Is Keysight Technologies Still a Buy After Its Strong 2025 Rally?

The question of whether Keysight Technologies (KEYS) remains a compelling investment after its 2025 rally hinges on a delicate balance between its valuation metrics and growth potential in a high-margin, tech-driven industry. While the company has demonstrated robust financial performance, its stock's recent surge has pushed key valuation indicators to levels that warrant closer scrutiny.

Valuation Metrics: A Mixed Picture

Keysight's trailing price-to-earnings (P/E) ratio of 40.33 and forward P/E of 25.02 suggest a premium valuation relative to its earnings according to the company's financial report. By November 2025, the P/E had spiked to as high as 66.34, reflecting investor optimism about its future prospects. However, the PEG ratio-a metric that adjusts for growth expectations-tells a more nuanced story. At 1.88, Keysight's PEG ratio exceeds 1, indicating a premium valuation to its earnings growth. This contrasts with the semiconductor sector's PEG ratio of 0.55, which suggests undervaluation relative to growth expectations.

The test and measurement industry, where Keysight operates, has a PEG ratio of 1.43 for the "Electronic equipment/Instruments" category according to industry analysis. While this is lower than Keysight's PEG, it still reflects a sector where valuations are somewhat aligned with growth. The discrepancy implies that Keysight is priced more aggressively than its peers, even as it outperforms in revenue and margin growth.

Growth Drivers: Strong Fundamentals

Keysight's fiscal 2025 results underscore its competitive positioning. Revenue rose 8% year-over-year to $5.37 billion, with non-GAAP net income climbing to $1.24 billion, or $7.16 per share according to earnings call data. Its 15.74% net margin according to the company's financial report and $1.28 billion in free cash flow according to earnings call data highlight operational efficiency. The Communications Solutions Group (CSG) and Electronic Industrial Solutions Group (EISG) each contributed meaningfully to this growth, with CSG reporting $990 million in Q4 revenue and EISG generating $429 million according to earnings call data.

The company's performance is fueled by secular trends in artificial intelligence and semiconductor demand, which according to the company's financial report drove 10% year-over-year revenue growth in Q4. A $1.5 billion share repurchase program announced in November 2025 further signals management's confidence in its financial position.

Industry Context: High-Margin Tech, But High Expectations

The test and measurement industry is projected to grow at a 4.29% CAGR through 2030, reaching $23.52 billion according to market research. However, Keysight's valuation must be compared to broader tech sectors. The U.S. semiconductor industry's P/E ratio of 47.3x according to market analysis is higher than Keysight's trailing P/E, suggesting the company is relatively cheaper. Yet the semiconductor sector's PEG of 0.55 according to market analysis indicates stronger value, as its growth expectations outpace its valuation.

For Keysight, the challenge lies in justifying its elevated P/E and PEG ratios. While its 7.89% revenue growth and 15.74% net margin according to the company's financial report are impressive, they must be sustained to support the current valuation. A PEG of 1.88 implies investors are paying 88% more for each unit of earnings growth compared to the industry average-a premium that could erode if growth slows.

Conclusion: A Buy for the Long-Term, But With Caution

Keysight Technologies remains a compelling long-term investment for those who believe in the enduring demand for test and measurement solutions in AI and semiconductor innovation. Its strong margins, free cash flow generation, and strategic focus on high-growth segments like CSG and EISG position it well for future opportunities. However, the stock's current valuation-particularly its PEG ratio-suggests that much of this potential is already priced in.

Investors should monitor Keysight's ability to maintain its growth trajectory and execute its share repurchase program effectively. If the company can deliver earnings growth that outpaces its PEG ratio, the premium may be justified. But for now, the stock appears more suitable for patient, long-term holders than for those seeking near-term gains.