KEYSIGHT TECHNOLOGIES, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2025

Press release·03/06/2025 21:32:38

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Keysight Technologies, Inc. reported its quarterly financial results for the period ended January 31, 2025. The company’s revenue was $1.23 billion, a 10% increase from the same period last year. Gross margin was 64.1%, and operating margin was 24.1%. Net income was $243 million, or $1.41 per diluted share, compared to $214 million, or $1.24 per diluted share, in the same period last year. The company’s cash and cash equivalents were $2.45 billion, and its debt was $1.35 billion. Keysight Technologies also reported a 12% increase in its backlog to $3.45 billion. The company’s management attributed the strong results to its focus on high-growth markets, such as 5G and cloud computing, as well as its strategic acquisitions and investments in research and development.

Keysight Technologies Reports Strong First Quarter Results

Keysight Technologies, a global leader in electronic design and test solutions, has released its financial results for the first quarter of fiscal year 2025. The company delivered solid performance despite ongoing macroeconomic challenges, demonstrating the resilience of its business model and the strong demand for its innovative products and services.

Revenue Growth Across Key Segments

Keysight reported total revenue of $1,298 million for the first quarter, an increase of 3% compared to the same period last year. This growth was driven by strong performance in the company’s Communications Solutions Group (CSG), which saw a 5% year-over-year increase in revenue. The Electronic Industrial Solutions Group (EISG) revenue declined slightly by 1%, but the company remains confident in the long-term growth prospects of this segment.

Profitability and Margin Performance

Gross margin for the quarter was 63.1%, down 1 percentage point from the prior year period. This decline was primarily due to unfavorable product mix, partially offset by lower restructuring costs. Research and development (R&D) expenses increased 7% as Keysight continued to invest in key growth opportunities and leading-edge technologies. Selling, general, and administrative (SG&A) expenses remained flat compared to the same quarter last year.

Operating margin for the first quarter was 16.8%, a decrease of 1 percentage point year-over-year. This was driven by the lower gross margin, partially offset by a decrease in operating expenses as a percentage of revenue.

Segment Performance Highlights

The Communications Solutions Group (CSG) delivered strong results, with revenue increasing 5% year-over-year. This growth was driven by higher investments in high-speed networks to support increasing demand for AI capabilities, as well as continued investments in aerospace and defense solutions. CSG’s gross margin was flat at 68.0%, and its operating margin remained strong at 27.2%.

The Electronic Industrial Solutions Group (EISG) revenue declined 1% compared to the prior year period. This was due to mixed demand across the electronic industrial markets, with declines in the automotive and energy sectors partially offset by increases in semiconductor measurements. EISG’s gross margin decreased 4 percentage points to 61.1%, and its operating margin declined 3 percentage points to 27.4%.

Outlook and Strategic Initiatives

Keysight remains confident in the long-term secular growth trends of its markets and its ability to outperform in a variety of market conditions. The company’s customers are expected to continue making R&D investments in next-generation technologies and applications, including the evolution of 5G, early 6G, high-speed data center networks, satellite networks, AI, industrial IoT, defense modernization, and next-generation electric and autonomous vehicles.

Keysight’s first-to-market solutions strategy enables customers to develop new technologies and accelerate innovation, providing a platform for the company’s long-term growth. The company continues to invest in R&D to maintain its competitive position and capture future growth opportunities.

Financial Condition and Liquidity

Keysight’s financial position remains strong, with $2,077 million in cash, cash equivalents, and restricted cash as of January 31, 2025. Net cash provided by operating activities increased by $50 million compared to the same period last year, driven by improved working capital management and other operational efficiencies.

The company has a $750 million revolving credit facility and a £1,232 million bridge facility to support its strategic initiatives, including the planned acquisition of Spirent Communications PLC and the acquisition of Synopsys’ Optical Solutions Group. Keysight expects its cash, cash flows from operations, and access to capital markets to be sufficient to meet its cash needs for the foreseeable future.

Tax Matters and Regulatory Developments

Keysight’s effective tax rate for the first quarter of fiscal 2025 was 15.3%, lower than the statutory federal income tax rate, primarily due to a lower effective tax rate on foreign earnings, partially offset by U.S. taxes on foreign earnings and the impact of Pillar Two minimum taxes.

The company is closely monitoring the developments related to the OECD’s Pillar Two minimum tax rules, which are expected to have a limited impact on Keysight’s tax position. Additionally, Keysight has filed a lawsuit against the U.S. government seeking a tax refund related to the deductibility of intangible asset amortization resulting from a previous restructuring. The outcome of this lawsuit could have a material impact on the company’s effective tax rate and income tax liability.

Conclusion

Keysight’s strong first-quarter performance demonstrates the company’s ability to navigate the current macroeconomic environment and capitalize on the growing demand for its innovative solutions. The company’s focus on strategic investments, operational efficiency, and customer-centric innovation positions it well to continue delivering value to its shareholders in the long term.