Key financial results
- Keysight reported record third quarter fiscal 2026 results with orders of $2.091 billion, up 56% reported and 52% core.
Orders of $2.091 billion were up 56% on a reported basis.
- Revenue reached $1.846 billion, representing 36% growth year-over-year on a reported basis and 31% on a core basis, exceeding the high end of guidance.
Revenue of $1.846 billion was up 36% on a reported basis and up 31% on a core basis.
- Gross margin was 69% and operating margin reached 33.2%, which was up 820 basis points year-over-year and exceeded the long-term target range of 31% to 32%.
Gross margin was 69% and operating expenses were $661 million. Operating margin was 33.2%, up 820 basis points year-over-year
- Diluted earnings per share came in at $3.07, and net income was $531 million.
We delivered net income of $531 million and earnings per share of $3.07.
- Operating cash flow was $437 million and free cash flow was $403 million for the quarter.
generating cash flow from operations of $437 million and free cash flow of $403 million.
Business segment results
- Communications Solutions Group: The Communications Solutions Group generated revenue of $1.345 billion, up 43% reported and 36% core, with a 70.8% gross margin and 34% operating margin.
generated revenue of $1.345 billion, up 43% on a reported basis and up 36% on a core basis.
- Commercial Communications: Commercial Communications revenue reached a record $1.006 billion, up 56%, driven by wireline demand and wireless strength, with wireline exceeding wireless revenue for the first time.
generated its first $1 billion quarter, with revenue of $1.006 billion, up 56% led by outstanding growth in wireline
- Aerospace, Defense and Government: Aerospace, defense and government achieved revenue of $339 million, an increase of 14% driven by modernization and deterrence demand.
Aerospace, defense and government achieved revenue of $339 million, an increase of 14%.
- Electronic Industrial Solutions Group: The Electronic Industrial Solutions Group generated record revenue of $501 million, up 21% year-over-year, with a 64.1% gross margin and 31% operating margin.
generated a record $501 million in revenue, an increase of 21% with growth across all 3 markets
- Electronic Industrial Solutions Group: EISG experienced meaningful double-digit order growth across general electronics, semiconductors, and automotive and energy markets.
meaningful double-digit order growth across all 3 markets: general electronics, semiconductors and automotive and energy.
- Software and Services: Software and services grew double digits and represent approximately 33% of total revenue, while annual recurring revenue stood at 24% of the mix.
Software and services both grew double digits, now representing approximately 33% of Keysight revenue
Capital allocation
- Keysight repurchased approximately 640,000 shares of stock at an average price of about $326 per share for a total consideration of $210 million.
repurchased approximately 640,000 shares of Keysight's stock at an average price of approximately $326 per share for a total consideration of $210 million.
- Year-to-date share repurchases in fiscal 2026 totaled $517 million.
Year-to-date in fiscal 2026, our share repurchases totaled $517 million.
- The company ended the quarter with $2.605 billion in cash and cash equivalents.
We ended the quarter with $2.605 billion in cash and cash equivalents
Industry trends and dynamics
- Customers are investing to address engineering challenges in AI infrastructure, advanced semiconductors, defense modernization, and next-generation communications.
Customers are investing to solve increasingly complex engineering challenges across our end markets, such as AI infrastructure, advanced semiconductors, defense modernization and next-generation communications.
- The 3GPP plenary meeting in Singapore confirmed the timeline for 6G, targeting the first standard for March 2029, driving customers into funded development programs.
In June, the 3GPP plenary meeting in Singapore confirmed the time line for 6G with the industry's first standard targeted for March 2029.
- High design test intensity and shrinking design margins across high-speed components, GPUs, CPUs, and silicon photonics are expanding test and emulation requirements.
Fundamentally, the design margins are shrinking, right? So with higher data rates, lower latency, AI needs to be lossless.
- Aerospace and defense demand is supported by a heightened global focus on deterrence, radar architectural shifts, and autonomous platforms.
Modernization is raising the bar on performance across the market. In radar, the industry is accelerating its shift to advanced radar architectures.
Competitive landscape
- Management stated that Keysight's differentiated portfolio and early customer engagements enable participation across the entire AI innovation life cycle.
Our outperformance reflects the differentiation of Keysight's solutions strategy and the increasing value we bring to customers across their innovation life cycle.
- The company added nearly 3,000 new customers year-to-date, generating more than $100 million of incremental business.
year-to-date, we've added nearly 3,000 new customers, representing more than $100 million of incremental business.
- Hyperscale cloud providers represent approximately 10% of total company business directly, while exerting significant downstream ecosystem influence.
roughly 10% of our business is from that cohort of companies directly, but they do have a lot of downstream effect and influence across the ecosystem.
Macroeconomic environment
- Global demand remains broad-based, supported by sovereign investments in Europe and defense modernization requirements.
Sovereign investments in Europe is another tailwind for our defense business.
- The supply chain environment has become less flexible and serves as a near-term governor on revenue conversion given high demand levels.
It's also true that the supply environment is less flexible today than, let's say, a year ago.
Growth opportunities and strategies
- Keysight continues to target four pillars of wireline opportunity: AI infrastructure scaling, speed transitions, silicon photonics, and system-level emulation.
The 4 pillars of opportunity associated with this business, AI infrastructure scaling, speed transitions, silicon photonics and system-level emulation all continue to drive growth
- Emerging 6G technology vectors include AI-RAN, Integrated Sensing and Communication, and non-terrestrial networks.
Three emerging technology areas are AI-RAN, Integrated Sensing and Communication, or ISAC, and non-terrestrial networks, or NTN.
- Southeast Asia has become Keysight's fastest-growing region, with business more than doubled for the quarter and year.
Southeast Asia is a good example. We've more than doubled our business and is our fastest-growing region for the quarter and for the year.
Financial guidance and outlook
- For the fourth quarter of fiscal 2026, Keysight expects revenue in the range of $1.930 billion to $1.950 billion.
For the fourth quarter of 2026, we expect revenue in the range of $1.930 billion to $1.950 billion
- Q4 diluted earnings per share are expected to be in the range of $3.34 to $3.40.
we expect Q4 earnings per share to be in the range of $3.34 to $3.40
- The guidance implies fiscal year 2026 revenue growth of 32% and EPS growth of approximately 60% at the midpoint.
This will result in fiscal year 2026 revenue growth of 32% and EPS growth of approximately 60% at the midpoint.
- Q4 guidance is based on a weighted diluted share count of approximately 172 million shares.
This guidance is based on a weighted diluted share count of approximately 172 million shares.
Acquisitions and integration
- Integration efforts for recent acquisitions are largely complete, finishing system migrations one quarter ahead of schedule.
Our integration efforts are now largely complete, including systems migrations, 1 quarter ahead of schedule.
- Cost synergy realization is accelerating, with 80% to 90% of the $100 million in cost synergies expected to be realized on a run rate basis exiting fiscal 2026.
We now expect to have 80% to 90% of the $100 million in cost synergies realized on a run rate basis exiting the fiscal year.
Q4 FY2026 results
| Metric | Result | Change |
|---|---|---|
| Orders | $2.091 billion | up 56% |
| Revenue | $1.846 billion | up 36% |
| Earnings per share | $3.07 | up 79% |
| Gross margin | 69% | Not stated |
| Operating margin | 33.2% | up 820 basis points |
| Communications Solutions Group revenue | $1.345 billion | up 43% |
How management sounded
Positive (+45 on our -100 to +100 scale). Management highlighted record orders, revenue, and EPS that exceeded guidance, driven by strong secular demand across AI infrastructure and communications. Management sounded more upbeat than on 62% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Read the analyst Q&A summary and guidance and outlook for this call.
What to watch before the next call
- Supply chain constraints and incoming component availability affecting revenue conversion.
- Progress on cost synergy realization from recent acquisitions, targeting 80% to 90% of $100 million exiting the fiscal year.
- Scaling of 1.6 terabit optical transceivers and AI data center deployments.
Earlier calls
- Q2 FY2026 (May 19, 2026), tone Positive: Keysight delivered record revenue, orders and earnings per share, driven by accelerating AI and broad market strength.
