Keysight Q3 Revenue Jumps on AI Demand

Keysight Technologies(NYSE:KEYS) reported its third quarter 2025 earnings on August 19, delivering revenue of $1.35 billion (up 11% year-over-year) and non-GAAP EPS of $1.72, both above the high end of guidance. Orders grew 7% year-over-year, and management raised full-year guidance, now targeting 7% revenue growth and 13% EPS growth at the midpoint (non-GAAP). This summary highlights three distinct insights on AI-driven core growth, tariff mitigation strategies, and differentiated wireline momentum, concluding with explicit forward guidance from management. For clarity, all fiscal period references are for the period ending Oct. 31, 2025.

AI demand fuels wireline outperformance at Keysight

Wireline revenue is tracking double-digit year-over-year growth. Wireline bookings are at record highs, in contrast to a normalized wireless business and steadier growth across other segments. Keysight’s proactive investment in AI infrastructure has resulted in major new product launches, including industry-first test solutions for 1.6 terabit networks and early PCIe Gen6 compliance validation with AMD.

"I expect to finish wireline business up double digits, strong double digits this year. Commercial comps up double digits, and it's a function of the underlying AI demand. And I, you know, I would say that, the AI demand in particular, one of the things that you know, it's really hard to sort of tease that out as unique ad demand because you have this sort of entrenched ecosystem of customers, whether it is NEMs, or silicon designers or hyperscalers that have been customers of Keysight capabilities for a long time. But clearly, that their business with us is growing and has continued to grow through this period, and AI has has been the incremental driver there."
-- Satish Dhanasekaran, President & CEO

Continued AI-driven demand in wireline technologies positions Keysight to outperform internal forecasts, while reinforcing the sustainability of its data-center-centric revenue streams.

Keysight advances tariff mitigation with operational flexibility

The company is absorbing $75 million annually from new August tariffs announced in fiscal 2025, with aggregate annual tariff exposure now at $150 million to $175 million; strategies include geographic supply chain diversification, incremental price actions, and efficiency improvements. Management expects mitigation for April tariffs to be completed in the first quarter of fiscal 2026, with August tariff impacts expected to be dollar-neutral within fiscal 2026.

"we do have a a geographically diverse manufacturing footprint, which gets to the second part of your question in in the that we're taking to mitigate the tariffs And it it really is a multipronged approach you know, looking at various supply chain strategies up to and including, potentially shifting manufacturing, probably more focused on making sure right now that we are appropriately utilizing capacity that's already in place rather than dramatically shifting capacity from one location to another, but we'll see how that develops over time. Obviously, looking at supplier relationships, cost efficiencies, and then to the extent that there's residual amounts looking to to pass those costs on"
-- Neil Dougherty, CFO

Keysight’s disciplined approach to offsetting tariff headwinds demonstrates business model resilience and operational agility.

Commercial communications pipeline broadens, driving durable growth

Record bookings in commercial communications coincide with customer activity migrating from a highly concentrated base to a broader set of hyperscalers, component makers, and new entrants, while typical multi-year technology refresh cycles are now accelerating due to AI-driven innovation needs.

"And what is still what has since ensued is wireless, you know, has normalized since the 2022 peak 5G levels and, is pretty stable. While wireline has continued to grow. And this year, I expect to finish the business with a record bookings and a solid pipeline of opportunities as we go into year. So you might say, well, what's really driving all this activity if we have you know because there is the obviously, the data center CapEx investments that we all know about. And so you're really asking at the core of it, how sustainable are these? But if you think about the nature of the AI workload, and the progression of it, it's going from just these chat GPT type applications into more agentic workflows and is poised to, I think, make substantial contributions to productivity for both companies and and individuals. And, as that plays out, the underlying economics of adopting the latest technology and the pressure to accelerate innovation, we we continue to see that as a as a as a probably a sustaining driver looking at far out into '28 and '30 even, some of the early look that we're getting engaging with our customers on memory, topology enhancements, compute enhancements, networking, speeds, and interconnect, what used to be a two, three, four year sort of refresh cycle is being pulled in. Which really creates a steady road map for us to keep working with our customers and engage."
-- Satish Dhanasekaran, President & CEO

This enhances Keysight’s long-term growth visibility in commercial communications.

Looking Ahead

For the fiscal fourth quarter 2025, management guides revenue between $1.37 billion and $1.39 billion (non-GAAP) and non-GAAP EPS from $1.79 to $1.85, incorporating all current tariff impacts. At the midpoint, full-year revenue growth is expected at 7% and full-year non-GAAP EPS growth of approximately 13%, with incremental margin targets returning to 40% once tariff normalization is complete.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.