Keysight Technologies saw its stock climb 2.6% in pre-open trading after the company reported record results for its fiscal third quarter. The firm posted adjusted earnings per share of $3.07, well above the analyst consensus of $2.48, and generated revenue of $1.85 billion versus estimates of $1.75 billion.
Orders were an especially notable highlight. For the quarter, orders rose 56% year-over-year to $2.09 billion, a level that beat market expectations and was attributed by the company to strong demand for testing solutions tied to AI infrastructure.
The Communications Solutions Group emerged as the primary growth driver. Commercial communications revenue increased 56%, with the wireline business - supported by AI data center buildout - surpassing wireless revenue for the first time in company history. That shift reflects demand patterns the company identified in its quarterly results.
Management reinforced the positive quarter with materially higher forward guidance. For the fourth fiscal quarter, the company projected revenue between $1.93 billion and $1.95 billion, compared with a consensus view of $1.82 billion. Adjusted EPS guidance for Q4 was raised to a range of $3.34 to $3.40 per share, significantly above the $2.68 analyst estimate.
Financial discipline featured prominently in the results. Operating margin expanded by more than 800 basis points year-over-year, and free cash flow reached $403 million for the quarter. The company also continued a sizable share repurchase program during the period.
Market conditions provided a modestly supportive backdrop as Keysight moved higher, with the S&P 500 edging up 0.1%, the Dow Jones Industrial Average gaining 0.02% and the Nasdaq adding 0.1% in pre-market trading. Peers in the test-and-measurement and photonics sectors registered similar positive sentiment tied to continued hyperscaler capital spending on AI infrastructure, consistent with the demand trends Keysight reported.
The combination of the sizable earnings beat, substantial order-book growth and guidance well above consensus produced a decisive pre-market reaction. Analysts had been factoring an AI infrastructure multi-year thesis into price targets; several of those targets, including a $400 target from Morgan Stanley, remain notably above the current trading level.
Context and implications
The quarter underlines the degree to which AI infrastructure spending is influencing demand patterns in testing equipment and communications products. The shift in revenue mix within the Communications Solutions Group - with wireline overtaking wireless - highlights where hyperscaler spending is concentrating, according to the results the company disclosed.