Keysight Technologies, Inc. (KEYS)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended October 31, 2025. This report contains forward-looking statements which include, but are not limited to predictions, future guidance, projections, beliefs, and expectations about the company’s trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of government regulations on our ability to conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, other regulatory approvals, the integration of our completed acquisitions and other transactions, and our transition to lower-cost regions. The forward-looking statements involve risks and uncertainties that could cause Keysight’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, the impact of global economic conditions such as inflation or potential recession, the impacts of increased trade tensions such as an imposition of or increase in tariffs and tightening of export control regulations, slowing demand for products or services, volatility in financial markets, reduced access to credit, changes in interest rates or currency exchange rates, the existence of political or economic instability, impacts of geopolitical tension and conflict in regions outside of the U.S., the impact of new and ongoing litigation, impacts related to net zero emissions commitments, and the impact of volatile weather caused by environmental conditions such as climate change. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Form 10-Q.

Basis of Presentation

The financial information presented in this Form 10-Q is not audited and is not necessarily indicative of our future consolidated financial position, results of operations, or cash flows. Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30, and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarter periods.

Overview and Executive Summary

Keysight Technologies, Inc. (“we,” “us,” “our,” “Keysight” or “the company”), incorporated in Delaware on December 6, 2013, is a global innovator in the computing, communications and electronics markets, committed to advancing our customers’ business success by helping them solve critical challenges in the development and commercialization of their

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products and services. Our mission, “accelerating innovation to connect and secure the world,” speaks to the value we provide our customers in a world of ever-increasing technological complexity. We deliver this value through a broad range of design, emulation, and test solutions that address the critical challenges our customers face in bringing their innovations to market on ever-shorter schedules.

We are committed to investing in research and development (“R&D”) and have focused our development efforts on strategic opportunities that align our business with available markets and position the company for growth. Our R&D investments focus on the development of first-to-market solutions with differentiated software and hardware, as well as improvements to existing software and hardware products to provide complete customer solutions addressing the evolving requirements of industries that we serve. We anticipate that we will continue to maintain R&D expenditures to deliver a continuous flow of innovative, high-quality customer solutions, products, and services.

Acquisition of Spirent Communications plc

In the fourth quarter of fiscal 2025, we acquired all of the outstanding common stock of Spirent Communications plc (“Spirent”) for $1,415 million, net of $127 million cash acquired, using existing cash. For the three and six months ended April 30, 2026, our acquisition of Spirent resulted in incremental revenue of $55 million and $143 million, respectively. In our discussion of changes in our results of operations, we have qualitatively disclosed the impact of the Spirent acquisition.

U.S. government tariffs and IEEPA tariff refund claims and related customer surcharge refunds

Changes to U.S. tariff policy, which resulted in broad-based increases in tariff rates, impacted our financial results for the three and six months ended April 30, 2026. We continue to closely monitor and assess the potential impact of ongoing tariff actions on our results, and take steps across multiple vectors to reduce the impact. This multipronged mitigation approach spans our global manufacturing footprint and sourcing strategies, as well as pricing and cost actions.

In February 2026, the Supreme Court of the United States (“U.S. Supreme Court”) determined that certain tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”) were not authorized by law. Subsequent rulings by the U.S. Court of International Trade have directed the U.S. Customs and Border Protection to establish processes to effect refunds of certain tariffs previously collected. Based on these judicial determinations, for the three and six months ended April 30, 2026, we recorded a receivable of $100 million within “other current assets” in the condensed consolidated balance sheet, representing recovery of tariffs previously paid and statutory interest accrued, with corresponding offsets of $93 million to “cost of sales,” $4 million to “selling, general and administrative,” and $3 million to “interest income” in the condensed consolidated statement of operations. In addition, we recorded a $40 million liability within “other accrued liabilities” in the condensed consolidated balance sheet as a result of our decision to refund IEEPA tariff surcharges collected from our customers, with a corresponding reduction of revenue in the condensed consolidated statement of operations. For additional information regarding the basis of accounting for tariff refund claims, see Note 1, “Overview and Summary of Significant Accounting Policies,” to the condensed consolidated financial statements.

The following table reflects the net impact of IEEPA tariff refund claims and related customer surcharge refunds on our reportable segments:

For additional discussion of risks related to tariffs, trade relations, and tariff refund claims, see Part II Item 1A, Risk Factors.

Three and six months ended April 30, 2026 and 2025

Total orders for the three and six months ended April 30, 2026 were $2,051 million and $3,696 million, respectively, an increase of 56 percent and 43 percent, respectively, compared to the same periods last year. For both the three and six months ended April 30, 2026, foreign currency movements and acquisitions had a favorable impact of 1 percentage point and 7 percentage points, respectively, on the year-over-year change. For the three and six months ended April, 30, 2026 orders increased across all regions.

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Revenue for the three and six months ended April 30, 2026 was $1,717 million and $3,317 million, respectively, an increase of 31 percent and 27 percent, respectively, compared to the same periods last year. For both the three and six months ended April 30, 2026, foreign currency movements and acquisitions had a favorable impact of 1 percentage point and 7 percentage points, respectively, on the year-over-year change. For both periods, revenue increased in the Communications Solutions Group (“CSG”) and the Electronic Industrial Solutions Group (“EISG”). Revenue from CSG and EISG represented 72 percent and 28 percent, respectively, of total revenue for the three months ended April 30, 2026. Revenue from CSG and EISG represented 71 percent and 29 percent, respectively, of total revenue for the six months ended April 30, 2026.

Net income for the three and six months ended April 30, 2026 was $349 million and $630 million, respectively, compared to $257 million and $426 million, respectively, for the same periods last year. The increase in net income for the three months ended April 30, 2026 was primarily driven by higher revenue, favorable mix, and net IEEPA tariff refund claims, partially offset by previous year net gains on derivative instruments, higher people-related costs, incremental costs from acquired businesses, higher amortization of acquisition-related balances, and the impact of ongoing tariffs. The increase in net income for the six months ended April 30, 2026 was primarily driven by higher revenue, favorable mix, higher net income tax benefit, and net IEEPA tariff refund claims, partially offset by incremental costs from acquired businesses, higher people-related costs, net losses on equity investment, higher amortization of acquisition-related balances, and the impact of ongoing tariffs.

Cash flows generated from operating activities were $942 million and $862 million, respectively, for the six months ended April 30, 2026 and 2025. Refer to the “Financial Condition” section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

Outlook

Our first-to-market solutions strategy enables customers to develop new technologies and accelerate innovation and provides a platform for Keysight's long-term growth. Our customers are expected to continue to make R&D investments in certain next-generation technologies and applications, including evolution of 5G, early 6G, quantum computing, high-speed data center networks and infrastructure, satellite networks, artificial intelligence (“AI”), industrial internet of things (“IoT”), defense modernization, next generation electric vehicles, and autonomous vehicles. We continue to engage actively with our customers and closely monitor the macroeconomic environment, including tariffs, trade restrictions and tightening of export control regulations, monetary and fiscal policies, and geopolitical tensions. We remain confident in the long-term secular growth trends of our markets and our ability to outperform in a variety of market conditions.

Critical Accounting Policies and Estimates

There were no material changes during the three and six months ended April 30, 2026 to the critical accounting

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This report contains forward-looking statements which include but are not limited to predictions, future guidance, projections, beliefs, and expectations about the company’s trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of government regulations on our ability to conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our completed acquisitions and other transactions, and our transition to lower-cost regions. The forward-looking statements involve risks and uncertainties that could cause Keysight’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, the impact of global economic conditions such as inflation or potential recession, the impacts of increased trade tensions such as an imposition of or increase in tariffs and tightening of export control regulations, slowing demand for products or services, volatility in financial markets, reduced access to credit, changes in interest rates, the existence of political or economic instability, uncertainty related to the impact of national elections results in the U.S. and U.K., impacts of geopolitical tension and conflict in regions outside of the U.S., the impact of new and ongoing litigation, impacts related to net zero emissions commitments, and the impact of volatile weather caused by environmental conditions such as climate change. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part I Item 1A and elsewhere in this Annual Report on Form 10-K.

Overview and Executive Summary

Keysight Technologies, Inc. (“we,” “us,” “our,” “Keysight” or “the company”), incorporated in Delaware on December 6, 2013, is a global innovator in the computing, communications and electronics markets, committed to advancing our customers’ business success by helping them solve critical challenges in the development and commercialization of their products and services. Our mission, “accelerating innovation to connect and secure the world,” speaks to the value we provide our customers in a world of ever-increasing technological complexity. We deliver this value through a broad range of design and test solutions that address the critical challenges our customers face in bringing their innovations to market on ever-shorter schedules.

Our fiscal year end is October 31. Unless otherwise stated, all years and dates refer to our fiscal year.

Acquisitions of Spirent Communications plc, Synopsys’ Optical Solutions Group, and Ansys’ PowerArtist RTL Business

On October 15, 2025, we acquired all of the outstanding common stock of Spirent Communications plc (“Spirent”) for $1,415 million, net of $127 million cash acquired, using existing cash. On October 16, 2025, Keysight divested Spirent’s high-speed ethernet, network security, and channel emulation business lines for $399 million to Viavi Solutions Inc. (“Viavi”) in connection with satisfying the regulatory conditions set out as part of the Spirent acquisition. For the year ended October 31, 2025, our acquisition of Spirent resulted in incremental revenue of $9 million. In our discussion of changes in our results of operations, we have qualitatively disclosed the impact of the Spirent acquisition.

On October 17, 2025, we acquired the Optical Solutions Group business (“OSG”) from Synopsys, Inc. (“Synopsys”) and the PowerArtist RTL business (“PowerArtist”) from Ansys, Inc. (“Ansys”) for $578 million and $26 million, respectively. For the year ended October 31, 2025, the acquisitions had an immaterial impact on our revenue.

See Note 2, “Acquisitions,” for additional information.

Impact of U.S. government tariffs

Beginning in the second quarter of fiscal 2025, the U.S. government announced tariffs on products from most countries and additional reciprocal tariffs on certain countries. In response, China and other countries announced retaliatory tariffs against certain imports from the United States. There have been recent changes effective August 1, 2025, resulting in broad-based increases in tariff rates, and there has been continuing litigation in the federal courts regarding the validity of the imposition of certain tariffs. These tariffs have impacted our financial results for the year ended October 31, 2025. We have taken actions across multiple vectors to reduce the impact on our results of operations. This multipronged mitigation approach spans our global manufacturing footprint and sourcing strategies, as well as pricing and cost actions.

For additional discussion of risks related to tariffs and trade relations, please refer to Part I Item 1A “Risk Factors.”

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Years ended October 31, 2025, 2024, and 2023

Orders were $5,452 million, $5,033 million, and $5,190 million in 2025, 2024, and 2023, respectively. Orders of $5,452 million for 2025 increased 8 percent compared to 2024. Acquisitions had a favorable impact of 1 percentage point on the increase, while foreign currency movements had an immaterial impact. Orders grew across all regions. Orders of $5,033 million for 2024 decreased 3 percent compared to 2023. Acquisitions had a favorable impact of 4 percentage points on the change, while foreign currency movements had an immaterial impact. Orders declined in the Americas and Asia Pacific, while Europe was flat.

Revenue was $5,375 million, $4,979 million, and $5,464 million in 2025, 2024, and 2023, respectively. Revenue of $5,375 million for 2025 increased 8 percent compared to 2024. Acquisitions and foreign currency movements had an immaterial impact on the change. Revenue increased in both the Communications Solutions Group (“CSG”) and the Electronic Industrial Solutions Group (“EISG”). Revenue from CSG and EISG represented approximately 69 percent and 31 percent, respectively, of total revenue for 2025. Revenue of $4,979 million for 2024 decreased 9 percent compared to 2023. Acquisitions had a favorable impact of 3 percentage points on the change, while foreign currency movements had an immaterial impact. Revenue declined in both CSG and EISG. Revenue from CSG and EISG represented approximately 69 percent and 31 percent, respectively, of total revenue for 2024.

Net income was $850 million, $614 million, and $1,057 million in 2025, 2024, and 2023, respectively. Net income of $850 million for 2025 increased 38 percent compared to 2024, primarily driven by higher revenue and net gains on equity investments and derivative instruments and lower income tax provisions, partially offset by higher people-related costs, higher acquisition and integration costs, impact of tariffs, and loss from discontinued operations, net of income taxes. Net income of $614 million for 2024 decreased 42 percent compared to 2023, primarily driven by lower revenue and higher acquisition and integration costs, restructuring costs, and amortization of acquisition-related balances, partially offset by lower provision for income taxes, favorable gross margin impact from the ESI Group acquisition, and lower people-related costs.

Cash flows generated from operating activities were $1,409 million, $1,052 million, and $1,408 million in 2025, 2024, and 2023, respectively.

Outlook

Our first-to-market solutions strategy enables customers to develop new technologies and accelerate innovation and provides a platform for Keysight's long-term growth. Our customers are expected to continue to make R&D investments in certain next-generation technologies and applications, including evolution of 5G, early 6G, high-speed data center networks and infrastructure, satellite networks, artificial intelligence (“AI”), industrial internet of things (“IoT”), defense modernization, and next generation electric vehicles and autonomous vehicles. We continue to engage actively with our customers and closely monitor the macroeconomic environment, including tariffs, trade restrictions and tightening of export control regulations, monetary and fiscal policies, and geopolitical tensions. We remain confident in the long-term secular growth trends of our markets and our ability to outperform in a variety of market conditions.

Currency Exchange Rate Exposure

Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates due to our global operating, investing, and financing activities. We hedge revenues, expenses, and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short-term and anticipated basis. The result of these hedging activities are included in our consolidated balance sheet and consolidated statement of operations. We may experience some fluctuations within individual lines of the consolidated balance sheet and consolidated statement of operations because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities. Our cash flow hedging program is designed to hedge short-term currency movements based on a rolling period of up to twelve months. Therefore, we are exposed to currency fluctuations over the longer term. To the extent that we are required to pay for all, or portions, of an acquisition price in foreign currencies, we may enter into foreign exchange contracts to reduce the risk that currency movements will impact the U.S. dollar cost of the transaction.

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Results from Operations - Years ended October 31, 2025, 2024 and 2023

A summary of our results is as follows:

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