Keysight's AI Bet Pays Off, Signals Confidence with $1.5B Buyback

SANTA ROSA, CA – November 24, 2025

Keysight Technologies (NYSE: KEYS) delivered a powerful message to Wall Street with its latest financial results, posting strong fourth-quarter and full-year 2025 earnings that demonstrated a firm return to growth. The performance, driven by surging demand in artificial intelligence infrastructure and next-generation networks, was punctuated by a significant strategic maneuver: the authorization of a new $1.5 billion share repurchase program, signaling robust confidence from the executive suite in the company’s future trajectory.

For the fiscal year ending October 31, 2025, the test and measurement leader reported revenues of $5.37 billion, an 8% increase from the prior year. The fourth quarter was particularly strong, with revenue climbing to $1.42 billion. This financial upswing reflects what CEO Satish Dhanasekaran described as "accelerating order momentum" and "sustained demand for Keysight's highly differentiated solutions." For investors and analysts, the results paint a clear picture of a company capitalizing on foundational technology shifts and skillfully managing its capital to reinforce its market leadership.

Powering the AI and Connectivity Revolution

A deeper look into the numbers reveals that Keysight's growth is intrinsically linked to the most transformative trends in technology. The Communications Solutions Group (CSG), the company's largest segment, saw its fourth-quarter revenue jump 11% to $990 million. This growth wasn't just a cyclical upswing; it was fueled by targeted investments from customers in AI data center infrastructure, non-terrestrial networks (NTNs), and defense modernization.

Keysight has strategically positioned itself as an indispensable partner in the AI arms race. As hyperscalers and enterprises prepare to invest what some analysts project to be over $1 trillion into AI data centers by 2029, the complexity of these systems creates a critical need for advanced testing and validation. The company's solutions, such as its Keysight Artificial Intelligence (KAI) architecture, are essential for ensuring that the intricate web of custom chips, high-speed optical interconnects, and networking fabric can handle the massive workloads of modern AI models. By enabling developers to emulate real-world AI traffic and validate system performance at scale, Keysight is mitigating risk and accelerating deployment in a market where speed is paramount. This positions the firm to capture significant value from the booming AI chip market, which is already on a trajectory to exceed $150 billion in 2025.

Simultaneously, the company is a key enabler in the expansion of connectivity beyond traditional terrestrial boundaries. The push for 5G non-terrestrial networks, which integrate satellite communications to provide ubiquitous coverage, represents a new frontier for wireless technology. Keysight provides the crucial emulation and testing platforms needed to validate these complex systems, ensuring that everything from satellite constellations to the devices on the ground operate seamlessly. This leadership in both AI and advanced communications underscores a strategy focused not just on current demand, but on enabling the core infrastructure of tomorrow's digital world.

A Signal of Financial Strength and Strategy

Beyond the impressive operational performance, Keysight's announcement of a new $1.5 billion share repurchase program provides a powerful signal about its financial health and capital allocation philosophy. This move, which replaces a previous authorization, comes after the company deployed $377 million on buybacks during fiscal 2025. Such a substantial commitment to repurchasing shares is a classic indicator of management's belief that the company's stock is undervalued and that its future earnings prospects are strong.

The buyback is supported by a robust balance sheet and formidable cash generation. Keysight reported a full-year free cash flow of $1.28 billion, providing ample capital to fund shareholder returns while continuing to invest aggressively in its future. This disciplined capital allocation strategy is a three-pronged approach: prioritizing organic growth through significant R&D investment (historically around 16% of sales), pursuing strategic acquisitions to expand its portfolio, and returning excess capital to shareholders.

This financial maneuver goes beyond simple financial engineering. For investors, it reduces the number of shares outstanding, thereby increasing earnings per share and enhancing shareholder value over time. More importantly, in the context of the "Executive Suite," it demonstrates a leadership team that is confident in its operational execution and long-term strategic positioning, even amidst a dynamic global economic landscape. It’s a move that balances investing in future growth with delivering tangible returns to its owners today.

The Unseen Engine of Industrial Tech

While the spotlight often shines on AI and communications, Keysight’s Electronic Industrial Solutions Group (EISG) posted a solid 9% revenue increase to $429 million in the fourth quarter. This segment serves as a testament to the company's diversification and its foundational role across the entire technology ecosystem. Growth here was driven by demand in broad general electronics and, critically, leading-edge semiconductor solutions.

As the semiconductor industry pushes the boundaries of physics with increasingly complex chip designs and advanced manufacturing nodes, the need for high-precision measurement and validation becomes exponentially more important. Keysight provides the essential tools that enable chipmakers to design, verify, and manufacture the processors that power everything from smartphones to the most advanced supercomputers. With the global semiconductor market forecast to grow significantly through 2026, fueled by the relentless demand for more powerful and efficient chips, Keysight’s role as a key enabler in this supply chain provides a stable and growing revenue stream.

Furthermore, the company's increasing focus on software and services, which now constitute about 37% of total revenue, is transforming its business model. The growth of annual recurring revenue, now at 29% of the total, adds a layer of predictability and stability, making the company less susceptible to cyclical hardware purchasing trends and strengthening its long-term financial profile.

A Bullish Outlook Amid Market Dynamics

Looking ahead, Keysight’s leadership has projected a confident outlook, forecasting first-quarter 2026 revenue between $1.53 billion and $1.55 billion. At the midpoint, this guidance implies an impressive 19% year-over-year growth, a figure that has prompted positive reactions from market analysts, with several raising their price targets on the stock.

This optimism is rooted in a strong order backlog, a healthy sales funnel, and the continued momentum in its key growth markets. The company expects to see sustained demand from AI data center build-outs, the next evolution of 5G networks, the industry-wide transition to more advanced semiconductor nodes, and stable defense budgets. Furthermore, recent strategic acquisitions are expected to be accretive, contributing significantly to both the top and bottom lines in the coming fiscal year.

By successfully aligning its portfolio with the most powerful secular growth trends in technology and backing it with disciplined financial management, Keysight has demonstrated a clear strategy for navigating the complexities of the current market. The company’s strong results and confident forward guidance suggest it is well-positioned to not only weather economic uncertainties but to thrive as a critical partner in building the next generation of innovation.