Keysight Technologies: F3Q26 Review: AI-Driven Momentum Continues as Building Backlog Bodes Well for FY27 Outlook

Research evidence excerpt

J P M O R G A N

North America Equity Research

19 August 2026

Keysight Technologies

F3Q26 Review: AI-Driven Momentum Continues as

Building Backlog Bodes Well for FY27 Outlook

Overweight

KEYS, KEYS US

Price (18 Aug 26):$341.00

▲Price Target (Dec-27):$425.00

Prior (Dec-27):$400.00

Keysight delivered another beat and guidance raise in F3Q, primarily driven by AI

infrastructure-related demand as organic revenue growth tracked well ahead of

expectations to +31% y/y and +7% q/q, driven by AI data center wireline scaling

in CSG (wireline surpassed wireless for the first time) along with strength in EISG

due to semiconductor capacity expansion (advanced nodes, HBM, silicon

photonics) and AI-linked general electronics test intensity. This helped deliver

strong upside to both gross margins, led by mix and volume, and operating

margins, led by leverage combined with opex discipline, value engineering,

synergy realization, and reduced discounting, with management expecting gross

margins to be sustainable in the upper-60% range, and expressing confidence in

outperforming its 40% leverage target at least through FY27. Importantly,

Keysight described customers as rapidly revising expectations higher, in turn

helping drive record order growth (+52% y/y organic), the conversion of which is

being gated by the broader supply chain (not tied to one single component) and

driving further expansion of the backlog. Nonetheless, as revenue growth

continues to accelerate into fiscal year-end and backlog continues to build, the

durability of multiple secular growth drivers (6G, AI, defense modernization,

rising test intensity) lining up for Keysight is becoming more evident and in our

view will likely warrant an upward revision to the long-term growth rate target of

+5%-7%. To that end, we are revising our revenue and earnings forecasts higher

on the F3Q results and guidance and we increase our December 2027 price target

to $425 (vs. $400 prior), as we continue to ascribe a premium multiple of ~27x,

justified by a secular acceleration in revenue and EPS growth.

F3Q26 (Jul-end) Results: Revenue and EPS beat, driven by broad-based

demand and continued AI wireline acceleration.…