencing increased demand linked to AI, particularly in high bandwidth memory and smaller process architectures [49][50] China Market Dynamics - **Geopolitical Challenges**: Ongoing trade sanctions have created headwinds, but demand has shifted to Southeast Asia, resulting in overall growth in the broader Asia region [51] Margin Outlook - **Operating Model**: Keysight aims for sustained growth of 5% to 7% with a target of 40% operating leverage, expecting to continue increasing profit margins despite tariff impacts [52] Additional Important Insights - **Acquisition of Spyrin**: Keysight is awaiting regulatory approval for the acquisition, which is expected to enhance its capabilities in precision location and network monitoring [33][34][36] - **Unique Portfolio**: Keysight's comprehensive set of tools across physical and protocol layers positions it uniquely in the marketplace, allowing for better customer solutions [30][31] This summary encapsulates the key points discussed during the conference call, highlighting the company's performance, market dynamics, and strategic outlook.

Group 1: Security Evaluation and Certification - Keysight Technologies has completed the first PSA Certified Level 4 security evaluation on Silicon Labs' Series 3 Secure Vault integrated into the SixG301 wireless SoC, marking a significant milestone in enhancing security assurance for connected devices amid rising cyber threats [1][10] - The PSA Certified Level 4 certification focuses on testing the resilience of key security components such as Root of Trust (RoT) and secure elements (SE), which are crucial for safeguarding data, firmware, and functionality throughout the device's lifecycle [2][4] - Keysight, as an authorized PSA Certified Test Lab, conducted the evaluation through in-depth design reviews, vulnerability assessments, and advanced attack simulations, ensuring the product's capability to withstand sophisticated cyberattacks [3][10] Group 2: Market Growth and Demand - The rapid expansion of the Internet of Things (IoT) is driving strong demand for advanced electronic testing equipment, contributing to robust order growth for Keysight [6][7] - Keysight's 5G portfolio has seen significant growth, with a recorded CAGR of over 60% in 5G orders over the past three years, supported by heavy infrastructure investments and successful trials [8] - The company is well-positioned to capitalize on growth opportunities in various sectors, including automotive, energy, aerospace, defense, and healthcare, as electronics-based testing equipment gains traction [7][9] Group 3: Financial Performance - Keysight reported strong third-quarter fiscal 2025 results, with both revenue and earnings exceeding the Zacks Consensus Estimate, driven by strength in the AI data-center market and aerospace and defense sectors [11] - For Q4 fiscal 2025, Keysight expects revenues in the range of $1.37 billion to $1.39 billion, with non-GAAP earnings per share estimated between $1.79 and $1.85 [10][11] - The company's shares have gained 3.6% over the past year, outperforming the Zacks Electronics - Measuring Instruments industry's growth of 1% [12]

Financial Performance - Keysight Technologies reported third-quarter earnings of $1.72 per share, exceeding the analyst consensus estimate of $1.67 per share [1] - The company achieved quarterly sales of $1.352 billion, surpassing the analyst consensus estimate of $1.318 billion [1] Future Outlook - For the fourth quarter, Keysight expects revenue to be in the range of $1.370 billion to $1.390 billion [2] - Non-GAAP earnings per share for the fourth quarter are projected to be between $1.79 and $1.85 [2] Management Commentary - Keysight's President and CEO, Satish Dhanasekaran, stated that the company delivered strong results, exceeding the high end of guidance for both revenue and earnings per share [3] - The company is raising its outlook for the full year, citing solid demand and strong customer engagements [3] Stock Performance - Following the earnings announcement, Keysight Technologies shares fell 3.8% to trade at $157.20 [3] Analyst Ratings - B of A Securities analyst David Ridley-Lane maintained a Neutral rating on Keysight and raised the price target from $175 to $179 [9] - Barclays analyst Tim Long maintained an Overweight rating but lowered the price target from $200 to $195 [9]