Keysight Technologies (KEYS) Stock: Is Now the Time to Buy?

Keysight Technologies (KEYS) has emerged as a compelling contender in the tech sector, driven by robust demand for its testing and simulation solutions amid transformative industry trends like AI, 5G, and IoT. For long-term investors, the question remains: does the stock's current valuation justify its growth potential? A closer look at its recent financial performance, valuation metrics, and strategic positioning offers clarity.

Strong Earnings and Revenue Growth Signal Resilience

Keysight's Q3 2025 results underscore its ability to capitalize on macroeconomic tailwinds. The company reported non-GAAP earnings per share (EPS) of $1.91, surpassing estimates by $0.08, while revenue hit $1.42 billion-a 10.1% year-over-year increase and $40 million above forecasts. This outperformance was fueled by surging demand for AI infrastructure, which has intensified the need for Keysight's advanced testing tools. Notably, its communications solutions segment grew 11% YoY, driven by data center expansion and innovations in non-terrestrial networks and defense technology.

Looking ahead, Keysight's guidance for Q1 2026 (its fiscal first quarter) is equally impressive. The company anticipates revenue between $1.53 billion and $1.55 billion, well above the consensus estimate of $1.42 billion. This optimism reflects confidence in sustained demand from AI-driven data centers and 5G infrastructure development, both of which are expected to remain growth engines in 2026.

Valuation Metrics: A Balance of Growth and Affordability

While Keysight's trailing price-to-earnings (P/E) ratio of 54.83 appears elevated, its forward P/E of 21.64 suggests a more attractive entry point when factoring in anticipated earnings growth according to market analysis. The stock's five-year projected PEG ratio of 1.08 further indicates that its valuation aligns closely with long-term growth expectations, positioning it as a "fairly valued" growth stock according to financial data. For context, a PEG ratio below 1 typically signals undervaluation, while a ratio above 1 implies higher valuation relative to growth. Keysight's near-1.0 reading suggests investors are paying a premium for growth but not an excessive one.

Strategic Positioning in High-Growth Tech Sectors

Keysight's competitive advantage lies in its alignment with structural trends. The company's tools are critical for developing and testing next-generation technologies, including AI-powered data centers, 5G networks, and IoT ecosystems. As major tech firms accelerate investments in these areas, Keysight's role as a provider of "infrastructure for innovation" becomes increasingly indispensable. For instance, its recent revenue gains in communications solutions highlight its ability to adapt to emerging opportunities, such as satellite-based networks and defense applications.

Risks and Considerations

Despite its strengths, Keysight faces challenges. Cyclical downturns in tech spending could pressure demand, particularly if AI adoption slows or global economic conditions deteriorate. Additionally, the stock's elevated trailing P/E may concern value-oriented investors. However, its forward-looking metrics and strong guidance mitigate some of these risks, suggesting management's confidence in navigating near-term volatility.

Conclusion: A Buy for Long-Term Investors?

Keysight Technologies presents a compelling case for investors seeking exposure to the tech sector's most transformative trends. Its ability to exceed earnings and revenue expectations, coupled with a valuation that balances growth and affordability, positions it as a stock with durable long-term potential. While short-term volatility is inevitable, the company's strategic alignment with AI, 5G, and IoT-combined with its track record of execution-makes a strong case for considering KEYS as a buy, particularly for those with a multi-year investment horizon.