Keysight Technologies — Financial Results

Revenue and Orders Rebounded Strongly After a Difficult 2024

After a rough 2024 — when revenue fell 9% and net income dropped 42% — Keysight bounced back meaningfully in 2025. Revenue grew 8% to $5,375 million, orders grew 8% to $5,452 million (a useful leading indicator of future sales), and net income jumped 38% to $850 million. Importantly, the revenue recovery was largely organic — acquisitions and currency movements had little impact on the growth rate.

AI-Driven Demand Is the Standout Growth Engine in the Core Business

Communications Solutions Group (CSG), which makes up 69% of total revenue, grew 9% to $3,726 million. The clearest driver was spending on high-speed data center networks: customers are racing to build 400G/800G Ethernet infrastructure to support AI workloads, and Keysight's test equipment sits squarely in that investment path. Aerospace, defense, and government was also strong, up 8%, driven by space, satellite, and radar programs.

Gross Margin Is Under Pressure From Tariffs

Gross margin (the percentage of revenue left after direct production costs) has been declining steadily, falling another 1 percentage point in 2025. Keysight specifically calls out U.S. tariffs as a headwind, partially offset by pricing actions and higher sales volumes. Operating margin was roughly flat year-over-year, meaning the company held the line on overall profitability despite the margin pressure — but it remains well below 2023 levels.

Three Acquisitions Add Capabilities but Cost Over $2 Billion in Cash

In the final weeks of fiscal 2025, Keysight acquired Spirent Communications (network testing) for a net $1,415 million, Synopsys' Optical Solutions Group for $578 million, and Ansys' PowerArtist for $26 million — spending roughly $2 billion in total. It simultaneously sold parts of Spirent it didn't want to Viavi Solutions for $399 million to satisfy regulators. These deals barely contributed to 2025 revenue (Spirent added just $9 million), so their real impact will show up in future years.

Cash Generation Is Healthy, but the Balance Sheet Is More Leveraged

Operating cash flow (cash the business actually generates from running itself) recovered strongly to $1,409 million in 2025, back to 2023 levels. However, to fund the acquisitions, Keysight raised $750 million in new debt (the 2030 Senior Notes at 5.35%), bringing total senior notes outstanding to $2,550 million — up from $1,800 million a year prior. Cash on hand stands at $1,890 million, and the company has an untapped $750 million revolving credit facility, so near-term liquidity looks adequate.

A Lower Tax Rate Gave Net Income a Meaningful Boost

The effective tax rate (the actual percentage of pre-tax profit paid in taxes) dropped from 29% in 2024 to 20% in 2025. Much of 2024's elevated rate was due to a one-time charge related to Singapore tax incentives, which did not recur. This tax improvement alone meaningfully inflated the year-over-year net income comparison, so investors should note that some of the earnings growth is not from operations alone.