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Should Investors Buy KEYS as Growth Surges but Valuation Looks Mixed?
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Key Takeaways
Keysight expects fiscal 2026 revenues to rise 32% and earnings to grow 59.9%.
KEYS trades at 22.6X forward earnings, below its five-year median but above broader benchmarks.
KEYS generated $403M in Q3 free cash flow as estimate revisions and AI demand strengthened.
Keysight Technologies, Inc. (KEYS - Free Report) is entering the final stretch of fiscal 2026 with faster growth across artificial intelligence infrastructure, communications and semiconductors. The operating picture is improving quickly, but the valuation case is less clear.
Investors therefore have to balance sharply higher earnings expectations and positive estimate revisions against a forward multiple that still sits above broader market benchmarks.
Keysight’s Growth Case Is Accelerating
Keysight expects fiscal 2026 revenues to increase 32%, while projected earnings growth for the year is 59.9%. Third-quarter revenues rose 36% year over year to $1.846 billion and non-GAAP earnings reached $3.07 per share, up from $1.72 a year earlier.
AI-related demand is broadening the opportunity set. Advantest Corporation (ATEYY - Free Report) is expanding semiconductor test solutions for AI and high-performance computing devices, including silicon photonics applications. Cadence Design Systems, Inc. (CDNS - Free Report) is pushing AI further into chip design and verification through its ChipStack AI platform.
KEYS Valuation Sends a Mixed Message
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. That comparison leaves some room relative to the stock’s own history and direct industry benchmark.
Image Source: Zacks Investment Research
The multiple remains above the Zacks Computer and Technology sector’s 20.4X and the S&P 500’s 19.8X. The stock is therefore not broadly inexpensive on forward earnings despite its discount to the sub-industry.
Keysight’s Estimate Revisions Strengthen the Case
The Zacks Consensus Estimate for current-fiscal-year earnings has moved 14.3% higher in the past four weeks and 14.4% higher in the past 12 weeks. Those revisions have accompanied stronger reported results and a higher earnings outlook.
The next-quarter earnings estimate has risen 27.7% over the past month. That change adds another positive revision signal, though it does not eliminate the valuation and execution risks surrounding the stock.
KEYS Still Faces Policy, Mix and Timing Risks
Currency reduced third-quarter reported order growth by about one percentage point. China demand, tariffs and export-policy changes also remain potential pressure points, while $64 million of tariff-refund claims were still outstanding at July 31.
Execution risk is also visible in order timing and supply. Demand for differentiated AI products has exceeded supply capability, and annual recurring revenue fell to 24% of the mix from 27% as product businesses grew faster.
Third-quarter cash flow from operations totaled $437 million and free cash flow was $403 million. Keysight also repurchased about 640,000 shares for $210 million during the quarter, bringing fiscal-year-to-date repurchases to $517 million.
Acquisition integration is largely complete, one quarter ahead of schedule. Management expects 80% to 90% of the $100 million cost-synergy target to be realized on a run-rate basis exiting fiscal 2026, supporting additional operating flexibility.
KEYS Strong Signal Meets Weaker Style Scores
The investment setup is not one-sided. Accelerating growth, upward estimate revisions and a valuation below Keysight’s own five-year median are positives, while the premium to broader benchmarks, policy exposure and recurring-revenue mix keep the case balanced.
KEYS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its VGM Score of D and Value Score of D are less supportive, while its Growth Score of C and Momentum Score of C also fall outside the A-or-B range favored for complementing top-ranked stocks. Because Zacks Style Scores complement the Rank, the combination points to a strong earnings-revision signal but a less favorable broader style profile.
View the Zacks #1 Rank List
Image: Bigstock
Should Investors Buy KEYS as Growth Surges but Valuation Looks Mixed?
Key Takeaways
Keysight Technologies, Inc. (KEYS - Free Report) is entering the final stretch of fiscal 2026 with faster growth across artificial intelligence infrastructure, communications and semiconductors. The operating picture is improving quickly, but the valuation case is less clear.
Investors therefore have to balance sharply higher earnings expectations and positive estimate revisions against a forward multiple that still sits above broader market benchmarks.
Keysight’s Growth Case Is Accelerating
Keysight expects fiscal 2026 revenues to increase 32%, while projected earnings growth for the year is 59.9%. Third-quarter revenues rose 36% year over year to $1.846 billion and non-GAAP earnings reached $3.07 per share, up from $1.72 a year earlier.
AI-related demand is broadening the opportunity set. Advantest Corporation (ATEYY - Free Report) is expanding semiconductor test solutions for AI and high-performance computing devices, including silicon photonics applications. Cadence Design Systems, Inc. (CDNS - Free Report) is pushing AI further into chip design and verification through its ChipStack AI platform.
KEYS Valuation Sends a Mixed Message
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. That comparison leaves some room relative to the stock’s own history and direct industry benchmark.
Image Source: Zacks Investment Research
The multiple remains above the Zacks Computer and Technology sector’s 20.4X and the S&P 500’s 19.8X. The stock is therefore not broadly inexpensive on forward earnings despite its discount to the sub-industry.
Keysight’s Estimate Revisions Strengthen the Case
The Zacks Consensus Estimate for current-fiscal-year earnings has moved 14.3% higher in the past four weeks and 14.4% higher in the past 12 weeks. Those revisions have accompanied stronger reported results and a higher earnings outlook.
The next-quarter earnings estimate has risen 27.7% over the past month. That change adds another positive revision signal, though it does not eliminate the valuation and execution risks surrounding the stock.
KEYS Still Faces Policy, Mix and Timing Risks
Currency reduced third-quarter reported order growth by about one percentage point. China demand, tariffs and export-policy changes also remain potential pressure points, while $64 million of tariff-refund claims were still outstanding at July 31.
Execution risk is also visible in order timing and supply. Demand for differentiated AI products has exceeded supply capability, and annual recurring revenue fell to 24% of the mix from 27% as product businesses grew faster.
Keysight’s Cash Flow Supports Strategic Flexibility
Third-quarter cash flow from operations totaled $437 million and free cash flow was $403 million. Keysight also repurchased about 640,000 shares for $210 million during the quarter, bringing fiscal-year-to-date repurchases to $517 million.
Acquisition integration is largely complete, one quarter ahead of schedule. Management expects 80% to 90% of the $100 million cost-synergy target to be realized on a run-rate basis exiting fiscal 2026, supporting additional operating flexibility.
KEYS Strong Signal Meets Weaker Style Scores
The investment setup is not one-sided. Accelerating growth, upward estimate revisions and a valuation below Keysight’s own five-year median are positives, while the premium to broader benchmarks, policy exposure and recurring-revenue mix keep the case balanced.
KEYS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its VGM Score of D and Value Score of D are less supportive, while its Growth Score of C and Momentum Score of C also fall outside the A-or-B range favored for complementing top-ranked stocks. Because Zacks Style Scores complement the Rank, the combination points to a strong earnings-revision signal but a less favorable broader style profile.