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Keysight Falls 11.1% in 3 Months While AI Demand Keeps Accelerating
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Key Takeaways
Keysight shares fell 11.1% in three months even as Q3 revenues rose 36% and non-GAAP EPS jumped 79%.
KEYS orders surged 56% to a record $2.091B as AI infrastructure and connectivity demand accelerated.
KEYS faces supply constraints, policy uncertainty and a lower recurring-revenue mix despite record backlog.
Keysight Technologies, Inc. (KEYS - Free Report) shares have fallen 11.1% in the past three months even as orders, revenues and earnings accelerated. The pullback raises a practical question for investors: has the recent weakness created room for better returns, or are unresolved risks still holding back the stock?
The answer is mixed. Demand tied to artificial intelligence (AI) infrastructure is expanding quickly, but valuation, supply constraints and policy exposure leave less room for a simple bargain argument.
The three-month decline follows an 82.1% gain in the past year. The recent weakness is therefore a test of whether expectations had moved ahead of fundamentals during the longer-term rally.
Operating results have moved in the opposite direction. Third-quarter fiscal 2026 revenues climbed 36% year over year to $1.846 billion, while non-GAAP earnings reached $3.07 per share, up 79%. Management expects fourth-quarter revenues of $1.930-$1.950 billion, with the midpoint implying 37% year-over-year growth.
Keysight Technologies Inc. Price, Consensus and EPS Surprise
KEYS Order Growth Signals Demand Still Has Momentum
Orders increased 56% year over year to a record $2.091 billion in the third quarter. Commercial Communications revenues rose 56% to $1.006 billion as AI infrastructure scaling, speed transitions and next-generation connectivity supported demand.
AI-driven validation demand extends beyond Keysight. Advantest Corporation (ATEYY - Free Report) supplies semiconductor test systems for AI and high-performance computing devices. Cadence Design Systems, Inc. (CDNS - Free Report) is extending AI-driven chip design and verification tools, reflecting rising complexity across the silicon workflow.
Keysight’s Backlog Adds Visibility but Supply Risk Remains
Keysight ended the quarter with record backlog, and orders remained above quarterly revenues. Scheduled fourth-quarter shipments add visibility as the company works through elevated demand.
That strength also creates an execution risk. Demand for differentiated AI products is exceeding supply capability, so manufacturing constraints or longer lead times could delay shipments and shift revenue recognition between periods.
KEYS Valuation Leaves Room but Not a Clear Bargain
KEYS trades at 22.6X forward 12-month earnings, below its five-year median of 24.02X and the Zacks sub-industry’s 25.43X. The current multiple is therefore below both its historical midpoint and the sub-industry comparison.
The multiple still sits above the Zacks Computer and Technology sector’s 20.4X and the S&P 500’s 19.8X. That makes valuation more balanced than outright cheap, particularly after the longer-term rally.
Keysight’s Risks Could Keep Volatility Elevated
Currency reduced third-quarter reported order growth by about one percentage point. China-related policy shifts, export controls and changing tariff rules remain sources of uncertainty. At July 31, $64 million of tariff-refund claims remained outstanding, with timing and funding uncertain.
Recurring-revenue diversification has softened as product businesses have grown faster. Software and services represented about 33% of third-quarter revenues, down from about 36% in the second quarter, while annual recurring revenue fell to 24% of the mix from 27%.
The pullback has lowered KEYS' valuation while order growth and AI-related demand remain strong. Supply constraints, policy exposure and a lower recurring-revenue mix, however, keep the investment setup from being one-sided.
KEYS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for current-fiscal-year earnings has moved 14.3% higher in the past four weeks, supporting the positive near-term revision signal.
The Zacks Style Scores are less supportive. KEYS has a VGM Score of D, Value Score of D, Growth Score of C and Momentum Score of C. Because Style Scores complement the Rank, this combination presents a more nuanced near-term picture than the Rank alone.
View the Zacks #1 Rank List
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Keysight Falls 11.1% in 3 Months While AI Demand Keeps Accelerating
Key Takeaways
Keysight Technologies, Inc. (KEYS - Free Report) shares have fallen 11.1% in the past three months even as orders, revenues and earnings accelerated. The pullback raises a practical question for investors: has the recent weakness created room for better returns, or are unresolved risks still holding back the stock?
The answer is mixed. Demand tied to artificial intelligence (AI) infrastructure is expanding quickly, but valuation, supply constraints and policy exposure leave less room for a simple bargain argument.
Keysight’s 3-Month Pullback Defies Stronger Fundamentals
The three-month decline follows an 82.1% gain in the past year. The recent weakness is therefore a test of whether expectations had moved ahead of fundamentals during the longer-term rally.
Operating results have moved in the opposite direction. Third-quarter fiscal 2026 revenues climbed 36% year over year to $1.846 billion, while non-GAAP earnings reached $3.07 per share, up 79%. Management expects fourth-quarter revenues of $1.930-$1.950 billion, with the midpoint implying 37% year-over-year growth.
Keysight Technologies Inc. Price, Consensus and EPS Surprise
Keysight Technologies Inc. price-consensus-eps-surprise-chart | Keysight Technologies Inc. Quote
KEYS Order Growth Signals Demand Still Has Momentum
Orders increased 56% year over year to a record $2.091 billion in the third quarter. Commercial Communications revenues rose 56% to $1.006 billion as AI infrastructure scaling, speed transitions and next-generation connectivity supported demand.
AI-driven validation demand extends beyond Keysight. Advantest Corporation (ATEYY - Free Report) supplies semiconductor test systems for AI and high-performance computing devices. Cadence Design Systems, Inc. (CDNS - Free Report) is extending AI-driven chip design and verification tools, reflecting rising complexity across the silicon workflow.
Keysight’s Backlog Adds Visibility but Supply Risk Remains
Keysight ended the quarter with record backlog, and orders remained above quarterly revenues. Scheduled fourth-quarter shipments add visibility as the company works through elevated demand.
That strength also creates an execution risk. Demand for differentiated AI products is exceeding supply capability, so manufacturing constraints or longer lead times could delay shipments and shift revenue recognition between periods.
KEYS Valuation Leaves Room but Not a Clear Bargain
KEYS trades at 22.6X forward 12-month earnings, below its five-year median of 24.02X and the Zacks sub-industry’s 25.43X. The current multiple is therefore below both its historical midpoint and the sub-industry comparison.
The multiple still sits above the Zacks Computer and Technology sector’s 20.4X and the S&P 500’s 19.8X. That makes valuation more balanced than outright cheap, particularly after the longer-term rally.
Keysight’s Risks Could Keep Volatility Elevated
Currency reduced third-quarter reported order growth by about one percentage point. China-related policy shifts, export controls and changing tariff rules remain sources of uncertainty. At July 31, $64 million of tariff-refund claims remained outstanding, with timing and funding uncertain.
Recurring-revenue diversification has softened as product businesses have grown faster. Software and services represented about 33% of third-quarter revenues, down from about 36% in the second quarter, while annual recurring revenue fell to 24% of the mix from 27%.
KEYS Signals Stay Strong Despite Mixed Style Scores
The pullback has lowered KEYS' valuation while order growth and AI-related demand remain strong. Supply constraints, policy exposure and a lower recurring-revenue mix, however, keep the investment setup from being one-sided.
KEYS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for current-fiscal-year earnings has moved 14.3% higher in the past four weeks, supporting the positive near-term revision signal.
The Zacks Style Scores are less supportive. KEYS has a VGM Score of D, Value Score of D, Growth Score of C and Momentum Score of C. Because Style Scores complement the Rank, this combination presents a more nuanced near-term picture than the Rank alone.