Keysight reported strong Q2 FY2025 earnings with revenue growth, impacted by new tariffs
From Nasdaq: 2025-05-20 18:42:00
In Q3 FY2025, Keysight expects the most significant tariff impact, with limitations on growth in new Aerospace, Defense, and Government programs due to the U.S. government’s continuing resolution. Q2 FY2025 saw revenue of $1.306 billion, with 7% reported and 8% core growth, and an EPS of $1.70. Orders were $1.316 billion, up 8% year over year and sequentially. The Communications Solutions Group (CSG) revenue grew by 9% to $913 million, with Commercial Communications and Aerospace, Defense, and Government revenues each increasing by 9% in Q2 FY2025. The Electronic Industrial Solutions Group (EISG) revenue was $393 million, up 5%. Software and services accounted for 36% of total revenue, with annual recurring revenue comprising 28%.
Gross margin reached 65% company-wide, with CSG at 67% and EISG at 59%. Operating margin was 25%, a 100 basis point increase, with CSG at 26% and EISG at 23%. CSG had double-digit order growth in commercial communications in Q2 FY2025, while EISG reversed a six-quarter revenue decline due to strength in semiconductor and electronics markets. New tariffs cost $7 million in Q2 FY2025, reducing margins and EPS, with an annual exposure expected between $75 million and $100 million. Cash flow and balance sheet showed $3.118 billion in cash and equivalents, $484 million in operating cash flow, and $457 million in free cash flow.
In Q3 FY2025, revenue is expected between $1.305 billion and $1.325 billion, with EPS projected in the range of $1.63 to $1.69. The Spirent transaction cleared U.K. regulatory review, with closing anticipated in Q3. Key advancements were seen in AI and data center technology, with wireline sales growing by double-digits and CSG delivering the industry’s first 448 gig per lane optical transmission solution in Q2 FY2025. Geographic exposures show minimal tariff exposure to U.S.-China trade, and order trends indicated a linear intake and funnel conversion. Despite macroeconomic risks, the company expects resilience in its operating model and demand pipeline.
Read more at Nasdaq: Keysight (KEYS) Q2 2025 Earnings Call Transcript