Keysight (KEYS) investor relations material

Strategic transformation and business model evolution

• Shifted from hardware-focused to software-centric solutions, increasing recurring revenue and stability.

• Investments during downturns enabled outperformance in recovery, especially in AI and wireline markets.

• Software and services now comprise 39% of revenue, with recurring revenue at 30%; both expected to rise.

• Recent acquisitions in software and satellite simulation support higher gross margins and portfolio expansion.

• Diverse industry exposure, including A&D, communications, auto, and industrial, provides resilience.

Market performance and outlook

• Achieved five consecutive quarters of year-over-year order growth, outperforming market expectations.

• Revenue for the year is expected at the high end of the 5%-7% target, driven mainly by business strength, not tariff pass-through.

• Wireline business set for record revenue with double-digit growth, while wireless shows renewed innovation intensity.

• Aerospace and defense revenue up 7% YTD, with long-term growth supported by global defense spending.

• Semiconductor and general electronics segments benefit from AI-driven demand and technology inflections.

Tariff management and financial strategy

• Mitigating tariffs through supply chain adjustments, customer collaborations, and selective cost pass-through.

• Tariff offsets expected to be fully realized within the first half of the coming fiscal year.

• Passing through costs is margin dilutive but not earnings dilutive; gross margin may see a 1%+ dilution.

• Focus remains on organic growth, with inorganic investments complementing the portfolio at attractive valuations.

• Operating margin targets of 31%-32% remain, with a near-term goal to return to high 20%-30% range.