Keysight Technologies(KEYS) - 2025 Q4 - Earnings Call Transcript

Financial Performance and Key Metrics - Keysight reported Q4 revenue of $1,419 million, a 10% increase year-over-year, and orders grew 14% to $1,533 million [18][19] - Full year revenue reached $5,375 million, up 8% as reported, with EPS increasing 14% to $7.16 [19][20] - Gross margin for Q4 was 64%, with an operating margin of 26% [19] Business Segment Performance - The Communication Solutions Group (CSG) generated Q4 revenue of $990 million, up 11%, driven by strong wireline and wireless growth [20] - The Electronic Industrial Solutions Group (EISG) reported revenue of $429 million, a 9% increase, with growth in semiconductor and general electronics [20][21] - Software and services accounted for approximately 37% of total revenue, with annual recurring revenue at 29% [20] Market Trends and Key Indicators - Strong demand in wireline driven by AI infrastructure buildouts and technology upgrades, with double-digit growth in orders and revenue [8][20] - Wireless segment saw high single-digit growth, supported by advancements in 5G and early 6G research [10][20] - Aerospace, defense, and government sectors achieved record orders, with an 8% revenue increase, reflecting strong customer engagement in defense modernization [11][20] Company Strategy and Industry Positioning - Keysight's strategy focuses on software-centric solutions and strategic acquisitions to enhance capabilities, including recent acquisitions of Spirent and Synopsys Optical Solutions Group [6][7] - The company is well-positioned to capitalize on trends in AI, 6G, and semiconductor advancements, with a robust pipeline of sales opportunities [5][17] - Keysight aims to achieve over $100 million in synergies from recent acquisitions while maintaining critical investments in R&D [22][23] Management Commentary on Business Environment and Outlook - Management expressed optimism about growth in wireless and wireline segments, anticipating continued demand driven by technological advancements [28][30] - The company expects Q1 2026 revenue to be between $1,530 million and $1,550 million, representing a 19% year-over-year growth at the midpoint [21][22] - Keysight's leadership remains confident in the fundamentals of its business model and long-term shareholder value creation [17][24] Other Important Information - Keysight achieved record free cash flow of $1.3 billion in FY25, with $375 million returned to shareholders through buybacks [7][21] - The company has authorized an additional $1.5 billion share repurchase program [7] Q&A Session Summary Question: Wireless segment outlook for FY2026 - Management is optimistic about wireless growth, driven by stabilization in 5G and investments in advanced technologies [26][28] Question: Growth potential from 1.6 TB per second wireline - The company is well-positioned to continue momentum in wireline, leveraging first-to-market solutions and technological complexity [29][30] Question: Order acceleration details - The significant acceleration in orders is attributed to broad strength across both CSG and EISG businesses, with a robust pipeline for future growth [34][36] Question: M&A revenue contribution cadence - Approximately 30% of the revenue from acquisitions is expected in Q1, with the remainder distributed evenly across the following quarters [61] Question: EPS growth despite dilution from acquisitions - Management indicated that the expected dilution from acquisitions is mild, with low single-digit percentage impacts [66][68] Question: Revenue growth expectations across different segments - AI is expected to be a significant growth driver, with wireline and wireless segments anticipated to grow in line with long-term targets [73][75]