Financial Performance - Keysight achieved record results in Q1 2026, with total revenue of $1.6 billion, up 23% year-over-year, driven by strong growth across all business segments [18][19] - Earnings per share reached $2.17, reflecting a 19% increase, supported by a gross margin of 66.7%, which improved by 90 basis points [20][19] - Orders totaled $1.645 billion, representing a 30% increase on a reported basis and a 22% increase on a core basis [19] Business Segment Performance - The Communication Solutions Group generated revenue of $1,124 million, up 27% on a reported basis and 16% on a core basis, with a gross margin of 68.5% [20][21] - The Electronic Industrial Solutions Group reported revenue of $476 million, an increase of 15%, with growth across general electronics, semiconductors, and automotive markets [21][20] - Aerospace, Defense, and Government achieved revenue of $366 million, an 18% increase, driven by heightened global focus on defense modernization [21][13] Market Trends and Drivers - Demand for AI-driven technology transformations and next-generation connectivity is accelerating, with significant growth in wireline business surpassing wireless for the first time [5][7] - The industry is moving towards higher speeds and Ethernet-based AI networking, creating more test opportunities for Keysight [8][10] - Increased defense spending in Europe and the U.S. is expected to sustain growth in the aerospace and defense sector [14][40] Company Strategy and Competitive Position - Keysight's strategic roadmap focuses on capitalizing on AI infrastructure, semiconductor complexity, and defense modernization [5][17] - The company is well-positioned to leverage its differentiated portfolio to address increasing design complexity and accelerate innovation [6][17] - Keysight's competitive advantage lies in its solutions-oriented approach, enabling it to stay ahead of customer needs in rapidly evolving markets [68][69] Management Commentary on Future Outlook - Management expressed confidence in sustaining growth momentum, with expectations for total annual revenue and earnings growth just above 20% for fiscal 2026 [24][23] - The company anticipates continued strong demand across its diversified end markets, particularly in AI and defense sectors [17][24] - Management noted that the integration of recent acquisitions is on track and expected to enhance operational efficiencies [23][22] Other Important Information - Keysight ended the quarter with approximately $2.2 billion in cash and cash equivalents, generating cash flow from operations of $441 million [22] - The company repurchased approximately 420,000 shares at an average price of $207, totaling $87 million [22] Q&A Session Summary Question: Insights on wireline vs wireless business growth - Management highlighted that wireline business has surpassed wireless for the first time, driven by robust demand for R&D and manufacturing solutions [26][27] Question: Operating margin expectations - Management indicated a target of 40% core leverage on mid-single-digit growth, with current operating margin leverage at 41% due to strong growth [28][29] Question: Customer base expansion in AI - Management noted a broadening of the customer base, with significant contributions from silicon companies and hyperscalers, alongside emerging neoclouds [34][36] Question: Aerospace and defense spending trajectory - Management expressed optimism about sustained growth in defense spending, particularly in Europe, and the potential for a new run rate in this business [38][40] Question: Supply chain and memory availability - Management stated that they are well-prepared for scaling operations and are not significantly exposed to high-demand memory shortages [60][62] Question: Competitive landscape in AI - Management emphasized Keysight's solutions-oriented approach as a competitive advantage, allowing it to stay ahead in rapidly evolving AI markets [67][68]

Keysight Technologies (NYSE:KEYS) Q1 2026 Earnings call February 23, 2026 04:30 PM ET Speaker15Good day, ladies and gentlemen, and welcome to Keysight Technologies fiscal 1st quarter 2026 earnings conference call. My name is Victoria, and I will be your lead operator today. If at any time during the conference you need to reach an operator, please press star zero. This call is being recorded today, Monday, February 23rd, 2026, at 1:30 P.M. Pacific Time. I would now like to hand the call over to Liz Morali, ...