Keysight Technologies, Inc. KEYS reported solid first-quarter fiscal 2025 results, with  adjusted earnings and revenues beating the respective Zacks Consensus Estimate. 

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Based in Santa Rosa, CA, the electronic design company reported higher year-over-year revenues, backed by strength in the AI data center market; aerospace, defense and government end markets; and healthy momentum in software and services. Management’s focus on expanding its business through collaborations with established sector players is another positive.

Net Income

Net income on a GAAP basis was $169 million or 97 cents per share, down from $172 million or 98 cents per share in the year-ago quarter. 

Non-GAAP net income in the reported quarter was $317 million or $1.82 per share compared with $286 million or $1.63 per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 13 cents.

Revenues

Quarterly net sales improved to $1.3 billion from the year-ago quarter’s $1.26 billion, exceeding the high-end of guidance. Total orders increased 4% year over year to $1.26 billion. The company is witnessing incrementally positive signals in its sales funnel and customer engagements. The top line beat the Zacks Consensus Estimate by $22 million.

Communication Solutions Group (CSG) generated $883 million in revenues, up from the year-ago quarter’s tally of $839 million. The 5% year-over-year growth was primarily driven by strong demand in commercial communications, aerospace, defense and government end markets.

Orders grew for the third consecutive quarter, driven by growth in both wireline and wireless. In wireline, demand for the company’s physical layer and AI workload emulation solutions remained strong. Keysight is enabling the expansion of the AI data center network and the design of electrical and optical technologies for higher speeds and bandwidth. Strong engagement from a broad ecosystem, chipset designers, network equipment manufacturers and hyperscaler customers also supported this segment’s revenues. The top line beat our revenue estimate of $867.7 million.

The Electronic Industrial Solutions Group (EISG) segment’s revenues decreased to $415 million from $420 million in the prior-year quarter, reflecting mixed demand across the end markets. In automotive, market conditions remain challenging, reflecting muted activity in manufacturing and EV battery development. However, in semiconductor, fab capacity investment and AI-driven demand for advanced node technologies, high bandwidth memory and silicon photonics continued to drive strong customer engagement. New fab projects helped drive a third consecutive quarter of strong order growth for parametric wafer test solutions. The top line beat our revenue estimate of $407.8 million.

Region-wise, Asia-Pacific revenues aggregated $488 million compared with $490 million in the prior-year quarter. The company reported a 7% year-over-year improvement in revenues from the Americas to $551 million. Revenues from Europe were $259 million, up 1% from the year-ago quarter's tally of $255 million.

Other Details

During the quarter, the company’s non-GAAP gross profit totaled $854 million compared with $846 million in the year-ago quarter, with gross margins of 65.8% and 67.2%, respectively. The non-GAAP operating margin was 27.3%, marginally down from 28.2% in the prior-year quarter.

CSG reported a non-GAAP operating margin of 27.2%, up 20 basis points (bps) year over year. EISG reported a non-GAAP operating margin of 27.4%, down 320 bps year over year, largely due to a higher mix of software. 

Cash Flow & Liquidity

In the first quarter of fiscal 2025, Keysight generated $378 million in cash from operating activities compared with $328 million a year ago. As of Jan. 31, 2025, the company had $2.06 billion in cash and cash equivalents and $1.79 billion of long-term debt.

Outlook

For the second quarter of fiscal 2025, Keysight expects revenues in the range of $1.27-$1.29 billion. Non-GAAP earnings are estimated to be between $1.61 and $1.67 per share. Non-GAAP tax rate is forecasted to be 14%.

KEYS’ Zacks Rank

Keysight currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Dell Technologies DELL is scheduled to release fourth-quarter fiscal 2025 earnings on Feb. 27. The Zacks Consensus Estimate for earnings is pegged at $2.53 per share, indicating growth of 15% from the year-ago figure.

Autodesk ADSK is scheduled to release fourth-quarter fiscal 2025 earnings on Feb. 27. The Zacks Consensus Estimate for earnings is pegged at $2.13 per share, indicating growth of 1.91% from the year-ago figure.

Globalstar GSAT is scheduled to release fourth-quarter 2024 earnings on Feb. 27. The Zacks Consensus Estimate for earnings is pegged at a loss of 6 cents per share, indicating growth of 60% from the year-ago figure.

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