Keysight Q2 Earnings Beat on Record Orders
Keysight Q2 earnings beat as record orders, revenue and EPS prompted a FY26 guide raise and bigger buybacks, boosting cash flow and supporting shares.
KEY TAKEAWAYS
- Recorded orders of $2.1 billion and non-GAAP EPS of $2.87, beating expectations.
- Raised FY26 outlook with revenue growth now expected in the high-20s percent.
- Record free cash flow of $472 million and $220 million of buybacks support returns.
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Keysight Technologies, Inc. (NYSE: KEYS) reported record fiscal second-quarter 2026 results for the period ended April 30, 2026, and raised full-year revenue and earnings per share (EPS) guidance, citing accelerating demand in artificial intelligence, data-center, and aerospace markets.
Record Quarter and Margin Expansion
The company said in a press release on May 19 that orders reached $2.1 billion, up 56.0% year over year, with core orders rising 48.0%. Revenue totaled $1.7 billion, a 31.0% increase, with core revenue up 24.0%. Non-GAAP net income was $497 million, and non-GAAP diluted EPS was $2.87, materially exceeding analyst expectations. GAAP net income was $349 million, with GAAP diluted EPS of $2.02. Satish Dhanasekaran, president and chief executive, said, "Keysight delivered the strongest quarter in the company's history, capping a record first half with all-time highs in orders, revenue, EPS, and free cash flow."
Non-GAAP gross margin expanded to 72.3%, up 770 basis points year over year, while operating margin rose to 33.3%, up 820 basis points. The company reported an organic incremental operating margin of 49%, attributing margin gains to scale, operating efficiencies, and integration of recent acquisitions.
Growth was broad based. The Communications Solutions Group generated $1.2 billion in revenue, up 35.0% year over year, while the Electronic Industrial Solutions Group grew 24.0%, reflecting strength across communications and industrial markets.
Guidance, Capital Returns, and Backlog
Keysight’s third-quarter revenue guidance ranges from $1.7 billion to $1.8 billion, with non-GAAP EPS expected between $2.43 and $2.49, based on roughly 173 million diluted shares. Management cited a record backlog and strong scheduled shipments supporting this outlook.
For the full fiscal year, the company now expects revenue growth in the high 20s percent. Recent acquisitions are projected to contribute about $375 million in revenue for fiscal 2026. Keysight targets $100 million in run-rate synergies and operational efficiencies, with approximately 80% expected by the end of fiscal Q4 2026.
The company reported record non-GAAP free cash flow of $472 million for the quarter. It repurchased about 780,000 shares for roughly $220 million, with cash generation supporting both buybacks and acquisition integration.
Following the results, one broker raised its price target to $415, while average analyst targets hovered near $332, with ratings clustered around a Moderate Buy. Management attributed the performance to disciplined investments and strategic positioning in AI, advanced communications, cloud/data center, aerospace and defense, and automotive and energy markets, enabling the company to capitalize on secular trends.
