Keysight Technologies: A Resilient Play in High-Growth Tech Sectors with Upside in Fiscal 2025

Keysight Technologies (NYSE: KEYS) has emerged as a standout performer in the high-growth tech landscape, leveraging its strategic positioning in communications, semiconductor, and industrial automation markets. With Q3 fiscal 2025 results exceeding expectations and an upgraded full-year outlook, the company is demonstrating resilience amid macroeconomic headwinds. For investors seeking exposure to innovation-driven sectors, Keysight's outperforming metrics and long-term vision present a compelling case for inclusion in a diversified portfolio.

Strategic Growth in Communications: A Cornerstone of Momentum

Keysight's Communications Solutions Group (CSG) delivered $940 million in revenue during Q3 2025, a 11% year-over-year increase. This growth was fueled by robust demand in commercial communications and aerospace, defense, and government sectors. The CSG's performance underscores Keysight's role in enabling next-generation 5G infrastructure and satellite communication systems, where its design and test solutions are critical for reducing time-to-market.

The company's focus on 5G and edge computing aligns with global trends, as telecom providers and defense contractors accelerate investments in high-speed, low-latency networks. Keysight's ability to provide end-to-end solutions—from signal generation to network optimization—positions it as a key enabler of the communications revolution.

Semiconductor Sector Momentum: Powering Innovation

The semiconductor industry remains a cornerstone of Keysight's growth, with the Electronic Industrial Solutions Group (EISG) reporting $412 million in revenue for Q3 2025, up 11% year-over-year. This segment's expansion is driven by surging demand for advanced test and measurement tools in chip design and manufacturing. As semiconductor companies navigate the complexities of 3nm and beyond, Keysight's solutions for wafer-level testing, RF characterization, and AI-driven analytics are becoming indispensable.

The company's strategic partnerships with leading foundries and IDMs further solidify its market position. For instance, Keysight's collaboration with TSMC and Intel on next-gen node testing highlights its technical leadership. With the global semiconductor market projected to grow at a 7.5% CAGR through 2030, Keysight is well-positioned to capture incremental revenue from both established and emerging players.

Industrial Automation Expansion: A Hidden Gem

While less publicized, Keysight's foray into industrial automation is a sleeper opportunity. The EISG's 11% revenue growth in Q3 2025 reflects strong traction in automotive and energy sectors, where automation is reshaping production lines and energy grids. Keysight's test solutions for electric vehicle (EV) battery systems and smart grid infrastructure are gaining traction, particularly in Asia-Pacific and Europe.

The company's ability to integrate IoT and AI into its automation tools is a differentiator. For example, Keysight's recent launch of a predictive maintenance platform for industrial equipment has attracted interest from automotive OEMs and energy utilities. As industrial automation spending is forecasted to exceed $300 billion by 2027, Keysight's early-mover advantage could translate into sustained revenue streams.

Financial Strength and Guidance: A Foundation for Confidence

Keysight's Q3 2025 results were marked by operational discipline and margin resilience. Despite a slight dip in EISG's gross margin to 57% (from 58% in 2024), operating margins expanded to 22%, reflecting cost optimization and pricing power. The company generated $291 million in free cash flow, a 30% increase year-over-year, which supports its R&D investments and share repurchase program.

The upgraded full-year guidance—7% revenue growth and 13% non-GAAP EPS growth—signals management's confidence in demand sustainability. With Q4 revenue projected between $1.37 billion and $1.39 billion, Keysight is on track to outperform its peers in capital efficiency and market share capture.

Investment Implications: A Buy for the Long-Term

Keysight's strategic alignment with high-growth sectors, coupled with its outperforming Q3 results, makes it an attractive long-term play. The company's diversified revenue streams across communications, semiconductors, and industrial automation reduce sector-specific risks while amplifying upside potential.

For investors, the current valuation offers a compelling entry point. At a forward P/E of 18x and a PEG ratio of 1.2x, Keysight is undervalued relative to its growth trajectory. The stock's recent underperformance against the S&P 500 (as shown in the visual) suggests a potential re-rating as market sentiment shifts toward innovation-driven equities.

Recommendation: Buy Keysight Technologies for a 12–18 month horizon. Key catalysts include the rollout of 5G infrastructure, semiconductor node advancements, and industrial automation adoption. Investors should monitor the company's Q4 earnings and guidance for further validation of its momentum.

In conclusion, Keysight Technologies is a resilient, innovation-led company poised to capitalize on the next wave of tech disruption. With its strategic positioning, financial strength, and outperforming results, it offers a compelling opportunity for investors seeking exposure to the future of communications, semiconductors, and industrial automation.