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01/11 03:09
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial and strategic positioning: raised full-year revenue and EPS growth outlooks, resilient demand, and robust semiconductor demand. The Q&A highlights effective tariff mitigation, strategic acquisitions, and positive AI and wireline growth, despite mild EPS dilution. Operating margin targets and free cash flow outlook remain strong. The absence of market cap data implies a moderate reaction, leading to a positive stock price prediction.
Orders Orders grew 14% year-over-year in Q4, with full-year orders rising 8%. The growth was attributed to strong demand across markets, including AI infrastructure, defense modernization, and next-gen semiconductors.
Revenue Revenue increased 10% year-over-year in Q4, reaching $1.419 billion. Full-year revenue rose 8% to $5.375 billion. Growth was driven by strong performance in Communications Solutions and Electronic Industrial Solutions segments.
Earnings Per Share (EPS) EPS rose 16% year-over-year in Q4 to $1.91. Full-year EPS increased 14% to $7.16. The increase was due to higher revenue and operational efficiencies.
Free Cash Flow Record free cash flow of $1.3 billion was achieved for the full year, driven by strong operational performance and disciplined capital allocation.
Gross Margin Gross margin was 64% in Q4 and 65% for the full year, reflecting strong pricing and cost management.
Operating Margin Operating margin was 26% for both Q4 and the full year, supported by revenue growth and operational efficiencies.
Communications Solutions Group Revenue Revenue for this segment grew 11% year-over-year in Q4 to $990 million, driven by double-digit growth in wireline and high single-digit growth in wireless.
Electronic Industrial Solutions Group Revenue Revenue for this segment increased 9% year-over-year in Q4 to $429 million, supported by growth in semiconductor and general electronics.
Aerospace, Defense, and Government Revenue Revenue for this segment increased 8% year-over-year for the full year, driven by strong demand for defense modernization and advanced technologies.
Acquisitions: Acquired Spirent, Synopsys Optical Solutions Group, and Ansys Power Artist to advance software-centric solutions.
AI Data Center Builder: Launched and won the Data Center Innovation Best Product Award at the European Conference on Connectivity.
AI and Accelerated Compute: Demand driven by AI infrastructure build-outs and rapid upgrades to technology stack.
6G and Nonterrestrial Networks: Momentum in 6G research and nonterrestrial networks with collaborations and new designs.
Defense Modernization: Strong customer engagement for defense modernization and operational readiness.
Revenue Growth: Achieved 10% revenue growth in Q4 and 8% for the full year.
Free Cash Flow: Generated record free cash flow of $1.3 billion in fiscal 2025.
Operational Efficiencies: Realizing over $100 million in synergies and operational efficiencies from acquisitions.
Share Repurchase Program: Authorized an additional $1.5 billion share repurchase program.
R&D Investments: Continued investment in R&D to align with growth opportunities.
Geopolitical and policy uncertainties: The transcript mentions that geopolitical and policy uncertainties remain, which could impact semiconductor capacity, investment, and new technology roadmaps.
Tariff impacts: The company has faced tariff impacts, which they have worked to mitigate. However, these tariffs could still pose challenges to operational costs and profitability.
Mild dilution from acquisitions: The acquisitions of Spirent, the Optical Solutions Group, and Power Artists are expected to be mildly dilutive to earnings in FY '26, which could impact financial performance in the short term.
Economic uncertainties: The transcript references an uncertain environment, which could affect the company's ability to deliver long-term shareholder value.
Supply chain shifts: The global supply chain shift is mentioned as a factor, which could pose challenges in maintaining operational efficiency and meeting customer demands.
Competitive pressures in defense and aerospace: The increasingly competitive global security and defense landscape could impact Keysight's ability to secure contracts and maintain market share.
Customer priorities in automotive: In the automotive sector, customer priorities such as vehicle network compliance, security, and new sensing architectures could pose challenges if not adequately addressed.
Revenue Growth: For the first quarter of 2026, Keysight expects revenue in the range of $1.530 billion to $1.550 billion, representing 19% year-over-year growth at the midpoint. Excluding recent acquisitions, this guidance assumes 10% year-over-year revenue growth. For FY '26, revenue growth, excluding acquisitions, is expected to be at or above the high end of the 5% to 7% long-term target.
Earnings Per Share (EPS): Q1 2026 EPS is expected to be in the range of $1.95 to $2.01. FY '26 EPS growth is expected to be at or above the long-term 10% target, despite mild dilution from recent acquisitions.
Acquisitions Impact: The acquisitions of Spirent, the Optical Solutions Group, and Power Artists are expected to contribute approximately $375 million of revenue in FY '26. These acquisitions are expected to be accretive to earnings 12 months post-close, with over $100 million in synergies and operational efficiencies anticipated.
Capital Expenditures: Capital expenditures for FY '26 are expected to be approximately $160 million.
Tax Rate: A 14% non-GAAP effective tax rate is modeled for FY '26.
Market Trends and Demand: Keysight anticipates strong demand driven by technology innovation in AI, 6G, nonterrestrial networks, and defense modernization. The company expects robust growth in semiconductor capacity and investment, as well as continued momentum in AI infrastructure and automotive sectors.
Operational Efficiencies: Keysight expects to realize in excess of $100 million in synergies and operational efficiencies from recent acquisitions, while sustaining critical R&D investments.
Share Repurchase Program: In fiscal 2025, Keysight returned approximately $375 million to shareholders through share buybacks. Since the start of 2023, the company has repurchased over $1.5 billion worth of shares, representing approximately 45% of its free cash flow. Additionally, the Board has authorized a new $1.5 billion share repurchase program to continue capital returns to shareholders.
The earnings call reveals strong financial and strategic positioning: raised full-year revenue and EPS growth outlooks, resilient demand, and robust semiconductor demand. The Q&A highlights effective tariff mitigation, strategic acquisitions, and positive AI and wireline growth, despite mild EPS dilution. Operating margin targets and free cash flow outlook remain strong. The absence of market cap data implies a moderate reaction, leading to a positive stock price prediction.
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