是德科技 (KEYS) 2026 財年 Q3 法說會：AI 需求帶動營收成長 36%

重點提要

• 是德科技 (NYSE: KEYS) 公布 2026 會計年度第三季營收為 18.46 億美元，按報告基準年增 36%，按核心基準年增 31%。
• 訂單金額達 29.1 億美元，按報告基準成長 56%，按核心基準成長 52%。管理層表示需求廣泛，並無異常的訂單提前拉貨情形。
• 營業利益率擴增 820 個基點至 33.2%，淨利為 5.31 億美元，每股盈餘 (EPS) 為 3.07 美元。
• 商業通訊業務首次實現單季營收突破 10 億美元，主因與 AI 資料中心開發和製造相關的有線通訊成長帶動。有線通訊營收首次超過無線通訊營收。
• 管理層預計 2026 會計年度第四季營收為 19.30 億至 19.50 億美元，EPS 為 3.34 至 3.40 美元。以中位數計算，這意味著年增率分別為 37% 與約 76%。
• 管理層指出，需求並非短期限制因素。零組件供應狀況與供應鏈產能可能會限制未來兩個季度積壓訂單轉化為營收的速度。

關鍵財務數據

是德科技在 2026 會計年度前九個月共回購了 5.17 億美元的股票。

業務與營運表現

通訊解決方案事業群 (Communications Solutions Group) 營收達 13.45 億美元，按報告基準年增 43%，按核心基準年增 36%。其毛利率為 70.8%，營業利益率為 34%。

商業通訊業務首次實現單季 10 億美元營收，營收達 10.6 億美元，年增 56%。受 AI 基礎設施需求推動，有線通訊領漲，同時無線通訊也強勁成長。管理層表示，與 AI 相關的有線通訊業務較上一季進一步擴張。

是德科技正受益於 AI 系統測試強度的提升。客戶正針對涉及 GPU、CPU 和 DPU 的日益異質化架構，以及更多協定、小晶片 (chiplet) 與高速連接進行測試。公司的產品組合涵蓋研發與生產階段的電氣、光學、射頻 (RF)、數位、協定及工作負載模擬測試。

有線通訊的營收組合已從過去約 80% 研發與 20% 製造，轉變為約三分之二研發與三分之一製造。管理層表示，隨著 1.6Tb 部署擴大，2026 會計年度第四季的比重可能會進一步向生產傾斜。客戶也正就 3.2Tb 技術與是德科技展開合作。

航太、國防與政府業務營收成長 14% 至 3.39 億美元。在威懾能力現代化、先進雷達架構及歐洲投資的支持下，所有地區的訂單均實現雙位數成長。管理層警示，政府預算可能會造成季度間的波動。

電子工業解決方案事業群 (Electronic Industrial Solutions Group) 創下 5.01 億美元的歷史新高營收，年增 21%，通用電子、半導體以及汽車與能源領域均實現成長。毛利率為 64.1%，營業利益率達 31%。

半導體需求包含先進製程、記憶體與矽光子的產能擴充。在軟體定義汽車架構、車載網路與資訊安全測試、電網應用、充電、儲能及合規驗證的支持下，汽車與能源訂單呈穩健的雙位數成長。

軟體與服務均實現雙位數成長，約占總營收的 33%。年度經常性營收 (ARR) 占營收組合的 24%。管理層指出，目前硬體的成長速度快於軟體與服務。

管理層財務預測

以第四季財務預測的中位數計算，管理層預計 2026 全會計年度營收成長 32%，EPS 成長約 60%。

是德科技預計訂單將符合正常季節性規律，較 2026 會計年度第三季微幅增加，隨後延續季節性趨勢步入 2027 會計年度第一季。公司將在公布第四季財報時提供具體的 2027 會計年度第一季財務預測。

包含系統遷移在內的收購整合已基本完成，比原定計畫提前了一季。是德科技目前預計在會計年度結束前，按年化運行率 (run-rate) 計算將實現 1 億美元成本綜效目標的 80% 至 90%。管理層指出，約 5,000 萬美元的新增綜效可能會從 2026 會計年度延續至 2027 會計年度。

風險與關注領域

• 供應限制：管理層表示需求並非限制成長的因素，但未來兩個季度的進貨零組件可取得性可能會主導營收轉化。由於多家公司競爭來自相似供應商基礎的零組件，供應狀況可能呈現非線性。
• 供應鏈應變時間延長：是德科技正提前 18 個月以上進行規劃，包括針對第二供應來源的產品重新設計以及長期合約。這些行動需要時間來落實。
• 獲利能力比較：一次性關稅影響提高了 2026 會計年度的獲利能力，且不會再次發生，這將影響 2027 會計年度營業槓桿的年增率比較。
• 業務組合：不同產品組合的毛利率有所差異，即使管理層認為 60% 高段的毛利率可持續維持，產品與部門組合仍是一項重要因素。
• 政府採購時程：受政府預算週期與計畫時程影響，航太、國防與政府業務的業績在季度之間可能會有所波動。

分析師問答亮點

管理層表示，儘管連續三個季度銷售額創歷史新高，潛在訂單管線 (order pipeline) 仍達到歷史新高。是德科技今年以來增加了近 3,000 家客戶，代表帶來超過 1 億美元的新增業務。東南亞市場在本季度成長超過一倍，成為成長最快的地區。

關於訂單品質，管理層表示沒有客戶提前拉貨或異常的需求模式。強勁表現橫跨商業通訊、航太與國防、半導體、汽車與能源以及多個地區。

關於 2027 會計年度，管理層將發展態態描述為強勁，但未提供正式的財務預測。管理層強調是德科技核心射頻 (RF)、微波與數位產品的大規模更新、持續的 AI 基礎設施投資、測試複雜度提升以及收購綜效為潛在利多。

在營業槓桿方面，財務長 Neil Dougherty 表示，他依然信心十足，認為在營運層面上，是德科技能在 2027 會計年度超越其 40% 的邊際營業利益率目標，特別是隨著收購綜效增加。他也強調，在評估基礎趨勢時，應排除 2026 會計年度非經常性關稅的影響。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.