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Keysight Technologies, Inc. (NYSE:KEYS): Powering Innovation Across Industries
Published on September 24, 2024 | Ticker: KEYS

Keysight Technologies, Inc. (NYSE:KEYS) is a global leader in the design, development, and deployment of cutting-edge electronic measurement and test solutions. With a rich history spanning over 80 years, the company has established itself as a trusted partner for customers across a diverse range of industries, including communications, aerospace and defense, automotive, semiconductor, and general electronics.

Keysight's comprehensive portfolio of solutions, encompassing hardware, software, and services, empowers customers to accelerate innovation and bring groundbreaking technologies to market faster and more efficiently. The company's unwavering commitment to innovation and customer success has solidified Keysight's position as a premier provider of mission-critical tools and technologies.

Financials

In the fiscal year 2023, Keysight reported annual revenue of $5,464 million and net income of $1,057 million. The company's strong financial performance is a testament to Keysight's ability to navigate dynamic market conditions and deliver consistent value to stakeholders. Keysight's annual operating cash flow and free cash flow for the fiscal year 2023 were $1,408 million and $1,212 million, respectively, further underscoring the company's financial strength and resilience.

Business Overview

Keysight's business is organized into two reportable segments: Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG). The CSG segment serves customers in the global commercial communications and aerospace, defense, and government markets, offering a comprehensive suite of electronic design and test software, instrumentation, systems, and related services. The EISG segment, on the other hand, caters to customers across a diverse set of end markets, including automotive and energy, semiconductor solutions, and general electronics, providing similar solutions and services.

Recent Performance

In the latest quarter (Q2 2024), Keysight reported revenue of $1,216 million, a decrease of 13% compared to the same period last year. The company's net income for the quarter was $126 million, with earnings per share of $1.41. Despite the year-over-year decline, Keysight's performance exceeded the high end of its guidance range, demonstrating the company's ability to navigate the current market environment.

The Communications Solutions Group (CSG) generated revenue of $840 million in Q2 2024, a 10% decrease compared to the same period last year. The decline was primarily driven by lower demand in the commercial communications and aerospace, defense, and government end markets. However, the company reported pockets of growth, particularly in the wireline business, where strong demand for AI data center solutions and high-speed networking technologies offset some of the broader market weakness.

The Electronic Industrial Solutions Group (EISG) reported revenue of $376 million in Q2 2024, a 17% decrease compared to the same period last year. The decline was largely attributable to normalization in customer spending, particularly in the semiconductor and general electronics markets. Despite the revenue decline, the company saw relative stability in the automotive and energy sectors, with steady demand for electric vehicle (EV) and autonomous vehicle (AV) solutions.

Keysight's software and services business continued to outperform the overall company, with orders and revenue growth outpacing the total business. Software and services now account for approximately 39% of the company's total revenue, enhancing the differentiation and resilience of Keysight's solutions.

Outlook

Looking ahead, Keysight provided guidance for the third quarter of fiscal year 2024, expecting revenue to be in the range of $1,180 million to $1,200 million and earnings per share to be between $1.30 and $1.36. The company's base case scenario for the full fiscal year 2024 remains unchanged, with a mid-single-digit increase in revenue from the third quarter to the fourth quarter, implying full-year revenue of approximately $4.9 billion.

Recent Developments

Keysight's long-term growth strategy is centered around three key pillars: capitalizing on technology trends, transforming industries, and leveraging market dynamics. The company continues to invest in research and development, both organically and through strategic acquisitions, to expand its solutions portfolio and address the evolving needs of its customers.

Recent acquisitions, such as the addition of ESI Group and Riscure, have strengthened Keysight's capabilities in automotive simulation and security assessment, respectively, further enhancing the company's position as a trusted partner for its customers. The company's disciplined approach to capital allocation and its focus on operational efficiency have enabled Keysight to maintain a strong financial profile, even in the face of macroeconomic headwinds.

Conclusion

Despite the current market challenges, Keysight remains confident in the long-term secular growth trends driving its business. The company's broad portfolio of differentiated solutions, strong customer relationships, technology leadership, and durable financial model position it well to capitalize on the waves of technology innovation and digitization across multiple industries.

As Keysight continues to invest in its future and navigate the evolving market landscape, the company's unwavering commitment to innovation, customer success, and operational excellence will be key to its continued growth and market leadership.

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