Keysight Technologies(US:KEYS)2025-11-24 22:30Financial Performance and Key Metrics - Keysight reported fourth quarter revenue of $1,419 million, exceeding guidance and reflecting a 10% increase year-over-year, or 9% on a core basis [16] - Orders for the fourth quarter reached $1,533 million, up 14% on a reported basis or 12% on a core basis [17] - Full year revenue was $5,375 million, an 8% increase as reported, or 7% on a core basis, with earnings per share (EPS) of $7.16, up 14% [17][18] Business Segment Performance - The Communication Solutions Group (CSG) generated fourth quarter revenue of $990 million, up 11% on a reported basis, driven by strong wireline and wireless performance [18] - The Electronic Industrial Solutions Group (EISG) reported revenue of $429 million, a 9% increase on a reported basis, with growth in semiconductor and general electronics [18] - Software and services accounted for approximately 37% of total revenue, with annual recurring revenue at 29% [18] Market Performance - Wireline orders and revenue grew double digits in Q4 and for the full year, driven by AI infrastructure buildouts and technology upgrades [6][10] - Wireless orders and revenue grew high single digits for the full year, supported by ongoing standards evolution and early 6G research [9] - Aerospace, defense, and government sectors saw record orders, with revenue increasing by 8% for the year, reflecting strong customer engagement in defense modernization [10][11] Company Strategy and Industry Competition - Keysight's strategy focuses on software-centric solutions and recent acquisitions to enhance capabilities in AI, 6G, and semiconductor markets [4][5] - The company is well-positioned to capture growth opportunities in emerging technologies, including AI and defense, with a robust sales pipeline [4][10] - Keysight aims to realize over $100 million in synergies from recent acquisitions, which are expected to be accretive to earnings within 12 months post-close [20][21] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about wireless growth in FY2026, driven by stabilization in 5G and advancements in next-gen connectivity [24] - The company anticipates revenue growth in FY2026 to be at or above the high end of its long-term target of 5%-7%, excluding acquisitions [20][22] - Keysight's operating model is expected to generate strong free cash flow, allowing for continued investment in R&D and shareholder returns [5][19] Other Important Information - Keysight achieved record free cash flow of $1.3 billion in FY2025, with $375 million returned to shareholders through buybacks [5][19] - The company has authorized an additional $1.5 billion share repurchase program to support ongoing capital return [5] Q&A Session Summary Question: How does the company see wireless trending in FY2026? - Management is optimistic about wireless growth, driven by stabilization in 5G and investments in advanced technologies [24] Question: What is the expected growth from the adoption of 1.6 TB per second wireline? - The company believes that higher technological complexity will drive growth in wireline, with a strong focus on first-to-market solutions [25] Question: Can you elaborate on the order acceleration and its drivers? - The revenue outperformance was attributed to broad order strength across both CSG and EISG, with a robust pipeline for future growth [27][28] Question: What are the expectations for M&A revenue contributions? - Approximately 30% of the revenue from acquisitions is expected in Q1, with the remainder distributed evenly across the following quarters [39] Question: How does the company plan to achieve operating margin targets? - Management indicated that achieving the 31%-32% operating margin target is further out, with current margins at 26% [47] Question: What is the outlook for software and services revenue growth? - The company expects continued growth in software and services, particularly with the integration of recent acquisitions [56]