KEYS earnings analysis
What we found in KEYS's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Keysight delivered strong growth in the third quarter, with revenue of $1.846 billion, GAAP EPS of $2.30, 43% CSG growth, and 21% EISG growth. Margin expansion was broad-based, and nine-month operating cash flow rose to $1.379 billion, although working-capital accounts used $92 million of cash. The principal offsets are elevated supplier commitments of $762 million, ongoing tariff uncertainty, acquisition-related cost growth, and substantial debt obligations.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Strong sequential and year-over-year growth
- Revenue was $1.846 billion, up approximately 7.3% from $1.72 billion in the prior quarter and 36.7% from $1.35 billion in the prior-year quarter. Reported GAAP EPS was $2.30, compared with $2.02 in the prior quarter and $1.10 a year earlier.
- Broad-based margin expansion
- Consolidated gross margin increased 4 percentage points year over year for the quarter, driven by higher volume, favorable mix, and acquisitions. CSG gross margin was 70.8%, up 4 percentage points, while EISG gross margin was 64.1%, up 7 percentage points.
- CSG led segment growth
- CSG revenue increased 43% year over year to $1.345 billion, with commercial communications revenue up 56% and aerospace, defense, and government revenue up 14%. Management cited AI-driven data-center expansion, 400G/800G/1.6-terabit Ethernet, radar, spectrum, space, and satellite demand.
- EISG demand strengthened
- EISG revenue rose 21% year over year to $501 million. Growth was driven by AI demand for advanced semiconductor technologies and fabrication capacity, next-generation PCB interconnects and capacitors, software-defined vehicles, autonomous driving, and digital health.
- Operating cash flow improved
- Operating cash flow increased $195 million year over year to $1.379 billion for the first nine months of fiscal 2026. The improvement included a $410 million increase in net income, although accounts receivable, inventory, and accounts payable used $92 million of cash versus providing $181 million in the prior-year period.
- Liquidity supports investment and buybacks
- Cash, cash equivalents, and restricted cash increased to $2.622 billion from $1.890 billion at October 31, 2025, while the company repurchased $242 million more treasury stock year over year. The company had $983 million remaining under its $1.5 billion repurchase authorization at July 31, 2026.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Tariff and trade-policy uncertainty
- Trade-policy exposure increased: a July 24, 2026 forced-labor tariff action is expected to affect imports from 60 designated countries, while a Section 301 investigation covers 16 economies and could result in additional tariffs or import restrictions. The company also cannot predict when tariff refunds will be recovered or whether claims will be reduced or denied.
- Backlog conversion and inventory risk
- Total commitments to contract manufacturers and suppliers rose to $762 million from $487 million at October 31, 2025, primarily because of advance purchases supporting a strong backlog. Non-cancellable purchase commitments totaled approximately $704 million, creating exposure to excess inventory if orders are delayed, reduced, or canceled.
- Debt and refinancing exposure
- The company had $2.550 billion of senior notes and a $750 million revolving credit facility outstanding in principal commitments as of July 31, 2026, although the revolver had no borrowings. The new facility expires April 21, 2031, and higher debt levels may constrain cash available for acquisitions, capital spending, and repurchases.
- Tax litigation remains unresolved
- Keysight is seeking a $107 million tax refund related to the GILTI deduction litigation. Although the Court of Federal Claims granted partial summary judgment on July 2, 2026, an adverse final outcome could require reversal of the previously recorded benefit and materially increase the effective tax rate and income tax liability.
- Acquisition and cost integration pressure
- R&D expense increased 25% year over year and SG&A increased 26% at the consolidated level, reflecting acquired-business costs, higher people-related costs, amortization, and continued investment. Headcount increased to approximately 16,600 from 15,500, which could pressure margins if revenue growth moderates.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $2.3
- Segment
- CSG: $1.345 billion revenue, up 43% year over year; 34.0% operating margin, up 8 percentage points.
- Segment
- EISG: $501 million revenue, up 21% year over year; 31.0% operating margin, up 9 percentage points.
What they said about what is next.
The 10-Q provides no revenue or EPS guidance. Management expects fiscal 2026 capital spending of approximately $160 million, primarily for capacity expansion and technology investments. Q4 revenue and non-GAAP EPS outlook was provided in the August 18 earnings release rather than this filing.
The filing reads better than the one before it.
What came before.
- 10-Q · June 4, 2026
- Keysight Technologies reported a strong second quarter with revenue reaching $1.71 billion, slightly above the consensus estimate of $1.708 billion. The company also beat EPS expectations of $2.26 by posting $2.87,…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
Read the next one first.
We read every filing KEYS makes the day it lands, and put it next to what the options market did about it. Members get both, and an alert when a filing arrives.
Cancel anytime · Month to month · Switch tiers whenever