Demand for AI testing is exploding at an accelerated pace! Keysight Technologies (KEYS.US) performance and guidance surpassed expectations, and Wall Street reached a high of $440

The Zhitong Finance App learned that Keysight Technologies (KEYS.US) announced strong results for the third quarter of fiscal year 2026. Driven by demand for artificial intelligence infrastructure, the company's revenue and profit both exceeded market expectations, while raising the fourth quarter and full year results outlook. After the financial report was announced, several Wall Street institutions raised their target prices.

For the third quarter of the fiscal year ending July 31, Keysight Technologies' revenue increased 36.5% year over year to US$1.85 billion, and adjusted earnings per share surged about 79% year over year to $3.07. Both indicators exceeded market expectations. The company's orders increased 56% year over year while maintaining strong free cash flow performance.

AI infrastructure was an important driver of growth this quarter. J.P. Morgan analyst Joseph Cardoso and others pointed out that Keysight Technologies' third-quarter organic revenue increased 31% year over year and 7% month on month, clearly exceeding expectations. Among them, AI data center construction has driven the rapid expansion of wired testing requirements in the communication solutions business, and the scale of the wired business has surpassed the wireless business for the first time.

At the same time, the expansion of semiconductor production capacity is also driving the growth of the electronics industry solutions business, including investment in advanced manufacturing processes, high-bandwidth memory (HBM), silicon photonics, etc., as well as increased demand for AI-related electronic device testing, all bringing new growth impetus to the company.

Driven by strong demand, Keysight Technologies further raised its performance expectations. The company expects adjusted earnings per share of $3.34 to $3.40 for the fourth fiscal quarter, which is significantly higher than market expectations of $2.68 billion; revenue is expected to be between $1.93 billion and $1.95 billion, which is also higher than market expectations of US$1.83 billion. The company also raised its outlook for the full year of FY2026.

Satish Dhanasekaran, president and CEO of Keysight Technologies, said the company once again achieved record results in the third quarter and achieved widespread growth in all major markets. As orders, revenue, and profit continued to grow strongly, the company decided to raise its fourth quarter and full year performance expectations.

The strong earnings report also received positive responses from Wall Street analysts. J.P. Morgan raised Keysight Technologies' target price from $400 to $425 and maintained an “overweight” rating. The bank believes that the AI-driven growth momentum continues, and the growing backlog of orders also supports the growth prospects for the 2027 fiscal year.

Morgan Stanley also raised its target price from $400 to $425 and maintained an “overweight” rating. The bank said that the increased demand for testing brought about by AI, increased market share, and operating leverage have all strengthened its bullish view. Currently, supply capacity is still the main limiting factor for the company's growth, but strong market demand and business pipeline are expected to support the company to continue to achieve high growth in the 2027 fiscal year.

Truist raised Keysight Technologies' target price from $376 to $400 while maintaining a “hold” rating. Susquehanna, on the other hand, raised the target price further from $425 to $440 and maintained a “positive” rating, which is the highest target price among several agencies.

Susquehanna is particularly optimistic about the AI business's growth potential in the next few years. The bank anticipates that AI-related revenue will rapidly rise from about 8% in FY2025 to 20% in FY2026, and further reach 25% in FY2028.

Furthermore, Keysight Technologies is expanding its potential revenue opportunities by 3 to 4 times as much as the business layout covering multiple segments of the AI and wired communications industry chain. At the same time, the recovery in wireless communication capital expenditure and the acceleration of 6G R&D investment are also expected to bring additional growth impetus to the company.

Overall, AI data center construction, advanced semiconductor production capacity expansion, and demand for new technologies such as HBM and silicon photonics are significantly increasing the intensity of demand for test equipment and solutions. As the share of AI-related businesses in the company's revenue rapidly increases, Keysight Technologies is gradually becoming another important beneficiary of the AI infrastructure investment boom.