キーサイト（KEYS）2026年度第3四半期決算説明会：AI需要が売上高36%増を牽引

要点

• キーサイト・テクノロジーズ（NYSE: KEYS）が発表した2026年第3四半期売上高は、報告ベースで前年同期比36%増、コアベースで31%増の18億4,600万ドルとなりました。
• 受注額は29億1,000万ドルに達し、報告ベースで56%増、コアベースで52%増となりました。経営陣によると、需要は広範にわたっており、異例の前倒し注文は見られなかったとのことです。
• 営業利益率は820ベーシスポイント拡大して33.2%となり、純利益は5億3,100万ドル、1株当たり利益（EPS）は3.07ドルとなりました。
• 商用通信部門は、AIデータセンターの開発および製造に伴う有線通信の伸びが牽引し、初の四半期売上高10億ドル超を達成しました。有線通信の売上高が無線通信の売上高を初めて上回りました。
• 経営陣は第4四半期の売上高を19億3,000万ドル〜19億5,000万ドル、EPSを3.34ドル〜3.40ドルと予想しています。それぞれの中央値では、前年同期比で37%増、約76%増を意味します。
• 経営陣によれば、短期的な制約要因は需要ではありません。今後2四半期における受注残の売上への転換は、部品の調達可能性やサプライチェーンのキャパシティによって制限される可能性があります。

主要財務データ

キーサイトは2026年度の最初の9か月間に5億1,700万ドルの自社株買いを実施しました。

事業・業績の動向

コミュニケーション・ソリューションズ・グループの売上高は報告ベースで43%増、コアベースで36%増の13億4,500万ドルとなりました。粗利益率は70.8%、営業利益率は34%でした。

商用通信部門は売上高が56%増の10億6,000万ドルとなり、初の四半期10億ドル超を記録しました。AIインフラ需要に裏付けられた有線通信が伸びを牽引したほか、無線通信も堅調に拡大しました。経営陣によると、AI関連の有線通信事業は前四半期からさらに拡大したとのことです。

キーサイトは、AIシステム全体におけるテスト密度の高まりの恩恵を受けています。顧客はGPU、CPU、DPUを含むますます異種混合化するアーキテクチャに加え、より多くのプロトコル、チップレット、高速接続のテストを行っています。同社のポートフォリオは、研究開発から製造・生産に至るまで、電気、光、高周波（RF）、デジタル、プロトコル、ワークロードエミュレーションのテストをカバーしています。

有線通信の売上構成は、歴史的な研究開発（R&D）約80%・製造約20%から、R&Dが約3分の2、製造が約3分の1へと変化しました。経営陣は、1.6テラビットの導入拡大に伴い、第4四半期には製造・生産へのシフトがさらに進む可能性があると述べています。顧客は3.2テラビット技術に関してもキーサイトとの協議を進めています。

航空・防衛・政府向け売上高は14%増の3億3,900万ドルとなりました。抑止力の近代化、高度なレーダーアーキテクチャ、および欧州での投資に支えられ、すべての地域で受注が2桁増となりました。経営陣は、政府予算によって四半期ごとの変動が生じる可能性があると警告しました。

エレクトロニック・インダストリアル・ソリューションズ・グループは、一般電子機器、半導体、自動車・エネルギーの各分野での成長により、前年同期比21%増となる過去最高の5億100万ドルの売上高を記録しました。売上総利益率は64.1%、営業利益率は31%に達しました。

半導体需要には、先端プロセスノード、メモリ、シリコンフォトニクスにおける生産能力の拡張が含まれました。自動車・エネルギー向けの受注は、ソフトウェア定義車両（SDV）アーキテクチャ、車載ネットワークおよびサイバーセキュリティ試験、スマートグリッド用途、充電、蓄電、適合性検証に裏打ちされ、好調な2桁成長を記録しました。

ソフトウェアとサービスはともに2桁成長となり、総売上高の約33%を占めました。年間リカーリングレベニュー（ARR）は売上構成比の24%を占めました。経営陣は、現在ハードウェアの成長ペースがソフトウェアやサービスを上回っていると言及しました。

経営陣による業績見通し（ガイダンス）

第4四半期ガイダンスの中央値に基づくと、経営陣は2026年度通期の売上高成長率を32%、EPS成長率を約60%と予想しています。

キーサイトは、通常の季節性に沿って第3四半期から受注がわずかに増加し、その後2027年度第1四半期にかけても同様の季節パターンを辿ると予想しています。同社は第4四半期決算発表時に、2027年度第1四半期の具体的なガイダンスを提示する予定です。

システム移行を含む買収に伴う統合は、予定より1四半期前倒しでほぼ完了しました。キーサイトは現在、目標としている1億ドルのコストシナジーのうち80%〜90%を、年度末までにランレートベースで実現できると見込んでいます。経営陣は、約5,000万ドルの追加シナジーが2026年度から2027年度へ繰り越される可能性があると示しました。

リスクおよび注視すべき事項

• 供給制約：経営陣は需要が成長を制約しているわけではないものの、今後2四半期における部品調達の状況が売上高への換算ペースを左右する可能性があると述べました。複数の企業が類似のサプライヤーベースからの部品確保を競い合うため、供給状況が不規則に変動する可能性があります。
• サプライチェーンの対応期間の長期化：キーサイトは、セカンドソース確保に向けた製品再設計や長期契約を含め、18ヶ月以上先を見据えた計画を立てています。これらの施策の実行には時間を要します。
• 収益性の比較：一時的な関税の影響により2026年度の収益性が押し上げられましたが、これは再発しないため、2027年度の前年同期比での営業レバレッジ比較に影響を与えます。
• 事業構成：ポートフォリオ全体で売上総利益率が異なるため、経営陣は60%台後半の売上総利益率を維持可能と見ているものの、製品およびセグメントの構成比が重要な要因となります。
• 政府予算のタイミング：航空・防衛・政府向けの業績は、政府の予算サイクルやプロジェクトのタイミングにより、四半期ごとに変動する可能性があります。

アナリスト質疑応答の要点

経営陣によると、3四半期連続で売上高が過去最高を更新したにもかかわらず、受注パイプラインは過去最高水準に達しました。キーサイトは年初来で3,000社近くの新規顧客を獲得し、1億ドル以上の追加ビジネスをもたらしました。東南アジアは2倍以上に拡大し、当四半期で最も急成長した地域となりました。

受注の質に関して、経営陣は顧客による前倒し発注や異常な需要パターンは見られないと述べました。好調さは商用通信、航空・防衛、半導体、自動車・エネルギー、および複数の地域にわたって広範に維持されています。

2027年度について、経営陣は事業環境が力強いと評価したものの、正式なガイダンスの提示は見送りました。キーサイトの主力であるRF、マイクロ波、デジタル製品の大規模な刷新、AIインフラ投資の継続、テストの複雑化、および買収シナジーが潜在的な追い風として挙げられました。

営業レバレッジについて、最高財務責任者（CFO）のニール・ドハーティ氏は、特に買収シナジーが拡大するにつれて、事業ベースで2027年度の限界営業利益率目標40%を上回ることができると引き続き確信していると述べました。また、基礎的な傾向を評価する際には、一過性の2026年度関税影響を除外すべきであると強調しました。

決算説明会（電話会議）文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

[Audio Gap]

vice President of Investor Relations. Please go ahead, Ms. Morali.

Liz Morali

Good afternoon, and thank you for joining us for Keysight's Third Quarter Earnings Conference Call for Fiscal Year 2026. Joining me on today's call are Satish Dhanasekaran, President and CEO, and Neil Dougherty, Executive Vice President and CFO; Kailash Narayanan, President of the Communications Solutions Group; Jason Kary, President of the Electronic Industrial Solutions Group; and Steve Yoon, Senior Vice President of Global Sales.

Following the prepared remarks from Satish and Neil, we will conduct a question-and-answer session. The press release and information to supplement today's discussion can be found on our Investor Relations website, investor.keysight.com. During today's discussion, we will make forward-looking statements about the financial performance of the company. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties.

Information about these risks and uncertainties can be found in our most recent Forms 10-K and 10-Q filings with the SEC. We do not intend to update any forward-looking statements. In addition, we will refer to non-GAAP financial measures and reference core growth, which excludes the impact of acquisitions or divestitures completed within the last 12 months and currency movements. The most directly comparable GAAP financial metrics and reconciliations can be found on our Investor Relations website, and all comparisons are on a year-over-year basis, unless otherwise noted. I'll now turn the call over to Satish.

Satish Dhanasekaran

Thank you, Liz. Good afternoon, and thank you, everyone, for joining us on today's earnings call. Keysight delivered another outstanding quarter with record results and broad-based growth across our markets. The outperformance was driven by strong execution by the team and demand extending across Keysight's full suite of differentiated products and solutions. Orders grew 56%. Revenue grew 36%

[Audio Gap]

customers globally. Let me share a few examples of the diversity of our business. First, silicon designers are adopting key sites recently introduced high-performance digital and RF solutions for the lab to validate new designs with system-level requirements to ensure interoperability, performance and reliability. Second, connect manufacturers are using Keysight's high-fidelity analyzers to characterize the performance of high-speed back lines to ensure signal integrity and manufacturing [indiscernible].

Third, switch designers are using Keysight's emulators to validate network. solutions into their development pipelines. Looking ahead, the scaling challenges associated with AI data center deployments are driving a multiyear industry road map for new architectures, evolving technologies and new standards. We're well positioned and continue to invest ahead of transitions to capture these opportunities.

Turning to wireless. Orders grew significantly again this quarter with rising customer investment in next-generation connectivity and continued demand across the supply chain supporting AI infrastructure scaling. In June, the 3GPP plenary meeting in Singapore confirm the. nation around higher speeds and new spectrum. The emerging technology areas our AI RAN, integrated sensing and communication or IAC and non-total networks or NTM.

Each of these is expanding the Solutions continue to build. Our solutions have been architected around a flexible platform that enables customers to validate various candidate technologies by providing insights from the radio channel, network, device and satellite emulators for early 6G use cases across terrestrial and non-total networks.

Keysight's comprehensive portfolio spanning the physical layer to emulation tools is helping us secure early wins with industry leaders.

Turning to aerospace, defense and government. Orders were up double digits with growth across all regions, driven by a heightened global focus on deterrent modernization is raising the bar on performance across the market.

In radar, the industry is accelerating its shift to advanced radar architectures. These use cases require high-performance validation solutions, leading to rapid adoption of our multichannel RF solutions and [Audio Gap] our engagement with industry leaders remains high and gives us good visibility into the future requirements as we look into next year and beyond.

Finally, in automotive and energy, orders grew solid double digits. Investment remains focused on software-defined vehicle architectures with broad-based global demand for in-vehicle network and cybersecurity test where our solutions provide verifiable compliance in support of new standards. Our energy and charging business also grew this quarter with engagements across both grid and automotive customers and spanning high-power charging, storage, compliance and infrastructure validation applications.

In summary, this quarter's results reflect the strength and diversity of our business. Our portfolio is enabling the major waves of innovation shaping our markets, AI and accelerated compute today and 6G defense modernization, grid and autonomous systems in the years ahead. Every one of these technologies must be designed, validated and proven before reaching the market. Keysight with its differentiated technology stack and consistent R&D investments, is well positioned to outperform the market over the long term. I want to acknowledge the entire Keysight team for their hard work and commitment to our customers' success. And with that, I'll pass the call over to Neil. Neil?

Neil Dougherty

Thank you, Satish, and hello, everyone. Our momentum continued in fiscal Q3 as we delivered record results that exceeded the high end of our guidance range for both revenue and EPS. These results were driven by further acceleration in our commercial communications business and ongoing strength in Electronic Industrial Solutions and aerospace, defense and government. Our portfolio of highly differentiated solutions is resonating with customers, allowing us to expand margins year-over-year. In addition, our cash flow generation was robust, and we are on track to achieve record operating cash flow in fiscal 2026.

Moving to the specifics for Q3. Orders of $2.91 billion were up 56% on a reported basis. Acquisitions represented 5 percentage points of growth and currency was a 1 percentage point headwind. On a core basis, excluding those items, orders grew 52%. Revenue of $1.846 billion was up 36% on a reported basis and up 31% on a core basis. Gross margin was 69% and operating expenses were $661 million. Operating margin was 33.2%, up 820 basis points year-over-year and exceeded our long-term target range of 31% to 32%. We delivered net income of $531 million and earnings per share of $3.07. Our core business contributed substantially to these results with an operating margin of 34.7% and an operating margin incremental of 66%.

From a segment perspective, the Communications Solutions Group generated revenue of $1.345 billion, up 43% on a reported basis and up 36% on a core basis. CSG gross margin was 70.8% and operating margin was 34%. Within CSG, the commercial communications business generated its first $1 billion quarter, with revenue of $1.06 billion, up 56% led by outstanding growth in wireline and supported by strong growth in wireless.

Wireline revenue exceeded wireless revenue for the first time this quarter. Aerospace defense and government achieved revenue of $339 million, an increase of 14%. The Electronic Industrial Solutions Group generated a record $501 million in revenue, an increase of 21% with growth across all 3 markets: general electronics, semiconductor and automotive and energy. EISG gross margin was 64.1% and operating margin was 31%. Software and services both grew double digits, now representing approximately 33% of Keysight revenue, while annual recurring revenue was 24% of total mix.

Moving to the balance sheet and cash flow. We ended the quarter with $2.605 billion in cash and cash equivalents, generating cash flow from operations of $437 million and free cash flow of $403 million, this quarter, we repurchased approximately 640,000 shares of Keysight's stock at an average price of approximately $326 per share for a total consideration of $210 million. Year-to-date in fiscal 2026, our share repurchases totaled $517 million.

Before I turn to our outlook, I wanted to provide an update on our recent acquisitions. Our integration efforts are now largely complete, including systems migrations, 1 quarter ahead of schedule. Given the faster-than-expected integration, our cost synergy realization will accelerate in Q4. We now expect to have 80% to 90% of the $100 million in cost synergies realized on a run rate basis exiting the fiscal year.

Now turning to our outlook. For the fourth quarter of 2026, we expect revenue in the range of $1.930 billion to $1.950 billion, representing 37% year-over-year growth at the midpoint. We expect Q4 earnings per share to be in the range of $3.34 to $3.40, representing approximately 76% year-over-year growth at the midpoint. This will result in fiscal year 2026 revenue growth of 32% and EPS growth of approximately 60% at the midpoint.

This guidance is based on a weighted diluted share count of approximately 172 million shares. In closing, fiscal 2026 thus far has been a remarkable year with exceptional performance across our business. Our leading portfolio of solutions levered to multiple technology megatrends is driving significant growth and margin expansion. We remain focused on enabling our customers and helping them further accelerate technology innovation in turn, driving continued organic growth, profitability and ultimately, value creation for our shareholders. With that, I will turn the call over to Liz to begin the Q&A session.

Liz Morali

Thank you, Neil. Hillary, can you please provide the instructions for the Q&A session?

Operator

[Operator Instructions]

Your first question comes from the line of Aaron Rakers from Wells Fargo.

質疑応答

Aaron Rakers

Congrats on the strong results here. I'm curious there was a lot of commentary around 6G and the setting forth kind of the standard path as we move forward. As we think about Keysight's participation in 6G, I'm curious of how you would characterize the opportunity relative to the 5G cycle that we saw several years ago. Any kind of framing of when we should expect to see some materializing revenue from a 6G cycle? And any thoughts on how you would frame that relative TAM opportunity versus, let's say, 5G several years ago? And I have a quick follow-up.

Satish Dhanasekaran

Yes. Thank you, Aaron. Yes, it's a great quarter. The team has been executing very well, and we're pleased with that. Relative to 6G, anytime you start a new generational cycle you always look for what's different [indiscernible].

[Audio Gap]

Meta Marshall

Great. Congrats on the quarter. You mentioned kind of a lot of different ways in which more there's more markets or more different types of technology to be testing as far as AI. But could you just give a sense of kind of how testing density has changed. So there's a lot of different more end markets, but just, kind of, how the overall content of testing has changed as, kind of, some of these technologies get a little bit more complex. And then, Neil, very [Audio Gap]

Neil Dougherty

Traditional opportunity associated with CapEx investments that customers are making. But the opportunity set as we see it into the future, continues to grow and expand. And it's a function of this ecosystem over the last few years has largely been a homogeneous integrated vertical stack with a finance of opportunities that we have done extremely well. But by working early, we're also working with other players that are entering the space and the space is increasingly becoming more heterogeneous in nature, all the way from compute to racks and also protocols. I mean the -- we're seeing a growth in the number of protocols at all layers of the stack.

And the architectures increasingly involve GPUs, CPUs, DPUs mix. And it's not just for the sake of making things more complex. It's -- the reality is different customers have different strategies -- and based on the type of workload they're using, they're trying to pick the right architecture for them -- and our tools are increasingly doing very well with customers across the broader tail, which positions us well into the future. I don't know, Kailash, if you have any other comments to add?

Kailash Narayanan

Yes. Fundamentally, the design margins are shrinking, right? So with higher data rates, lower latency, AI needs to be lost less. And even if there is a limited amount of gap there, the models won't perform. So what our customers are seeing is they can no longer guarantee anything by design. They also need to test it in production as well. So this is increasing a lot of design emulation and test intensity. If you look at a computer or a switch trade these days, it's gone from tens to hundreds of high-speed pin-outs and that's more insertion points for us.

We have our [indiscernible] and soloscopes testing things at signal level. We introduced a new portfolio to test things at a bit level, and our AI workload emulators are testing things and emulating things at a protocol and packet level, you look at scaling, and things are going from monolithic chips to chiplet architectures. So the interoperability of chiplets need to get emulated and tested. Customers are asking when a chip is exercising a model, we emulate an environment for that chip to get stress-tested, and they want to see if the chip shuts down or gets overheated, they want to activate all of the cores and with higher power and higher speeds.

So all of these are creating additional opportunities for us and we're excited about the complete portfolio we have, electrical optical RF digital and protocol, we're bringing all of these capabilities to enable our customers, and we're seeing R&D as well as our manufacturing business grow significantly.

Neil Dougherty

Yes, [indiscernible], to your second question, obviously, we saw -- we've seen really strong core operating leverage this quarter. And I think as we look forward, I continue, at least as it relates to '27 to feel confident in our ability to continue to outperform our 40% leverage target, particularly given the synergy realization that we'll see. I mentioned that we've largely completed our integration of the recently completed acquisitions. You put the question in the context of guardrails. The only thing I would just caution people to pay attention to is we did have the onetime tariff impacts this year that, kind of, artificially pulled up '26 profitability that won't repeat. So if you adjust for that and think about it on an operational basis, I would expect we'll continue to outperform the 40% metric.

Operator

Your next question comes from the line of Mark Delaney from Goldman Sachs.

Mark Delaney

Congratulations on the strong results. I was hoping to talk around demand sustainability to start. I think orders at over $2 billion for 2 quarters in a row now. And as you look into the fourth quarter of next year, do you think this level of demand is sustainable or even a level that Keysight can grow from?

Satish Dhanasekaran

Yes, Mark, we think it is. I'll just say our base case is orders slightly up from Q3 in line with seasonality and then following that seasonal trend into Q1 of '27. Steve, I know the pipeline, you may make some comments there.

Sung Yoon

Thanks, Satish. Well, let me start by saying it's great to be ahead of sales at Keysight right now. We had an outstanding Q3. We delivered highest quarter ever for the third consecutive quarter. And with the traditional uplift that we expect in Q4, we're confident in delivering another record quarter and surpassing $2 billion for the third consecutive quarter. Even more promising, despite these record quarter results, our pipeline has continued to grow throughout the year and now stands at an all-time high. I think this is proof that our go-to-market strategy and priorities are working.

Our top priority has been to really spend more time with customers as much as possible, identifying those new opportunities and find those unarticulated needs and capturing new logos. As a case in point, year-to-date, we've added nearly 3,000 new customers representing more than $100 million of incremental business. And we're also partnering closely with marketing to broaden our reach and get to those customers earlier in [Audio Gap] both areas. Southeast Asia is a good example. We've more than doubled our business and is our fastest-growing region for the quarter. Overall, we further accelerated our momentum this quarter, resulting in our highest ever monthly funnel intake just last month and our new record for rolling 12 months.

Mark Delaney

Very helpful context. My other question was on supply and the ability to meet this level of demand the company has seen. So can you double click a bit more on Keysight's ability to meet demand at these types of volumes, both in terms of the supply chain and the ability to get enough parts as well as your own ability from a manufacturing standpoint?

Satish Dhanasekaran

Thank you, Mark. As you heard from Steve, we're seeing broad-based strength in demand. I think one of the points that in addition to everything Steve said, is we're seeing demand across the globe and our portfolio is doing very well. Now from a supply chain perspective, our team has done a great job this year, continuing to scale with discipline, as you see from our gross margins at levels as well. And we're continuing to meet our customers' demand needs. [Audio Gap]

Operator

Your next question comes from the line of Tim Long from Barclays.

Timothy Long

I'll ask one and then come back with my follow-up. I want to go back to commercial comms and the strong AI business on the wireline side. You talked about some of the applications and the use cases that are helping there. Curious if you can just give us a little update on how that business is looking from an R&D standpoint versus manufacturing? If you can give us a little update on any movement that you've seen in the AI-related business. And then I have a follow-up.

Neil Dougherty

Yes. as it relates to R&D and manufacturing, we'll talk about it from the wireline side of things where we put out the numbers previously. Historically, this has been a business that's been amongst the most heavily levered towards R&D. We've talked about it at about 80-20. We've more recently said with the addition of manufacturing business and the support of the AI data center build-out, that, that shifted to more like 70-30. And I think if you looked at it over a shorter horizon over the last [Audio Gap].

Satish Dhanasekaran

Uncovering new opportunities such as with regard to emulating. [Audio Gap]

Operator

[Audio Gap].

Unknown Analyst

It's Adrian on for Atif Malik. I was hoping you could talk a little bit more about the sequentially slower growth in Aerospace, Defense and Government segment. You described a lot of strong demand dynamics and double-digit order growth, but we did see a bit of a step down in the growth rate there?

Satish Dhanasekaran

Yes, Adrian, I've said this. You heard me state this on the call. Aerospace defense is a business I can easily call years out. very difficult to call in a given quarter just because it's got government budgets, it moves at its own pace. But this year, we're quite pleased with the growth and adoption of our solutions, including our newly acquired P&T offerings from Spirent. So Neil, any specific points?

Neil Dougherty

Yes, I would just reiterate that we're still up double digits. There is some quarter-to-quarter perturbations in these end markets. My honest feeling is you're probably -- there's probably nothing to see there from that perspective.

Unknown Analyst

And then just as a follow-up, could you comment on if the run rate that you were in a business within wireline consistent with last quarter?

[Audio Gap]

Yes, thank you, I just wanted to confirm or rather to ask, if the run rate of the business, the AI business within the wireline segment was consistent with what you were seeing last quarter? Or have you seen that expand at all?

Satish Dhanasekaran

It is expanded.

Operator

Your next question comes from the line of Andrew Spinola from UBS.

Andrew Spinola

You reported another strong quarter in the EISG segment. I think you highlighted some of the strength in semi and general electronic. And I wonder if you could unpack that a little bit. You said last quarter you're seeing some of the demand from AI expand into some of these segments. I'm wondering if you're seeing that and if you think that there's a fairly meaningful expansion still ahead in those segments, and I'd also like you to comment on the operating margin, which was quite strong in the ISG in the quarter. And how you're thinking about the sustainability of that going forward?

Satish Dhanasekaran

Yes, Andrew, pleased with the double-digit growth we're seeing in our ISG business year-to-date recovery in auto is another key along with strengthen semi. But we have Jason here, and we'll touch upon those points.

Jason Kary

Yes. Thank you, Andrew, for your question. And specifically, with regards to the AI tailwinds that we're seeing in the rest of the business, we've talked frequently about the leverage of our communications technologies and our key into end markets. We do have some specific technologies around semiconductor wafer test, where we're seeing significant capacity expansion there across multiple dimensions, including advanced nodes, memory silicon photonics. As far as looking forward, again, to the earlier question from Meta about test intensity. You're seeing a lot of that multilayer high-density heterogeneity that's coming through at the component level resulting in higher test intensity on the production side, which Elesh mentioned, we see that in some of our end markets in general electronics.

And again, that's moving from the board level to the component level where the tolerances are getting increasingly tighter as you look at higher frequency and higher data throughput and just expectations of high performance in small spaces.

So I think that's the challenge that customers face. And the beauty of our solutions is we address those all the way from R&D into production and so strong leverage there. On the operating margin side, yes, we're pleased with the progress that we're making there. I think historically, that business had suffered a little bit. And over the last 12 to 18 months, we've really focused on driving top line growth because that's where it always starts and then transforming pieces of the business. We're investing more in some of the software elements of the business with ESI and the Optical Solutions group. And there's been rationalization of certain pieces of the business where perhaps lower margin and at the same time, pursuing other opportunities that we've talked about related to digital health and the grid. So I think in summary, despite the different profile and composition of the businesses within EISG today, we're confident of our ability to continue to achieve higher levels of profitability as we move forward.

Andrew Spinola

I appreciate that color, Jason. That's helpful. I just had one follow-up question for Neil. In prior commentary, you discussed potentially the synergies being $100 million plus from the acquisitions. And I'm wondering now that you've completed the integration. Is your estimate of those synergies potentially larger? And I'm just sort of thinking about what sort of contribution I can assume for Q4, Q1.

Neil Dougherty

Yes, I would say that at this point, given where we're at, we certainly have direct line of sight to the $100 million. So I think that's -- to the extent there was risk in that, that substantially derisked and I think as this business now begins to operate more holistically within the Keysight framework, we'll continue to look for additional opportunities. So I don't have a quantification for you, but I think history would suggest that when the initial kind of wave of synergies come out that there is admittedly smaller dollars, but some additional follow-on efficiencies that tend to materialize.

If you think about it on an incremental basis, as you move from FY '26 to FY '27, I'd be thinking on the order of $50 million. I think we realized close to $40 million, again, ramping throughout the year as you thought about it from Q1 through Q4. And again, I expect that we're going to be kind of close to 90% of that $100 million realized as we enter next fiscal year.

Operator

Your next question comes from the line of Joseph Cardoso from JPMorgan.

Unknown Analyst

This is Mark Vitanze on for Joseph Cardoso. I guess you guys have given us a lot of detail on the strength in AI-related wireline. So wanted to ask about traditional non-AI portion of wireline, how does growth look like in that business? And what are you seeing there?

Satish Dhanasekaran

Yes. I think we're seeing a convergence, I think, Mark, is what -- how I would characterize it. And I think that is to be expected as such a disruptive technology starts to intercept multiple end markets. I'll give you an example the wireless customer base historically maybe never had to think about AI. And now AI is entering the RAM. That's an example of an application. The wireless ecosystem has a known set of contract manufacturing companies that play into the telco market. Many of them have now started to invest in building their own racks for AI. That's another example of started the applications that are now emerging that we're well positioned to capitalize, given our strength and reputation in this ecosystem.

Unknown Analyst

Got it. And then you guys mentioned that software and services was roughly 33% of revenue. I guess, I'm curious like where do you think that number eventually goes especially following the recent acquisitions?

Satish Dhanasekaran

Yes. I think, look, the strategy for the company is to become a solutions company. This has been what we worked hard to building and inherently, that implies providing more software-centric solutions and also offering differentiated services to build the life cycle value contributions. And we do it the pace of our markets and at the pace of our customers. It's all about our customers' needs, and so we're not trying to force a business model into the marketplace. And so yes, we've tried to run as high as 40% a year or so ago, and now we're at 33%. But I just want to say on a dollar basis, this is record levels for software and services, and we'll continue to keep innovating to stay differentiated in the marketplace.

Neil Dougherty

I would also maybe just add that our software and services businesses are also growing double digits. We're just not growing as fast as the hardware business is at this point in time.

Operator

Your next question comes from the line of Matthew Niknam from Truist Securities.

Matthew Niknam

Congrats on the results. Just if I could. First, on the 4Q revenue guide, so it's implied to only increase about 5% sequentially. I know that's pretty normal to the seasonality. But your book-to-bill has been north of 1.1 for 2 straight quarters. So I'm wondering if you can speak to any sort of supply constraints that are inhibiting or limiting that revenue guide for the fourth quarter? And if there's any color in terms of how much of the backlog that's been growing is going to ship next fiscal year. And then on a related note, I think in the last several years, you've given some initial color or framework in terms of next fiscal year on the third quarter call. I'm curious if there's any initial thoughts you're ready to provide, just given the momentum you're seeing across the business.

Satish Dhanasekaran

Maybe I'll take the 2027 commentary Neil, and then you could cover the remaining. It's a great question. Look, we have a snow doubt a strong setup as we enter our fiscal '27. Even as we remain cognizant of the outperformance you're seeing in 2026 on top of the growth here in '25. Supply chain will remain the governor of near-term revenue. I think I mentioned that earlier. But when I look at the broader end market, I just have to look at the technology trends and say, the complexity of these technologies are only growing. The intensity and the pace of which our customers are innovating across our end markets globally, it's relentless right now, then that intensity is matched with the investment and we're well positioned as a company to capitalize because of all the investments we made in the downturn in R&D that is now going to generate and as already started, a good refresh cycle for our new products, which are already being enthusiastically received by our customers.

So we're well positioned from that point of view. We also are taking a -- given this demand that is consistently now for a few quarters, and we're executing well on a quarterly basis, but we've taken a longer-term view 18-month-plus view of our supply chain planning, and we're working to create additional flexibility, but those come with a lag because I'll give you an example, we'll have to redesign some products on the margin to accommodate second sources and enter into some more longer-term agreements with our customers. So we're already starting to take those actions. And so I put it all together, we feel good about the setup. We will give you a more specific guidance for Q1 when we report in Q4. Neil?

Neil Dougherty

Yes. I mean I think you said most of it. I think if I was just going to recap. Right now, supply is not the limiter, right -- excuse me, demand is not the limiter. We do have some supply chain limitations. It's a little bit of a mixed bag. I think if we think back 3 months to the biggest supply chain challenges we were facing, most of the more internally channel capacity related around ramping some NPIs that has seen kind of unprecedented early demand from the marketplace. We've made tremendous progress in that area. I think the the challenges have shifted more towards incoming parts, which are under high demand as demand has ramped and continues to ramp across the ecosystem, right?

You've got numerous players that are all competing for supply from a similar set of component suppliers. And so I just think that the supply situation is likely to be nonlinear and will likely be a governor of our ability to convert demand into revenue for the next 2 quarters.

Unknown Executive

If I can just add a couple of comments about 2027 outlook. You just had the biggest refresh of our core RF microwave in [indiscernible] digital products since we formed Keysight, and we reinforce this at our worldwide annual sales training event in June, where we trained our entire sales team on this portfolio as well as [indiscernible] products. So as these solutions are rolled out and introduced to more and more customers, I expect this to be a strong tailwind for us for many years -- many quarters to come.

Satish Dhanasekaran

And years.

Unknown Executive

Years.

Operator

Your next question comes from the line of Quinn Fredrickson from Baird.

Quinn Fredrickson

I wanted to go back to the orders discussion. Good to see the $2 billion orders number again, but it's been unusual typically to see orders grow sequentially in the third quarter. So could you just unpack what the drivers were? And do you think you saw any tailwinds for possible future sovereign transceiver restrictions? Or are customers getting ahead of any other constraints or supply issues?

Satish Dhanasekaran

There was nothing unusual about the demand. In fact, we saw a conversion of the pipeline in a very orderly fashion, no pull-ins. We are looking for it. It is just an environment where the markets are stronger and Keysight's differentiated position in its core markets, starting within commercial comps, which really outperformed for us relative to our expectation even with AI. And equally, the demand from our prime contractors in aerospace defense remains strong as they're building out capacity, [indiscernible] investments in Europe is another tailwind for our defense business. And the EISG business is clearly outperforming with the semiconductor business doing exceptionally well. So strong broad-based demand, and we expect, as Steve mentioned before, we expect that to continue into Q4.

Quinn Fredrickson

Thanks, Satish. And Neil, gross margin came at 6%. I think you had said mid 67% range. Was the difference just on incremental volume or mix? Just if you can unpack that -- and then any color on how to think about sustainability into 4Q or even 2?

Neil Dougherty

Yes. I mean I think if you go back a quarter and adjust for the tariff thing, we were 68% last quarter were 69% this quarter. It's obviously volume is helping, but I think it gets to the differentiation of the solutions that we're bringing forward across end markets, whether that's early 6, AI, semiconductor, we have a highly differentiated set of solutions mix does. We do have a broad range of gross margins across the portfolio. So mix does matter. But I do think this upper 60s percent is a sustainable level for us.

Operator

Your final question comes from the line of [indiscernible] from SIG.

Unknown Analyst

This is Sebastian filling in for Mehdi. [indiscernible] You saw some momentum in wireline with up 56% year-on-year. And you mentioned the mix going towards 70%, 30% production R&D from 80/20. Could you give us a breakdown on how you expect R&D and production to look like in revenues in the coming quarter?

Satish Dhanasekaran

Well, I would just say I'm asking. It's 1 of those things that move -- things move around on a quarterly basis. So we tend to look at it over a longer-term horizon because in a given quarter with our customer comes in and they're doing an expansion in production line that could dominate a certain part of the segment. But as I've called out, I think we said 2/3 in R&D, 1/3 in manufacturing. On the margin, we're seeing in our pipeline, greater activity as the customers are scaling. We're ramping production of 1.6 terabit as we speak right now, and the demand is very, very strong, right?

So in a given quarter like Q4, I can easily see that mix even trend more towards production, and we're meaningfully participating across the workflow. And that's the that's the important message is our R&D business is growing, as Kailash mentioned, we're very pleased with the diversity of that business, and we're also happy that we're participating in the volume part of the data center build-out as well.

Robert Mason

Got it. Very helpful. And then as a follow-up, how should we think about the long-term mix of R&D versus production, given that the ramp and adoption of new transceivers are accelerating? Your volume is kind of ramping, but you also have more complexity when it comes to testing those new technologies. Is there a way to think about that long-term R&D and production mix as we're reaching higher deployments of Altice years?

Satish Dhanasekaran

Yes. I mean I would just say, look, our strategy as we have laid out, it's really to be an innovation accelerator for our customers. That's sort of our core purpose. We're focused on building our tech stacks, optical rice, both of them to be able to help our customers go through in R&D. And what we're seeing now is pretty unprecedented that the rate of adoption of these technology curves or technology waves, it's accelerating to a point where you're seeing concur interruption across many dimensions, right? 800 gig is still sort of the underlying technology, but 1.6% is scaling -- and typically, that would have been spaced out a little more. So it's really hard for us to make sense for how long this goes and how broad this goes. But I do know customers are already engaging us on 3.2. We did a demo at a conference earlier this year. So the intensity associated with technology change and the economics for companies to find the latest technology remains high, and we're participating in this, and I feel good about our position heading into '27.

Operator

That concludes our question-and-answer session for today. I would like to turn the call back to Liz Morali for any closing comments.

Liz Morali

Thank you, Hilary, and thank you all for joining us today. A replay of today's call will be available on the Investor Relations website later today. And we appreciate your interest in Keysight.

Operator

Thank you for attending. This concludes today's call. You may now disconnect.