Keysight Techs (NYSE:KEYS) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Watch the full earnings call below:
Summary
Keysight Techs reported record financial performance with a 56% growth in orders, 31% increase in revenue, and a 69% rise in earnings per share for Q2 2026.
The company is raising its growth expectations for fiscal 2026 with anticipated revenue growth in the high 20s percentage due to a strong start to the year and a robust pipeline.
Strong demand in AI-related solutions, wireline business, and aerospace and defense sectors drove significant growth, with notable engagements in AI infrastructure and 6G capabilities.
Record cash flow was reported with $472 million in free cash flow, alongside a strong balance sheet with over $2 billion in cash and cash equivalents.
Keysight Techs maintained its FY26 revenue guidance from acquisitions at $375 million, with ongoing integration and synergy realization on track.
Management highlighted continued investments in AI, defense technology, and space as key strategic initiatives for future growth.
Full Transcript
OPERATOR
Ladies and gentlemen and welcome to Keysight Technologies Fiscal Second Quarter 2026 Earnings Conference Call. My name is Abby and I will be your operator today. If at any time during the conference you need to reach an operator, please press star zero. This call is being recorded today, Tuesday, May 19, 2026 at 1:30pm Pacific Time. I would now like to hand the call over to Liz Morale, Vice President of Investor Relations. Please go ahead Ms. Morale..
Liz Morale (Vice President of Investor Relations)
Good afternoon and thank you for joining us for Keysight’s second quarter earnings conference call for fiscal year 2026. Joining me on today’s call are Satish Dhanasekaran, President and CEO, Neal Doherty, Executive Vice President and CFO Kailash Narayanan, President of the Communication Solutions Group Jason Carey, President of the Electronic Industrial Solutions Group and Steve Yoon, Senior Vice President of Global Sales. Following the prepared remarks from Satish and Neal, we will take your questions. The press release and information to supplement today’s discussion can be found on our investor relations website, investor.keysight.com. During today’s discussion we will make forward looking statements about the financial performance of the company. Actual results may differ materially from those mentioned in these forward looking statements as a result of risks and uncertainties. Information about these risks and uncertainties can be found in our most recent Forms 10K and 10Q filings with the SEC. We do not intend to update any forward looking statements. In addition, we will refer to non GAAP financial measures and reference core growth which excludes the impact of acquisitions or divestitures completed within the last 12 months and currency movements. The most directly comparable GAAP financial metrics and reconciliations can be found on our investor relations website and all comparisons are on a year over year basis unless otherwise noted. I will now turn the call over to Satish.
Satish Dhanasekaran (President and CEO)
Thank you Liz, Good afternoon and thank you for joining us today. Keysight delivered the best quarter in company history, capping off a record first half quarter. Two orders grew 56% year over year, surpassing $2 billion. Revenue grew 31%, earnings per share grew 69% and we generated a record $472 million in free cash flow. These results demonstrate the strength of keysight’s portfolio which has been built strategically to deliver first to market solutions that enable innovations across our end markets, including data centers, networking, defense, semiconductors and general electronics. We are raising our growth expectations for fiscal 2026 driven by the solid start to the year and the pipeline of opportunities we see in the second half. We now expect revenue growth in the high 20s percent for the fiscal year as the underlying trends driving our business are expected to continue. These investments we’re making in our comprehensive set of solutions and deep engagements with market defining customers positions us well for sustained value creation. Moving to our results by Business Communications solutions order growth significantly outpaced revenue growth of 35% year over year with broad strength across both commercial communications and aerospace, defense and government. This performance builds on the growth we saw in quarter two last year where CSG delivered 9% revenue growth in commercial communications. We continue to see accelerating momentum in our wireline business driven by the ongoing AI data center expansions. Wireline delivered record orders again this quarter with robust demand for both R and D and manufacturing solutions in the first half of fiscal 2026. Our AI related business has already surpassed the levels achieved in all of 2025. As I mentioned in our Q1 earnings call, this momentum continues to be driven by four key pillars of opportunity that we expect to AI infrastructure scaling, speed transitions, optical and photonics technologies, and system level emulations. First, the scaling challenge is intensifying as AI clusters integrate GPUs, CPUs, GPU, DPUs switches, NICs, memory fabrics and storage across multiple vendors and the networking technologies including EtherNet, UA Link, PCIe, NVMe and CXL. Customers are adopting Keysight solutions for end to end interoperability and system validation to ensure that these components function reliably together at scale. This quarter, keysight announced new scale up validation solutions for performance characterization. As systems become more complex and expensive, additional investments in deeper manufacturing validation and production test coverage are needed to improve yields and reduce post deployment failures. We saw a strong adoption for newly introduced ultra high density interconnect solutions that enable rapid characterization of rack backplanes for next generation scale up networks. Second, the industry continues to navigate multiple overlapping speed transitions with continued 800 gig deployments, accelerating adoption of 1.6 terabit architectures and increased R&D activity around 3.2 terabit technologies. The Optical Fiber Conference and Nvidia’s GTC this quarter reinforced the accelerating importance of networking as a critical enabler of AI data center scaling. At OFC, Keysight demonstrated our 1.6-terabit physical layer solutions with over 20 industry leaders. We also showcased 1.6-terabit traffic emulation, link reliability validation and SERDES signal integrity solutions for switch and system vendors. And we collaborated with Broadcom on the industry’s first public interoperability demonstration of Ultra Ethernet Consortium specifications, marking a major step towards production ready AI optimized Ethernet fabrics. Third, activity in Silicon Photonics and Co packaged optics continues to expand our early engagements in co packaged optics position Keysight well to capture value as the industry transitions to these architectures. We’re also seeing strong demand from next generation optical component and transceiver development and deployment driven by expansion in scale out networks. We recently expanded our optical portfolio with the industry’s first 220 GHz lightwave component analyzer to support advanced transceiver and photonics designs. Building on our existing chiplet and photonic design Solutions, our new 3D interconnect designer is also helping customers address the growing complexity of designing next generation 3D stack chip architectures. Finally, customers need system level emulation and benchmarking capabilities for data centers at scale. We saw strong adoption of our AI workload emulation solutions among hyperscalers at as they work to improve utilization of GPU power resources while addressing growing system and security complexity. This quarter we expanded keysight’s AI portfolio with the release of keysight AI Inference Builder designed to support emerging inference applications. Together these trends are driving increased demand for our solutions across multiple domains. The breadth of keysight solutions portfolio and ongoing R and D investments enable us to maintain a differentiated portfolio and an industry leading position. Turning to wireless orders saw robust growth in the quarter with activity in non terrestrial networks, 6G research and increased demand to support the supply chain associated with AI expansion. NTN is becoming an important layer of of future wireless architectures with new LEO constellation scaling and the industry targeting direct to cell deployments in the next few quarters. The increasing complexity of LEO environments including speed, dynamic link conditions and stringent positioning requirements is driving demand for keysight’s orbit emulation and Spiren’s PNT solutions which together provide customers with a differentiated ability to validate next generation NTN systems. As the industry explores new use cases for 6G such as integrated sensing and communication, energy efficient networks and expanded coverage capabilities, we are well positioned to intercept these opportunities through our portfolio of high fidelity tools for design and emulation. This quarter we expanded our collaboration with Qualcomm on RF Digital Twins and at Mobile World Congress conducted a joint demonstration with Samsung on AI RAN workflows. Next month Keysight will host the 3GPP meeting in Singapore where the timeline for 6G standardization is being solidified further reflecting Keysight’s leadership position as the ecosystem evolves towards commercialization. Turning to aerospace, defense and government, we saw broad based global momentum led by Europe supported by continued strength in Americas. As the global defense modernization priorities increasingly translate into new programs and investments in next generation systems, demand was strongest across radar and electromagnetic spectrum operations as governments and prime contractors expanded capacity to support evolving operational requirements. While activity in space, satellite and autonomous systems remained healthy, this drove ongoing customer engagement and new wins for our recently introduced radar target generation solutions. Keysight’s ability to accurately simulate radar signals and emulate threat environments is a key differentiator creating higher value system level opportunities with defense contractors and government agencies around the world. As contested spectrum environments drive a greater focus on radar survivability and autonomous operations, customers are increasingly adopting keysight solutions that include high fidelity emulation, signal analysis, PNT and RF validation to accelerate their development and deployment. This quarter we secured a key win with U.S. air Force to enable next generation operational flight line testing with more stringent requirements. Given the mission critical nature of this defense market, we also continue to see increased attach rate for our value added services to enable mission readiness and operations. Moving to Electronic Industrial Solutions group, we delivered a record quarter with all time highs for both orders and revenue with strong growth across all three EISG markets, General Electronics, semiconductors and automotive and energy. In general electronics, double digit order and revenue growth was driven by ongoing momentum in AI related innovation and infrastructure investments. Customer capacity investment for high performance PCBs was again strong this quarter. Greater complexity, increasing density, interconnects, multilayer architectures and higher speeds are driving customer engagement across multiple standards and and applications resulting in a higher test intensity for PCBs. In education, we saw healthy demand from governments and universities around the globe in the development of next generation of semiconductor workforce talent through our tailored training modules. Our solutions are also facilitating leading edge university research in advanced technologies. With key wins this quarter in quantum photonics, semiconductor and 6G in our semiconductor markets. We saw continued momentum in the pace of innovation and customer investments as the industry races to scale capacity through 2030. AI ecosystem demand further accelerated this quarter across advanced node memory and silicon photonics. Our collaborations with leading foundries from R and D to production are enabling faster development and commercial ramp timelines for increasingly complex chip architectures and packaging. This quarter we had key wafer test solution wins in support of silicon photonics and advanced node programs across Asia, the US and Europe, while our solutions for key lithography customers grew strongly as well. We expect this to be a sustainable contributor of growth for us over the next several years. Finally, in automotive and energy orders grew for the third consecutive quarter as the business has largely stabilized. Growth was across both software defined vehicles and EV charging solutions with key wins for in vehicle network, cybersecurity and over the air design and validation at OEMs and test labs globally. We’re leveraging our expertise and and leadership in networking applications to develop solutions for the new mobility market. In closing, the strong results we’re delivering in fiscal 2026 reflect the execution of our strategy we outlined at Investor Day in 2023 centered around consistently identifying and investing in long term growth opportunities across technology trends, transforming industries and global market dynamics. This framework has guided our disciplined organic and inorganic investments, enabling us to build a differentiated portfolio aligned with some of the world’s most important and fastest growing end markets. As we are focused on capitalizing on our early leadership in the AI data center infrastructure ecosystem, we’re equally excited by the broader set of secular growth opportunities we’re progressing, including defense technology, space 6G and quantum computing. We believe our portfolio’s technology leadership, product pipeline and deep customer relationships position us well to capitalize on these opportunities and continue creating long term value for our customers and shareholders. All of this value creation is enabled by the commitment of our team and the collaborative and innovative culture in the company. I want to acknowledge the entire keysight team for their hard work and dedication to our success. I’ll pass the call over to Neil to provide additional details on our financial performance and guidance.
Neal Doherty (Executive Vice President and CFO)
Neil, thank you Satish and hello everyone. We delivered outstanding results in fiscal Q2 setting new company records for orders, revenue and earnings per share. Our teams capitalized on the robust and dynamic demand environment resulting in strong double digit growth across all our business groups. Q2 orders of $2,051,000,000 were up 56% on a reported basis with acquisitions adding 700 basis points and currency adding 100 basis points on a core basis. Excluding those items, orders grew 48%. Revenue of $1.717 billion was up 31% on a reported basis and and up 24% on a core basis. Gross margin was 72.3% and operating expenses were $669 million. We delivered net income of $497,000,000 and earnings per share of $2.87. As noted in our earnings press release following the US Supreme Court decision invalidating the IEEPA tariffs in Q2, we recognized the impact of tariff refunds and the refund of associated surcharges collected from our customers. This resulted in a $40 million reduction in Q2 revenue and a $97 million reduction in costs and expenses. Excluding these one time impacts, Q2 revenue was $1,758,000,000, …
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