Keysight Focuses on AI Infrastructure to Spur Growth: Worth a Buy?

Keysight Technologies, Inc. KEYS is benefiting from accelerating investments across artificial intelligence (AI) infrastructure, next-generation communications, semiconductors and defense markets, as exemplified by solid third-quarter fiscal 2026 results. The company’s growth momentum is likely to continue, backed by an expanding portfolio and improving operating leverage.

Keysight’s revenues were $1.85 billion, up 36% year over year, while non-GAAP earnings surged 79% to $3.07 per share. Orders increased to $2.09 billion from $1.34 billion in the year-ago quarter, marking the second consecutive quarter with orders above $2 billion.

AI Infrastructure: Key Growth Catalyst

The rapid expansion of AI infrastructure is one of the key growth drivers for Keysight. Rising investments in AI data centers are increasing the complexity of computing and networking architectures, creating demand for Keysight’s design, emulation and testing solutions.

Wireline orders more than doubled year over year in the fiscal third quarter, benefiting from AI infrastructure scaling, higher-speed technology transitions, silicon photonics and system-level emulation. Keysight is participating across the AI development lifecycle, spanning pre-silicon design, chip and component validation, data-center rack and cluster emulation and manufacturing testing.

Increasing adoption of 800-gig and 1.6-terabit optical transceivers is another positive. Moreover, Keysight’s deeper engagement with hyperscalers and semiconductor companies should expand its addressable opportunity as AI architectures become increasingly complex. Management believes AI adoption remains in its early stages, indicating a potentially long runway for the company.

6G Investments Lend Support

Keysight is well-positioned to benefit from the transition toward 6G. With the initial 6G standard targeted for March 2029, customers are gradually moving from exploratory research toward funded development programs.

Emerging technologies such as AI-powered radio access networks, integrated sensing and communication and non-terrestrial networks are expanding Keysight’s growth opportunities. Its broad portfolio of radio-channel, network, device and satellite emulation solutions should help customers test new 6G architectures and applications. Management expects the 6G opportunity to be larger than the 5G cycle.

Semiconductor and Industrial Demand Adds Momentum

Keysight’s Electronic Industrial Solutions Group is another important growth engine. Segment revenues jumped 21% year over year to a record $501 million in the fiscal third quarter, driven by growth across semiconductor, general electronics, automotive and energy markets.

Semiconductor demand is benefiting from capacity expansion related to advanced process nodes, high-bandwidth memory and silicon photonics. AI-related computing growth is also increasing test requirements for increasingly complex electronic components.

Software-defined vehicles, automotive cybersecurity, EV charging, energy storage and infrastructure validation are creating additional opportunities for Keysight’s test and measurement solutions.

Price Performance

Keysight has gained 89.6% over the past year compared with the sector’s growth of 29.2%. It has, however, lagged peers like Aehr Test Systems, Inc. AEHR and Advantest Corporation ATEYY. While Advantest has gained 190.6%, AEHR is up a stellar 485.4% over this period. 

One-Year KEYS Stock Price Performance

Image Source: Zacks Investment Research

Robust Outlook Bodes Well for KEYS

The strong demand environment prompted Keysight to provide an upbeat fiscal fourth-quarter outlook. Revenues are projected between $1.93 billion and $1.95 billion, implying approximately 37% year-over-year growth at the midpoint. Non-GAAP earnings are expected between $3.34 and $3.40 per share. For fiscal 2026, management expects revenues and earnings to increase approximately 32% and 60%, respectively.

Keysight has a long-term earnings growth expectation of 19.4%. It delivered a trailing four-quarter average earnings surprise of 15.1%. Keysight currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With a favorable Zacks Rank and healthy fundamentals, KEYS appears primed for further price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock now.

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This article originally published on Zacks Investment Research (zacks.com).

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