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KEYS Rides on Strength in the CSG Segment: More Upside Ahead?
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Key Takeaways
KEYS' CSG revenues rose 35% in Q2 FY26 as AI and networking demand boosted testing solutions.
Keysight is seeing strong momentum from expanding AI infrastructure and advanced testing needs.
KEYS saw strong aerospace and defense demand across radar, satellite and autonomous systems.
Keysight Technologies, Inc.’s (KEYS - Free Report) Communications Solutions Group (CSG) is benefiting from strong demand across AI data centers, next-generation networking, aerospace & defense modernization, and emerging wireless technologies. In the second quarter of fiscal 2026, CSG revenues increased 35% year over year to $1.23 billion, while operating margin expanded 750 basis points to 33.4%.
As AI clusters become increasingly complex, customers are investing heavily in interoperability testing, system validation, and production testing solutions. Keysight is benefiting from demand for solutions supporting GPUs, CPUs, DPUs, switches, NICs, PCIe, Ethernet and UALink architectures. The company also saw strong adoption of ultra-high-density interconnect solutions. It is seeing accelerating momentum in its wireline business due to expanding AI infrastructure deployments. The industry is transitioning from 800G deployments toward 1.6-terabit and future 3.2-terabit architectures, creating significant opportunities for testing and validation solutions.
The Aerospace, Defense & Government business also remains a major growth driver. Keysight is seeing strong demand from Europe and the Americas for radar systems, electromagnetic spectrum operations, autonomous defense systems, space and satellite technologies. The company expects strong momentum across AI data centers, defense technology, semiconductors and wireless markets to continue.
How Are Competitors Faring?
Viavi Solutions Inc. (VIAV - Free Report) is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. The product portfolio of the company offers end-to-end network visibility and analytics that help build, test, certify, maintain, and optimize complex physical and virtual networks.
In the third quarter of fiscal 2026, the NSE segment generated $321.5 million in revenues, up 54.4% year over year. The segment accounted for 79% of total revenues. Acquisition of Spirent product lines and strong demand across lab, production and field products, mainly from the data center ecosystem and aerospace & defense sectors, drove solid sales growth in this segment.
Teradyne, Inc. (TER - Free Report) designs, develops, manufactures and sells automated test equipment and robotics products. Its automatic test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s wafer-to-AI data center strategy is translating into demand across Semiconductor Test, Product Test, and Robotics, supported by a portfolio that spans wafer, package, board, and system-level needs. Teradyne’s AI-related demand accounted for nearly 70% of fiscal first-quarter revenues, up from about 60% in the fiscal fourth quarter, as customers increased investment across compute, networking, memory and power devices.
Going by the price/earnings ratio, the company’s shares currently trade at 35.32 forward earnings, lower than 40.33 for the industry but above its mean of 27.68.
Image Source: Zacks Investment Research
The company’s earnings estimates for 2026 and 2027 have improved over the past 60 days.
View the Zacks #1 Rank List
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KEYS Rides on Strength in the CSG Segment: More Upside Ahead?
Key Takeaways
Keysight Technologies, Inc.’s (KEYS - Free Report) Communications Solutions Group (CSG) is benefiting from strong demand across AI data centers, next-generation networking, aerospace & defense modernization, and emerging wireless technologies. In the second quarter of fiscal 2026, CSG revenues increased 35% year over year to $1.23 billion, while operating margin expanded 750 basis points to 33.4%.
As AI clusters become increasingly complex, customers are investing heavily in interoperability testing, system validation, and production testing solutions. Keysight is benefiting from demand for solutions supporting GPUs, CPUs, DPUs, switches, NICs, PCIe, Ethernet and UALink architectures. The company also saw strong adoption of ultra-high-density interconnect solutions. It is seeing accelerating momentum in its wireline business due to expanding AI infrastructure deployments. The industry is transitioning from 800G deployments toward 1.6-terabit and future 3.2-terabit architectures, creating significant opportunities for testing and validation solutions.
The Aerospace, Defense & Government business also remains a major growth driver. Keysight is seeing strong demand from Europe and the Americas for radar systems, electromagnetic spectrum operations, autonomous defense systems, space and satellite technologies. The company expects strong momentum across AI data centers, defense technology, semiconductors and wireless markets to continue.
How Are Competitors Faring?
Viavi Solutions Inc. (VIAV - Free Report) is a leading provider of network test, monitoring and service enablement solutions to diverse sectors across the globe. The product portfolio of the company offers end-to-end network visibility and analytics that help build, test, certify, maintain, and optimize complex physical and virtual networks.
In the third quarter of fiscal 2026, the NSE segment generated $321.5 million in revenues, up 54.4% year over year. The segment accounted for 79% of total revenues. Acquisition of Spirent product lines and strong demand across lab, production and field products, mainly from the data center ecosystem and aerospace & defense sectors, drove solid sales growth in this segment.
Teradyne, Inc. (TER - Free Report) designs, develops, manufactures and sells automated test equipment and robotics products. Its automatic test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries. Teradyne’s wafer-to-AI data center strategy is translating into demand across Semiconductor Test, Product Test, and Robotics, supported by a portfolio that spans wafer, package, board, and system-level needs. Teradyne’s AI-related demand accounted for nearly 70% of fiscal first-quarter revenues, up from about 60% in the fiscal fourth quarter, as customers increased investment across compute, networking, memory and power devices.
KEYS’ Price Performance, Valuation and Estimates
Keysight has gained 119.3% in the past year compared with the Electronics - Measuring Instruments industry’s growth of 123.4%.
Image Source: Zacks Investment Research
Going by the price/earnings ratio, the company’s shares currently trade at 35.32 forward earnings, lower than 40.33 for the industry but above its mean of 27.68.
Image Source: Zacks Investment Research
The company’s earnings estimates for 2026 and 2027 have improved over the past 60 days.
Image Source: Zacks Investment Research
KEYS carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.