Keysight Technologies
KEYS
$335.00
+1.07%
Keysight Technologies, Inc. is a leading provider of test and measurement solutions, serving electronics OEMs and suppliers across the communications, government, automotive, industrial, and semiconductor manufacturing markets. The company offers a comprehensive portfolio of testing tools, analytical software, and services designed to accelerate time-to-market and improve efficiency for more than 30,000 customers globally. Keysight operates in the Technology sector within the Hardware, Equipment & Parts industry, and is distinctively positioned as a critical enabler of next-generation wireless communications, high-speed digital, and aerospace/defense applications. The current investor narrative centers on the company's record Q2 2026 earnings beat and raised guidance, which signal robust demand, particularly in the Communications Solutions Group, though management's recent warning about supply chain constraints has introduced near-term uncertainty that could pressure future growth and margins.…
KEYS
Keysight Technologies
$335.00
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Investment Opinion: Should I buy KEYS Today?
Based on the synthesis of fundamental, valuation, and analyst data, Keysight Technologies (KEYS) earns a Buy rating. The core thesis is that the company is experiencing accelerating revenue growth (31.47% YoY in Q2 2026) and expanding profitability (gross margin 68.6%, operating margin 23.7%), which justifies a premium valuation, especially with a forward PE of 24.81x and a PEG ratio of 0.96. The analyst consensus is Buy (mean 1.58) with an average target price of $415.08, implying 22.6% upside from the current $338.64.
The supporting evidence is compelling: revenue growth has accelerated for three consecutive quarters (10.3% in Q4 2025, 23.3% in Q1 2026, 31.47% in Q2 2026); net margin expanded to 20.3% in Q2 2026 from 17.6% in Q1 2026; free cash flow is robust at $1.447B TTM, yielding 4.6% of market cap; and the balance sheet is strong with a current ratio of 2.35 and debt-to-equity of 0.51. The forward PE of 24.81x is reasonable given the estimated EPS growth of 37.3% (from $9.07 trailing to $11.18 forward), and the PEG ratio below 1 suggests undervaluation relative to growth. Compared to the broader market, KEYS has outperformed with a 96.46% 1-year return versus the S&P 500's 16.22%.
The biggest risks that could invalidate the thesis are: (1) supply chain constraints materially impacting revenue and margins, as management warned; (2) a slowdown in communications and semiconductor capital spending, which would hit the core segment; and (3) valuation compression if growth decelerates or interest rates rise. The rating would upgrade to Strong Buy if supply chain issues resolve and revenue growth sustains above 25% with margin expansion, or downgrade to Hold if revenue growth falls below 15% or if gross margin contracts below 60%. At 37.34x trailing earnings and 24.81x forward earnings, the stock is fairly valued to slightly undervalued relative to its growth prospects, but it is not a deep value play; it is a growth stock with a premium that is justified by execution.
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KEYS 12-Month Price Forecast
Keysight presents a compelling growth story with accelerating revenue, expanding margins, and strong cash flow, supported by a bullish analyst consensus. The forward PE of 24.81x is attractive given the estimated 37.3% EPS growth, and the PEG ratio below 1 indicates undervaluation relative to growth. However, supply chain constraints and a high beta of 1.208 introduce near-term uncertainty, and the stock's recent underperformance (-4.47% over 1 month) suggests a cautious market. I would upgrade to high confidence if supply chain issues are resolved and revenue growth sustains above 25%, or downgrade to neutral if growth decelerates below 15% or margins contract significantly.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Keysight Technologies's 12-month outlook, with a consensus price target around $415.08 and implied upside of +23.9% versus the current price.
Average Target
$415.08
0 analysts
Implied Upside
+23.9%
vs. current price
Analyst Count
—
covering this stock
Price Range
$350 - $452
Analyst target range
Keysight is covered by 12 analysts, with a consensus recommendation of "Buy" (recommendation mean of 1.58, where 1 is Strong Buy and 5 is Strong Sell). The average target price is $415.08, which implies an upside of approximately 22.6% from the current price of $338.64. The consensus is bullish, with no sell ratings and a majority of analysts maintaining positive ratings. Recent institutional ratings show a mix of Overweight and Buy ratings, with Morgan Stanley upgrading the stock to Overweight from Equal Weight on July 13, 2026, signaling growing confidence in the company's prospects.
The target price range spans from a low of $350 to a high of $452, representing a spread of $102, or about 29% of the low target. The high target of $452 assumes continued market share gains, successful execution on supply chain improvements, and multiple expansion driven by AI and 5G-related demand. The low target of $350, which is only 3.4% above the current price, likely prices in margin compression from supply chain constraints and potential macroeconomic headwinds. The wide spread indicates moderate uncertainty, but the fact that even the low target is above the current price suggests that analysts see limited downside. The estimated EPS average of $11.18 for the next fiscal year, with a range of $10.57 to $11.97, further supports the bullish case, as it implies strong earnings growth that could drive the stock toward the higher end of the target range.
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Bulls vs Bears: KEYS Investment Factors
The bull case for Keysight rests on accelerating revenue growth (31.47% YoY in Q2 2026), expanding margins (gross margin 68.6%, operating margin 23.7%), strong free cash flow ($1.447B TTM), and a bullish analyst consensus with 22.6% upside to the average target. However, the bear case highlights supply chain constraints that could pressure future growth, a premium valuation (trailing PE 37.34x, EV/EBITDA 22.98x), recent momentum divergence (down 4.47% over 1 month), and high beta (1.208) that amplifies market volatility. Currently, the bull evidence appears stronger given the robust fundamental momentum and analyst support, but the most critical tension is whether supply chain constraints will materially impact Keysight's ability to sustain its growth trajectory and margin expansion. If supply chain issues prove transitory, the stock could re-rate higher; if they persist, the premium valuation could compress significantly.
Bullish
- Revenue growth accelerating sharply: Q2 2026 revenue of $1.717B grew 31.47% YoY, up from 23.3% in Q1 2026 and 10.3% in Q4 2025, demonstrating a clear multi-quarter acceleration. This trajectory suggests strong demand for Keysight's test and measurement solutions, particularly in the Communications Solutions Group which contributed 71.7% of revenue.
- Margin expansion and profitability: Gross margin expanded to 68.6% in Q2 2026 from 62.2% in Q1 2026 and 61.2% in Q4 2025, while operating margin reached 23.7% and net margin 20.3%. This reflects favorable product mix and operating leverage, with net income rising to $349M from $281M in the prior quarter.
- Strong analyst consensus and upside: 12 analysts rate KEYS a Buy with a mean recommendation of 1.58 and an average target price of $415.08, implying 22.6% upside from the current $338.64. The low target of $350 is still 3.4% above the current price, indicating limited perceived downside.
- Robust free cash flow and balance sheet: TTM free cash flow is $1.447B, with Q2 2026 FCF of $472M on operating cash flow of $501M and capex of only $29M. The current ratio of 2.35 and debt-to-equity of 0.51 provide ample liquidity and financial flexibility.
Bearish
- Supply chain constraints threaten future growth: Management warned of supply chain constraints that could hurt future growth and margins, despite the Q2 earnings beat. This warning caused the stock to drop in the week following the August 23 news, highlighting investor sensitivity to execution risks.
- Premium valuation leaves little room for error: The trailing PE of 37.34x and forward PE of 24.81x are elevated, with EV/EBITDA at 22.98x and PS at 5.89x. The PEG ratio of 0.96 suggests fair value relative to growth, but any slowdown could trigger multiple compression.
- Recent momentum divergence and relative weakness: Despite a 96.46% 1-year gain, the stock is down 4.47% over the past month and 3.43% over three months, underperforming the S&P 500 by 3.41% and 6.47% respectively. This divergence signals a potential trend reversal or healthy mean reversion after a massive run-up.
- High beta amplifies market volatility: With a beta of 1.208, KEYS is about 20.8% more volatile than the broader market. The maximum drawdown of -20.52% over the past year highlights the potential for significant pullbacks, especially if macroeconomic conditions deteriorate.
KEYS Technical Analysis
Keysight is in a powerful long-term uptrend, with a 1-year price change of +96.46%, dramatically outperforming the S&P 500's +16.22% over the same period. The stock is trading at $338.64, which is approximately 84.1% of its 52-week range (low of $158.79, high of $374.96), indicating it is in the upper echelon of its annual range but not at the absolute peak. This positioning suggests sustained momentum, yet the proximity to the high also raises the risk of overextension, especially given the recent pullback from the July peak. The 52-week low of $158.79 serves as a distant but critical support level, while the 52-week high of $374.96 represents the key resistance to watch for a breakout.
Short-term momentum has decelerated sharply, with a 1-month price change of -4.47% and a 3-month change of -3.43%, both diverging from the strong 1-year trend. This divergence signals a potential trend reversal or a healthy mean reversion after the massive run-up. The 6-month change remains positive at +21.04%, and year-to-date the stock is up +63.92%, underscoring that the recent weakness is a pullback within a broader uptrend. Relative strength versus the S&P 500 is negative over the past 1 and 3 months (-3.41% and -6.47%, respectively), but remains strongly positive over 1 year (+80.24%), confirming that the stock is taking a breather after a period of exceptional outperformance.
Key technical levels are defined by the 52-week low at $158.79 and the 52-week high at $374.96. A breakout above $374.96 would signal renewed bullish momentum and likely target new all-time highs, while a breakdown below the recent consolidation zone around $310 could test deeper support near the 200-day moving average (not provided). The stock's beta of 1.208 indicates it is about 20.8% more volatile than the broader market, which is an important consideration for position sizing and risk management. The maximum drawdown of -20.52% over the past year highlights the potential for significant pullbacks, even within a strong uptrend.
Beta
1.21
1.21x market volatility
Max Drawdown
-20.5%
Largest decline past year
52-Week Range
$159-$375
Price range past year
Annual Return
+89.0%
Cumulative gain past year
| Period | KEYS Return | S&P 500 |
|---|---|---|
| 1m | +4.9% | -1.0% |
| 3m | -7.9% | +2.0% |
| 6m | +20.7% | +17.4% |
| 1y | +89.0% | +15.0% |
| ytd | +62.2% | +11.7% |
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KEYS Fundamental Analysis
Keysight's revenue trajectory is accelerating, with the most recent quarter (Q2 2026, ended April 30, 2026) delivering $1.717 billion in revenue, a 31.47% year-over-year increase from $1.306 billion in Q2 2025. This follows a Q1 2026 revenue of $1.600 billion (up 23.3% YoY from $1.298 billion) and Q4 2025 revenue of $1.419 billion (up 10.3% YoY from $1.287 billion), demonstrating a clear multi-quarter acceleration. The Communications Solutions Group is the primary growth engine, contributing $1.231 billion (71.7% of total revenue), while the Electronic Industrial Solutions Group added $486 million. This robust growth, driven by demand for advanced test and measurement solutions, supports a compelling investment case, though supply chain constraints flagged by management could temper near-term upside.
Profitability is strong and improving, with Q2 2026 net income of $349 million and a net margin of 20.3%, up from $281 million and 17.6% in Q1 2026 and $229 million and 16.1% in Q4 2025. The gross margin expanded to 68.6% in Q2 2026 from 62.2% in Q1 2026 and 61.2% in Q4 2025, reflecting favorable product mix and operating leverage. Operating income reached $407 million in Q2 2026, a 23.7% operating margin, compared to $248 million (15.5%) in Q1 2026 and $217 million (15.3%) in Q4 2025. These margin levels are typical for a high-tech instrumentation leader and indicate effective cost management and pricing power.
The balance sheet is healthy, with a current ratio of 2.35 and a debt-to-equity ratio of 0.51, indicating ample liquidity and moderate leverage. Free cash flow (TTM) is $1.447 billion, and in Q2 2026 alone, operating cash flow was $501 million with capital expenditures of only $29 million, resulting in free cash flow of $472 million. The company returned $204 million to shareholders through stock repurchases in Q2 2026, while maintaining a strong cash position of $2.43 billion. Return on equity (ROE) stands at 14.4%, and return on assets (ROA) at 7.2%, demonstrating efficient capital deployment. The FCF yield, based on the current market cap of $31.65 billion, is approximately 4.6%, which is solid for a growth-oriented technology company.
Quarterly Revenue
$1.7B
2026-04
Revenue YoY Growth
+31.5%
YoY Comparison
Gross Margin
68.6%
Latest Quarter
Free Cash Flow
$1.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is KEYS Overvalued?
Since Keysight is profitable with positive net income, the PE ratio is the primary valuation metric. The trailing PE is 37.34x, while the forward PE is 24.81x, implying a significant gap that reflects the market's expectation of strong earnings growth. The forward PE is based on estimated EPS of $11.18 for the next fiscal year, which represents a 37.3% increase from the trailing EPS of $9.07 (calculated as current price divided by trailing PE). This gap suggests that investors are pricing in substantial earnings acceleration, likely driven by the continued adoption of 5G, AI, and high-speed digital technologies.
Compared to the industry average, Keysight's valuation appears to be at a premium. The industry average PE for the Hardware, Equipment & Parts sector is not provided, but the stock's PS ratio of 5.89x and PB ratio of 5.39x are elevated relative to historical norms. The PEG ratio of 0.96, however, suggests that the valuation is reasonable relative to expected growth, as a PEG below 1 is often considered undervalued. The EV/EBITDA of 22.98x is also high, indicating that the market is willing to pay a premium for Keysight's cash flow generation and growth prospects. This premium is justified by the company's strong competitive position, consistent earnings beats, and exposure to secular growth trends.
Historically, Keysight's PE ratio has ranged from a low of 15.58x (in Q3 2024) to a high of 51.37x (in Q2 2024), with the current trailing PE of 37.34x sitting in the upper half of that range. The PS ratio of 5.89x is near the lower end of its historical range (which has been as high as 35.26x in Q2 2026, though that appears to be an anomaly), but more typically around 20x. The current PS ratio is significantly lower than the historical average, which could indicate a value opportunity if the company continues to grow. However, the PB ratio of 5.39x is near the middle of its historical range (4.57x to 9.56x), suggesting that the stock is not excessively overvalued on a book value basis.
PE
37.3x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 16x~51x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
23.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks for Keysight center on its premium valuation and dependence on continued growth to justify it. The trailing PE of 37.34x and EV/EBITDA of 22.98x leave little room for error, and any deceleration in revenue growth or margin contraction could trigger a sharp re-rating. While the balance sheet is healthy with a current ratio of 2.35 and debt-to-equity of 0.51, the company's revenue is heavily concentrated in the Communications Solutions Group (71.7% of Q2 2026 revenue), making it vulnerable to a downturn in telecom or semiconductor capital spending. Additionally, supply chain constraints flagged by management could pressure margins and delay revenue recognition, as evidenced by the stock's negative reaction to the August 23 news despite an earnings beat.
Market and competitive risks include the potential for valuation compression if growth slows or if interest rates remain elevated, which would disproportionately affect high-multiple technology stocks. Keysight's beta of 1.208 means it is 20.8% more volatile than the market, so a broad market selloff could hit the stock harder. Competitive pressures from rivals like National Instruments (now part of Emerson) and emerging Asian test equipment providers could erode market share and pricing power. Regulatory headwinds, such as export controls on advanced technology to China, could also impact sales, given Keysight's significant exposure to the communications and semiconductor markets. The recent AI-led sell-off and tariff threats mentioned in the news further highlight macro sensitivity.
In a worst-case scenario, a combination of supply chain disruptions, slowing demand from key end-markets (communications, automotive, industrial), and multiple compression could drive the stock down to its 52-week low of $158.79, representing a 53% decline from the current price of $338.64. Even a moderate bear case, aligning with the analyst low target of $350, implies only 3.4% upside, but if the stock breaks below the recent consolidation zone around $310, it could test the 200-day moving average (not provided) and potentially the $250-$270 range. The maximum drawdown of -20.52% over the past year shows that such a decline is plausible in a risk-off environment. Investors could lose 20-30% from current levels in a moderate downturn, and up to 50%+ in a severe scenario.
FAQ
The most severe risk is supply chain constraints, which management warned could hurt future growth and margins, potentially leading to revenue shortfalls and earnings misses. Second, the premium valuation (trailing PE 37.34x, EV/EBITDA 22.98x) leaves little room for error, and any deceleration could trigger multiple compression. Third, revenue concentration in the Communications Solutions Group (71.7% of Q2 2026 revenue) makes the company vulnerable to a downturn in telecom or semiconductor capital spending. Fourth, macroeconomic risks, including high interest rates and trade tensions, could reduce demand and disproportionately impact high-beta stocks like KEYS (beta 1.208). These risks are ranked in order of severity, with supply chain and valuation being the most immediate concerns.
Our 12-month forecast for KEYS includes three scenarios: a bull case with 30% probability targeting $415-$452, a base case with 50% probability targeting $350-$415, and a bear case with 20% probability targeting $250-$350. The base case is most likely, assuming revenue growth moderates to 15-20% YoY and margins hold near current levels, with the stock trading around the analyst average target of $415. The key assumption behind the base case is that supply chain constraints are gradually resolved without a major macroeconomic downturn. The bull case requires sustained revenue growth above 25% and margin expansion, while the bear case would be triggered by worsening supply chain issues and a communications spending slowdown.
KEYS appears fairly valued to slightly undervalued relative to its growth prospects. The trailing PE of 37.34x is above the industry average, but the forward PE of 24.81x is reasonable given the estimated 37.3% EPS growth from $9.07 to $11.18. The PEG ratio of 0.96, below 1, suggests the stock is undervalued relative to its expected growth rate. The PS ratio of 5.89x and EV/EBITDA of 22.98x are elevated, but justified by the company's strong competitive position and exposure to secular trends. Compared to its own history, the trailing PE is in the upper half of its range (15.58x to 51.37x), but the forward PE suggests the market is pricing in significant earnings acceleration. Overall, the valuation implies the market expects Keysight to sustain its growth trajectory and margin expansion.
From a risk/reward perspective, KEYS offers a favorable setup with 22.6% upside to the analyst average target of $415.08 and limited downside to the low target of $350 (only 3.4% below current price). The company's accelerating revenue growth (31.47% YoY) and expanding margins (gross margin 68.6%) support the bullish case, while the forward PE of 24.81x and PEG of 0.96 suggest reasonable valuation. However, the biggest downside risk is supply chain constraints, which could pressure future growth and margins, as management warned. For growth-oriented investors with a medium-term horizon and tolerance for volatility (beta 1.208), KEYS is a good buy at current levels, but conservative investors may want to wait for a pullback to the $310 support level or clearer evidence of supply chain resolution.
KEYS is more suitable for long-term investment (minimum 2-3 years) given its growth stage, exposure to secular trends in 5G, AI, and high-speed digital, and lack of dividend (payout ratio 0, dividend yield 0). The stock's high beta of 1.208 and maximum drawdown of -20.52% over the past year indicate significant volatility, making it less appropriate for short-term trading unless one has a high risk tolerance. Earnings visibility is moderate, with analyst estimates for next fiscal year EPS ranging from $10.57 to $11.97, suggesting some uncertainty. A long-term holding period allows investors to ride out supply chain disruptions and benefit from the company's strong competitive position and cash flow generation. For short-term traders, the stock's recent momentum divergence and relative weakness could present trading opportunities, but the risk of sharp reversals is elevated.
