Keysight’s SWOT analysis: test firm’s stock poised for 6G, AI growth

Keysight Technologies , Inc. (NYSE:KEYS), a global leader in test and measurement equipment with a market capitalization of $28.7 billion, stands at a pivotal juncture as it navigates the evolving landscape of telecommunications and technology. According to InvestingPro data, the company maintains strong financial health with a current ratio of 3.39, indicating robust liquidity to meet short-term obligations. With a diverse portfolio spanning mobile infrastructure, wireline networks, defense, electronics, semiconductor, and automotive sectors, Keysight has positioned itself as a key player in the industry. This comprehensive analysis delves into the company’s recent performance, market position, and future prospects, offering insights for investors considering Keysight’s stock.

Company Overview and Recent Performance

Keysight Technologies reported $5 billion in revenue for fiscal year 2024, demonstrating its significant market presence. The company’s business is segmented into three main areas: mobile infrastructure and wireline networks (46% of revenue), defense (23%), and electronics/semiconductor/automotive (31%).

In the second quarter of fiscal year 2025, Keysight delivered a slight earnings beat, with top-line guidance increased marginally. This positive performance was accompanied by an 8% year-over-year growth in orders and a book-to-bill ratio of approximately 1, indicating a healthy demand for the company’s products and services.

Market Position and Competitive Landscape

Keysight’s global leadership in the test and measurement industry is underpinned by its strong presence across diverse market segments. The company has shown resilience and adaptability in the face of changing market dynamics, particularly in the transition from 5G to 6G technologies and the increasing importance of artificial intelligence (AI) in various sectors.

Analysts note that Keysight’s valuation metrics show the stock trading at a P/E ratio of 39x and an EV/EBITDA multiple of 24.6x. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading slightly above its intrinsic value. This positioning suggests potential upside for investors if the company can capitalize on emerging opportunities and maintain its competitive edge. InvestingPro subscribers have access to over 10 additional valuation metrics and insights to make more informed investment decisions.

Segment Analysis

Wireline and AI

The wireline segment, particularly in relation to AI investments, has emerged as a strong performer for Keysight. Analysts highlight the growing demand from AI-related projects, extending beyond traditional data centers. This trend aligns with the broader industry shift towards AI technologies and presents a significant growth opportunity for Keysight.

Defense

The Aerospace, Defense, & Government sector has shown an uptick in orders, driven by international reinvestment in defense capabilities. This segment’s strength contributes to Keysight’s diversified revenue stream and provides a buffer against fluctuations in other markets.

Wireless

While the wireless communications sector has experienced some weakness, particularly in the aftermath of the 5G investment peak, analysts suggest that this decline is largely played out. The stability in this segment, coupled with the anticipation of 6G developments, positions Keysight for potential future growth as the next generation of wireless technology unfolds.

Semiconductor

The semiconductor sector within Keysight’s Electronic Industrial Solutions Group (EISG) has shown signs of recovery. This improvement comes at a crucial time, as the global semiconductor industry faces both challenges and opportunities amidst supply chain disruptions and increasing demand for advanced chips.

Future Outlook and Growth Drivers

Keysight’s future prospects are closely tied to several key factors that are expected to drive growth in the coming years.

6G Prospects

Analysts anticipate that 6G orders will begin in earnest by the second half of 2027, aligning with historical patterns of order timing versus finalized specifications. While the full benefits of the 6G rollout may not materialize for several years, Keysight’s early positioning in this space could provide a significant competitive advantage.

AI Investments

The increasing focus on AI across various industries presents a substantial opportunity for Keysight. The company’s test and measurement solutions are crucial for the development and implementation of AI technologies, from data centers to edge computing applications.

Strategic Acquisitions

Keysight’s pending acquisitions are expected to drive modest upward earnings revisions. These strategic moves could enhance the company’s product offerings, expand its market reach, and contribute to overall growth.

Financial Projections

Analysts project earnings per share (EPS) of $7.06 for fiscal year 2025, with growth continuing into 2027, reaching an estimated $9.03. The company has demonstrated strong profitability with a gross margin of 61.9% and return on equity of 14% over the last twelve months. Want deeper insights? InvestingPro offers comprehensive financial analysis, including detailed profitability metrics, growth forecasts, and expert recommendations for over 1,400 stocks. Free Cash Flow is expected to increase from $1,145 million in fiscal year 2025 to $1,335 million in fiscal year 2027, indicating strong financial health and potential for reinvestment or shareholder returns.

Bear Case

How might continued weakness in wireless communications impact Keysight’s growth?

While analysts suggest that the revenue declines post-5G investment peak are largely played out, continued weakness in the wireless communications sector could pose challenges for Keysight. The company derives a significant portion of its revenue from mobile infrastructure and wireline networks. A prolonged slowdown in this area could impact overall growth and potentially lead to reduced capital expenditure from telecom operators.

Additionally, delays in the adoption of new wireless technologies or slower-than-expected rollout of 6G could extend the period of subdued demand for Keysight’s test and measurement solutions in this segment. This situation might necessitate a reallocation of resources or a strategic pivot to maintain growth momentum.

What risks does Keysight face from tariffs and trade tensions?

The impact of tariffs has already led to a decrease in second-half EPS estimates for fiscal year 2025. Ongoing trade tensions and potential new tariffs could further affect Keysight’s profitability and supply chain efficiency. As a global company with operations and customers worldwide, Keysight is exposed to geopolitical risks that can disrupt its business operations.

Trade restrictions could limit access to certain markets or increase the cost of components, potentially eroding profit margins. Moreover, if trade tensions escalate, they could lead to reduced global economic growth, which might dampen overall demand for Keysight’s products and services across various sectors.

Bull Case

How could Keysight’s strategic acquisitions drive earnings growth?

Keysight’s pending acquisitions are viewed positively by analysts, who expect these strategic moves to drive modest upward earnings revisions. Strategic acquisitions can expand Keysight’s technological capabilities, broaden its product portfolio, and enhance its market position in key growth areas such as AI, 6G, and advanced semiconductor testing.

These acquisitions could also provide Keysight with access to new customer bases and geographical markets, potentially accelerating revenue growth. Furthermore, successful integration of acquired companies could lead to cost synergies and operational efficiencies, contributing to improved profit margins and earnings growth over time.

What potential does the upcoming 6G rollout hold for Keysight’s future revenue?

The anticipated rollout of 6G technology presents a significant opportunity for Keysight. As a leader in test and measurement solutions, the company is well-positioned to capitalize on the development and implementation of 6G networks. Analysts expect 6G orders to begin in earnest by the second half of 2027, which aligns with historical patterns of order timing versus finalized specifications.

The transition to 6G is likely to drive demand for advanced testing equipment and software solutions across the entire ecosystem, from network infrastructure to device manufacturers. Keysight’s expertise in previous wireless generations positions it as a trusted partner for companies developing 6G technologies. This could lead to long-term contracts, increased market share, and substantial revenue growth as the 6G rollout gains momentum in the latter part of the decade.

SWOT Analysis

Strengths:

• Global leadership in test and measurement industry
• Diverse market segments reducing dependency on any single sector
• Strong order growth and book-to-bill ratio
• Increasing recurring revenue mix (30% of total revenue)

Weaknesses:

• Exposure to cyclical markets such as semiconductor and automotive
• Impact of tariffs on profitability
• Dependency on capital expenditure cycles in telecom and defense sectors

Opportunities:

• Upcoming 6G rollout and associated testing requirements
• Growing demand from AI investments across various industries
• Strategic acquisitions to enhance product offerings and market reach
• Expansion in emerging markets and new technology areas

Threats:

• Economic uncertainties affecting customer spending
• Ongoing trade tensions and potential new tariffs
• Rapid technological changes requiring continuous R&D investment
• Intense competition in the test and measurement industry

Analysts Targets

• July 21st, 2025: BofA Securities - Neutral rating with a price target of $175.00
• May 21st, 2025: Barclays (LON:BARC) - Overweight rating with a price target of $200.00
• February 26th, 2025: Barclays - Overweight rating with a price target of $200.00
• February 24th, 2025: Barclays - Overweight rating with a price target of $200.00

This analysis is based on information available up to July 28, 2025, and reflects the market conditions and analyst opinions as of that date.

InvestingPro: Smarter Decisions, Better Returns

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