Keysight Technologies stock (US49338L1035): margin resilience and AI test demand in focus after latest earnings

Keysight Technologies has reported its latest quarterly figures while navigating a softer electronics cycle and rising AI-related test demand. What is driving the business now, and which segments matter most for US-focused investors?

Keysight Technologies has remained in the spotlight after releasing results for its fiscal second quarter 2024, which ended on April 30, 2024, showing resilient profitability despite lower revenue in a still-muted electronics demand environment, according to Keysight investor update as of 05/20/2024. The measurement specialist continues to benefit from long-term trends in 5G, cloud, and AI-related test equipment, even as near-term orders fluctuate, as highlighted by comments from management and sector coverage reported by Reuters as of 05/21/2024.

As of: 05/20/2026

By the editorial team – specialized in equity coverage.

At a glance

• Name: Keysight Technologies
• Sector/industry: Electronic measurement and test equipment
• Headquarters/country: Santa Rosa, United States
• Core markets: Communications, electronics, aerospace & defense, semiconductor and automotive testing
• Key revenue drivers: Network and wireless test, semiconductor and electronics validation, aerospace and defense solutions
• Home exchange/listing venue: New York Stock Exchange (ticker: KEYS)
• Trading currency: USD

Keysight Technologies: core business model

Keysight Technologies traces its roots back to the test and measurement activities historically associated with Hewlett-Packard and later Agilent, but today operates as a focused provider of electronic design and test solutions for a broad range of industries. The company develops instruments, software and services that help engineers design, simulate, validate and manufacture electronic systems and components. This spans oscilloscopes, signal analyzers, network analyzers and protocol test platforms used across labs and production sites worldwide, according to the company’s corporate materials published on 10/30/2024.

The business is organized around solutions that address the full workflow from design to deployment in communications, networking, aerospace and defense, automotive, energy, and semiconductor markets. In practice, this means Keysight’s tools are embedded in R&D environments validating new chip architectures, wireless standards, and high-speed interconnects, as well as in manufacturing lines where finished devices are tested for compliance and reliability. Recurring software and services play a growing role, complementing the historically hardware-centric product portfolio and supporting more stable revenue streams over time, according to the fiscal 2023 Form 10-K filed on 12/19/2023.

Keysight generates revenue globally, with a strong presence in North America, Europe and Asia-Pacific. Customers range from large telecom operators and network equipment makers to semiconductor foundries, consumer electronics brands, automotive suppliers and government agencies. In many of these segments the company positions itself as a high-value partner focusing on precision, performance and integration with customers’ design tools. This approach is particularly relevant in complex technologies like 5G, 6G research and emerging high-speed computing interfaces, where precise measurement is critical and switching costs can be significant, as noted in sector commentary by Bloomberg as of 03/15/2024.

Main revenue and product drivers for Keysight Technologies

Keysight’s revenue base is anchored in two primary business segments: Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG). CSG serves customers in wireless, wireline, and data-center-related markets, providing test systems for cellular infrastructure, handsets, cloud networking and related applications. EISG focuses on electronic design and test for industrial, automotive, energy and general electronics customers, including solutions for power electronics, battery testing and automotive radar validation, according to the company’s fiscal 2023 annual report released on 12/19/2023.

In fiscal 2023, Keysight reported total revenue of approximately 5.46 billion USD for the year ended 10/31/2023, with CSG contributing the majority and EISG providing a meaningful and growing share, according to the same annual report dated 12/19/2023. Within CSG, demand patterns are closely tied to investment cycles in wireless infrastructure, device launches and network upgrades, making orders somewhat cyclical. EISG tends to be more diversified by end market, with exposure to automotive electrification, industrial automation and general electronics that can provide partial counterweights when telecom spending slows, as discussed in coverage by Reuters as of 02/21/2024.

Software, services and solutions bundles represent another important driver, as Keysight integrates application-specific software, automation and analytics into its platforms. Management has highlighted that these offerings can enhance customer stickiness and support margins because they deliver ongoing value around installed instruments. This trend aligns with broader industry moves toward subscription-based licensing and cloud-connected measurement solutions, where updates and new capabilities are delivered over time instead of via one-off purchases, according to remarks in the fiscal Q2 2024 earnings call transcript published on 05/20/2024.

Geographically, Asia-Pacific remains a significant revenue contributor, reflecting the concentration of electronics manufacturing and R&D in countries such as China, Taiwan and South Korea. However, North America and Europe also represent large markets, particularly for aerospace and defense, advanced communications research and high-end semiconductor design. Keysight’s ability to sell into both R&D environments and production lines gives it exposure to early-stage innovation budgets as well as later-stage volume deployments, which can smooth demand over the course of product lifecycles, based on data from the fiscal 2023 Form 10-K dated 12/19/2023.

Latest quarterly results and margin picture

For its fiscal second quarter 2024, Keysight reported revenue of 1.18 billion USD, down from 1.39 billion USD in the prior-year quarter, reflecting slower spending in certain communications and semiconductor markets, according to Keysight investor update as of 05/20/2024. Despite the lower top line, the company delivered GAAP net income of 230 million USD and non-GAAP earnings per share of 1.63 USD for the quarter, helped by cost discipline and an improved mix of software and services.

Operating margin remained robust, with non-GAAP operating margin around the mid-20% range in the quarter, a level that stands out against many hardware-focused industrial peers according to sector comparisons cited by Morningstar as of 05/21/2024. Management pointed to continued demand in aerospace and defense, as well as pockets of strength in automotive and high-speed digital testing, as factors supporting gross margin resilience even as certain communications accounts delayed or moderated capital spending.

Guidance for the following quarter reflected cautious optimism. Keysight forecast revenue in the range of 1.16 billion to 1.18 billion USD and non-GAAP earnings per share between 1.55 and 1.61 USD for fiscal third quarter 2024, signaling an expectation that demand conditions would remain mixed but gradually improve in some segments, according to the same Q2 2024 press release dated 05/20/2024. The company reiterated its focus on maintaining strong free cash flow and disciplined capital allocation, including investments in R&D to capture long-term opportunities in AI-related computing and next-generation wireless.

From a balance sheet perspective, Keysight exited the quarter with a solid cash position and manageable leverage, which provides flexibility to continue funding acquisitions, share repurchases and organic growth initiatives. The company has historically favored buybacks over dividends as a mechanism to return cash to shareholders, and no regular dividend was announced alongside the Q2 2024 results, according to the investor materials released on 05/20/2024. This capital allocation stance may particularly resonate with investors who prioritize earnings growth and share count reduction over current income.

Industry trends and competitive position

The electronic test and measurement market in which Keysight operates is highly specialized and closely linked to technological innovation cycles in communications, computing and electronics. Key secular drivers include the rollout and evolution of 5G and future 6G networks, growth in data center capacity, the proliferation of connected devices and the increasing complexity of semiconductor designs. Each new technology generation typically requires more sophisticated testing, creating opportunities for suppliers of high-performance instruments and software, as outlined in a market overview by IDC as of 04/10/2024.

Within this landscape, Keysight competes with established players such as Rohde & Schwarz, Tektronix and National Instruments in various product categories. Competitive dynamics often center around measurement performance, software integration, customer support and the breadth of application-specific solutions. Keysight’s broad portfolio across RF, microwave, digital, and automotive test, combined with relationships in both commercial and government markets, positions it as one of the larger global vendors in this niche. The company’s history and installed base in labs and production environments can also be a barrier to entry for smaller rivals, according to industry commentary from S&P Global Market Intelligence as of 03/22/2024.

Artificial intelligence and high-performance computing represent an emerging driver for the test and measurement sector. As AI models require increasingly advanced chips and high-speed interconnects, validation of signal integrity, power consumption and thermal behavior becomes critical. This trend can support demand for Keysight’s high-speed digital and semiconductor test solutions, although the timing and magnitude of related orders may be influenced by capex cycles at cloud providers and semiconductor manufacturers. At the same time, the company must navigate periodic downturns in consumer electronics and smartphone demand, which historically have weighed on test equipment orders during weak cycles, as discussed in coverage by Financial Times as of 02/22/2024.

Why Keysight Technologies matters for US investors

For US-focused investors, Keysight represents exposure to several strategic technology themes that play a central role in the country’s innovation ecosystem. The company is listed on the New York Stock Exchange under the ticker KEYS and reports in US dollars, which simplifies portfolio integration for domestic investors. Its customers include major US-based semiconductor companies, communications equipment manufacturers and defense contractors, aligning the business with national priorities in connectivity, security and advanced manufacturing, according to the fiscal 2023 Form 10-K filed on 12/19/2023.

Keysight’s results are influenced by US federal research budgets, defense spending and commercial capex in telecom and cloud infrastructure. An uptick in investment in 5G, 6G research programs or AI data centers can translate into higher demand for high-performance test equipment sold to US labs and production facilities. Conversely, delays in network rollouts or tighter tech capex can weigh on orders and revenue. This sensitivity to broader technology cycles means the stock can provide a barometer for certain segments of the US innovation economy, as noted by analysts quoted in CNBC as of 05/21/2024.

From a diversification perspective, Keysight offers a different profile from many US large-cap technology firms because it focuses on hardware, software and services that enable R&D and manufacturing rather than on consumer-facing platforms. Its revenue mix across communications, industrial and aerospace and defense can provide some offsetting dynamics across cycles. However, investors should be aware that the stock may still experience volatility around earnings reports and industry data points, particularly when market expectations for telecom and semiconductor spending shift rapidly.

Conclusion

Keysight Technologies is navigating a period of softer demand in parts of the communications and semiconductor markets while maintaining solid margins and cash generation. The latest quarterly figures underline both the cyclicality of its end markets and the strength of its business model in high-value test and measurement solutions. Long-term growth drivers such as 5G evolution, AI computing and automotive electrification continue to support the strategic relevance of its portfolio, even if near-term orders remain uneven across regions and customer groups. For US investors, the stock offers targeted exposure to enabling technologies behind major innovation trends, but performance is likely to remain sensitive to shifts in technology capex, macro conditions and competitive dynamics in the specialized test equipment space.

Disclaimer: This article does not constitute investment advice. Stocks are volatile financial instruments.