Keysight Q3 2025 slides: Revenue jumps 11%, company raises full-year outlook

Introduction & Market Context

Keysight Technologies Inc (NYSE:KEYS) reported strong third-quarter fiscal 2025 results on August 19, 2025, with revenue and earnings exceeding the high end of guidance. The test and measurement equipment provider delivered double-digit growth across both major business segments, continuing its positive momentum from earlier quarters.

Following the earnings release, Keysight shares traded at $164 in after-hours trading, down slightly by 0.26% from the regular session close of $164.43. The stock has traded between $121.43 and $186.20 over the past 52 weeks.

Quarterly Performance Highlights

Keysight reported Q3 revenue of $1.352 billion, representing an 11% year-over-year increase (9% on a core basis), marking the third consecutive quarter of overall revenue growth. Non-GAAP earnings per share reached $1.72, up 9% from the year-ago period.

As shown in the following financial highlights chart, the company has maintained steady improvement in key metrics:

Orders for the quarter totaled $1.34 billion, increasing 7% year-over-year (6% core), reflecting continued demand for the company’s solutions. The non-GAAP operating margin improved to 25.0%, up 60 basis points from Q3 2024, while core operating margin reached 25.4%, representing a 110 basis point year-over-year improvement.

Satish Dhanasekaran, Keysight’s CEO, highlighted in the presentation that the company’s performance was driven by "strong demand for AI solutions and robust order growth in aerospace, defense and government," while also noting "continued growth in wafer test and general electronics with stable demand in automotive."

Segment Performance

Keysight’s business is divided into two main segments, with the Communications Solutions Group (CSG) representing 70% of revenue and the Electronic Industrial Solutions Group (EISG) accounting for 30%, as illustrated in the following breakdown:

The Communications Solutions Group delivered revenue of $940 million, up 11% year-over-year (10% core), with an operating margin of 26.1%, down slightly by 20 basis points compared to the prior year. The segment’s performance was driven by double-digit increases in both wireline and wireless communications, with order growth reflecting continued investment in AI data center infrastructure.

The following chart details CSG’s performance:

The Electronic Industrial Solutions Group generated revenue of $412 million, also up 11% year-over-year (9% core), with a significantly improved operating margin of 22.3%, representing a 220 basis point increase from Q3 2024. This segment saw particular strength in wafer test solutions, which grew by double digits as foundries and integrated device manufacturers continued to invest in AI-driven advanced node, memory, and silicon photonics technologies.

EISG’s performance is illustrated in the following chart:

Regional Performance

Geographically, Keysight saw strong performance in the Americas and Asia Pacific regions, while Europe experienced a slight decline. The Americas and Asia Pacific each accounted for 42% of total revenue, with Europe representing the remaining 16%.

Revenue in the Americas reached $566 million, up 13% year-over-year, driven by growth across commercial communications, aerospace/defense/government, and electronic industrial segments. Asia Pacific revenue grew to $569 million, up 15% year-over-year, with growth across all major segments. Europe was the only region to show a decline, with revenue of $217 million, down 2% year-over-year, primarily due to weakness in the aerospace, defense, and government sector.

Forward Guidance

Based on strong execution and a robust Q4 backlog of $2.4 billion, Keysight raised its full-year outlook. For the fourth quarter of fiscal 2025, the company provided the following guidance:

The Q4 guidance projects revenue between $1.37 billion and $1.39 billion, with non-GAAP earnings per share ranging from $1.79 to $1.85. For the full fiscal year 2025, Keysight now expects revenue growth of 7% and non-GAAP EPS growth of approximately 13%.

This guidance represents an improvement from the company’s outlook following Q2 results, when it had projected full-year revenue growth of 5-7%. The raised guidance aligns with the upper end of that previous range, indicating continued confidence despite macroeconomic challenges.

Strategic Initiatives

Keysight highlighted several strategic developments in its Q3 presentation. The company reported that regulatory clearances for its Spirent (LON:SPT) acquisition are progressing, with closing now expected in Q4 FY25. Additionally, the acquisitions of Synopsys (NASDAQ:SNPS)’ Optical Solutions Group and Ansys (NASDAQ:ANSS)’ PowerArtist are advancing toward final regulatory approval.

The company is also actively addressing tariff challenges. The presentation noted that the incremental gross impact of tariff increases announced on August 1 is estimated at $75 million on an annualized basis. Keysight stated it is implementing a "multi-pronged approach" to reduce the impact of tariffs on financial results and expects to fully mitigate the April tariffs on a dollar basis by Q1 FY26 and the August tariff increases within the first half of FY26.

Financial Health

Keysight continues to demonstrate strong cash generation capabilities. For Q3, the company reported free cash flow of $291 million, representing 22% of revenue. Year-to-date free cash flow reached $1.094 billion, or 28% of revenue, a significant improvement from $577 million (16% of revenue) in the comparable period of fiscal 2024.

The company’s Q3 highlights slide provides a comprehensive overview of its performance:

During the quarter, Keysight repurchased approximately 300,000 shares for a total consideration of $50 million, reflecting ongoing commitment to returning value to shareholders. The company also noted that software and services revenue represented 36% of overall revenue, with recurring revenue accounting for 28%, highlighting its progress in diversifying revenue streams beyond hardware.

Conclusion

Keysight’s Q3 FY25 results demonstrate the company’s ability to execute effectively in a dynamic macroeconomic environment. The double-digit revenue growth across both major segments, improved operating margins, and raised full-year outlook suggest continued momentum despite tariff challenges. The company’s strong position in growth markets such as AI, aerospace and defense, and semiconductor testing appears to be driving sustainable performance as it progresses with strategic acquisitions to further strengthen its market position.

Full presentation:

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