Keysight Orders Top $2 Billion Again as AI Test Demand Accelerates
The electronic-measurement company posted $1.85 billion in quarterly revenue, beating its own guidance by nearly $100 million.
Keysight Technologies (KEYS) reported fiscal third-quarter results that showed the AI infrastructure buildout is now a measurable tailwind for its test-and-measurement business, with commercial communications revenue surging 56% and orders topping $2 billion for the second straight quarter.
The electronic-measurement company posted revenue of $1.85 billion for the three months ended July 31, up 36% from a year earlier and accelerating from 31% growth in the second quarter and 23% in the first. The result exceeded the top end of Keysight's own guidance range by roughly $96 million. Orders reached $2.09 billion, a 56% year-over-year increase, extending a streak that began in the prior quarter when bookings first crossed the $2 billion threshold.
The acceleration was concentrated in the Communications Solutions Group, whose revenue rose 43% to $1.345 billion, up from 35% growth in the second quarter and 27% in the first. Within that segment, commercial communications—the division most exposed to AI-related network and semiconductor testing—grew 56% to $1.006 billion, quickening from 40% in the second quarter and 33% in the first. The segment's operating margin widened to 34% from 26% a year ago, an 800-basis-point expansion, while gross margin improved to 71% from 67%.
The Electronic Industrial Solutions Group told a different story. EISG revenue grew 21% to $501 million, slowing from 24% in the second quarter, even as its operating margin expanded 900 basis points to 31% and gross margin climbed to 64% from 57%. Aerospace, defense and government revenue—reported separately—decelerated to 14% growth at $339 million, down from 24% in the prior quarter.
Profitability improved across the company. GAAP net income per share more than doubled to $2.30 from $1.10 a year earlier, accelerating from $2.02 in the second quarter and $1.63 in the first. Non-GAAP earnings reached $3.07 a share, up 78% year over year, and exceeded the top end of management's guidance by $0.58. The margin gains came on an organic basis; a $100 million tariff refund that boosted the second quarter was not repeated.
Cash generation kept pace. Cash flow from operations was $437 million, up 36%, and free cash flow reached $403 million, up 38%. The company's cash balance grew to $2.62 billion at quarter-end, up from $1.87 billion at the start of the fiscal year. Keysight repurchased $520 million in stock during the first nine months of fiscal 2026, nearly double the $278 million spent in the same period a year ago.
Management projected fourth-quarter revenue of $1.930 billion to $1.950 billion at the midpoint, implying roughly 37% year-over-year growth and suggesting the sequential acceleration has further to run. Non-GAAP earnings guidance of $3.34 to $3.40 a share points to continued sequential improvement from the $3.07 reported in the third quarter.
The results underscore how spending on AI data-center equipment and next-generation wireless testing is flowing through to Keysight's order book faster than other end markets are recovering. Commercial communications now accounts for more than half of total company revenue, and its growth rate has quickened each quarter this fiscal year. The defense and industrial segments, while still expanding, are growing at roughly half that pace, leaving the company's near-term trajectory closely tied to how long hyperscaler and telecom capital expenditure remains elevated.