Keysight Technologies, Inc. (KEYS): A Bull Case Theory

We came across a bullish thesis on Keysight Technologies, Inc. (KEYS) on Best Anchor Stocks’ Substack. In this article, we will summarize the bulls’ thesis on KEYS. Keysight Technologies, Inc. (KEYS)'s share was trading at $161.74 as of 22^nd May. KEYS’s trailing and forward P/E were 37.97 and 23.09 respectively according to Yahoo Finance.

Keysight Technologies delivered a standout quarter, outperforming expectations despite macroeconomic headwinds and customer CapEx volatility. Unlike many firms, Keysight benefits from exposure to strategic rather than discretionary CapEx, allowing it to defy typical cyclicality.

This quarter marked the second consecutive quarter of growth, confirming the recovery is well underway. Strength was broad-based, with both its Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG) growing—EISG’s first revenue increase after six quarters of declines. While gross margins contracted due to a $7 million tariff impact and an unfavorable sales mix—software sales dropped as a share of revenue—operating leverage was robust, with GAAP operating income rising 17% on 7% revenue growth.

The gross margin dip was purely optical, as the revenue mix naturally shifts during cyclical recoveries. GAAP net income and cash flows were boosted by non-recurring items including a $112 million other income gain and a $60 million hedging windfall from the Spirent acquisition, which are not expected to recur. Management raised full-year revenue growth guidance from 5% to 6%, with EPS growth exceeding 10%, even with tariffs—an impressive feat given Keysight’s long-standing guidance conservatism.

Future upside exists from the Spirent and Ansys/Synopsys acquisitions, expected to enhance gross margins and expand software exposure. Though share repurchases may slow due to acquisitions, the company’s strong cash generation supports ongoing buybacks. Tariffs remain a concern but are manageable due to a diversified supply chain. Meanwhile, strength in the European defense sector offers another tailwind. Overall, Keysight remains a compelling investment with strong execution, resilient demand, and attractive long-term prospects.

Keysight Technologies, Inc. (KEYS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held KEYS at the end of the fourth quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of KEYS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KEYS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.