AI data-center demand is driving strong growth in Keysight’s wireline business, particularly around 1.6T and emerging 3.2T networking, silicon photonics, co-packaged optics and system-level testing.
Demand currently exceeds supply, with Keysight expanding manufacturing capacity, supplier agreements and component sourcing; revenue beyond its typical order-to-revenue window was approaching $100 million.
Keysight expects additional growth from 6G, aerospace and defense, semiconductors and software-defined vehicles. The company anticipates 6G acceleration in the first half of 2028 and plans to maintain investment while targeting incremental margins of at least 40% when growth exceeds 5%.
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Keysight Technologies NYSE: KEYS executives said the company is seeing strong demand tied to artificial intelligence data-center buildouts, while preparing for future opportunities in 6G wireless, aerospace and defense, semiconductor testing and software-defined vehicles.
Speaking at a Truist investor conference, Chief Financial Officer Neil Dougherty described Keysight as a provider of hardware, software and solutions for industries employing electrical engineers. More than half of company revenue comes from customer research-and-development labs, he said, with Keysight supporting measurement and validation from physical-layer testing through protocol and application-layer software.
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The company also serves electronics manufacturing customers and, to a lesser extent, post-deployment operational applications. Its major markets include wireline infrastructure for AI data centers, wireless technology transitions, aerospace and defense, automotive, semiconductors and broader electronics.
AI Data-Center Demand Drives Wireline Momentum
Kailash Narayanan, senior vice president and president of Keysight’s Communication Solutions Group, said the company’s commercial communications operations span wireless and wireline markets and serve chipmakers, device manufacturers, network-equipment vendors, contract manufacturers, mobile operators, hyperscalers and satellite-network operators.
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He said AI-related demand has become a major near-term priority, particularly as the industry moves toward higher network speeds. Keysight is seeing activity around the transition to 3.2-terabit technology, as well as research in silicon photonics and co-packaged optics.
According to Narayanan, speed transitions and system-level emulation are currently the biggest contributors to the company’s AI-related business. Keysight is seeing traction in 1.6T technology, while 3.2T research is already underway. Silicon photonics remains primarily an R&D opportunity that the company expects to scale over the coming years.
“Our customers’ innovation cadence is increasing,” Narayanan said, citing a rising number of product configurations and growing design complexity as data rates advance from 100 gigabits per second to 200, 400 and 800 gigabits per second.
He highlighted the Keysight AI Data Center Builder, launched about 18 months ago, as an example of the company’s product development. The offering is designed to help customers benchmark multi-vendor AI infrastructure, including network topologies, hardware energy consumption and performance across racks and clusters.
Narayanan said hyperscalers represent a relatively small percentage of Keysight’s direct revenue but drive multiple times that level of demand through their broader supplier ecosystems. He added that neoclouds and companies developing frontier AI models are also contributing to the expanding customer base.
Supply Constraints Remain a Near-Term Revenue Limiter
Dougherty said Keysight remains constrained more by supply than by demand, although the company has increased production and supply-chain capacity. He cited quarterly revenue progress during the fiscal year, from $1.6 billion in the first quarter to guidance of $1.94 billion for the fourth quarter.
Using the company’s typical six-month order-to-revenue conversion framework, Dougherty estimated that revenue pushed beyond that window was approaching $100 million, though likely less after accounting for software and longer-dated business.
Keysight is addressing supply constraints through added internal capacity, higher capital expenditures, longer-term supplier agreements, product redesigns to qualify more available components, and qualification of second and third sources. Dougherty said the company is a high-mix, relatively low-volume manufacturer, which can make certain supply issues more manageable than they would be for producers requiring millions of units.
“The demand forecast, we keep having to increment it north,” Dougherty said, characterizing the supply challenge as a favorable problem because suppliers can support base volumes but have struggled with repeated upward revisions.
6G, Defense and Electronics Opportunities
In wireless, Narayanan said customer spending has shifted from university and research-institute activity toward funded product research and early development programs. Keysight expects its 6G business to inflect in the first half of 2028, ahead of expected commercialization in late 2029 and 2030. He said the overall shape of the 6G cycle could be broadly similar to 5G, which was commercialized in 2019 and 2020.
The company is also pursuing opportunities in AI-enabled radio access networks, integrated sensing and communications, and non-terrestrial networks. Narayanan said non-terrestrial networks are the most commercially active of those categories today, supported by satellite constellations, additional frequency bands, broadband applications and direct-to-cell connectivity.
In aerospace and defense, Narayanan said Keysight’s U.S. business has expanded at a strong double-digit rate, while Europe is growing faster from a smaller base. Demand is being supported by larger defense budgets, increased R&D spending, satellite applications and a growing group of venture-backed defense technology startups.
Dougherty said the company’s Electronic Industrial Solutions Group is also benefiting from data-center investment. Semiconductor demand tied to high-bandwidth memory, advanced logic and silicon photonics has supported testing demand, while automotive growth has been driven by software-defined vehicles, including in-car networking, security, sensing and autonomous-driving applications.
Investment Priorities and Margin Outlook
Dougherty said Keysight is prioritizing organic investment in R&D, sales capacity, manufacturing capacity, supply-chain support and inventory. He said the company expects to continue generating incremental margins at or above its 40% target when growth exceeds 5%, despite increased spending to capture AI-related opportunities.
The CFO said Keysight exceeded the gross-margin and operating-margin commitments it outlined at its 2023 analyst day during the current fiscal year. He added that three acquisitions completed near the beginning of the fiscal year are now meaningfully integrated and are expected to provide roughly $50 million in cost synergies next year.
Beyond organic investment, Dougherty said the company plans to balance value-creating acquisitions with shareholder returns. Keysight had $2.6 billion in cash at the end of the quarter and had repurchased more than $500 million of stock year to date, according to the discussion.
Keysight Technologies, Inc is a technology company that provides electronic design and test solutions for engineers, manufacturers and service providers. Its products and services help customers design, validate, manufacture and optimize electronic and communications systems across the product life cycle.
The company offers electronic measurement instruments, software and related services for applications including radio-frequency and microwave testing, wireless communications, high-speed digital systems, semiconductor development and power electronics.
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