The demand for AI testing is surging! Keysight Technologies (KEYS.US) has exceeded expectations in both performance and guidance, with Wall Street predicting a high of $440.

Keysight Technologies (KEYS.US) announced strong performance 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, and it has raised its outlook for the fourth quarter and the entire year. Following the earnings announcement, multiple Wall Street firms raised their target prices. For the third quarter of the fiscal year ending July 31, Keysight Technologies reported a year-over-year revenue growth of 36.5% to $1.85 billion, and adjusted earnings per share surged approximately 79% year-over-year to $3.07, both metrics beating market expectations. The company saw a 56% year-over-year increase in orders, while maintaining strong free cash flow performance. AI infrastructure has become a significant driver of growth this quarter. JPMorgan analyst Joseph Cardoso pointed out that Keysight Technologies achieved a 31% organic year-over-year revenue growth in Q3, with a 7% sequential increase, clearly surpassing expectations. Notably, the demand for wired testing in the communications solutions business rapidly expanded due to AI data center construction, with the wired segment surpassing the wireless segment in size for the first time. At the same time, the expansion of semiconductor capacity has also driven growth in the electronic industrial solutions business, including investments in advanced processes, high-bandwidth memory (HBM), and silicon photonics, as well as increased demand for testing AI-related electronic devices, providing new growth momentum for the company. Given the strong demand, Keysight Technologies has further raised its performance expectations. The company anticipates adjusted earnings per share in the fourth fiscal quarter to be between $3.34 and $3.40, significantly higher than the market expectation of $2.68; it expects revenue to be between $1.93 billion and $1.95 billion, also surpassing the market expectation of $1.83 billion. Additionally, the company has raised its full-year outlook for fiscal year 2026. Satish Dhanasekaran, President and CEO of Keysight Technologies, stated that the company achieved record performance once again in the third quarter, with widespread growth across all major markets. In light of the continued strong growth momentum in orders, revenue, and profits, the company decided to raise its expectations for the fourth quarter and the entire year. The strong earnings report has also garnered positive responses from Wall Street analysts. JPMorgan raised Keysight Technologies' target price from $400 to $425 and maintained an "overweight" rating. The firm believes that the AI-driven growth momentum is ongoing, and the increasing backlog of orders supports the growth outlook for fiscal year 2027. Morgan Stanley also raised its target price from $400 to $425 while maintaining an "overweight" rating. The firm highlighted that the growth in testing demand driven by AI, market share gains, and operational leverage collectively reinforce its bullish outlook. Currently, supply capacity remains the main limiting factor for the company's growth, but strong market demand and a robust business pipeline are expected to support continued high growth in fiscal year 2027. Truist raised Keysight Technologies' target price from $376 to $400 while maintaining a "hold" rating. Susquehanna further raised its target price from $425 to $440, maintaining a "positive" rating, making it the highest target price among several firms this time. Susquehanna is particularly optimistic about the growth potential of AI business over the next few years. The firm expects the proportion of AI-related revenue to rapidly increase from about 8% of Keysight Technologies' total revenue in fiscal year 2025 to 20% in fiscal year 2026, and further reach 25% by fiscal year 2028. In addition, Keysight Technologies' business layout covering multiple segments of the AI and wired communications industry chain is expanding its potential revenue opportunities to three to four times the original level. Meanwhile, the recovery of capital expenditures in wireless communications and accelerated investments in 6G research and development are expected to bring additional growth momentum to the company. Overall, the construction of AI data centers, the expansion of advanced semiconductor capacities, and the demand for new technologies such as HBM and silicon photonics are significantly increasing the intensity of demand for testing equipment and solutions. As the proportion of AI-related business in the company's revenue rises rapidly, Keysight Technologies is gradually becoming another important beneficiary of the surging investment trend in AI infrastructure.