KEYS Set to Report Q4 Earnings: Will Revenue Growth Boost Earnings?

Keysight Technologies, Inc. KEYS is scheduled to report fourth-quarter fiscal 2025 results on Nov. 24, after the closing bell. It pulled off a trailing four-quarter earnings surprise of 4.71%, on average.

Based in Santa Rosa, CA, the leading electronic design company is expected to report higher year-over-year revenues, backed by strength in both segments. Management’s focus on expanding its business through collaborations with established players in various sectors is positive.

Factors at Play

Keysight is benefiting from the growing proliferation of electronic content in vehicles, momentum in space and satellite applications, and rising adoption of driver-assistance systems globally.

During the quarter, Fortinet selected the Keysight BreakingPoint QuickTest network application and security test solution to evaluate the security capabilities of its FortiGate 700G series next-generation firewall. Rapidus Corporation, a Japanese semiconductor manufacturer, is collaborating with Keysight to develop a high-precision Process Design Kit for 2nm GAA semiconductors. Such customer wins are expected to have a favourable impact on upcoming earnings.

Keysight completed the industry’s first PSA Certified Level 4 security evaluation, conducted on Silicon Labs’ Series 3 Secure Vault integrated into the SixG301 wireless SoC. This marks a significant milestone in advancing the security assurance of connected devices amid rising cyber threats. This is expected to boost commercial prospects.

In the to be reported quarter, Keysight introduced Quantum System Analysis, a leading-edge Electronic Design Automation solution that empowers engineers to simulate and optimize quantum systems by conducting system-level quantum analysis. It eliminates the issues with time-consuming and costly cryogenic experiments by offering a unified environment that integrates electromagnetic, circuit, and quantum dynamics. It is a major breakthrough as it ensures early assessment of quantum system designs, reducing the development time. Such innovative product launches are expected to have supported net sales during the quarter.

However, macroeconomic uncertainty continues to impact customer spending decisions in several regions. This will likely impact near-term growth prospects. Keysight’s frequent acquisitions have escalated integration risks.

Key Developments in Q4

In the to be reported quarter, Keysight has completed the acquisition of Spirent Communications. Spirent boasts a robust portfolio that caters to satellite emulation, positioning and network automation. The acquisition has diversified KEYS' product offerings, boosting its commercial prospects across several sectors, including communications, automotive, aerospace, defense and more. 

The company has also completed the acquisition of Optical Solutions Group from Synopsys, Inc. and PowerArtist from Ansys, Inc. This acquisition has significantly boosted KEYS’ design engineering software portfolio and computer-aided engineering capabilities.

Overall Expectations

Our estimate for revenues from the Communications Solutions Group segment is pegged at $965.2 million, suggesting 8% year-over-year growth. Revenues from the Electronic Industrial Solutions Group vertical are projected to be $414.2 million, up 5.4% year over year.

For the fourth quarter of fiscal 2025, the Zacks Consensus Estimate for revenues is pegged at $1.39 billion, indicating year-over-year growth from $1.29 billion. The consensus estimate for adjusted earnings per share is pegged at $1.85, suggesting an improvement from the $1.65 per share reported a year ago.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Keysight in the fiscal fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +2.98%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Keysight Technologies Inc. Price and EPS Surprise

Keysight Technologies Inc. price-eps-surprise | Keysight Technologies Inc. Quote

Zacks Rank: Keysight has a Zacks Rank #4 (Sell).

Stocks to Consider

The Earnings ESP for Marvell Technology MRVL is +11.04% and carries a Zacks Rank of 3 currently. The company is scheduled to report quarterly numbers on Dec. 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pure Storage PSTG has an Earnings ESP of +1.31% and carries a Zacks Rank of 2 currently. The company is scheduled to report quarterly numbers on Dec. 2. 

The Campbell's Company CPB has an Earnings ESP of +0.28% and carries a Zacks Rank of 3 currently. The company is scheduled to report quarterly numbers on Dec. 2.

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This article originally published on Zacks Investment Research (zacks.com).

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