Keysight Q3 Revenue Jumps to $1.85 Billion as Profit More Than Doubles

Keysight Technologies reported a sharp acceleration in its fiscal third quarter, with revenue rising 36% to $1.85 billion and GAAP net income more than doubling to $397 million. The company also recorded more than $2 billion of orders for a second consecutive quarter and issued a stronger fourth-quarter outlook that lifted its expectations for fiscal 2026.

For the quarter ended July 31, Keysight reported revenue of $1.846 billion, up from $1.352 billion a year earlier. GAAP net income increased from $191 million to $397 million, while diluted earnings per share rose to $2.30 from $1.10. Non-GAAP net income climbed to $531 million from $297 million, and non-GAAP diluted earnings per share increased 79% to $3.07.

The quarter also came in well above the guidance Keysight issued in May. At the end of the second quarter, management had forecast third-quarter revenue of $1.730 billion to $1.750 billion and non-GAAP earnings of $2.43 to $2.49 per share. Actual revenue exceeded the top of that range by $96 million, and non-GAAP earnings per share finished $0.58 above the high end.

Record orders and communications demand drive the quarter

Keysight’s third-quarter results showed orders of $2.091 billion, up 56% from $1.340 billion a year earlier. Core orders, which exclude currency effects and recently acquired or divested businesses, increased 52%. Management also said backlog reached a record level, with a strong level of shipments already scheduled for the fourth quarter.

The Communications Solutions Group was the largest contributor to the revenue increase. Segment revenue rose 43% to $1.345 billion, compared with $940 million a year earlier. Commercial communications revenue climbed 56% to $1.006 billion, while aerospace, defense and government revenue increased 14% to $339 million.

Keysight said commercial communications benefited from the rapid scaling of the AI infrastructure ecosystem and investment in next-generation connectivity. Its aerospace, defense and government business was supported by demand tied to advanced radar architectures, autonomous platforms and positioning, navigation and timing applications. Those areas fit directly with the company’s design, emulation and test portfolio, which is used in development and validation before new systems move into production or deployment.

The Electronic Industrial Solutions Group also grew at a double-digit rate. Revenue rose 21% to $501 million from $412 million, with growth across semiconductor, general electronics, automotive and energy markets. Keysight attributed semiconductor growth to capacity expansion involving advanced nodes, high-bandwidth memory and silicon photonics. General electronics benefited from AI-related infrastructure investment, including demand around multi-layer printed circuit boards and capacitors.

The increase was broad geographically as well. Revenue in the Americas rose 29% to $729 million, Europe increased 41% to $307 million and Asia Pacific grew 42% to $810 million. On a core basis, which removes acquisition and currency effects, the respective growth rates were 20%, 32% and 41%.

Margins expand even after separating acquisition effects

The revenue jump was not solely the result of acquisitions. Keysight reported $84 million of third-quarter revenue from acquisitions or divestitures completed within the prior twelve months and a $6 million adverse currency adjustment in its core-revenue reconciliation. After removing those effects, core revenue was $1.768 billion, up 31% from the prior-year quarter.

Profitability improved at the same time. GAAP income from operations rose to $461 million from $234 million, lifting the GAAP operating margin to 24.9% from 17.3%. Non-GAAP operating income increased to $613 million from $338 million, while the corresponding margin expanded to 33.2% from 25.0%. Non-GAAP gross margin increased to 69.0% from 63.9%.

Both reporting segments posted sizable margin gains. Communications Solutions Group operating margin rose to 34% from 26%, while Electronic Industrial Solutions Group operating margin increased to 31% from 22%. The company described the quarter as benefiting from higher revenue, favorable mix and operating leverage across its portfolio.

Cash generation also strengthened. Cash flow from operations was $437 million, compared with $322 million a year earlier, and free cash flow rose to $403 million from $291 million. Keysight ended July with $2.62 billion of cash, cash equivalents and restricted cash. During the quarter, the company repurchased about 640,000 shares for approximately $210 million.

Recent acquisitions remain part of the earnings story, but management said integration work is moving faster than previously planned. Keysight now expects integration of recent acquisitions to be largely complete one quarter ahead of schedule and expects to have 80% to 90% of a targeted $100 million of cost synergies on a run-rate basis by the end of the fourth quarter. The company’s largest recent transaction was its October 2025 acquisition of Spirent Communications, whose retained operations were folded into Keysight’s Communications Solutions Group.

Fourth-quarter guidance lifts fiscal 2026 expectations

Keysight expects fourth-quarter revenue of $1.930 billion to $1.950 billion. At the midpoint, that would represent year-over-year growth of about 37%. Non-GAAP earnings per share are forecast at $3.34 to $3.40, with the midpoint representing growth of about 76% from the same quarter a year earlier.

That outlook implies fiscal 2026 revenue of about $7.103 billion and full-year revenue growth of roughly 32%, according to Keysight’s third-quarter presentation. The company now expects revenue growth in the low-30% range, compared with the high-20% growth expectation it outlined after the second quarter. Implied full-year non-GAAP earnings per share are $11.48, which would be about 60% above fiscal 2025.

The step-up in guidance follows two consecutive quarters in which orders exceeded $2 billion. In the third quarter alone, orders were $245 million higher than revenue, adding to backlog rather than merely matching current-period shipments. Keysight said demand was extending across AI infrastructure, semiconductors, communications and defense applications, although its forward-looking statements continue to flag tariffs, export controls, customer purchasing decisions, geopolitical tensions and broader economic conditions as risks to the outlook.

The company will close fiscal 2026 on October 31. Its fourth-quarter guidance therefore sets the final operating benchmark for a year in which acquisition contributions, core demand growth and margin expansion have all played a role in the earnings increase.