Keysight Technologies
KEYS
$285.86
-6.31%
Keysight Technologies is a leading provider of electronic test and measurement equipment, software, and services used by communications, semiconductor, automotive, industrial, aerospace, and government customers to design, validate, and bring complex electronic products to market. Spun out of Agilent in 2014, the company occupies a premium, high-barrier position in the test-and-measurement oligopoly alongside peers like Rohde & Schwarz and Anritsu, with deep incumbency in wireless standards validation and a growing software and services mix that distinguishes it from pure hardware vendors. The current investor narrative centers on an AI-driven demand inflection: management has highlighted a striking 56% jump in orders tied to AI data-center and high-speed networking test requirements, and the most recent quarter delivered 36.5% year-over-year revenue growth with record results. That bullish setup is being actively debated against a sharp October-to-November share-price pullback and management's warnings about supply-chain constraints that could pressure future growth and margins, leaving investors to weigh whether the AI order surge is durable or a cyclical spike already priced in.…
KEYS
Keysight Technologies
$285.86
Related headlines
Investment Opinion: Should I buy KEYS Today?
Rating: Buy, with position sizing discipline. The core thesis is that Keysight's 36.5% year-over-year revenue growth and 56% AI-driven order jump represent a genuine, multi-quarter demand inflection that the market has temporarily discounted via a 20.7% one-month decline, leaving the stock 37.5% below the $419.67 average analyst target despite 11 of 12 analysts rating it Buy with zero Sells. Anchoring the view: even the most cautious analyst target of $350 sits 14.7% above the current $305.11, meaning the entire Street range is above the market price.
The supporting evidence is unusually concrete. Revenue accelerated sequentially from $1.600B (Q1) to $1.717B (Q2) to $1.846B (Q3), while operating margin climbed from 15.5% to 23.7% to 25.0% and Q3 net income of $397M nearly doubled the year-ago $191M. The forward PE of 21.9x is roughly 41% below the 37.3x trailing multiple, and the PEG of 0.96 implies growth is not overpriced; free cash flow TTM of $1.469B (about a 4.6% FCF yield on the $31.65B market cap) funds $210M of Q3 buybacks with debt-to-equity of just 0.51 and a current ratio of 2.35. The PS ratio has compressed from a 35.3x peak in Q2 2026 to 5.89x, restoring valuation support even though EV/EBITDA of 22.97x remains a premium to hardware peers.
Three risks could invalidate the thesis: supply-chain constraints compressing the 25.0% operating margin (gross margin already slipped from 68.6% in Q2 to 65.9% in Q3), a hyperscaler digestion pause hitting the 73% of revenue concentrated in Communications Solutions ($1.345B of $1.846B), and multiple de-rating given the 1.209 beta and 22.96% realized max drawdown. This Buy would upgrade to a higher-conviction stance if Q4 guidance confirms backlog conversion with gross margin holding above 65%, and would downgrade to Hold if revenue growth decelerates below 20% or operating margin falls under 20%. Verdict: fairly valued to modestly undervalued relative to its own recent history and the analyst consensus, but still at a premium to hardware peers — a quality-growth name priced for execution, not a deep-value bargain.
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KEYS 12-Month Price Forecast
The forward view is bullish but sized for volatility. Fundamentals are accelerating on every measure — 36.5% revenue growth, a 56% AI order jump, and operating margin nearly doubling from 15.5% to 25.0% across fiscal 2026 — while valuation has reset to a sub-1.0 PEG and a 5.89x PS ratio down from a 35.3x peak. The 20.7% one-month decline against a 37.5% implied consensus upside suggests the market is pricing more pessimism than the analyst community, a potential dislocation. However, the 1.209 beta, 22.96% realized max drawdown, and management's explicit supply-chain warning mean conviction should be medium rather than high. I would upgrade to high confidence if Q4 guidance confirms backlog conversion with gross margin above 65%, and downgrade to neutral if revenue growth decelerates below 20% or operating margin falls under 20%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Keysight Technologies's 12-month outlook, with a consensus price target around $419.67 and implied upside of +46.8% versus the current price.
Average Target
$419.67
12 analysts
Implied Upside
+46.8%
vs. current price
Analyst Count
12
covering this stock
Price Range
$350 - $487
Analyst target range
Coverage is broad and overwhelmingly bullish: 12 analysts cover Keysight with 11 Buy ratings, 1 Hold, and 0 Sells, yielding a consensus recommendation of "buy" (mean score of 1.58 on a 1-5 scale where lower is more bullish). The average target price of $419.67 implies roughly 37.5% upside from the current $305.11 — a strikingly large gap that underscores how far the stock has fallen below where the Street sees fair value. The consensus clearly leans bullish, and the recent institutional ratings flow reinforces this: Morgan Stanley upgraded to Overweight from Equal Weight in July 2026, and firms including Goldman Sachs, JP Morgan, Barclays, Wells Fargo, UBS, Baird, and Susquehanna have maintained Buy/Overweight/Outperform stances through the August-October period.
The target range spans $350 to $487, a wide $137 spread that signals meaningful uncertainty about the AI demand cycle's durability. The high target of $487 likely assumes sustained order growth, successful navigation of supply constraints, multiple expansion on accelerating AI-driven earnings, and forward EPS toward the high end of the $10.62-$12.07 estimate range. The low target of $350 — still 14.7% above the current price — prices in margin compression from supply-chain pressures and slower conversion of the order backlog, but notably even the most cautious analyst sees upside. The wide spread, combined with the stock's 20.7% one-month decline against a +37.5% implied consensus upside, suggests the market is pricing in more pessimism than the analyst community — a potential dislocation, though one that warrants caution given the beta of 1.21 and the 22.96% max drawdown already realized.
Bulls vs Bears: KEYS Investment Factors
The bull case currently rests on stronger fundamental evidence: 36.5% revenue growth, a 56% AI-driven order jump, expanding margins, a sub-1.0 PEG, and a unanimous-to-bullish analyst consensus with a $419.67 average target implying 37.5% upside. The bear case is primarily technical and sentiment-driven — a 20.7% one-month collapse, supply-chain warnings, and a premium 23x EV/EBITDA multiple — rather than a deterioration in reported results. The single most important tension is whether the AI order surge converts into revenue and margin expansion or gets throttled by supply constraints; if Q4 guidance confirms backlog conversion, the dislocation closes toward the Street target, but if supply friction compresses margins, the premium multiple de-rates further. On balance, the evidence favors the bulls, but the wide $350-$487 target spread and 1.21 beta mean conviction should be sized accordingly.
Bullish
- AI order surge signals durable demand: Management flagged a 56% jump in orders tied to AI data-center and high-speed networking test requirements, and Q3 revenue of $1.846 billion grew 36.5% year-over-year versus $1.352 billion a year ago. This is a multi-quarter acceleration (Q1 $1.600B, Q2 $1.717B, Q3 $1.846B), not a one-off spike, suggesting the AI test cycle is broadening.
- Analyst consensus sees 37.5% upside: 11 of 12 analysts rate KEYS Buy with zero Sells, and the $419.67 average target implies 37.5% upside from $305.11. Even the lowest target of $350 sits 14.7% above the current price, meaning the entire Street range is above the market — a rare dislocation after the 20.7% one-month decline.
- Margins expanding on operating leverage: Gross margin climbed from 62.2% in Q1 to 68.6% in Q2 and 65.9% in Q3, while operating margin rose from 15.5% to 23.7% to 25.0% over the same quarters. Q3 net income of $397 million (21.5% net margin) nearly doubled the year-ago $191 million (14.1%), demonstrating powerful incremental profitability on the revenue surge.
- Valuation reset with sub-1.0 PEG: The forward PE of 21.9x is roughly 41% below the 37.3x trailing multiple, and the PEG ratio of 0.96 is below 1.0, implying growth is not overpriced. The PS ratio has collapsed from a 35.3x peak in Q2 2026 to 5.89x today, restoring valuation support after the selloff.
Bearish
- Supply-chain constraints threaten margins: Management explicitly warned that supply-chain constraints could pressure future growth and margins, and the stock sank on that guidance despite an earnings beat. With gross margin already fluctuating (68.6% in Q2 down to 65.9% in Q3), any conversion friction on the order backlog could compress the 25.0% operating margin that underpins the forward-EPS story.
- Severe momentum breakdown: KEYS is down 20.7% over the past month versus a -1.99% SPY, a -18.7 percentage-point relative-strength gap, and down 9.2% over three months. The 22.96% max drawdown and a price at just 61.9% of its 52-week range ($167.23-$389.93) show a former leader that has lost its bid and is testing the $296-299 support zone.
- Premium multiple leaves no room for error: EV/EBITDA of 22.97x and EV/Sales of 7.92x are rich for a hardware-equipment vendor where mid-single-digit to low-double-digit EV/EBITDA is common. The 37.3x trailing PE remains above the 2023-2024 band of roughly 22-25x, so the stock is priced for continued execution rather than stability.
- Revenue concentration in communications: The Communications Solutions Group generated $1.345 billion of Q3 revenue versus just $501 million for Electronic Industrial Solutions, meaning roughly 73% of sales hinge on the AI/communications test cycle. A pause in AI infrastructure spending or a digestion phase among hyperscalers would hit the dominant segment disproportionately.
KEYS Technical Analysis
Keysight is in a powerful but volatile longer-term uptrend that has recently rolled over into a corrective phase. The stock is up 63.9% over the trailing year and 47.7% year-to-date, massively outperforming the S&P 500's 10.4% and 10.6% respective gains, yet at $305.11 it now sits at just 61.9% of its 52-week range (low of $167.23, high of $389.93). That positioning — still deeply profitable for long-term holders but well off the highs — signals a momentum stock that has lost its leadership mantle and is testing whether the uptrend can reassert itself or whether a deeper mean-reversion is underway. The 22.96% maximum drawdown confirms this is a meaningful correction, not a minor wobble.
Short-term momentum has deteriorated sharply and is diverging violently from the longer-term trend. The stock is down 20.7% over the past month and 9.2% over three months, even as it remains up 63.9% over twelve months — a classic deceleration pattern where the trailing-year gain is increasingly a rearview-mirror artifact. The one-month relative strength versus SPY is -18.7 percentage points, a severe underperformance that accelerated into late October and early November, with the stock closing at $298.94 on November 2 before a modest 2.06% bounce to $305.11 on November 3. This divergence — parabolic annual gains colliding with a -20.7% monthly collapse — typically signals either a trend reversal or an oversold bounce candidate, and the recent stabilization off the $296-299 area hints the selling may be finding a floor.
Key technical levels are now clearly defined. Immediate support sits at the recent $296.72-298.94 zone (the late-October/early-November lows), with the 52-week low of $167.23 far below as a catastrophic backstop; resistance is the 52-week high of $389.93, with intermediate overhead near the $340-360 area where the stock repeatedly stalled in September and October. A breakout above $390 would confirm the uptrend's resumption and likely require a fresh fundamental catalyst, while a breakdown below $296 would open the door to a deeper retracement and signal that the AI-driven rally has fully unwound. With a beta of 1.209, Keysight is roughly 21% more volatile than the market, meaning position sizing should account for amplified drawdowns — the 22.96% max drawdown is a realistic reminder of the risk embedded in this name.
Beta
1.21
1.21x market volatility
Max Drawdown
-26.3%
Largest decline past year
52-Week Range
$167-$390
Price range past year
Annual Return
+59.6%
Cumulative gain past year
| Period | KEYS Return | S&P 500 |
|---|---|---|
| 1m | -25.6% | -1.0% |
| 3m | -15.2% | -0.2% |
| 6m | -20.7% | +4.0% |
| 1y | +59.6% | +13.6% |
| ytd | +38.4% | +12.4% |
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KEYS Fundamental Analysis
Keysight's revenue trajectory is accelerating impressively, not decelerating. The most recent quarter (ended July 31, 2026) delivered $1.846 billion in revenue, up 36.5% year-over-year, building on a clear sequential ramp from $1.600 billion in Q1 and $1.717 billion in Q2 of fiscal 2026 — a multi-quarter acceleration that contrasts sharply with the $1.352 billion reported in the year-ago Q3. The Communications Solutions Group is the dominant engine at $1.345 billion versus $501 million for the Electronic Industrial Solutions Group, meaning the AI/communications test cycle is the primary growth driver, and the reported 56% order jump suggests the forward pipeline remains robust even as supply constraints pose a near-term risk to conversion.
Profitability is strong and margins are expanding meaningfully. Q3 net income reached $397 million on a 21.5% net margin, with gross margin at 65.9% and operating margin at 25.0% — a marked improvement from the year-ago Q3's $191 million net income and 14.1% net margin, and well above the 62.2% gross margin and 15.5% operating margin in Q1 of this fiscal year. The sequential climb in gross margin from 62.2% (Q1) to 68.6% (Q2) to 65.9% (Q3) and operating margin from 15.5% to 23.7% to 25.0% reflects operating leverage on the revenue surge, and the 62.1% trailing gross margin and 17.6% operating margin in the valuation data confirm a structurally high-margin business typical of premium test-and-measurement franchises.
The balance sheet and cash generation are healthy and self-funding. Free cash flow TTM stands at $1.469 billion, with quarterly FCF of $403 million in Q3, $472 million in Q2, and $407 million in Q1 — consistently strong conversion. Debt-to-equity is a conservative 0.51, the current ratio is a robust 2.35, and cash sits at $2.622 billion, while ROE of 14.4% and ROA of 7.2% are solid if not spectacular. The company is actively returning capital, repurchasing $210 million of stock in Q3 alone, and its $1.469 billion FCF against a $31.65 billion market cap implies a roughly 4.6% FCF yield — adequate but not cheap, consistent with a high-quality compounder rather than a deep-value cash machine.
Quarterly Revenue
$1.8B
2026-07
Revenue YoY Growth
+36.5%
YoY Comparison
Gross Margin
65.9%
Latest Quarter
Free Cash Flow
$1.5B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is KEYS Overvalued?
Because Keysight is solidly profitable (Q3 net income of $397 million, positive trailing EPS), the PE ratio is the appropriate primary metric. The stock trades at a trailing PE of 37.3x but a forward PE of just 21.9x — a dramatic compression that implies the market expects earnings to roughly double, consistent with the consensus forward EPS estimate of $11.18 versus the trailing figure. That wide trailing-to-forward gap signals the market is pricing in substantial earnings growth from the AI-driven order surge, and the PEG ratio of 0.96 (below 1.0) suggests the growth is not overvalued relative to its expected pace.
On peer and cross-metric comparison, the picture is mixed. The PS ratio of 5.89x and EV/Sales of 7.92x are rich for a hardware-equipment vendor, and the EV/EBITDA of 22.97x and PCF of 22.46x reflect premium quality but leave limited room for error; the PB ratio of 5.39x is moderate. Against a hardware/equipment peer set where mid-single-digit to low-double-digit EV/EBITDA is common, Keysight's 23x EV/EBITDA is a clear premium, justified by its 65.9% gross margin, 25% operating margin, and oligopolistic market position — but the premium means the stock is priced for continued execution, not merely stability.
Historically, Keysight's valuation has compressed from elevated levels. Its PE ratio has fallen from 43.3x in Q2 2026 and 34.8x in Q3 2026 to the current 37.3x trailing, while its PS ratio has fallen from a peak of 35.3x in Q2 2026 to 5.89x today — a massive de-rating that reflects both the price pullback and the earnings surge catching up to the multiple. The stock is now near the lower end of its own recent valuation band on a sales basis, which, combined with the sub-1.0 PEG, suggests the recent selloff has restored some valuation support even as the trailing PE remains above its 2023-2024 levels of roughly 22-25x.
PE
37.3x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 16x~51x
vs. Industry Avg
37.3x
Industry PE ~37.3x*
EV/EBITDA
23.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on margin durability and revenue concentration. Gross margin already oscillated from 68.6% in Q2 to 65.9% in Q3, and management's supply-chain warning threatens the 25.0% operating margin that justifies the forward-EPS estimate of $11.18; a few points of compression would materially cut that figure. Roughly 73% of Q3 revenue ($1.345 billion of $1.846 billion) came from Communications Solutions, so any digestion pause among AI/communications customers hits the core. Earnings volatility is real — Q4 2024 posted a -$73 million net loss on a $321 million tax charge — showing that one-time items can swing results sharply, though the current $1.469 billion FCF TTM and 0.51 debt-to-equity provide a solid buffer.
Market and competitive risks are dominated by valuation compression and momentum. At 22.97x EV/EBITDA and 7.92x EV/Sales, KEYS trades at a clear premium to hardware-equipment peers, leaving limited room for error if growth decelerates; the 37.3x trailing PE also sits above its 2023-2024 band of 22-25x. The stock's beta of 1.209 means it amplifies market moves, and the -18.7pp one-month relative-strength gap versus SPY shows how quickly sector rotation can punish a high-multiple name. Competitive pressure from Rohde & Schwarz and Anritsu in test-and-measurement, plus the risk that AI capex normalizes, could trigger multiple de-rating even if results hold.
A worst-case scenario would combine supply-chain constraints delaying backlog conversion, a hyperscaler pause in AI test orders, and a broad de-rating of high-multiple tech. In that chain, the stock could retest its recent $296.72 low and, in a deeper unwind, approach the analyst low target of $350 is above the current price, so the more realistic downside anchor is the 52-week low of $167.23 — a catastrophic -45% from $305.11 — though the 22.96% max drawdown already realized suggests a more probable adverse outcome of roughly -20% to -25% toward the $230-245 area. Investors should size positions for a realistic -25% drawdown, with the $296 support level as the first warning sign of a deeper retracement.
FAQ
Ranked by severity: first, margin and supply-chain risk — gross margin already fell from 68.6% in Q2 to 65.9% in Q3, and management warned constraints could pressure future margins, directly threatening the 25.0% operating margin and $11.18 forward EPS that justify the multiple. Second, revenue concentration — Communications Solutions is $1.345B of $1.846B in Q3 revenue (roughly 73%), so a hyperscaler AI capex digestion phase would hit the core disproportionately. Third, valuation compression — at 22.97x EV/EBITDA and 7.92x EV/Sales the stock has little room for error, and a de-rating toward hardware-peer levels could occur even if results hold. Fourth, market sensitivity — a 1.209 beta and a -18.7 percentage-point one-month relative-strength gap versus SPY show how fast a rotation away from high-multiple tech can punish the shares, as the 22.96% max drawdown already demonstrated.
The scenario framework assigns 50% to the base case of $350-$419.67, in which Keysight hits consensus forward EPS of $11.18 and revenue near the $7.53B estimate average, with gross margin stabilizing in the 65-66% range and the stock grinding back toward the $419.67 average target as the 20.7% one-month dislocation closes. The 25% bull case targets $419.67-$487, requiring durable AI demand, easing supply constraints, and multiple expansion toward the $487 high target. The 25% bear case spans $167.23-$350, driven by backlog conversion delays, a hyperscaler pause, and high-multiple tech de-rating, with the $296.72 recent low as the first test and the $167.23 52-week low as a catastrophic backstop. The base case is most likely, and its key assumption is that the 56% order surge converts into revenue without further gross-margin erosion below 65%.
The answer depends on the metric. On trailing figures KEYS looks expensive at 37.3x PE, 22.97x EV/EBITDA, and 7.92x EV/Sales — a clear premium to hardware-equipment peers where low-double-digit EV/EBITDA is common — but on forward earnings it trades at just 21.9x against a consensus EPS of $11.18, roughly 41% below the trailing multiple, with a PEG of 0.96 implying growth is not overpriced. The PS ratio has compressed from a 35.3x peak in Q2 2026 to 5.89x, placing the stock near the low end of its own recent valuation band even as the trailing PE remains above its 2023-2024 range of roughly 22-25x. The market is therefore paying a quality premium that assumes the AI order surge converts into the forecast earnings doubling — fair-to-modestly-undervalued versus its own history and the analyst consensus, but not a discount to peers.
From a risk/reward standpoint the setup is asymmetric but volatile. The stock at $305.11 sits 37.5% below the $419.67 average analyst target, and even the lowest of the 12 analyst targets ($350) is 14.7% above the current price with 11 Buy ratings and zero Sells — a rare configuration where the entire Street range is above the market. The downside is real, however: a 1.209 beta, a 22.96% realized max drawdown, and management's explicit supply-chain warning mean a retest of the $296.72 low or a slide toward the $230-245 area is plausible if Q4 guidance disappoints. It is a good buy for investors with a 12-24 month horizon who size positions for a -25% drawdown and treat the $296 support level as a thesis checkpoint; it is a poor buy for anyone needing near-term stability or income, given the 0% dividend yield.
KEYS fits a medium-to-long-term holding period of at least 12-24 months rather than short-term trading. The fundamentals support patience — revenue accelerated sequentially from $1.600B to $1.717B to $1.846B across fiscal 2026, operating margin climbed from 15.5% to 25.0%, and $1.469B of trailing free cash flow funds $210M of quarterly buybacks with debt-to-equity of just 0.51 — but the 1.209 beta, 22.96% max drawdown, and 20.7% one-month decline make short-horizon entry timing treacherous. There is no dividend (0% yield) to cushion the wait, so total return depends entirely on the AI test cycle proving durable and the multiple holding. A staged entry around the $296-305 support zone with a minimum 12-month horizon best matches the risk profile; traders should note the stock is 61.9% of its 52-week range with resistance near $340-360 and the $389.93 high.