Keysight Technologies’ Stock Eyeing Highs Ahead of Earnings – What To Expect

Keysight Technologies’ stock (NYSE: KEYS) has been rallying ahead of earnings, adding 17.89% so far YTD, and setting new highs in the process. The company reports fiscal Q1 26 results after market close today, with plenty riding on the print.

Consensus sits at $2.00 adjusted EPS on $1.54B revenue, both at the upper end of management’s prior guide range, creating asymmetric risk if execution merely meets rather than exceeds the midpoint.

The setup reflects a valuation that has already priced in sustained growth. Shares trade at 48.5x trailing earnings, a 13.7% premium to the average analyst price target of $226.46, following a 38% rally over the past 52 weeks. That move was catalyzed by fiscal Q4 results in November, when Keysight beat estimates by 4.9% and guided Q1 revenue $1.53B-$1.55B, well ahead of where the Street had been modeling.

The stock surged 13.7% after hours on that combination, but the forward valuation now embeds the assumption that AI infrastructure test demand and high-speed networking adoption will continue to drive above-trend growth.

What the result will determine is whether Keysight can hold the higher run-rate implied by its Q4 guide, or whether the quarter represents a peak in the current cycle.

Historical patterns argue that guidance matters more than the backward-looking beat: across the past four quarters, Keysight delivered clean EPS beats averaging 4.3%, yet the stock’s reaction turned on whether management’s outlook validated the Street’s recovery timetable. The February print tests that dynamic again, with consensus now positioned at the high end of the company’s range.

Consensus Estimates

Consensus expectations sit at the upper boundary of management’s November guidance. The Street’s $2.00 adjusted EPS estimate matches the top of Keysight’s $1.95-$2.01 range, while the $1.54B revenue view aligns with the midpoint of the $1.53B-$1.55B guide. That positioning reflects confidence in execution, but it also means the bar for a positive surprise has been raised. A result that merely meets the midpoint would represent a 1% miss versus consensus EPS, despite beating management’s original guidance.

Estimate stability over the past 30 days, with one upward revision and no downgrades, suggests analysts have converged on the view that Keysight will deliver at or above the guided range. The 18.7% year-over-year revenue growth expectation marks a significant acceleration from the 3.1% growth recorded in the comparable quarter last year, underscoring the market’s belief that AI infrastructure and next-generation communications test demand has entered a sustained upcycle.

The risk lies in the forward guide. If Keysight beats Q1 estimates but guides Q2 below where the Street is modeling, the stock could still react negatively. History shows that for KEYS, guidance credibility drives the multiple more than the backward-looking beat.

Management Guidance and Commentary

“We are being repriced as an AI infrastructure supplier—via high-bandwidth memory—and that mix plus pricing story is what investors now require management to reaffirm every 90 days.”

Management’s November guidance reset the near-term run-rate higher, with the $1.53B-$1.55B revenue range representing a step-function increase from prior quarters. The company framed the outlook around three drivers: AI-driven data-center expansion, 400G/800G Ethernet adoption, and aerospace/defense modernization. CEO commentary emphasized “durable demand” in high-speed networking test equipment, explicitly tying growth to AI capabilities and terabit-scale network infrastructure.

The gap between the guided midpoint ($1.98 adjusted EPS, $1.54B revenue) and where consensus now sits is minimal, with the Street essentially modeling to the upper half of the range. That convergence reflects analyst confidence in the AI networking thesis, but it also means management has limited room to undershoot without triggering a negative reaction. The company’s SEC disclosures highlight “major defense and government programs worldwide” and “AI-driven data-center expansion” as key demand drivers, providing a strategic rationale for the higher guide.

What matters for the February print is whether management can sustain this trajectory into Q2. If the company guides fiscal Q2 2026 revenue below $1.50B or adjusted EPS below $1.90, it would signal that Q1 represented a peak rather than a new baseline, likely prompting estimate cuts across the full year.

Analyst Price Targets & Ratings

Sector & Peer Comparison

Keysight trades at a significant premium to its peer group on both trailing and forward earnings multiples. The 48.5x trailing P/E represents a 51% premium to Teledyne’s 28.4x and a 51% premium to Fortive’s 32.1x. On a forward basis, Keysight’s 30.1x forward P/E sits 24% above Teledyne and 12% above Fortive, despite all three companies operating in adjacent test and measurement markets.

The valuation premium reflects two factors: superior profit margins and the market’s belief in AI-driven growth durability. Keysight’s 15.8% profit margin leads the peer group, exceeding Fortive by 150 basis points and Teledyne by 370 basis points. That operational efficiency, combined with exposure to high-growth end markets like AI data centers and next-generation communications, justifies some premium. However, the magnitude of the gap suggests the stock has priced in sustained above-trend growth, leaving limited room for execution missteps.

Viavi Solutions, a more direct peer in communications test, recently reported 36.4% revenue growth and beat expectations, providing sector-level validation for the demand environment Keysight is describing. That peer performance supports the bull case, but it also raises the bar for what constitutes a “good” result for KEYS.

Earnings Track Record

Keysight has delivered EPS beats in 17 of the last 20 quarters, an 85% success rate that establishes credibility with the Street. The most recent four-quarter stretch shows a pattern: three beats and one significant miss in July 2025, when the company reported $1.10 versus $1.36 expected. That miss, alongside the January 2025 shortfall, demonstrates that when Keysight misses, the magnitude tends to be substantial, averaging -22.3% on the two misses versus +7.4% on the beats.

The October 2025 result, a 4.9% beat, marked the inflection point that reset expectations higher. That quarter’s combination of a beat plus ahead-of-estimates guidance for Q1 2026 drove the 13.7% after-hours surge and established the current run-rate. The pattern across fiscal 2025 suggests that Keysight’s execution improved as the year progressed, with beats in three of the four quarters and the guidance trajectory moving consistently higher from February through November.

What the track record does not show is tolerance for guidance misses. Even when Keysight beat estimates in April 2025 by 3.0%, the stock rose only 0.7% the next day, consistent with a market that focuses more on the forward outlook than the backward-looking result.

Post-Earnings Price Movement History

The historical price reaction data reveals a counterintuitive pattern: beats do not guarantee positive stock moves, and the magnitude of the EPS surprise correlates poorly with next-day performance. The average move on beats is only +0.1%, while the average on misses is -0.9%, suggesting the market looks through the quarterly result to the forward guidance.

October 2025 stands out as the exception, with a 6.2% next-day gain following the 4.9% EPS beat. That reaction was driven not by the beat itself but by the ahead-of-estimates Q1 2026 guidance. In contrast, July 2024’s massive 16.3% EPS beat produced a -2.5% next-day decline, and April 2024’s 1.4% beat led to a -3.5% drop. Both instances reflected guidance that failed to meet the Street’s elevated expectations.

The January 2025 miss provides the clearest evidence of guidance primacy: despite a -25.4% EPS shortfall, the stock rose 3.4% the next day, consistent with management commentary that framed the miss as temporary and maintained confidence in the full-year outlook. The pattern argues that for the February print, the Q2 2026 guide will matter more than whether Q1 EPS comes in at $1.98, $2.00, or $2.02.

Expected Move & Implied Volatility

The options market is pricing a ±5.8% move for Keysight following the February 23 earnings release, implying a trading range of $229.62 to $257.90. That expected move sits well above the -0.2% average historical next-day reaction, reflecting elevated uncertainty around the outcome. The 42.3% implied volatility level ranks in the 68th percentile of the past year’s range, indicating options traders see this print as carrying above-average event risk.

The gap between implied volatility (42.3%) and 30-day historical volatility (38.1%) suggests the market is pricing in a larger-than-typical move, likely driven by uncertainty around the Q2 guidance. The 5.8% expected move would translate to a $14.15 absolute price swing, compared to the October 2025 actual move of 6.2% ($10.81 in dollar terms). If the stock moves less than 5.8%, options sellers will profit; if it exceeds that threshold, buyers of straddles or strangles will benefit.

The elevated IV percentile also indicates that options are relatively expensive compared to recent history, which typically occurs when the market perceives binary risk around a specific catalyst. In this case, that catalyst is whether management can guide Q2 2026 in a way that sustains the post-Q4 valuation reset.

Expert Predictions & What to Watch

Key Outlook: Cautiously Bullish with Guidance-Dependent Upside

The bull case rests on three pillars: AI infrastructure build-out driving sustained demand for high-speed networking test equipment, aerospace/defense modernization providing a stable revenue floor, and operational leverage translating revenue growth into margin expansion. If Keysight reports Q1 revenue at or above $1.55B (the top of the guided range) and guides Q2 revenue $1.52B-$1.58B with adjusted EPS $1.95-$2.05, the stock could re-rate higher on confirmation that AI-driven growth is durable. Recent sector data supports this view: Viavi Solutions’ 36.4% revenue growth and Teledyne’s 7.3% growth both exceeded expectations, validating the demand environment.

The bear case centers on valuation and the risk that Q1 represents a peak. At 48.5x trailing earnings and 30.1x forward earnings, Keysight trades at a significant premium to peers, embedding the assumption of sustained above-trend growth. If the company beats Q1 estimates but guides Q2 below $1.50B revenue or below $1.90 adjusted EPS, it would signal that the AI networking cycle is moderating faster than expected, likely triggering multiple compression. The July 2025 miss, when EPS came in 19.1% below estimates, demonstrates that when demand falters, the magnitude of the shortfall can be severe.

Key Metrics to Watch

The Communications Solutions Group revenue figure will provide the clearest signal on whether AI-driven networking demand is sustaining or moderating. Consensus expects approximately $1.06B with 19.8% year-over-year growth, but the bull case requires a beat to $1.07B+ to confirm the thesis. Within that segment, Commercial Communications revenue (expected at $712.79M with 24.6% growth) is the key sub-metric, as it captures 5G infrastructure and data-center networking test equipment sales.

The Q2 guidance midpoint matters more than the Q1 result. If management guides Q2 revenue sequentially flat or higher (implying $1.54B+), it signals confidence that the current run-rate is sustainable. A guide below $1.50B would represent a 3% sequential decline and likely trigger estimate cuts across the full year. Historical patterns show that Keysight’s stock reacts more to guidance than to the backward-looking beat, making this the single most important number in the release.

Gross margin trajectory will determine whether the revenue growth translates into earnings leverage. Q4 fiscal 2025 gross margin was 61.2%; expansion to 61.5%+ would validate the high-value product mix story and support the premium valuation. Flat or declining margins would raise questions about pricing power or mix headwinds, potentially pressuring the multiple even if revenue beats.

For investors looking to understand the fundamental differences between trading vs investing approaches to stocks like Keysight, the earnings reaction provides a case study in how short-term volatility can create opportunities for both strategies.