Keysight Technologies (KEYS) Citi's 2024 Global TMT Conference summary

Business overview and market focus

• Leading provider of hardware and software tools for electrical engineers, serving commercial communications, aerospace defense, automotive, semiconductor, and general electronics markets.

• End markets include wireless/wireline communications, next-gen automotive, and industrial electronics.

• TAM estimated at $21–22 billion, split between commercial communications, industrial, and aerospace defense.

Recent performance and financial highlights

• Outperformed guidance and Street expectations in the last quarter, with strong order and revenue conversion.

• Maintains 25% operating margins and resilient gross margins, with a recent quarter at 64%.

• Software and services now comprise 39% of revenue, with software in the mid-20% range and services at 15%.

• Capital allocation prioritizes R&D investment, with 78% of free capital returned to shareholders via buybacks in the last year.

Growth strategy and M&A

• Long-term organic growth target remains 5–7%, with a gradual recovery expected as secular drivers remain intact.

• M&A is core to strategy, with 22 deals in 10 years, focusing on portfolio gaps, talent, and new markets like quantum computing.

• Recent ESI acquisition expands multi-physics simulation capabilities; Spirent deal aims to enhance network assurance and market reach.