Keysight Technologies : Third Quarter 2025 Quarterly Results Presentation

Keysight Technologies Q3 Fiscal Year 2025 Results

August 19, 2025

Q3'25 Highlights

1	Revenue and earnings per share above high end of guidance range	Q3 revenue of $1.4B (+11% y/y) and earnings per share1 of $1.72 (+9% y/y). Third consecutive quarter of overall revenue growth. Continued momentum in CSG (+11%) and second consecutive quarter of growth in EISG (+11%). Core operating margin1,2 of 25.4% increased 110 basis points y/y.
2	Raised full-year outlook on strong execution and Q4 backlog	$2.4B backlog with strong scheduled shipments for Q4. Strong demand for AI solutions and robust order growth in aerospace, defense and government. Continued growth in wafer test and general electronics with stable demand in automotive. Expected FY25 revenue growth of 7% and non-GAAP EPS growth of approximately 13%.
3	Focused on strong execution in dynamic macroeconomic environment	YTD free cash flow1 of $1.1B; strong cash flow conversion in the quarter. Q3 share repurchases totaled ~300K shares for a total consideration of $50M. Software and services revenue was 36% of overall Keysight; recurring revenue was 28%. Spirent regulatory clearances are progressing; close now expected in Q4 FY25. Acquisitions of Synopsys' Optical Solutions Group and Ansys' PowerArtist advancing towards final regulatory approval.
4	Progressing tariff mitigation strategy	Actioning multi-pronged approach to reduce impact of tariffs on financial results. Incremental gross impact of tariff increases announced on August 1 is $75M on an annualized basis. On track to fully mitigate April tariffs on a dollar basis by Q1 FY26. Expect to fully mitigate impact of August tariff increases on a dollar basis within 1H FY26.

1 Non-GAAP measure. Reconciliations to the closest GAAP equivalent provided for the current period. 3

2 Core excludes the impact of currency, acquisitions or divestitures closed in the last twelve months; reconciliations included.

Q3'25 Non-GAAP Financial Highlights

Orders	Revenue	Operating Margin	EPS
$1.340B	$1.352B	25.0%	$1.72
+7%y/y (+6%core*)	+11%y/y (+9% core*)	+60 basis points y/y	+9%y/y

* Core excludes the impact of currency, acquisitions or divestitures closed in last twelve months; reconciliations included. Reconciliations to closest GAAP equivalent provided for current period for all non-GAAP 4

measures. For prior periods, please refer to investor.keysight.com.

Q3'25 Revenue: $1.352B

5

+13% y/y (+13% core*): Revenue growth across CC, ADG and EI.

-2% y/y (-6% core*): Revenue decline in ADG while EI and CC were flat.

+15% y/y (+13% core*): Revenue growth across EI, CC and ADG.

* Core excludes the impact of currency, acquisitions or divestitures closed in last twelve months; reconciliations included.

Key:

ADG - Aerospace, Defense & Government 6

CC - Commercial Communications

EI - Electronic Industrial Solutions

Revenue

$940M

+11% y/y (+10% core*)

Operating Margin

26.1%

-20 basis points y/y

• Commercial Communications: Revenue growth was driven by double-digit increases in both wireline and wireless. Order growth reflected continued investment in AI data center infrastructure.

• Aerospace, Defense & Government: Revenue growth reflected strength in the

  U.S. and Asia. Orders grew by double-digits both y/y and sequentially fueled by ongoing global government and defense spending.

  
  
  
  
  

  Revenue

  $412M

  +11% y/y (9 core*)

  Operating Margin

  22.3%

  +220 basis points y/y

  • Automotive: Revenue grew both y/y and sequentially. Orders were stable y/y

    and improved sequentially with steady OEM ecosystem engagement.

  • Semiconductor: Wafer test solutions revenue grew by double-digits as foundries and IDMs continued to invest in AI-driven advanced node, memory and SiPh.

  • General Electronics: Revenue grew for a second consecutive quarter, reflecting strength in advanced research and digital health. Broad-based demand across all key sub-segments drove double-digit order growth.

    
    
    

    Commercial $644M	+13%
    Aerospace, Defense & $296M	+8%
    Electronic Industrial $412M	+11%
    Total $1,352M	+11%

    
    
    

    End Market Revenue YoY %

    Communications

    Government

    Solutions

    $1.79 - $1.85

    Non-GAAP Earnings per share

    $1.370B - $1.390B

    Revenue

    Q4'25 Guidance

    Q4'25 Financial Assumptions

    • Interest Income, Interest Expense and Other Income/Expense: ~$14-16M net income

    • Non-GAAP tax rate of 14% for Q4'25 and FY25

    • Guidance assumes Q4 weighted average diluted share count of approximately 173M shares

    • FY25 capital expenditures expected to be approximately $135M

    • Tariff rates are at August 1 levels

Reconciliations

Three months ended Nine months ended

July 31, July 31,

Percent

Percent

2025 2024

Inc/(Dec) 2025 2024

Inc/(Dec)

Revenue $ 1,352 $ 1,217 11% $ 3,956 $ 3,692 7%

Adjustments:

Revenue from acquisitions or divestitures	(2)	-		(12)	-
Currency impacts	(19)	-		(1)	-
Core Revenue	$ 1,331	$ 1,217	9%	$ 3,943	$ 3,692	7%

Year-over-Year

Revenue

YoY %

Revenue from

acquisitions or

divestitures

Currency

Adjustments Core Revenue

YoY %

Revenue by Segment	Q3'25	Q3'24	Chg.	Q3'25		Q3'25		Q3'25	Q3'24	Chg.
Communications Solutions Group	$ 940	$ 847	11%	$	2	$	10	$ 928	$ 847	10%
Electronic Industrial Solutions Group	412	370	11%		-		9	403	370	9%
Total Revenue	$ 1,352 $ 1,217		11%	$ 2		$ 19		$ 1,331 $ 1,217		9%

Revenue

YoY %

Revenue from acquisitions or

divestitures

Currency

Adjustments Core Revenue

YoY %

Revenue by Region	Q3'25	Q3'24	Chg.	Q3'25		Q3'25		Q3'25	Q3'24	Chg.
Americas	$ 566	$ 500	13%	$	1	$	-	$ 565	$ 500	13%
Europe	217	221	(2)%		1		10	206	221	(6)%
Asia Pacific	569	496	15%		-		9	560	496	13%
Total Revenue	$ 1,352 $ 1,217		11%	$ 2		$ 19		$ 1,331 $ 1,217		9%

			Percent
Q3'25		Q3'24	Inc/(Dec)
Aerospace, Defense and Government	$ 296	$ 275	8%
Commercial Communications	644	572	13%
Electronic Industrial	412	370	11%
Total Revenue	$ 1,352	$ 1,217	11%

2025	2024		2025	2024
Gross Profit, as reported	$ 834	$ 755	$ 2,468	$ 2,331
Amortization of acquisition-related balances	19	17	58	51
Share-based compensation	8	7	28	22
Acquisition and integration costs	-	1	1	1
Restructuring and others	3	1	7	12
Non-GAAP Gross Profit	$ 864	$ 781	$ 2,562	$ 2,417
GAAP Gross margin, %	61.7 %	62.0 %	62.4%	63.1 %
Non-GAAP Gross margin, %	63.9%	64.1 %	64.8%	65.5 %

Three months ended Nine months ended July 31, July 31,

2025	2024		2025	2024
Income from operations, as reported	$ 234	$ 205	$ 659	$ 603
Amortization of acquisition-related balances	33	31	100	106
Share-based compensation	32	32	131	118
Acquisition and integration costs	31	23	98	59
Restructuring and others	8	6	32	60
Non-GAAP income from operations	$ 338	$ 297	$ 1,020	$ 946
GAAP Operating margin, %	17.3 %	16.8 %	16.7%	16.3 %
Non-GAAP Operating margin, %	25.0%	24.4 %	25.8%	25.6 %

Three months ended Nine months ended July 31, July 31,

Three months ended

July 31,

2025		2024
Non-GAAP income from operations	$ 338	$ 297
Adjustments:
Operating profit from acquisitions or divestitures	-	-
Currency impacts	1	-
Core Income from operations	$ 339	$ 297

Core Revenue

$

1,331

Core Operating margin, % 25.4 %

GAAP Net income $ 191 $ 1.10 $ 389 $ 2.22 $ 617 $ 3.56 $ 687 $ 3.92

Non-GAAP adjustments:

Three months ended Nine months ended July 31, July 31,

2025	2024					2025	2024
Net	Diluted		Net	Diluted		Net	Diluted		Net	Diluted
Income	EPS		Income	EPS		Income	EPS		Income	EPS

Amortization of acquisition-related balances	33	0.19	31	0.18	100	0.58	106	0.60
Share-based compensation	32	0.18	32	0.18	131	0.75	118	0.68
Acquisition and integration costs	46	0.27	16	0.09	70	0.40	56	0.32
Restructuring and others	(6)	(0.04)	6	0.03	(4)	(0.02)	44	0.25
Adjustment for taxes(a)	1	0.02	(199)	(1.13)	(5)	(0.03)	(203) (1.16)
Non-GAAP Net income	$ 297 $ 1.72			$ 275 $ 1.57		$ 909 $ 5.24		$ 808 $ 4.61
Weighted average shares outstanding - diluted	173			175		173		175

(a) For the three and nine months ended July 31, 2025, management uses a non-GAAP effective tax rate of 14%. For the three and nine months ended July 31, 2024, management uses a non-GAAP effective tax rate of 8% and 14%, respectively.

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Please refer to the last slide for details on the use of non-GAAP financial measures.

2025		2024 2025		2024
Net cash provided by operating activities	$ 322	$ 255	$ 1,184	$ 693
Less: Investments in property, plant and equipment	(31)	(33)	(42)	(28)
Free cash flow	$ 291	$ 222 $ 1,094		$ 577
Free cash flow as a percentage of Revenue	22%	18%	28%	16%

Three months ended Nine months ended July 31, July 31,

Management uses both GAAP and non-GAAP financial measures to analyze and assess the overall performance of the business, to make operating decisions and to forecast and plan for future periods. We believe that our investors benefit from seeing our results "through the eyes of management" in addition to seeing our GAAP results. This information enhances investors' understanding of the continuing performance of our business and facilitates comparison of performance to our historical and future periods.

Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies, including industry peer companies, limiting the usefulness of these measures for comparative purposes.

These non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The discussion below presents information about each of the non-GAAP financial measures and

the company's reasons for including or excluding certain categories of income or expenses from our non-GAAP results. In future periods, we may exclude such items and may incur income and expenses similar to these excluded items.

Accordingly, adjustments for these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual.

Core Revenue/ Margin excludes the impact of foreign currency changes and revenue/ expenses associated with acquisitions or divestitures completed within the last twelve months. We exclude from the current period the impact of foreign currency changes as currency rates can fluctuate based on factors that are not within our control and can obscure growth trends. As the nature, size and number of acquisitions can vary significantly from period to period and as compared to our peers, we also exclude revenue/ expenses associated with recently acquired businesses to facilitate comparisons of growth and analysis of underlying business trends.

Free cash flow includes cash provided by operating activities adjusted for net investments in property, plant & equipment.

Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP Diluted EPS may include the following types of adjustments:

Acquisition-related Items: We exclude the impact of certain items recorded in connection with business combinations from our non-GAAP financial measures that are either non-cash or not normal, recurring operating expenses due to their nature, variability of amounts and lack of predictability as to occurrence or timing. These amounts may include non-cash items such as the amortization of acquired intangible assets and amortization of items associated with fair value purchase accounting adjustments. We also exclude other acquisition and integration costs associated with business acquisitions that are not normal recurring operating expenses, including gain/loss on foreign exchange contracts and legal, accounting and due diligence costs. We exclude these charges to facilitate a more meaningful evaluation of our currentoperating performance and comparisons to our past operating performance.

Share-based Compensation Expense: We exclude share-based compensation expense from our non-GAAP financial measures because share-based compensation expense can vary significantly from period to period based on the company's share price, as well as the timing, size and nature of equity awards granted. Management believes the exclusion ofthis expense facilitates the ability of investors to compare the company's operating results with those of other companies, many of which also exclude share-based compensation expense in determining their non-GAAP financial measures.

Restructuring and others: We exclude incremental expenses associated with restructuring initiatives including those of acquired entities, usually aimed at material changes in the business or cost structure. Such costs may include employee separation costs, asset impairments, facility-related costs, contract termination fees, and costs to move operations from one location to another. These activities can vary significantly from period to period based on the timing, size and nature of restructuring plans; therefore, we do not consider such costs to be normal, recurring operating expenses.

We also exclude "others," not normal, recurring, cash operating income/expenses from our non-GAAP financial measures. Such items are evaluated on an individual basis, based on both quantitative and qualitative factors and generally represent items that we do not anticipate occurring as part of our normal business. While not al-linclusive, examples of such items would include net unrealized gains on equity investments still held, significant non-recurring events like realized gains or losses associated with our employee benefit plans, costs and recoveries related to unusual events, gain onsale of assets/divestitures, adjustment attributable to non-controlling interest etc. We believe that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to our operating performance in other periods.

Estimated Tax Rate: We utilize a consistent methodology for long-term projected non-GAAP tax rate. When projecting this long-term rate, we exclude any tax benefits or expenses that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. Additionally, we evaluate our current long-term projections, current tax structure and other factors, such as existing tax positions in various jurisdictions and key tax holidays in major jurisdictions where Keysight operates. This tax rate could change in the future of r a variety of reasons, including but not limited to significant changes in geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where Keysight operates. The above reasons also ilmit our ability to reasonably estimate the future GAAP tax rate and provide a reconciliation of the expected non-GAAP earnings per share for the fourth quarter of fiscal 2025 to the GAAP equivalent.

Management recognizes these items can have a material impact on our cash flows and/or our net income. Our GAAP financial statements, including our Condensed Consolidated Statement of Cash Flows, portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded costs are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company's profit and loss from any and all events, management does (and investors should) rely upon the Condensed Consolidated Statement of Operations prepared in accordance with GAAP. The non-GAAP measures focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company's performance.