Keysight Q1 Earnings Surge on AI Demand
Keysight Q1 earnings beat as AI demand drove record orders; management raised Q2 guidance and approved a $1.5 billion buyback, supporting shares.
KEY TAKEAWAYS
- Keysight reported Q1 revenue of $1.6 billion and non-GAAP EPS $2.17, beating estimates.
- Record orders hit $1.6 billion and backlog climbed to $2.8 billion, reflecting strong AI and communications demand.
- Board authorized a $1.5 billion buyback after $407 million free cash flow and $2.2 billion cash.
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Keysight Technologies reported Q1 FY2026 results on Feb. 23, 2026, with earnings surpassing forecasts as AI and semiconductor demand drove record orders. The company raised its Q2 guidance and lifted its full-year growth outlook.
Q1 Results and Guidance
The company said revenue for the quarter ended Jan. 31, 2026, was $1.60 billion, up 23% year-over-year and 14% on a core basis excluding acquisitions and currency effects. Non-GAAP earnings per share rose 19% to $2.17, beating the consensus estimate by about 8.5%. Gross margin increased 90 basis points to 66.7%, while operating margin expanded 20 basis points to 27.4%.
Management set Q2 revenue guidance between $1.69 billion and $1.71 billion, with non-GAAP EPS expected between $2.27 and $2.33. It raised the full-year revenue and earnings growth target to just above 20%.
Record Orders, AI Demand, and Cash Returns
Orders reached a record $1.645 billion, up 30% year-over-year and 22% on a core basis, leaving a backlog of $2.75 billion. The Communications Solutions Group generated $1.124 billion in revenue, up 27% with a 68.5% gross margin, while the Electronic Industrial Solutions Group produced $476 million, up 15%.
Commercial communications revenue rose 33% to $758 million, and aerospace, defense, and government sales increased 18% to $366 million. Management said AI accounted for roughly 10% of revenue on a prior run rate and delivered order growth well above the company average. The company also doubled its AI customer count on that run rate.
Keysight generated $407 million in free cash flow and ended the quarter with about $2.2 billion in cash. The board authorized a $1.5 billion share-repurchase program. Recent acquisitions are expected to contribute about $375 million of revenue in FY2026, with targeted run-rate synergies of roughly $100 million later in the fiscal year.
"Keysight had a strong start to the fiscal year with outstanding results that exceeded our expectations," said Satish Dhanasekaran, president and CEO.
