Keysight fiscal Q3 2026: revenue rose 36.5% to $1.85B and orders 56% to $2.09B as AI data-center networking lifted commercial communications 56%; operating margin widened to 24.9% and GAAP EPS more than doubled to $2.30.
Revenue
$1.8B
+36.5% YoY
Net income
$397M
+107.9% YoY
Diluted EPS
$2.30
+109.1% YoY
Operating margin
24.9%
Overview
Keysight Technologies makes the design software, test instruments and measurement systems that engineers use to build and check electronics — from 1.6-terabit data-center networking gear and 5G/6G radios to radar, chips and car electronics. Its fiscal year ends October 31, so this is fiscal Q3 2026: the three months ended July 31, 2026, reported in the 10-Q filed on September 2, 2026 (results were first released on August 18).
The quarter was driven by one thing above all: AI data-center networking. Revenue rose 36.5% to $1,846 million, and new orders rose 56% to $2,091 million — the second quarter in a row above $2 billion, per the company's earnings release. Revenue from commercial communications customers (telecom, networking and data-center equipment makers) jumped 56%, which the 10-Q attributes primarily to customers' "R&D spend in terabit solutions and expanding 400G/800G/1.6 terabit transceiver manufacturing capacity to meet rising demand for AI capabilities." (A transceiver is the part that converts data between electrical and optical signals in a network link; each jump in link speed needs new test equipment to design and manufacture it.)
Profit grew much faster than revenue: operating income nearly doubled (up 97%) and GAAP net income more than doubled to $397 million.
Key metrics
Metric
Q3 FY2026
Q3 FY2025
YoY Change
Revenue
$1,846M
$1,352M
+36.5%
Orders
$2,091M
$1,340M
+56%
Book-to-bill (orders ÷ revenue)
1.13
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Operating margin is the share of revenue left after running the business (making products, R&D, sales and administration), before interest and tax. A book-to-bill above 1.0 means the company took in more new orders than it shipped, so its order backlog grew.
What drove growth: acquisitions helped, but most was organic
Keysight closed two deals in October 2025, at the very start of this fiscal year: Spirent Communications (network and wireless test; $1,415 million net of cash acquired, after which Keysight sold three Spirent business lines to Viavi for $399 million) and Synopsys' Optical Solutions Group ($580 million). Neither was owned a year ago, so both inflate this year's growth rates.
The 10-Q quantifies that: acquisitions added 6 percentage points to revenue growth and 5 points to order growth, and Spirent alone contributed $61 million of incremental revenue in the quarter. Currency had an immaterial effect on revenue (and cost orders about 1 point). Stripping those out, revenue grew roughly 30% and orders roughly 52% in the businesses Keysight already owned — so the acceleration is real demand, not just bought-in revenue.
All three regions grew: Americas +29%, Europe +41% (of which 3 points came from favorable currency) and Asia Pacific +42% (despite a 2-point currency drag).
Segment performance
Segment / end market
Q3 FY2026 revenue
Q3 FY2025 revenue
YoY
Q3 FY2026 op. margin
Q3 FY2025 op. margin
Communications Solutions Group (CSG)
$1,345M
$940M
+43%
34.0%
26.1%
— Commercial communications
$1,006M
$644M
+56%
—
—
— Aerospace, defense & government
$339M
$296M
+14%
—
—
Electronic Industrial Solutions Group (EISG)
$501M
$412M
+21%
31.0%
22.3%
Segment operating margins exclude share-based pay, amortization of acquired intangibles, acquisition costs and restructuring, so they run higher than the company-wide GAAP margin. Keysight reports margins by segment, not by end market.
CSG (73% of revenue). Acquisitions added 7 points of CSG's 43% growth. Commercial communications is now 75% of the segment, up from about 69% a year ago, reflecting 400G/800G/1.6T Ethernet demand "both in R&D and manufacturing." Aerospace, defense and government grew 14%, "primarily driven by strong growth in radar and spectrum operations coupled with space and satellite solutions," with growth in the Americas and Europe partly offset by a decline in Asia Pacific. CSG's segment operating income rose 87% to $458 million.
EISG (27% of revenue). Up 21%, with acquisitions adding 4 points and currency subtracting 1 (most of the goodwill from the Synopsys optical deal was assigned to this segment). The 10-Q credits "AI-driven demand for advanced semiconductor technologies and fabrication capacity," next-generation circuit-board interconnects and capacitors, software-defined and autonomous vehicles, and digital health. EISG had the bigger margin improvement of the two: gross margin rose to 64.1% from 57.4% and operating margin to 31.0% from 22.3%, with segment operating income up 69% to $155 million.
Why margins widened so much
Gross margin (revenue minus the direct cost of what was sold, as a share of revenue) rose to 65.8% from 61.7%. The 10-Q attributes the quarter's gain to "higher revenue volume, favorable mix, and incremental gross margin impact from acquisitions," partly offset by higher people costs and more amortization of acquisition-related balances (the gradual write-down of the value assigned to acquired technology and customer relationships).
Operating costs grew more slowly than sales: R&D rose 25% to $312 million and SG&A (selling, general and administrative costs) 26% to $446 million, both mostly from the acquired businesses. As a share of revenue they fell to 17% and 24% (from 19% and 26%). That operating leverage — costs rising slower than sales — is how a 36.5% revenue increase became a 97% operating-income increase.
One thing that does not explain this quarter: earlier in the fiscal year Keysight booked a net benefit from US tariff refunds after the Supreme Court ruled in February 2026 that tariffs imposed under IEEPA were not authorized — a $100 million refund receivable, partly offset by $40 million it decided to refund to customers who had paid tariff surcharges. Over nine months that lifted operating income by $57 million and operating margin by 1.3 points. The 10-Q lists it as a driver of the nine-month margin gains but not of the Q3 gains, so the Q3 improvement is operational.
Below the operating line
Other income was $22 million versus $4 million a year earlier, mainly from smaller losses on derivative (hedging) instruments. Interest income fell to $20 million from $31 million on a smaller cash pile ($2.62 billion versus $3.40 billion a year earlier, before the acquisitions were paid for).
Tax: the effective tax rate was 16.7% versus 20.8%, despite a $12 million one-off charge (mainly a valuation allowance on California research tax credits). Pre-tax income rose 98%, so the lower tax rate added only modestly to net-income growth.
GAAP vs. non-GAAP: non-GAAP EPS of $3.07 was $0.77 above GAAP, mainly because it excludes $72 million of acquisition-related amortization (up from $33 million, reflecting Spirent and Synopsys OSG), $47 million of share-based pay and $28 million of acquisition and integration costs. GAAP EPS grew faster (109.1% vs. 78.5%) partly because acquisition and integration costs fell from $46 million a year earlier.
Nine months and balance sheet
For the first nine months of fiscal 2026, revenue was $5,163 million (+31%), orders $5,787 million (+48%) and net income $1,027 million (+66%). Nine-month net income was also helped by a $97 million tax benefit from an audit settlement, which is why the nine-month effective tax rate was just 6.0%.
Operating cash flow over nine months was $1,379 million, and Keysight spent $520 million buying back shares; $983 million remains under its $1.5 billion authorization. Cash and restricted cash totaled $2,622 million against $2,550 million of senior notes, of which $700 million is due within a year. Commitments to contract manufacturers and suppliers rose to $762 million from $487 million at fiscal year-end, "primarily driven by advance purchase orders placed to support fulfillment of a strong order backlog."
Keysight does not break out recurring (software and subscription) revenue in the 10-Q. The closest disclosure is services and other revenue, which rose 16% to $382 million — well behind the 43% growth in product revenue to $1,464 million, so the business became more hardware-weighted this quarter.
Takeaway: Orders of $2,091 million against $1,846 million of revenue mean Keysight is booking work faster than it can ship it, and roughly 30 of the 36.5 points of revenue growth came from businesses it already owned rather than acquisitions. The risk the 10-Q itself flags is that "extended lead times and elevated order backlog" could lead customers to cancel or reduce orders — so the next test is converting that backlog into revenue, not winning more of it.
Outlook
Management guided fiscal Q4 2026 (August–October) revenue to $1.930–$1.950 billion, about 37% growth at the midpoint, and non-GAAP EPS of $3.34–$3.40 on about 172 million diluted shares. Added to the nine-month result, the midpoint implies full-year revenue of roughly $7.1 billion. Keysight also expects about $160 million of capital spending in fiscal 2026, "primarily for investments in capacity expansion and technology investments."
Our read: the order book supports the Q4 guide. Two things to watch. First, the Spirent and Synopsys deals reach their one-year anniversary in October, so from fiscal Q1 2027 the roughly 6-point acquisition boost drops out and reported growth will look slower even if underlying demand holds. Second, concentration: commercial communications — and within it AI data-center networking — now drives most of the growth, while aerospace/defense (+14%) and EISG (+21%) are growing at more ordinary rates. A pause in AI network build-outs would hit Keysight's fastest-growing and highest-margin business first.