Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

KEYS · Q3 2025 Earnings

Keysight Technologies

Reported August 19, 2025

30-second summary

Revenue grew 11.1% YoY to $1.352B and non-GAAP EPS of $1.72 both came in above the top of the Q2-issued guide, and management raised FY25 revenue growth to ~7% (top of the 5–7% target) and FY25 EPS growth to ~13% (well above the slightly-above-10% prior target). Non-GAAP operating margin landed at 25%, +60bps YoY, despite this being the flagged peak tariff quarter. The signal: the "gradual recovery" framing is gone, AI-driven wireline plus EISG re-acceleration are compounding, and tariff mitigation is running ahead of schedule.

Headline numbers

EPS

Q3 FY2025

$1.72

Revenue

Q3 FY2025

$1.35B

+11.1% YoY

Gross margin

Q3 FY2025

61.7%

Free cash flow

Q3 FY2025

$0.29B

Operating margin

Q3 FY2025

17.3%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$1.35B	+11.1%	$1.31B	+3.5%
EPS	$1.72	—	$1.70	+1.2%
Gross margin	61.7%	—	62.4%	-70bps
Operating margin	17.3%	—	15.8%	+150bps
Free cash flow	$0.29B	—	$0.46B	-36.3%

Guidance

Keysight raised full-year FY2025 revenue growth to ~7% and EPS growth to ~13%, beating Q3 expectations on both revenue and EPS; forward Q4 guidance issued as part of fiscal-year raise.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q3 FY2025	$1.305B–$1.325B	$1.352B	+$0.027B above guide (top of range +2.0%)	Beat
Non-GAAP EPS	Q3 FY2025	$1.63–$1.69	$1.72	+$0.03 above guide (top of range +1.8%)	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q4 FY2025	$1.37B–$1.39B	—
Non-GAAP EPS	Q4 FY2025	$1.79–$1.85	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue growth (FY2025)	FY2025	midpoint of 5%–7% target range	approximately 7%	raised from ~6% midpoint to ~7% (top of prior range)	Raised
Non-GAAP EPS growth (FY2025)	FY2025	slightly above 10% long-term target	approximately 13%	+3pts above prior guidance (~10% vs ~13%)	Raised

Product revenue

Q3 FY2025

Segment	Q3 FY2025	YoY
Communications Solutions Group (CSG)	$0.94B	+11.0%
Electronic Industrial Solutions Group (EISG)	$0.412B	+11.0%
Commercial Communications	$0.644B	+13.0%
Aerospace, Defense and Government	$0.296B	+8.0%
Electronic Industrial	$0.412B	+11.0%

Management tone

Narrative arc: Q2 "gradual recovery, raising to midpoint" → Q3 "recovery ahead of plan, raising to top of range and beyond."

Two quarters ago management framed FY25 as a slow climb to the midpoint of a 5–7% long-term target. This quarter the language shifted from raising to the midpoint to "raising our outlook for the full year once again," with FY25 EPS growth jumping from "slightly above 10%" to ~13%. When pressed on the recovery framing, Satish confirmed: "we're feeling good about how the year is progressing slightly even better than what we expected at the beginning of the year." The "gradual" qualifier that anchored Q2's narrative is gone.

AI's framing has expanded from a wireline-specific tailwind to a multi-end-market secular engine with visibility extending years out. Satish: "What used to be a two-, three-, four-year sort of refresh cycle is being pulled in, which really creates a steady roadmap for us to keep working with our customers," and notably: "I'm probably more convinced now that this is going to play out and we're well positioned than I was maybe 18 months ago when we started down this path." That is an explicit personal-conviction upgrade — rare from this management team — and signals durability rather than cyclical capex spike.

The supply-chain narrative inverted from constraint to unlock. Q2 was framed as constrained capacity limiting upside; this quarter Satish reframed it: "what's really played out over the last few quarters is that the unlocking of the supply chain… last year at this time, I would have said this is a highly concentrated business… what's playing out is the broadening of the business." Customer concentration risk in AI/wireline — a key Q2 watch item — is being actively de-risked, not just defended.

Tariff posture moved from execution risk to executed. Neil's commentary — "we've taken incremental actions to mitigate the August increase and should have that mitigated on a dollars basis… sometime during the first half of this fiscal year. So we feel like we've got it well handled" — is materially more confident than Q2's commitment-to-mitigate framing. Non-GAAP operating margin expanding 60bps YoY in the flagged-peak-tariff quarter is the proof.

Wireless flipped from "stable at lower levels" to growing double-digit and tracking ahead of internal expectations, removing what had been a hedged note in CSG.

Recurring themes management leaned on this quarter:

AI-driven infrastructure investment translating into sustained multi-year demand (wireline, general electronics, semiconductor)Supply chain unlocking from constrained state enabling volume growth and manufacturing mix shiftAerospace, defense & government acceleration post-administration change and European spend emerging as new dynamicTariff mitigation through multi-pronged approach (supply chain optimization, pricing, production shift) tracking to planBroadening customer base and ecosystem activity reducing concentration risk in high-growth markets6G research & standards progression creating near-term R&D engagement pipeline

Risks management surfaced:

Automotive market still challenged despite overall recovery; ongoing 'in-market dynamics' headwindsTariff environment and macroeconomic uncertainty not yet fully absorbed by market; potential for future tariff changesGovernment budget dependency limits pace of aerospace/defense growth acceleration relative to commercial marketsGeopolitical environment and trade tensions creating overhang despite resilient demandBroader smartphone supply chain remains subdued, limiting wireless upside in consumer segment

Answers to last quarter's watch list

Tariff absorption math — Q3 non-GAAP operating margin came in at 25%, +60bps YoY per Neil's prepared remarks, despite Q3 being flagged as peak tariff impact. April tariffs are now expected fully mitigated by Q1 FY26 and August tariff increase mitigated on a dollars basis within H1 FY26. Mitigation is running ahead of plan. Status: Resolved positively

EISG durability — EISG grew +11% YoY in Q3, the second consecutive growth quarter and an acceleration rather than a stall. Automotive remains a drag but no longer dominates; semiconductor and general electronics carried the segment. Status: Resolved positively

Orders run-rate — Q3 orders of $1.340B versus revenue of $1.352B implies book-to-bill of 0.99x, marginally below 1.0. Management attributed the gap to the timing of a large system integration deal that received customer acceptance on the last day of Q3, pulling revenue forward. Status: Continue monitoring

Wireline customer concentration — Management did not disclose customer counts or share-of-wallet figures, but explicitly addressed concentration: "last year at this time, I would have said this is a highly concentrated business… what's playing out is the broadening of the business." Directional reassurance without a hard metric. Status: Continue monitoring

Software/services mix — Software and services accounted for approximately 36% of Keysight revenue, with annual recurring revenue at 28% of the total — flat versus Q2 on both measures. Status: Resolved (flat)

What to watch into next quarter

Q4 operating margin glide path. Q4 revenue guide midpoint of $1.38B is +2% sequential, but with August tariffs now in the run-rate. Watch whether non-GAAP operating margin holds near 25% or expands further, which would confirm tariff mitigation is structurally ahead of plan rather than a Q3 one-off. Neil flagged tariff expense rising in Q4, only partially offset by ramping mitigation actions.

Orders re-cross 1.0x book-to-bill. Q3 came in at 0.99x. With the FY25 raise implying acceleration into Q4, watch whether Q4 orders exceed the $1.38B revenue guide midpoint — a sub-1.0x book-to-bill for two quarters in a row would undermine the multi-year visibility narrative management is selling.

EISG growth rate sustains double-digit. A third quarter at +10% or above would confirm the segment is fully out of its six-quarter decline. Watch whether automotive becomes neutral rather than a drag.

A&DG re-acceleration. Management committed to A&DG pacing improving as the administration-change drag unwinds and European defense spend emerges. Watch whether Q4 A&DG growth steps up from +8% — a hold or deceleration would undermine the "exactly the way it's played out" market-timing claim.

FY26 framing on the Q4 call. Tariff mitigation completion within H1 FY26 implies an FY26 margin tailwind. Watch whether management initiates FY26 commentary that anchors above the 13% long-term EPS growth target, and whether AI wireline visibility gets quantified beyond directional language.

Sources

Keysight Q3 FY2025 press release: https://www.sec.gov/Archives/edgar/data/1601046/000160104625000088/exhibit991-q325pressrelease.htm
Tapebrief Q2 FY2025 brief (prior-quarter guidance baseline, watch list)

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