Keysight (KEYS) FY2025: Acquisition-Led Growth and the Non-Operating Income Boost

If you rely on a smartphone, drive an electric vehicle, or trust the avionics in an airplane, there is a very high probability that Keysight Technologies (KEYS) played a role in making that technology work. As a spin-off from Agilent (and originally Hewlett-Packard), Keysight dominates the electronic measurement industry, providing the hardware and software engineers need to design and validate their products.

We are going to unpack the numbers from their latest 10-K filing covering the fiscal year ended October 31, 2025. This report offers a window into the health of the broader technology hardware ecosystem, from 6G research to semiconductor manufacturing.

To see exactly how their revenue translates into profit, take a look at the flow diagram below:

Growth Through Acquisition and Innovation

Keysight reported total revenue of $5.38 billion for 2025, an 8% increase over the previous year. This growth is notable given the mixed macroeconomic signals in the broader industrial sector. While organic innovation played a role, a significant portion of this activity was driven by an aggressive acquisition strategy, including the purchase of Spirent Communications and Synopsys’ Optical Solutions Group.

The company operates in two primary segments, both of which saw growth:

1. Communications Solutions Group (CSG): This is the heavyweight division, accounting for about 69% of total revenue ($3.73 billion). CSG handles the wireless ecosystem (5G/6G), aerospace, and defense. Revenue here was up 9%, signaling that despite global carrier spending slowdowns in some regions, the R&D push for next-gen communications and defense modernization remains robust.
2. Electronic Industrial Solutions Group (EISG): Generating $1.65 billion (up 6%), this segment focuses on automotive (EVs and autonomous driving), semiconductor testing, and general electronics.

Margins and the Bottom Line

While top-line revenue grew, there was a slight compression in profitability metrics that investors usually watch closely. Gross margin dipped slightly to 62.1% from 62.9% in 2024. This contraction often happens when a company integrates new acquisitions or when the product mix shifts slightly more toward lower-margin hardware versus high-margin software.

However, the bottom line tells a different story. Net income surged 38% to $850 million. How does net income jump 38% when operating income only grew 5% (to $876 million)?

The answer lies below the operating line. Keysight reported $200 million in "Other income," compared to just $35 million the prior year. This variance was largely driven by gains on derivative instruments and investment valuations. For analysts, it is important to note that while the core business is healthy, the massive spike in Earnings Per Share (EPS)—which hit $4.91—was aided significantly by these non-operating financial items.

Strategic Shifts and Risks

The filing highlights a company in transition from a pure hardware "box maker" to a software-centric solutions provider. The acquisitions of Spirent and the Optical Solutions Group are clear moves to capture more value in emulation—testing software and networks virtually before physical hardware is even built.

However, the 10-K also flags significant risks. As a company deeply embedded in global supply chains, Keysight is vulnerable to geopolitical friction. With substantial revenue coming from the Asia Pacific region ($2.2 billion), trade tariffs or export restrictions could impact their ability to serve key semiconductor and communications markets.

The Big Picture

Keysight Technologies effectively acts as a barometer for R&D spending across the tech world. Their 2025 results show that despite economic headwinds, companies are still spending money to design the future.

By aggressively deploying capital to acquire software and optical capabilities, Keysight is widening its moat against competitors like Fortive (Tektronix), Rohde & Schwarz, and Anritsu. They are betting that as electronics become more complex, the tools needed to test them must become smarter and more integrated. Based on the cash flow from operations of $1.41 billion, they have the fuel to keep making those bets.