Keysight Technologies Inc (KEYS) Q1 2026 Earnings Call Highlights: Record Revenue and Strong …

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Tue, February 24, 2026 at 2:02 PM GMT+9 4 min read

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**Total Revenue:** $1.600 billion, up 23% on a reported basis.

**Core Revenue Growth:** 14%, excluding acquisitions and currency impacts.

**Orders:** $1.645 billion, up 30% on a reported basis.

**Gross Margin:** 66.7%, up 90 basis points.

**Operating Expenses:** $628 million.

**Operating Margin:** 27.4%, up 20 basis points.

**Net Income:** $376 million.

**Earnings Per Share (EPS):** $2.17, up 19%.

**Communications Solutions Group Revenue:** $1.124 billion, up 27% on a reported basis.

**Commercial Communications Revenue:** $758 million, up 33%.

**Aerospace, Defense, and Government Revenue:** $366 million, up 18%.

**Electronic Industrial Solutions Group Revenue:** $476 million, up 15%.

**Cash and Cash Equivalents:** $2.200 billion.

**Cash Flow from Operations:** $441 million.

**Free Cash Flow:** $407 million.

**Share Repurchase:** 420,000 shares at an average price of $207, totaling $87 million.

**Q2 2026 Revenue Guidance:** $1.690 billion to $1.710 billion.

**Q2 2026 EPS Guidance:** $2.27 to $2.33.

Warning! GuruFocus has detected 7 Warning Signs with KEYS.

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Release Date: February 23, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Keysight Technologies Inc (NYSE:KEYS) delivered outstanding results with both revenue and earnings per share exceeding the high end of their guidance range.

The company experienced robust growth across business segments and key regions, driven by AI-driven technology transformations, next-generation connectivity, and defense modernization.

The Communications Solutions Group saw a 27% revenue growth, driven by commercial communications and aerospace defense and government markets.

The Electronic Industrial Solutions Group achieved record revenue with double-digit growth across general electronics, semiconductors, and automotive and energy markets.

Keysight Technologies Inc (NYSE:KEYS) has a strong pipeline of solutions and go-to-market momentum, positioning them well for future growth opportunities.

Negative Points

The company faces risks and uncertainties that could cause actual results to differ materially from forward-looking statements.

There is a potential impact from the recently announced Supreme Court decision regarding tariffs, which the company is still assessing.

Operating expenses were $628 million, which, while in line with expectations, reflect continued investments in next-generation R&D.

The acquisitions are currently operating at a significantly lower operating margin, which is dilutive to the overall operating margin in the first year.

The company has less visibility beyond two quarters, which could impact their ability to accurately forecast future performance.

 






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Q & A Highlights

Q: Can you provide more details on the growth drivers, particularly in the AI and optical interconnect sectors, and how they are contributing to the business? A: Satish Dhanasekaran, President and CEO, explained that the AI business within the wireline segment has seen robust order growth, significantly above the company average of 30%. The demand is broadening across the customer base, with a doubling of customers representing that demand. The growth is driven by AI infrastructure scaling, higher speeds in Ethernet-based AI networking, and increasing importance of optical interconnects.

Q: How do you view the current operating margin leverage in the P&L, given the significant incremental operating leverage achieved in recent quarters? A: Neil Dougherty, CFO, stated that the business model is designed to deliver 40% core leverage on mid-single-digit growth or better. In the recent quarter, they achieved 41% leverage despite absorbing the impact of tariffs. The acquisitions are currently dilutive to operating margin but are expected to be accretive once $100 million in cost synergies are realized.

Q: Are you seeing a broadening of the customer base in AI orders, or is it mainly existing customers expanding their implementations? A: Satish Dhanasekaran noted that the customer base includes silicon companies, manufacturing ecosystems, hyperscalers, and new cloud providers. There is a broadening of demand across these groups, with more international business, particularly in Southeast Asia, where much of the manufacturing base is located.

Q: Can you discuss the competitive landscape in the AI business and how pricing is affected by the strength of demand? A: Satish Dhanasekaran highlighted that Keysight’s competitive advantage lies in being a solutions-oriented company with an in-house tech stack that provides differentiation, especially in advanced technologies. The company participates in global standards bodies, which helps them stay ahead of customers’ needs. The goal is to design competitive products that also allow for gross margin growth.

Q: What are the expectations for the second half of the year, and how much visibility do you have into the future quarters? A: Neil Dougherty explained that the company has strong visibility one quarter out and decent visibility two quarters out. The guidance for the second quarter is based on a strong funnel and visibility into Q3. The base case for fiscal '26 is for total annual revenue and earnings growth just above 20%, with potential upside if current momentum continues.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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