Keysight Technologies (NYSE: KEYS): Fiscal Year 2025 Investor Briefing

1.0 Introduction: A Year of Accelerating Momentum and Strategic Execution

Fiscal year 2025 marked a significant period of achievement for Keysight Technologies, characterized by a return to robust full-year growth, accelerating order momentum, and the successful execution of key strategic initiatives. The company demonstrated remarkable resilience and market leadership, capitalizing on durable, long-term secular trends to deliver results that exceeded expectations. This briefing details Keysight's strong financial performance, analyzes the strategic drivers underpinning its growth across core business segments, and outlines its confident outlook for the future.

The year's success is best captured by President and CEO, Satish Dhanasekaran:

"Keysight delivered an outstanding quarter and strong close to the fiscal year, returning the company to full-year growth with order momentum accelerating through the year. These results reflect our leadership across the markets we serve and sustained demand for Keysight's highly differentiated solutions.”

This document will now provide a comprehensive overview of the financial results that validate this confident assessment.

2.0 Fiscal Year 2025 Financial Performance: A Foundation of Strength and Growth

Keysight's fiscal year 2025 financial results are a clear testament to the company's operational discipline, the strength of its business model, and its ability to generate significant shareholder value in a dynamic market. These metrics underscore a well-executed strategy that translates market leadership into tangible financial success.

FY2025 Full-Year Non-GAAP Financial Highlights	Value
Revenue	$5.375 billion (+8% YoY)
Orders	$5.452 billion (+8% YoY)
Earnings Per Share (EPS)	$7.16 (+14% YoY)
Operating Margin	25.9%
Free Cash Flow	Record $1.28 billion

These results paint a picture of a healthy and expanding business. The 8% year-over-year growth in both revenue and orders signifies a strong return to full-year growth and robust, sustained demand for Keysight's solutions. This momentum is further evidenced by a substantial $2.7 billion order backlog entering fiscal 2026. The 14% increase in earnings per share highlights strong operational leverage and profitability, while the record-setting free cash flow of $1.28 billion demonstrates the company's exceptional efficiency and provides significant flexibility for strategic investments and shareholder returns.

This strong financial foundation is directly powered by the performance of Keysight's core business segments.

3.0 Analysis of Core Growth Engines and Market Leadership

3.1. Keysight's exceptional performance is the result of its strategic alignment with major secular growth trends that are reshaping global industries. The company's two primary segments—the Communications Solutions Group (CSG) and the Electronic Industrial Solutions Group (EISG)—are positioned at the epicenter of innovation in next-generation connectivity, artificial intelligence, defense modernization, and industrial transformation. This section deconstructs the performance of each segment to reveal the specific market dynamics fueling their success.

3.2. Communications Solutions Group (CSG): Capitalizing on Next-Generation Connectivity and Defense Modernization

The Communications Solutions Group delivered strong results, with fourth-quarter revenue reaching $990 million (+11% YoY) and achieving full-year revenue growth of 9%. This performance was broad-based across its key end markets.

• Commercial Communications: This end market was a standout performer, with revenue growing 12% YoY in the fourth quarter. Growth was fueled by significant R&D and infrastructure investments in AI data centers, non-terrestrial networks (NTN), 5G-Advanced standards, and early-stage 6G research. This includes collaborating directly with industry leaders like Broadcom to validate their next-generation 1.6 terabit networking silicon and custom AI accelerators. Furthermore, Keysight is demonstrating its central role in the AI supply chain through partnerships, such as with Meta at the Open Compute Project Conference, to validate large-scale GPU and networking deployments. The wireline business, in particular, was a key driver, setting a new record for both orders and revenue in the fiscal year.
• Aerospace, Defense & Government: This segment also delivered impressive results, with fourth-quarter revenue increasing 9% YoY and achieving record orders for the fiscal year. This momentum is driven by global investments in defense modernization, the rapid expansion of space and satellite applications, and heightened national security initiatives. This is evidenced by key wins with U.S. prime contractors to accelerate automated device verification for phased array antennas used in space and tactical communications, as well as new contracts for high-performance spectrum and network analysis for advanced radar and air defense applications.

3.3. Electronic Industrial Solutions Group (EISG): Powering Innovation Across a Diversified Industrial Base

The Electronic Industrial Solutions Group demonstrated its strength and diversification, reporting fourth-quarter revenue of $429 million (+9% YoY) and full-year revenue growth of 6%. The segment's growth reflects its critical role in enabling innovation across the industrial and technology landscape.

• Semiconductor Solutions: Keysight delivered double-digit revenue growth in its wafer test solutions. This was directly linked to capacity expansion by foundries and Integrated Device Manufacturers (IDMs) to meet the surging demand for AI-driven advanced nodes, high-bandwidth memory (HBM), and silicon photonics. Keysight’s deep, collaborative relationships with the world's leading foundries and IDMs provide unique insight into their technology roadmaps, allowing the company to address end-to-end needs from early R&D to high-volume wafer fabrication.
• General Electronics: Revenue grew for the third consecutive quarter, posting double-digit year-over-year growth. This was driven by robust demand from industrial end markets and the expanding digital health solutions space.
• Automotive: After a period of market adjustment, revenue in the automotive sector has stabilized. Critically, orders returned to growth after six consecutive quarters of decline, signaling a positive inflection point and renewed investment from customers in areas like software-defined vehicles and electrification.

This powerful organic growth is being intentionally amplified by a series of strategic acquisitions designed to accelerate the company's long-term vision.

4.0 Strategic Acquisitions: Accelerating a Software-Centric Future

In fiscal year 2025, Keysight executed a series of targeted acquisitions, underscoring its commitment to a software-centric solutions strategy. This strategy is designed to expand the company's addressable market, enhance its portfolio with high-margin software and services, and deepen its alignment with the most compelling long-term growth vectors in the industry.

The key strategic acquisitions completed in FY2025 include:

• Spirent
• Synopsys' Optical Solutions Group
• Ansys' PowerArtist

The combined strategic and financial impact of these acquisitions is significant, positioning Keysight for accelerated growth and enhanced profitability.

1. Expanded Market Opportunity: These acquisitions expand Keysight's served addressable market by approximately $1.25 billion, opening new avenues for growth and customer engagement.
2. Enhanced Software Portfolio: The transactions meaningfully advance Keysight's software-centric strategy, growing the company's overall software mix by approximately 300 basis points and adding critical capabilities in advanced design, simulation, and assurance.
3. Alignment with Secular Trends: Each acquisition is precisely aligned with durable, high-growth drivers, including AI, 6G, space and satellite, and automotive, ensuring Keysight remains at the forefront of technological innovation.
4. Financial Projections: The acquisitions are expected to contribute approximately $375 million in revenue in fiscal year 2026 at an attractive gross margin of greater than 75%. They are projected to be accretive to EPS within 12 months post-close.

These strategic investments are a key component of Keysight's disciplined capital allocation framework, which balances growth initiatives with direct returns to shareholders.

5.0 Disciplined Capital Allocation and Shareholder Returns

Keysight's strong and consistent free cash flow generation provides the financial strength to execute a balanced and shareholder-friendly capital allocation strategy. In fiscal year 2025, the company demonstrated its commitment to both reinvesting for future growth and returning significant capital to shareholders.

Strategic Investments: Deployed $1.7 billion for acquisitions and continued robust investment in internal R&D to fuel organic innovation.

Share Repurchases: Returned $375 million to shareholders through the repurchase of approximately 2.4 million shares.

New Authorization: Signaling deep confidence in the company's long-term value creation potential, the Board of Directors has authorized a new $1.5 billion share repurchase program.

This new, substantial repurchase authorization reinforces the company's positive long-term view and serves as a natural transition to its confident forward-looking guidance.

6.0 Confident FY2026 Outlook and Financial Guidance

Keysight enters fiscal year 2026 from a position of significant strength. A robust order backlog of $2.7 billion and a healthy sales funnel provide excellent visibility and underpin a confident outlook for the year ahead. Management has provided the following guidance, reflecting strong operational momentum and the initial contribution from recent acquisitions.

Q1 FY2026 Guidance	Value
Revenue	$1.530 billion – $1.550 billion
Non-GAAP Earnings per share	$1.95 – $2.01

Looking at the full fiscal year 2026, Keysight expects its core business (excluding the impact of recent acquisitions) to deliver revenue growth that is at or above the high end of its 5%-7% long-term target. Furthermore, despite the expectation of mild, short-term dilution from the acquisitions, the underlying strength of the core business is projected to drive full-year FY2026 EPS growth at or above the company's long-term 10% target.

This guidance is a direct reflection of strong execution, strategic alignment with key growth markets, and confidence in the company's ability to deliver sustained, profitable growth.

7.0 Conclusion: The Keysight Investment Thesis

Fiscal year 2025 was a year in which Keysight Technologies clearly demonstrated its ability to execute its strategy, deliver strong financial results, and position itself for an even more promising future. The company's performance, driven by both organic growth and strategic acquisitions, has created accelerating momentum heading into fiscal year 2026. The investment thesis for Keysight is clear, compelling, and built on four key pillars:

• Market Leadership: Uniquely positioned at the forefront of durable, high-growth secular trends, including Artificial Intelligence, 6G, next-generation semiconductor design, and defense modernization.
• Financial Strength: A consistent track record of robust, double-digit earnings growth, strong and stable operating margins, and record free cash flow generation that fuels a disciplined capital allocation strategy.
• Strategic Execution: A proven ability to enhance strong organic growth with strategic, software-focused acquisitions that expand market opportunity, increase recurring revenue, and enhance overall profitability.
• Confident Outlook: A strong forward-looking guidance for FY2026, supported by a significant order backlog and a clear commitment to shareholder returns through a newly authorized $1.5 billion share repurchase program.

8.0 Appendix: Important Disclosures

This document has been prepared for informational purposes. The information contained herein is based on company data and public filings.

Forward-Looking Statements This briefing contains forward-looking statements that involve risks and uncertainties. These statements include, but are not limited to, projections regarding future financial performance, market trends, strategic initiatives, and capital allocation. Actual results may differ materially from those expressed or implied. For a more complete discussion of the risks and uncertainties, please refer to Keysight's filings with the U.S. Securities and Exchange Commission (SEC).

Use of Non-GAAP Financial Measures This document includes certain non-GAAP financial measures, such as non-GAAP revenue, earnings per share, operating margin, and free cash flow. Management uses these metrics to assess the underlying performance of the business. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with Generally Accepted Accounting Principles (GAAP). Reconciliations of non-GAAP measures to their most directly comparable GAAP measures are available in the company's official financial reports and earnings releases, which can be found on its investor relations website.