Keysight Technologies, Inc. (KEYS Quick QuoteKEYS - Free Report) reported strong results for the second quarter of fiscal 2026, with adjusted earnings and revenues exceeding the Zacks Consensus Estimate. The company benefited from robust demand across AI data center, semiconductor, wireless and defense markets, driving record quarterly orders and revenues.

Non-GAAP earnings were $2.87 per share, up 69% year over year and ahead of the Zacks Consensus Estimate of $2.33 by 23.18%. Revenues increased 31% year over year to a record $1.72 billion and surpassed the consensus estimate of $1.64 billion by 4.7%. Total orders reached an all-time high of $2.05 billion, reflecting accelerating customer demand.

Keysight's Communications Unit Drives Growth

The Communications Solutions Group remained the largest contributor to overall performance. Segment revenues rose 35% year over year to $1.231 billion.

Commercial Communications revenues climbed 40% to $858 million, benefiting from AI-driven networking investments and strong demand for wireline and wireless testing solutions. Aerospace, Defense and Government revenues increased 24% to $373 million, supported by radar, electronic warfare, satellite and autonomous systems programs across the Americas and Europe.

The segment generated an operating margin of 33.4%, expanding 750 basis points from the prior-year quarter as higher volume and operating leverage boosted profitability.

KEYS Industrial Markets Maintain Healthy Momentum

The Electronic Industrial Solutions Group reported revenues of $486 million, up 24% year over year. Growth reflected strength across semiconductor, automotive and general electronics markets.

Demand for wafer and lithography solutions accelerated as customers increased investments in advanced chip architectures and production ramps. Automotive and energy markets also contributed, supported by software-defined vehicle initiatives, cybersecurity applications and EV charging infrastructure projects.

Segment operating margin expanded 970 basis points year over year to 33.1%, reflecting improved scale and a favorable business mix.

KEYS Delivers Record Revenue and Orders

Keysight generated revenues of $1.717 billion compared with $1.306 billion in the year-ago quarter. Growth was supported by broad-based strength across communications, semiconductor, aerospace and industrial end markets.

Orders surged 56% year over year to a record $2.051 billion, marking the strongest quarterly order intake in the company’s history. Management noted continued momentum in AI data center deployments, advanced semiconductor development and next-generation wireless technologies, resulting in a record backlog entering the fiscal third quarter.

Keysight’s Financial Position

Profitability improved substantially during the quarter. Non-GAAP gross profit increased to $1.241 billion from $844 million in the prior-year period. Non-GAAP gross margin expanded to 72.3% from 64.6% a year ago. Non-GAAP operating income rose to $572 million from $328 million, while operating margin improved to 33.3% from 25.2%.

Management highlighted disciplined execution, favorable product mix and operational efficiencies. The quarter also included benefits related to tariff refund claims that positively affected earnings and margins.

Keysight continued to generate healthy cash flows. Cash flow from operations totaled $501 million compared with $484 million in the prior-year quarter. Free cash flow reached a record $472 million, up from $457 million a year earlier. During the quarter, the company repurchased approximately 780,000 shares for $220 million, underscoring its commitment to shareholder returns.

As of April 30, 2026, cash, cash equivalents and restricted cash totaled $2.43 billion, providing significant financial flexibility to support acquisitions, internal investments and capital returns.

Keysight Raises Outlook for Fiscal 2026

Encouraged by strong first-half execution and a robust demand environment, management raised its expectations for fiscal 2026. The company now anticipates fiscal-year revenue growth in the high-20% range.

For the third quarter of fiscal 2026, KEYS expects revenues between $1.73 billion and $1.75 billion. Non-GAAP earnings are projected in the range of $2.43-$2.49 per share.

Management expects secular technology trends, including AI infrastructure expansion, advanced semiconductor development, defense modernization and next-generation wireless deployments, to remain important growth drivers. The company also expects recently completed acquisitions to contribute approximately $375 million in fiscal 2026 revenue and remains on track to achieve $100 million of run-rate synergies by the end of the fiscal year.

KEYS’ Zacks Rank

Keysight currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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