Keysight Technologies, Inc. Q1 FY2026 earnings call

• Strong acceleration in demand across business segments and key regions, with revenue and earnings per share exceeding guidance range. • Secular tailwinds like AI-driven tech transformations, next-gen connectivity, etc. driving growth. • Communications Solutions Group: Commercial comms wireline record orders, wireless growth; aerospace, defense and government strong. • Electronic Industrial Solutions Group: Orders and revenue growth across all 3 markets, with specific growth drivers in each sub-segment.

Communications Solutions Group: Revenue of $1.124 billion, up 27% reported, 16% core; gross margin 68.5%, operating margin 27.5%. Commercial communications: Wireline delivered record orders, surpassing wireless; wireless saw healthy growth. Aerospace, defense and government: Revenue $366 million, increase of 18%. Electronic Industrial Solutions Group: Revenue $476 million, increase of 15% across general electronics, semiconductors, and automotive and energy.

• Q2 2026 revenue expected $1.690 billion to $1.710 billion, 30% y-o-y growth midpoint. • Q2 2026 EPS expected $2.27 to $2.33, 35% y-o-y growth midpoint. • Fiscal '26 acquisition-related revenue expectation unchanged at $375 million. • Synergy target of over $100 million in run rate cost synergies unchanged, realization weighted to late 2026. • Base case for fiscal '26 total annual revenue and earnings growth just above 20%.

Q: Congrats on the quarter, Satish, on growth drivers including AI and wireline surpassing wireless. Any color on contribution and growth?

A: AI exposure last year Q4 was ~10% of company revenue, this quarter order growth robust above company average, customer base broadening.

Q: Neil, on incremental operating leverage, how view with 20% growth?

A: Delivered 41% core operating leverage this quarter, acquisitions dilutive to operating margin initially but expect accretive once $100 million synergies realized.

Q: Meta Marshall on AI customers, same customers expanding or new ones?

A: Customer base includes silicon companies, manufacturing ecosystem, hyperscalers, and neoclouds, with more business internationally now.

Q: Meta on aerospace and defense, trajectory?

A: This quarter saw effects of defense spending changes, increasing defense spending in Europe, U.S. primes investing more, well positioned with broad portfolio.

Q: Tim Long on AI emerging use cases and software services margin?

A: Concurrent technology waves, Kailash on helping with new AI racks/clusters, Neil on software services mix shift with acquisitions, hardware growth slowing mix shift but portfolio aligned to secular themes.

Q: Mark Delaney on second half guidance and supply chain?

A: Strong visibility 1-2 quarters out, base case 20% growth, not exposed to DRAM/memory tightness much but factored into outlook.

Q: Andrew Spinola on AI business competitive landscape and pricing?

A: Keysight's solutions-oriented advantage, participate in standards bodies, goal to be competitive and grow gross margins.

Q: Andrew on Q2 acceleration and constraints?

A: Largely improvements in demand, confidence improving with AI infrastructure deployment.

Q: Atif Malik on NTN TAM and Q1 orders vs revenue?

A: Too early to size NTN TAM, orders strong in Q1, Q2 guide suggests orders and revenue close.

Q: Mehdi Hosseini on software hardware mix and scale-out?

A: Software and services 40% of revenue, software ~26-27%, Kailash on scale-up and scale-out opportunities in R&D and manufacturing.

Q: Samik Chatterjee on revenue increase and software AI disruption?

A: Compounding momentum from multiple tailwinds, Satish on solutions business, software part of value proposition with deep physics.

Q: Robert Mason on wireline growth and Spirent businesses?

A: Wireline growth due to concurrency, Spirent businesses tracking in line with expectations, $375 million revenue and synergy realization on track.

Q: Robert Jamieson on AI customer expansion and free cash flow prioritization?

A: AI still early innings, Neil on organic growth priority, balance between returning capital and accretive M&A, Board authorized $1.5 billion stock buyback.

Q: David Ridley-Lane on why now with orders hitting?

A: 2025 built momentum, now broad-based demand across all businesses and regions