Keysight (KEYS) Up 9.1% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Keysight Technologies Inc. reported strong Q3 fiscal 2025 results, with both revenue and net income exceeding estimates, driven by growth in AI data-center markets and defense sectors [2][3][4]. Financial Performance - Net income on a GAAP basis was $191 million or $1.10 per share, down from $389 million or $2.22 per share in the same quarter last year [3]. - Non-GAAP net income was $297 million or $1.72 per share, compared to $275 million or $1.57 in the prior-year quarter, surpassing the Zacks Consensus Estimate by 4 cents [3]. - Quarterly net sales increased to $1.35 billion from $1.22 billion year-over-year, exceeding guidance [4]. Revenue Breakdown - Communication Solutions Group (CSG) generated $940 million in revenues, an 11% increase from $847 million in the prior year, driven by demand for AI data-center network solutions [5]. - Electronic Industrial Solutions Group (EISG) revenues rose to $412 million from $370 million, supported by investments in AI-driven technologies [6]. - Region-wise, Asia-Pacific revenues were $569 million, up from $496 million, while revenues from the Americas increased by 13% to $566 million; European revenues decreased by 2% to $217 million [7]. Profitability Metrics - Non-GAAP gross profit was $864 million with gross margins of 63.9%, compared to $781 million and 64.1% in the prior year [8]. - Non-GAAP operating margin was 25%, up from 24.4% year-over-year; CSG's margin was 26.1%, while EISG's margin improved to 22.3% [8]. Cash Flow and Liquidity - Keysight generated $322 million in cash from operating activities, up from $255 million a year ago; as of July 31, 2025, the company had $2.63 billion in cash and cash equivalents [9]. Future Outlook - For Q4 fiscal 2025, Keysight expects revenues between $1.37 billion and $1.39 billion, with non-GAAP earnings per share estimated between $1.79 and $1.85 [10]. - There has been an upward trend in estimates revisions for the stock, indicating positive investor sentiment [11][13]. Investment Scores - Keysight has a Growth Score of B and a Momentum Score of A, with an aggregate VGM Score of B, indicating a balanced investment profile [12].