It has been about a month since the last earnings report for Keysight (KEYS). Shares have added about 9.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Keysight due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Keysight Technologies Inc. before we dive into how investors and analysts have reacted as of late.
Keysight's Q3 Earnings Surpass Estimates, Revenues Rise Y/Y
Keysight reported strong third-quarter fiscal 2025 results, wherein both bottom and top lines beat the Zacks Consensus Estimate. Based in Santa Rosa, CA, the leading electronic design and testing solution provider reported higher year-over-year revenues, backed by strength in the AI data-center market, aerospace, defense and government end markets. Management’s focus on expanding its business through collaborations with established sector players is another positive.
Net Income of KEYS
Net income on a GAAP basis was $191 million or $1.10 per share compared with $389 million or $2.22 per share in the year-ago quarter.
Non-GAAP net income in the reported quarter was $297 million or $1.72 per share compared with $275 million or $1.57 in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 4 cents.
KEYS’ Q3 Revenues
Quarterly net sales improved to $1.35 billion from the year-ago quarter’s $1.22 billion, exceeding the high end of the guidance. Total orders increased 7% year over year to $1.34 billion. The company is witnessing incrementally positive signals in its sales funnel and customer engagement. The top line beat the Zacks Consensus Estimate by $38 million.
Communication Solutions Group (CSG) generated $940 million in revenues, up from the year-ago quarter’s $847 million. The 11% year-over-year growth was primarily driven by healthy traction in the commercial communications end market, induced by strong demand for AI data-center network solutions and applications. Aerospace, defense and government end markets grew backed by healthy demand trends in the United States and Asia. The growing defense modernization initiative is a positive factor. The top line beat our estimate of $909.4 million.
The Electronic Industrial Solutions Group (EISG) segment’s revenues increased to $412 million from $370 million in the prior-year quarter. Growing investment in AI-driven advanced nodes, high-bandwidth memory and silicon photonics is induced by high AI-performance requirements driving growth in the semiconductor vertical. Strength in advanced research and digital health is driving growth in the general electronics vertical. The top line beat our revenue estimate of $401.3 million.
Region-wise, Asia-Pacific revenues aggregated $569 million compared with $496 million in the prior-year quarter. The company reported a 13% year-over-year improvement in revenues from the Americas to $566 million. Revenues from Europe were $217 million, down 2% from the year-ago quarter's $221 million.
Other Details of KEYS
During the quarter, the company’s non-GAAP gross profit totaled $864 million compared with $781 million in the year-ago quarter, with gross margins of 63.9% and 64.1%, respectively. The non-GAAP operating margin was 25%, up from 24.4% in the prior-year quarter.
CSG reported a non-GAAP operating margin of 26.1%, down 20 basis points (bps) year over year. EISG reported a non-GAAP operating margin of 22.3%, up 220 bps year over year, largely due to a higher mix of software.
Cash Flow & Liquidity of KEYS
During the quarter, Keysight generated $322 million in cash from operating activities compared with $255 million a year ago. As of July 31, 2025, the company had $2.63 billion in cash and cash equivalents and $2.53 billion of long-term debt.
KEYS’ Outlook
For the fourth quarter of fiscal 2025, Keysight expects revenues in the range of $1.37-$1.39 billion. Non-GAAP earnings per share are estimated to be between $1.79 and $1.85.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates revision.
VGM Scores
Currently, Keysight has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock has a score of C on the value side, putting it in the middle 20% for value investors.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Keysight has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Keysight Technologies Inc. (KEYS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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